Is your Neighbour Corrupt? Would you know?
Is it my imagination or do we seem to be awash with corruption at the moment?
And no, we are not talking about shady South American drug cartels, we’re talking about supposedly legitimate businesses that buy from our Governments and supply our public services.
A new study by RAND Europe and posted by Marino Donati in Ethics, Procurement, Public sector, Risk said the annual total cost of corruption in Europe is as much as €990bn (£780bn). This is what it looks like: £780,000,000,000 and considering that there are 508m people living in the EU that equates to about £1525 per person. Frightening isn’t it?
So, what sort of corruption is it? Well, one is straight paying of bribes and others include exercising power to give privileged access to public services, goods or contracts; having only one organisation in a procurement process; or giving organisations little time to respond to tenders.
Another, according to the report, includes acts such as unjustified sole sourcing or direct contracting of awards, tailoring specifications to a favoured bidder and sharing inside information.
As with all research, Rand have identified the countries most at risk and here’s another surprise. The costs of corruption risk are highest in Poland and the United Kingdom (both above €1bn), and while in a country like Croatia there is a relatively high corruption risk across its public procurement contracts, the overall value of contracts is low. Poland, Romania, Lithuania, Cyprus and Croatia had above EU member state average of corruption risk in public procurement, the study said. Luxembourg had the least corruption.
What about countries outside of Europe? In research carried out by Ernest & Young, corruption cost India 36,400 crore (that is 36.4 billion rupees) from October 2011 to September 2012.
In Pakistan, according to the Herald Tribune, corruption has caused an unbearable loss to the economy in recent decades. A newspaper has reported that the estimated loss corruption caused was more than Rs12 billion per day including Rs7 billion of tax evasion.
And what about the economic powerhouse that is China? According to The Australian, widespread corruption in China is eating away whatever is left of the Chinese Communist Party’s legitimacy. Wikipedia tells us that corruption in China is estimated at $86 billion per year.
Why does it matter?
Marco Hafner, a research leader at RAND Europe and the report’s main author, said corruption imposed significant social, political and economic costs.
“Not only does it result in huge amounts of money being lost annually, but corruption leads to more unequal societies, higher levels of organised crime, weaker rule of law and lower trust in public institutions,” he said.
Could we have any less trust in our Governments and institutions with the Panama Papers, deals with large corporates over their tax obligations, mishandling of the banks and corruption in sporting institutions such as FIFA?
Trust is earned and there does not seem to be a lot of it around at the moment.
So, are you going to open your doors for business today knowing that it is costing £1535 for every staff and family member?
Are you going to view your neighbour with suspicion?