Edward Olowo-Okere, World Bank Governance Chief, has spent the last three years working to improve public services and financial management in low- and middle-income countries. His greatest challenge is corruption, and this is a problem for the rich world too.
“Corruption is really the most daunting development challenge,” says Edward Olowo-Okere. “And I don’t just mean in the low-income countries, but also the middle-income ones.”
His view is built on long experience: throughout his 24-year career at the World Bank, Olowo-Okere – a former university lecturer, originally from Nigeria – has specialised in public sector financial management. And he’s just completed a three-year stint as global director of the Bank’s Governance Global Practice, which helps developing and emerging economies to “undertake necessary reforms to be able to better manage their bureaucracies” – ultimately providing “better services for citizens and businesses, facilitating private sector development while increasing shared prosperity”.
Given the range of obstacles holding back development – from weak inward investment to heavy debt burdens; from crumbling national infrastructures to sclerotic bureaucracies – Olowo-Okere’s strong focus on corruption is striking. But the reality is that corruption fosters and exacerbates many of these other problems. Investors stay away because demands for backhanders increase the cost of doing business; corrupt officials collect bribes rather than taxes and fees, increasing national deficits; infrastructure is shoddily built by cowboy firms that have bought their contracts; and bureaucrats fiercely defend the slow, inefficient systems that create a market for costly short-cuts.
“Corruption diverts resources away from where they’re most needed,” Olowo-Okere comments – so funds “that would have been used to have better health, better education, better roads, better infrastructure are pocketed by a few people. The impact is that you have poor infrastructure, poor service delivery, affecting the standard of living of the majority of the people; and then you have a few people with a lot of money, living in luxury”.
When corruption becomes embedded in a country’s public services, everyday activities – like registering a business or getting a driving license – involve paying a bribe. This holds back economic growth, while empowering and enriching the dishonest – further increasing their stranglehold on the system. “Out of the little that they have, poor people also have to give to those few people who are taking bribes,” says Olowo-Okere.
The role of the rich world
So, corruption deepens and perpetuates many of the problems affecting low- and middle-income countries – but both its causes and consequences are global, says Olowo-Okere, and civil servants in the rich world have a crucial role to play in challenging it. Most obviously, “they can make sure that the countries they support, in terms of giving overseas development assistance, are implementing the right policies and controlling corruption,” he says. Where countries fail to do so, governments in the industrialised world should “find better ways to channel these resources directly to the people that they want to help”.
But, that is just the start. “You have two sides to corruption. One is asking for the rent,” he comments – but “if nobody’s willing to give, then corruption cannot thrive. It does take two to tango: you have to have the receiver and the giver”. International businesses seeking contracts – for road construction or mineral extraction, for example – are often asked for baksheesh; and Olowo-Okere points out that some rich countries have legislated to criminalise the payment of bribes overseas by their companies and businesspeople. “Where you have rules in the developed world that hold these people accountable, that can deter businessmen from those countries from giving bribes,” he says. “I think countries who are not yet doing that should introduce these rules and processes. And enforcement is also important.”
Corrupt officials and politicians often invest their money in property in high-value locations such as London.
Meanwhile, wealthier nations can deny corrupt officials and politicians a safe haven for their stolen assets. “Most of the receivers of the proceeds of corruption are not comfortable retaining the resources within their own countries,” Olowo-Okere comments – so they invest them in property and businesses abroad. “The developed world can prevent these resources from being brought to their countries illegally,” he says. “Or where they are brought to their countries illegally, they can find a way to seize those resources and get them back to the people they belong to.”
Here, most rich world nations could do more: Olowo-Okere praises UK legislation outlawing the payment of bribes, for example, but notes the high levels of investment in British “real estate by politicians from some of the Commonwealth countries”. Increasing the pressure, he believes, would generate benefits for developed countries as well as poorer nations: after all, “corruption is not just a low-income country challenge”.
Pandemic payola
During the pandemic, for example, “a lot of people saw the opportunity to profit. The rest of the world saw misery and debt and so on and so forth, but they saw a good opportunity to enrich their pockets,” Olowo-Okere recalls. “And these bad people are not only in the developing world; they’re also in the developed world.”
In some instances, forms of corruption emerged in the business support and economic stimulus packages devised to protect industries and jobs. Agriculture was less affected by lockdowns than other sectors, notes Olowo-Okere. Yet in one country those planning support programmes, themselves “mostly involved in agriculture, were advocating locating a lot of money to support agriculture companies, because they were going to get a good chunk of that money”. Elsewhere, the rush to procure PPE led to “various forms of corruption where, for example, masks were being bought at ten times the normal price”.
The solution, he says, is to prepare in advance for such crises – producing “proper procedures for emergency procurement” that “anticipate the risks of corruption” and block those opportunities. Digital procurement platforms can be helpful here, he adds – boosting transparency to tackle corruption, while enabling civil service buyers to access broad, competitive supplier markets online at times when other routes to market are disrupted.
Hidden costs
So there are ways to improve the response to future crises – but meanwhile, the pandemic has further weakened the tenuous financial position of governments around the world. According to the UN, developing countries’ debts jumped from 58 to 65% of GDP between 2019 and 2021. And even these figures may be optimistic: many stimulus packages included ‘below the line’ measures such as loan guarantees that don’t appear in the public accounts but may, notes Olowo-Okere, “translate into real liabilities”. As a result, “government balance sheets may not be showing the true and fair view” of countries’ financial health.
This problem persists in part because many governments use a “cash basis” to prepare their accounts, counting money received and spent but disregarding liabilities such as loan guarantees and arrears. “If we were able to get the true balance sheets of some countries, they have what we’d call negative equity in the private sector,” he comments. “You won’t find a lot of companies surviving with negative equity.” Some national budgets, he adds, conceal the fact that “the real budgeting is done during implementation”: finance departments may try to link spending to public policy goals, but in reality “you don’t implement based on need; you implement based on available cash”.
As a result, Olowo-Okere backs the ‘public sector net worth’ approach to accounting: championed by organisations such as the Association of Chartered Certified Accountants, this involves totting up the total value of a government’s assets and liabilities. “I do fully agree with them,” he says. “Moving away from cash accounting to a more robust, comprehensive reporting, where we know their net worth, will I think be a better way to manage going forward, because it will force governments to make better fiscal management decisions”. He also supports the use of programme-based budgeting, under which finance departments allocate resources to outcome-focused, cross-departmental work programmes rather than funding individual services and public bodies.
Donating digital
Here again, he says, the rich world can lend a hand by “sharing knowledge and experience and practices – not for wholesale adoption, but to learn from it and adapt it” to local circumstances. On digital public services too, he argues that the expertise, techniques and technologies developed by rich nations should “be shared with developing countries”: in 2019 Olowo-Okere led the establishment of a ‘Govtech Global Partnership’ to promote international collaboration on digital services.
Digital services hold particular promise in the developing world, says Olowo-Okere. In many poor countries, “a lot of resources – both financial and human – are concentrated in the capital cities, but you have lots of people living in very remote areas. Connecting all of them with roads and hardwired phones will be a challenge”. But many such nations have high rates of mobile phone ownership: serving citizens digitally could improve access to public services, while reducing demand for costly fixed communications infrastructure.
Like the use of online procurement platforms, digital public service delivery can also help tackle corruption, says Olowo-Okere. Digital services can “take the human out of the equation”, he explains. “If you can automate it and have a direct transaction between the citizen and the machine, that has the potential to squeeze out corruption”– denying staff the opportunity to seek bribes, while channelling citizens’ fees, fines and taxes directly into departments’ bank accounts.
A shared challenge
As developing nations’ real financial positions continue to weaken under the burdens of pandemic-related spending, rising debt levels and corrosive corruption, Olowo-Okere argues, it is becoming ever more important that they reform budgeting systems and pursue digitalisation – or their public sectors risk becoming financially unsustainable. “A lot of people will say that a state is sovereign, and there is no limit to the power of the state to raise revenue,” he comments. “But, I will say that there is a limit, because I think you can get to a point where people, the citizens say: ‘We can’t pay any more.’ And in that situation, they can revert to other measures to push government back.”
So, it is essential that governments bear down on corruption – reducing the damage done to public revenues, spending decisions, service delivery and economic development. And this, says Oloro-Okere, applies to the developed as well as the developing world: as we’ve seen during the pandemic, nations of all kinds can be vulnerable to corruption in high office.
“Where you have corrupt people in leadership in a country, they can use an emergency as an opportunity to enrich their friends, their families and themselves – and you have examples of that across the various continents,” he says. The harms caused by corruption may be most acute and obvious in lower-income countries, but no government is immune to the risk; and even the best-planned emergency procurement rules will fail if senior leaders are not ethical and honest.
“If people in leadership positions really want to do the right thing, then even in an emergency they can do that,” Olowo-Okere concludes. “But if they don’t want to do the right thing, they can invoke emergency rules or declare a state of emergency – and decide to do whatever they want in order to enrich themselves.”
This article was produced and first published by Global Government Forum, the specialist publisher serving civil servants around the world. www.globalgovernmentforum.com
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