The cost of public corruption

Published : 18 Oct 2012, 01:22 PM
Updated : 18 Oct 2012, 01:22 PM

Tk 3600 crore embezzled from Sonali Bank! At Tk 80 per dollar, that's a whopping $450,000,000.  Suranjit Sen Gupta and Tk 70 lakh? Amateurish by comparison! Coco Rahman's $3m bribe from Siemens? Nothing! Child's play. So how is this possible? Take half a billion dollars! The GDP of Bangladesh in 2011 was $110 billion. Did a few businessmen and bank officials really manage to steal ½ % of our GDP?

According to an English daily report, "After being interrogated by the ACC team, Tanvir (Mahmud, GM Hall Mark Group) told journalists that he had assets worth 20 times higher than the amount borrowed from the state-run commercial bank." So, let's compute: the Hallmark group borrowed Tk 2700 crore. If Mr. Mahmud is worth 20 times more, then his net worth is Tk 54,000 crore (or Tk 72,000 crore if we use the Tk 3600 crore figure). That is: Tk 540000000000. It is difficult to count the number of 0's without making a mistake! Converted: $6.75 billion (or may be as high as $9 billion). So why does a person of Mr. Mahmud's wealth engage in seemingly corrupt means to acquire money?

We cannot blame Mr. Mahmud. The scale of his undertaking may have been different, but the nature of the undertaking is the same. Our politicians have been leading the way and we the citizens are simply following the lessons our leaders are teaching us.

Coco Rahman, son of our former prime minister, resides outside Bangladesh for fear of prosecution for corruption. Our former PM calls him an innocent victim of persecution. Sonali Bank officials, after an 11-year hiatus, finally filed a case against the brothers Rahman for not making payments on loans that, with accrued interest, is about Tk 42 crore. Yet, when the former PM speaks, we often see Tarique Zia's picture proudly displayed on the wall behind her. And why should it not be there? Minister Suranjit Sen Gupta resigned because his personal assistant was caught with a sack full of money apparently on his way to the minister's home. Our PM waited only a few days before honouring him with another cabinet appointment, albeit without portfolio. MP Abul Hossain, accused of corruption by the World Bank, resigned from the cabinet, only for us to learn that our PM has given him the accolade of being a "true patriot." It was reported that Bangladesh Bank, under immense political pressure, approved the formation of nine new banks. And who are the beneficiaries? They include MPs of the party in power and also a coalition partner, former president, General Ershad.

Our politicians, of all persuasion, and their cronies take as they please, and our leaders commend them for their accomplishments. The corrupt are protected and offered immunity with impunity. And repeated governments legitimize corruption by allowing the "whitening" of ill gotten gains.

With corruption endemic, governance fails. We know not to rely on our institutions, for those institutions are not credible. The August 21 bomb attack killed many, including Ivy Rahman, but the then government chose to frame an innocent man, Joj Mia, and jailed him for several years for the attack. Many are killed by crossfire, but none investigated, no one held responsible for the extrajudicial killings. Who are we to trust and who are we to approach when we seek justice?

Dhaka University student Limon, was shot and maimed by RAB, but instead of punishing the culprits, the victim is repeatedly harassed by the very law enforcement officials who have sworn to protect him. And the then home minister, Shahara Khatun, simply waived her hands and declared that the government has no further responsibility, not even to ensure that a fair and forthright investigation is completed. No wonder that we are often reluctant to approach the institutions of justice unless we are able to bring along a sack full of taka to satisfy the lust of those in positions of authority. And without the trust in our institutions, we sometimes take matters in our own hands: accused criminals are not handed over to the police, but justice (or injustice) meted out immediately by the crowd. The rule of law is set aside.

The economic cost of public corruption is well documented. Bangladesh has ranked near the top of the Corruption Perception Index for the last decade. Bangladesh is often called one of the most corrupt countries in the world. Countries that rank high in the Corruption Perception Index also do poorly on the Doing Business Index, restricting much needed investment, particularly by foreigners. Some have estimated that had corruption not been prevalent, the country's GDP could grow at nine to ten percent every year instead of the six to seven percent that Bangladesh currently achieves.

Compounded over time, the cost of corruption is considerable. If we did not lose this 3% every year since 2000, the Gross National Income of Bangladesh, measured in constant 2000 US $'s, could have been 25% larger today. Surely more than enough to pay for the Padma bridge ourselves!

Household surveys done by Transperancy International, Bangladesh, indicate over 80% of households that interacted with institutions, public and private, were victims of corruption. The same body reports that households in Bangladesh lose 4% of their income to corruption, with those in lower economic echelons bearing a disproportionate share of this economic cost.

The Padma bridge affair is a solemn reminder of what the failure to reform can do to us as a nation. We are a sovereign nation. Yet we find the World Bank now telling us who can serve in our governments' cabinet, who can serve as the prime minister's advisor, which public official is acceptable and who is not. They insist on coming into our country to observe and decide whether the ACC is creditably investigating accusations of corruption. That's a shame, but a shame that the corrupt in our country have brought upon us. We have all the laws we need. Yet, the terms of compliance are dictated to us by outsiders. As a nation we hope that our governments succeed because we need our governments to succeed. The lasting legacy that our politicians can leave us is a set of institutions that above all establishes the rule of law in the country. And we have no more time to waste.

The PM speaks about reforming the World Bank and the IMF. Suranjit Sen Gupta is still in the cabinet; Abul Hossain "a patriot." Perhaps she should begin by looking at those who sit at the table around her, and speak to her own first. The former PM speaks of corruption by the members of the current government. Her sons await repatriation and rehabilitation. Perhaps she should also begin by speaking to her own first.

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Muhammad Q. Islam, is an Associate Professor of Economics, John Cook School of Business, Saint Louis University, USA.