SUNS  4287 Thursday 24 September 1998



FINANCE: WATCHDOG OFFERS BLINKERED VIEW OF CORRUPTION

Washington, Sep 22 (IPS/Abid Aslam) - The major clients of International lending agencies are seen as among the most corrupt countries in the world, according to the watchdog group
Transparency International.

The non-governmental organisation's latest 'Corruption Perceptions Index', released Tuesday, scores 85 countries in terms of how clean they are perceived to be by investors and the public.

While the index reflects perceptions of who are the biggest takers of bribes, Transparency admits that it sheds no light on bribe-giving official agencies and private businesses.

"We're saddened that there isn't a 'Bribery Propensity Index'," says Frank Vogl the group's vice chairman. Such a measure would answer the question, "Where do the bribers live?"

Vogl faults a "huge silent majority of international business" for going along with corrupt practices - including offering kickbacks in exchange for major contracts - while professing outrage at graft
overseas.

Similar practices permeate the world of official development assistance, with wealthy governments engaging in 'tied aid', which forces recipient countries to buy goods and services from donors in
exchange for development financing. Such goods and services cost developing countries 10-30 percent more than if they had been allowed to shop around, according to research cited in World Bank reports.

Transparency's index, however, "provides insights into perceptions of corruption" in developing and former Soviet economies, says Vogl. "It makes no effort to measure corruption itself."

A "perfect" score of 10, awarded only to Denmark, shows high confidence in international business circles. Low scores reflect "perceptions of a significant corruption problem," he explains.  These "could seriously dissuade companies from investing in a country and seriously undermine" economic prospects there.

As in previous years, some of the worst scores go to some of the largest borrowers from the International Monetary Fund (IMF) and World Bank. These include Indonesia (with a score of 2), Russia (2.4), Pakistan (2.7), India (2.9), and China (3.5).

Kenya, where the IMF halted lending last year over what it termed "governance issues", scored 2.5. Nigeria, which held last place on a shorter list last year with a score of 1.8, this time garnered
1.9 points, the same as Tanzania.

The United States, with a score of 7.5, shares 17th place with Austria. Singapore, with 9.1 points, is in 7th place, one notch above Norway and the Netherlands.

In last place, with a score of 1.4, is Cameroon. The World Bank and International Finance Corporation (IFC), its private-sector affiliate, are weighing a combined $365 million in loans for oil
development there and in neighbouring Chad.

In addition, the IFC would help raise up to a further one billion dollars on the private market to develop oil fields in Chad and build a pipeline to a marine terminal off southern Cameroon's
Atlantic coast.

A corporate consortium of the Exxon, Shell, and Elf oil companies would finance most of the Chad-Cameroon initiative, dubbed the largest construction project in sub-Saharan Africa.
World Bank support would finance the governments' investment in joint-venture companies formed with the oil titans.

Cameroon's oil industry also is being supported by IFC's largest syndicated loan in sub-Saharan Africa. The agency put up 60 million dollars of its own money and raised 190 million dollars from a
syndicate of 15 banks to support offshore oil development by joint ventures involving Cameroon's state oil company and subsidiaries of Shell and Elf.

Chad does not appear on Transparency's index but graft there is so widespread that donor governments last year insisted that public finances be controlled by a Swiss company.

Concerns about corruption should be addressed by that arrangement, Bank sources say. In addition, the global lending agency is working with Chadian authorities on a 'revenue management programme' aimed at ploughing project profits into social spending.

"How the revenues are to be used is an important part of the discussion," says Philippe Benoit, project team leader at the World Bank.

However, "the situation in Chad and Cameroon is such that there's no way the Bank can guarantee satisfactory performance on human rights, the environment, or corruption," says Andrea Durbin,
international programme director at the environmental group Friends of the Earth.

Specific projects notwithstanding, the heads of the Bank and IMF "are saying all the right things" on corruption, says Vogl, a former World Bank official who runs a public-relations business and
volunteers as Transparency's vice chairman.

"We hope both of them understand the importance of working with civil society," he adds. "External agencies cannot force countries to change."

Transparency International, founded in 1993 and describing itself as "a not for profit, non-partisan, coalition", has issued its corruption index annually since 1995.

It has received funding from multilateral institutions (including the World Bank and IMF); bilateral aid agencies (including the US Agency for International Development); foundations (including the Open Society Institute, founded by currency speculator George Soros); and corporations (including leading arms, oil, and finance firms).

The Bank and Fund themselves have come in for harsh attention in the two years since they highlighted corruption as a priority for action. The Fund is plagued with criticism it turned a blind eye to - or, worse, nurtured - post-Soviet era financial 'oligarchs' in Russia.

World Bank President James Wolfensohn has called in outside investigators - including a former federal prosecutor - to sift evidence of corruption within his agency. The probe has so far
resulted in one civil law suit and at least two suspensions of agency staff.

The Bank also is trying to come to terms with its own record in Indonesia, where officials, business analysts, and activists long have accused the lender of collusion in state-sanctioned graft.
The agency, so far, has admitted only that it went along with
government claims of epic improvements in living standards as it lent the Suharto regime 25 billion dollars over three decades.