[ALOCHONA] How to tackle systemic corruption? The Hong Kong Experience

 Since we spend an inordinate time dealing with corruption, I hope this article may be of some use.

Removing the rot

How to tackle systemic corruption?

The Hong Kong Experience

Mona Makram Ebeid

Al Ahram Weekly

http://weekly.ahram.org.eg/2008/899/op12.htm

 

Mona Makram Ebeid is a professor of political science at the American University in Cairo.

 

What triggered my interest in sharing with you some thoughts on corruption was my recent trip to Hong Kong where I had been invited by the chief executive, Sir Donald Tsang, a fellow student of mine at Harvard University during the early 1980s. It was a fantastic visit during which I met many senior officials, gave lectures at different universities and even had a helicopter tour of the whole island to see the latest developments which were amazingly impressive.

 

The first time I visited Hong Kong and China was in 1977 on a trip organised by the American University in Cairo at the invitation of the government of the Peoples Republic of China. At that time China was one of the world's poorest countries. Since then 400 million people have been lifted out of poverty, about 75 per cent of the world's total poverty reduction over the last century. The new cities and towns, roads and ports that have been built are stunningly impressive. People in China can now work, travel and own property as they please. This may not be enough in the eyes of policy analysts and intellectuals analysing the Chinese scene but it is not insignificant either. It is definitely a movement forward.

 

China, as we all know, is well on its way to becoming a formidable global power. The size of its economy has quadrupled since the launch of market reforms in the late 1970s, and by some estimates will double again over the next decade. It has become one of the world's major manufacturing centres and consumes roughly a third of the global supply of iron, steel and coal. It has accumulated massive foreign reserves worth more than $1 trillion, and its diplomacy has extended its reach not just in Asia but also in Africa, Latin America and recently the Middle East. And, whereas the Soviet Union rivalled the US as a military competitor only, China is emerging as both a military and an economic rival, heralding a profound shift in the distribution of global power.

 

WHERE IS HONG KONG IN ALL THIS? To its credit, China has respected the basic law of 1997, the date of Hong Kong's independence from Britain and which, under the slogan of One Country, Two Systems guarantees that Hong Kong's capitalist system and way of life will remain unchanged for 50 years. This includes the authority to conduct external economic and trade affairs, the rights and freedoms of the press, of speech, of religion and of travel. The result is that Hong Kong is a free and open society and its people are quick to speak out when they believe these freedoms are under threat. They understand that past and future success depends on safeguarding the institutions that have made Hong Kong a major hub for international business, finance, trade, transport, communication and tourism.

 

The rule of law upheld by an independent judiciary is one of Hong Kong's greatest strengths and is the cornerstone of its success as a leading international commercial and financial centre providing a secure environment for individuals and organisations. Foreign businesses are treated the same way as local businesses and there are no restrictions on ownership of property. By joining forces with established Hong Kong businesses overseas companies have been able to bring their products and services to the mainland China market as well as draw on the experience of Hong Kong's entrepreneurship. It has thus become an ideal location for companies wishing to enter the Chinese market as well as a strategic platform for trade with and investment in mainland China. In fact one fifth of China's imports and exports are handled through Hong Kong.

 

Hong Kong's GDP in 2006 amounted to $189.53 billion with growth at 6.8 per cent.

 

As I said, it is to China's credit that it has discovered the massive economic returns that are possible by operating within the Western open market system and by keeping Hong Kong as a spring- board for Chinese enterprises to expand globally. To further consolidate Hong Kong's position as a global financial centre they are planning to develop an Islamic financial platform in Hong Kong. Apart from stepping up their efforts to promote Hong Kong's financial services to Islamic countries and regions they are now focussing on developing an Islamic bond market and are studying recommendations for the early introduction of Islamic debt offerings in Hong Kong.

 

I was extremely impressed by this small (even million people) but dynamic city and by the professionalism and efficiency of all those I came across during my stay. However, what depressed me most was the three-hour briefing I had at the Independent Commission against Corruption (ICAC).

 

We all know that combating corruption is such a difficult and sensitive issue that many national political leaders who support such efforts in principle are hesitant to undertake them in practice. Yet virtually all forms of corruption are proscribed by virtually all countries. Why then don't countries take more steps to reduce corruption?

 

If countries have trouble fighting corruption it may be because they lack the will or the strategies, including incentives, to prevent corruption. In some instances, local capacities are constrained by costs, in others by a lack of know- how, and in still others by insufficient efforts to combat corruption.

 

As I said before, Hong Kong has become a premier international financial centre and is widely recognised as one of the freest economies in the world. Among the many fundamental strengths Hong Kong possesses is that it is regarded as one of the least corrupt places in the world. In 2005 For Ex Transparency International ranked Hong Kong as the second least corrupt place in Asia and the 15th least corrupt place among the 159 surveyed.

 

Tackling corruption has always been one of Hong Kong government's most fundamental pledges to the community. Established nearly 30 years ago, the Independent Commission against Corruption has played a significant role in upholding Hong Kong's reputation as a world city with clean government and a level playing field for business.

 

How did they go about it?

 

At various times, particularly during the 1950s and 1960s, Hong Kong was rated as extremely corrupt on scales such as those compiled by Transparency International.

 

Lack of accountability at the political level, together with weak transparency in public administration, proved fertile ground for corruption. Corruption had expanded from the traditional form of patronage, what we call wasta in Arabic, into the unabashed personal enrichment of office holders. It is the latter form of corruption that alienated large parts of the population from the government.

 

Faced with such a situation what could be done and by whom?

 

During the 1950s and 1960s Hong Kong witnessed a massive increase in population. While fuelling robust economic growth it stretched social and regulatory systems to the limit. As a result, corruption extended its tentacles to all corners of the community. Corruption syndicates were particularly visible in the public sector. Not only did they prey on the citizens they were meant to serve, but they provided protection for illegal activities. Despite persistent public condemnation corruption remained widespread and deep rooted and people were resigned to accepting it as a way of life. Some pertinent examples will clarify the picture more. In the early years, when resources were scarce, it was not uncommon for bribes to be paid to secure priority when applying for public services. For those who were not willing to compromise queuing time grew longer and longer. Ordinary people, those barely able to make ends meet, had to shoulder the added burden of having to bribe to survive. Small shop operators hoping to get business permits were typical prey. Bribery became a licence for non-prosecution and corrupt officials reaped a fortune by abusing their authority.

 

The amount of money amassed by some corrupt officials was astounding. In 1979 a retired detective sergeant, whose salary had amounted to a few hundred dollars a month, was convicted of possessing unexplained wealth and a total of $16 million was confiscated.

 

Another example is the construction industry, for a long time a vulnerable target of corruption syndicates within government departments and public utilities. To avoid suffering losses due to work delays construction companies had little choice but to pay for an occupation permit or for the approval of electrical installations. Public resentment reached a boiling point in 1973 when news broke that the chief superintendent of police had fled overseas while being investigated on corruption charges. Led by university students, thousands took to the streets to express their outrage and demand action. Their fury resonated throughout the community and the governor established a Commission of Enquiry which proposed the establishment of a truly independent organisation to tackle corruption. So it was that in 1974 the commission came into being. It knew it had to move fast to achieve results and credibility and bringing the policeman to justice was a priority of the highest order. With perseverance and hard work they were able to effect his extradition from the UK the following year and he was convicted and jailed.

 

Independence from the government and speedy enforcement in a number of major cases strengthened and consolidated public confidence in the commission shortly after its inception. But that was only one fact of the commission's all- out war against corruption. Equally important were endeavours to raise public awareness on corruption prevention and to educate the community about civil bribery and kickbacks and also anticorruption legislation.

 

By integrating corruption prevention and community education with investigations the commission set about making corruption such a high risk crime that people dared not be corrupt. They also promoted vigorous monitoring and control systems. The transformation of Hong Kong into one of the least corrupt cities of the world is a testament to the success of this multi-pronged strategy based on the belief that a clean and honest civil service is essential to Hong Kong's success.

 

WHAT WERE THE FACTORS THAT HELPED ITS SUCCESS? First, staunch public support was central to the commission's ability to bring the corrupt to justice. The core complainants in the early days of the commission were victims of corruption seeking redress from suffocating exploitation. Their ranks gradually swelled to include those who refused to pay bribes and even bystanders who came forward in defence of justice. Valuable information supplied by these complainants was pivotal in helping cripple syndicated corruption within a few years of the commission's inception.

 

With syndicated corruption contained the public began to demand an equally clean private sector. Complaints from members of the public, businessmen and regulatory bodies began to stream in, exposing acceptance of illegal rebates and connivance in fraud. Company executives grew increasingly intolerant of corruption as they realised it not only jeopardised the operation of their business but also ate up profits. They pro-actively referred information to the commission and offered full assistance in investigations.

 

WHAT ABOUT PRIVACY AND CONFIDENTIALITY? Despite growing readiness to report corruption many people remained concerned about possible repercussions should their identities or revelations be exposed. To remove this fear the commission has enforced since its inception a confidentiality rule on all complaints and complainants. It is a pledge that has not once been broken in 30 years.

 

On the other hand anyone making false reports has been prosecuted and penalised. The immense public trust in the commission is partly ascribed to its meticulous witness protection system.

 

The use of mass media publicity has also been shown to be an effective strategy to spread anticorruption messages. The commission has a web-based TV channel launched in 2004, which continues to provide the public with updated information on anticorruption initiatives. They told me that to build and sustain a corruption- free society was contingent upon changing institutional culture and replacing it with an integrity culture.

 

The commission spared no effort in collaborating with strategic sectors to promote moral education in schools, inculcate positive values and business ethics in young people, thus rooting an integrity culture firmly in the social fabric of Hong Kong. The commission has also drawn on the talent, enthusiasm and support of a wide spectrum of Hong Kong's community in instilling a culture of integrity.

 

Hong Kong invests heavily in education in order to foster social mobility to reduce cross generational poverty. They draw together government enterprises and individuals. Artists and singers help encourage the public with drama and music and portray the benefits of honest living.

 

Government departments, public bodies, private companies and professional associations all see the need for control systems if corruption is to be minimised. For instance, the smart ID card replacement scheme benefited from comprehensive preventive measures, incorporated right from the start, to keep corruption at bay.

 

Because of the prosperity of the city organised criminals are tempted to abuse Hong Kong's open economy to launder their money. But they face an efficient and effective law enforcement regime. As the globalisation of trade and the advent of knowledge-based economics made corruption a growing international concern the commission has been actively embracing international cooperation in investigation, intelligence exchanges and training. The commission shares Hong Kong's unique anticorruption experience through international conferences, forums and courses. The commission's most valuable asset is a dedicated and persevering staff that has demonstrated time and again that the three-pronged strategy of effective law enforcement, preventive education and corruption prevention can bear fruit.

 

Suppose a new minister wishes to attack corruption in his ministry. Let us set aside our scepticism about whether such people are in abundant supply and suppose, for the sake of discussion, that the minister does have the will to make reforms. What advice might we give him in the context of Hong Kong's experience? What lessons could be learned? What are the themes that have emerged that might be helpful to fight systemic corruption?

 

First, we need to define systemic corruption. We use this term to distinguish between two situations: one is where some people are corrupt, the second where many people are corrupt and the system itself has grown sick. A distinguishing characteristic of systemic corruption is that the parts of government that are supposed to prevent corruption -- budgeting, auditing, inspection, monitoring, evaluation and enforcement -- have themselves been corrupted. This makes the anticorruption task much more difficult. The good news is that around the world some courageous ministers have made impressive progress against systemic corruption. First, they need to change a corrupt institutional culture. Then they need to mobilise and coordinate resources inside and outside the government. Next, they have to think in terms of corrupt systems instead of corrupt individuals.

 

When corruption is systemic expectations are that corruption will continue. Cynicism and despair are widespread. Change seems impossible. And yet there are cases where substantial progress in changing a corrupt institutional culture has succeeded.

 

In the culture of corruption it is assumed that the big fish will swim free, and that the powerful enjoy immunity. To change this idea requires action, not words. One strategy is to fry a big fish or two, as we saw 30 years ago when Hong Kong captured and punished a former police commissioner.

 

A successful battle against systemic corruption must involve more than one government agency. Success requires the help of the audit authority, the police, the courts et al. It also requires the help of the business community and civil society. They are the ones that can provide information about where corruption is occurring and how corrupt systems work.

 

The task of the successful leader is not command and control but mobilisation and coordination. It is important to mobilise the employees of systemically corrupt institutions. Surprisingly, many success stories I was told about in Hong Kong involved people in the government providing diagnoses of government corruption. It turned out that even people involved in corrupt systems were willing and able to analyse where those systems were most vulnerable, where there was a combination of monopoly plus discretion (i.e. lack of transparency) minus accountability.

 

Success also depends on doing something positive, on improving the lot of public sector employees by, say, introducing new systems of performance measurement and linking them to better pay and promotion.

 

Those who have successfully fought systemic corruption have always involved the people. Many have invited business groups and lawyers and accountants to describe how corrupt systems work and to suggest remedial measures. One example is using the Internet to publicise contracts and budgets. E-government initiatives are proliferating around the world and promise a reduction in corruption.

 

Success also means analysing existing corrupt systems in terms of winners and losers. Winners will resist change and must, as a consequence, be neutralised. Losers are potential allies in the battle against corruption and can be mobilised in the anticorruption effort. Potential allies include international aid agencies, multinational corporations as well as the head of state. These allies should be made to understand that the fight against corruption is good for them. In the long term, curing systemic corruption requires better systems which go beyond better laws and new codes of conduct.

 

Corruption flourishes when someone has monopoly over a good or service, or has the discretion to decide how much you get or whether you get any at all, and where transparency and accountability are weak. So to fight corruption, we must reduce monopoly, reduce discretion and increase transparency and accountability.

 

Corrupt systems will not be subverted unless we get involved. By "we" I mean members of civil society. Around the world are new examples of citizen activism, of business groups entering into integrity pacts, of intellectuals and journalists and religious leaders going beyond lectures and sermons to analyse corrupt systems and work together to subvert them.

 

According to the Oxford Business Group Egypt is now Africa's largest recipient of foreign direct investment (FDI). Though the total capital inflow may be low by global standards it is on the rise and the trend is tipped to continue for the foreseeable future.

 

From $700 million in the 2000-2001 FDI rose to $6.1 billion for the year ending June 2006 and a further $8 billion is expected to have entered the Egyptian market from overseas in 2007.

 

In recent years, citizens around the world, international institutions including the UN, the World Bank and donor countries, as well as international NGOs, have been calling for greater transparency and integrity to encourage foreign direct investment. This call has been driven by the realisation that achieving economic, political and social objectives in many countries is only possible through improved governance and the prevention of corruption.

 

Corruption can be reduced even where it seems endemic and our combined efforts are an essential part of the solution.

 

• The writer is a professor of political science at the American University in Cairo.

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[Disclaimer: ALOCHONA Management is not liable for information contained in this message. The author takes full responsibility.]
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