Engineering sector corruption hampering programmes to reduce poverty in developing world

Massive corruption in the construction and engineering sector in the developing world especially in Africa is sabotaging policies and programmes that aim to reduce poverty, according to a  presentation by Zimbabwe’s Engineer Martin Manuhwa, Vice-President of the World Federation of Engineering Organisations (WFEO) Anti-Corruption chairperson and Chairperson of the Engineering Council of Zimbabwe (ECZ) at the recent World Engineering Conference and Convention held in Kyoto, Japan in 2015.

According to Manuhwa, corruption is broadly defined as the abuse of public office for private gain and has been generally acknowledged to be a universal problem.

“It encompasses all activities involving bribery, deception or dishonesty in order to gain personal or corporate profit.It occurs both in the developed world and the developing world,” Manuhwa.

Manuhwa said that the harmful effects of corruption are severe on the poor in the developing world like Africa who are hardest hit by economic decline, are most reliant on the provision of public services, are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges. Manuhwa’s  presentation focused on anti-corruption strategies and anti-bribery standards for optmising construction development projects delivery in the developing world.

Giving an overview on corruption, Manuhwa says that it ranks high  among the greatest obstacles to economic and social development, undermining development by distorting the rule of law and weakening the institutional foundation on which economic growth depends.

“Corruption is pervasive in developing countries because of weak institutions and the lack of effective checks and balances. It is mainly the funds from the developed world, the development banks and donors that circulate in corrupt practices in the developing world,’ he says.

He adds that the construction sector is  particularly vulnerable to corrupt practices since it involves significant building contracts as well as monopolistic services.

Providing an overview on the nature and extent of  corruption in Africa and the developing world its myths and realities, Manuhwa said that the scourge  occurs in all nations, both developed and developing countries, in public and private sectors, as well as non-profit organizations.

“The problem of corruption within or across nations is not a recent phenomenon, nor is it exclusively a Third World problem,” said Ghazanafar and May in 2000.

It is however reported that  corruption exists both in developed and developing countries in different forms, degrees and has differing consequences.

“Furthermore, within those countries falling in the category of developing countries, ranging from the bigger, relatively well developed countries such as Indonesia to the smaller poorly developed countries such as Equatorial Guinea, we can observe differences in corruption practices pertaining to the unique economic, political, and social features of each country,” Manuhwa said.

Manuhwa says that the anti-corruption environment is beginning to change. He says that previously, about 20 years ago, corruption was widely regarded as being normal, part of the culture, an inevitable part of business life and a necessary economic oil.

Business people from developed countries which enforced anti-corruption rules domestically believed that different rules applied when working in developing countries. It was inconceivable that a UK director would go to jail for a corrupt act committed overseas, or that a UK company would be convicted and fined for overseas corruption,” Manuhwa said.

Manuhwa added that 20 years later, there are numerous examples in the UK, USA and internationally of corporate prosecutions or plea bargains, and jail sentences for individuals for corruption.

He added that change probably started in the 1990s with the gradual realisation that corruption was damaging.

He said that evidence emerged that corruption kills for example when houses collapsed in earthquakes killing people and the massive plunder which was taking place of public funds.

“Economists who previously argued that corruption helped growth were silenced, and a consensus emerged that corruption retarded growth,” Manuhwa said.

Counting the costs of corruption in the engineering sector, he says that it is one of the greatest obstacles to the development of safe and adequate infrastructure, project funds are diverted to corrupt officials, funders, contractors, consultants, suppliers and agents.

On the human cost he said stealing of public money is rife, fewer good roads, schools and hospitals available, poor safety and environmental procedures followed, people dying due to lack of food and healthcare, and dangerous infrastructure.

On the economic costs, the World Bank and EU Commission estimate the cost of corruption including bribery and fraud generally to be 5% of the world’s Gross Domestic Product of  $1,5 trillion per annum.

Conservative estimates of the cost of corruption in the international construction sector are 5% of the global construction sector at $200 billion. Also national development is affected by levels of development and project implementation is compromised by corruption, Manuhwa told international delegates in Kyoto.

Manuhwa says with the growing realisation that corruption was damaging, demands for change emerged.

“In the 1990s, several organisations led change.  For example, Transparency International was established, the Organisation for Economic Co-operation and Development (OECD) established an anti-bribery working group, the USA began to advocate that other countries adopt similar legislation to Foreign Corrupt Practices Act 1977,” he said.

He added that realisation grew that nothing would change unless there was international consensus.  Calls emerged for international anti-corruption treaties to be signed.

He says that many international and regional treaties have been signed during the last 15 years requiring member states to implement anti-corruption laws and procedures.  For example, the United Nations Convention against Corruption (2003), the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1999), the African Union Convention on Preventing and Combating Corruption (2003), the Inter-American Convention against Corruption (1996) and the Council of Europe Criminal Law Convention on Corruption (2002).  Treaties require signatory countries to increase their anti-corruption efforts by improving their laws to criminalise corrupt acts, increasing resources allocated to investigating and prosecuting corruption, and improving co-operation and exchange of information between countries.

Manuhwa says that the two treaties which have probably had the most impact are the United Nations Convention against Corruption and the OECD Convention. Most countries have changed their laws in accordance with treaty requirements.  Bribery and other corruption offences are therefore crimes worldwide. He adds that all OECD countries have now made it a crime for their nationals and organisations to bribe overseas.   As a result, a person or organisation may be liable for corruption both, in the country where the corrupt activity took place and in person or organisation’s home country and the US Foreign Corrupt Practice Act 1977 and UK Bribery Act 2011 have had a significant impact.

Donors Agencies such as the World Bank, AfDB, ADB, IADB, EBRD, EU  and Export Credit Agencies (ECA), USAid  have tightened up on anti-corruption requirements.

Most of them debar companies and individuals which have committed corruption,” Manuhwa said.

For example a former railway minister Liu Zhijun in China was given a suspended death sentence in July 2013 for accepting a total of 64.6 million yuan in bribes to help 11 people secure contracts and promotions. His female colleague Ding Shumiao  is accused of giving Liu more than 49 million yuan and arranging sexual favours for him, she will face trial in Beijing for bribery and illegal business activities after she “intervened in bidding for dozens of railway projects”, the China Daily (2013, September) reported, citing prosecutors. The alleged total in inappropriate activities were equivalent to a quarter of China’s entire national railway investment in 2010.

In March the railways ministry was disbanded, with its administrative functions handed to the transport ministry and its commercial role given to a new China Railway Corporation.

The anti-corruption campaign has also targeted a former senior economics policymaker, top executives from a major state-owned oil firm and numerous low-ranking officials, but has not yet introduced systematic reforms in China.

Manuhwa says a stakeholder analysis of preventive measures should be applied to yield better results against corruption in the engineering sector.

He says the  strategies should  reflect the view that much of the problem can be addressed by focusing on deterrence and prevention in key areas.

“This should be done by all stakeholders who include, multilateral and bilateral donors, export credit agencies (ECAs) and commercial banks, national governments, civil society, media and NGOs, private sector companies, inter-governmental systems and international legal systems,” he said.

Manuhwa revealed that several anti-corruption initiatives have been established in the international construction and engineering industry which include the Global Anti-Corruption Education & Training Project (ACET),  Construction Industry Ethics & Compliance Initiative (CIECI), Construction Sector Transparency Initiative (CoST),  International Federation of Consulting Engineers (FIDIC), Global Infrastructure Anti-Corruption Centre (GIACC),UK Anti-Corruption Forum, World Economic Forum – Partnering against Corruption Initiative (WEF PACI) and the  World Federation of Engineering Organisations (WFEO).

It is not sufficient merely to have good laws and prosecution.  Corruption prevention is increasingly seen as a vital management issue. Good management in government, in companies and on projects can materially reduce corruption. Corruption prevention should be treated in a similar manner to quality and safety management”, Manuhwa said.

He also added that organisations are  now beginning to look for independent verification that their clients, partners, and supply chain have implemented anti-corruption systems. The British Standards Institution (BSI) in 2011 published BS 10500 – Specification for an anti-bribery management system.

Organisations can obtain certification to BS 10500 in a similar way to obtaining certification to 9001, 14001 and 18001,” Manuhwa said.

Strategies outlined by Manuhwa to combat corruption in the engineering sector include national governments adopting anti-corruption tools  in national and  sectoral governance systems dealing with projects.

He says that on the public sector’s side, enhancing or promoting a culture of transparency and accountability as well as promoting effective regulation are crucial.

Manuhwa says it requires adapting tools appropriate to fight corruption in national systems of governance with related capacity building support from the donor community.

He says that national governments should adopt anti-corruption tools  in national and sectoral governance systems dealing with projects.

He says that on the public sector’s side, enhancing or promoting a culture of transparency and accountability as well as promoting effective regulation is crucial.

“This requires adapting tools appropriate to fight corruption in national systems of governance with related capacity building support from the donor community,” Manuhwa said.

Other initiatives include civil society and NGO involvement in governance reform around projects  being strengthened, especially independent monitoring, social accountability and compliance activities.

Manuhwa said that civil society can play a role in providing transparency and enabling local people most vulnerable to the effects of corruption to have a voice in anti-corruption measures on projects that impact them.

An effective communications strategy on infrastructure projects can ensure that beneficiaries have the information they need to monitor the delivery of project benefits and hold providers accountable,” he said.

He adds that private sector companies involved in project development and equipment supply should adopt transparent mechanisms to promote integrity in business transactions.

Also project companies developing or managing assets and companies supplying equipment or services should meet recognized good practice standards for corporate governance and have explicit internal anti-corruption policies.

Companies have also been urged to apply monitorable codes of ethics across the company, from executive levels to the shop floor.

“Industry associations can provide anti-corruption guidelines, either on an international or a regional basis in order to reach members not directly involved in donor or Export Credit Agencies (ECA) financing. On the private sector’s side, corporate governance and transparent practices need to be reinforced,” Manuhwa said.

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