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The cost of corruption

Sunday, August 30, 2015

How exhausting it is, the leech stuck to society’s flesh draining its energy. It is the friend of poverty, in all that poverty means—from those without access to the basic needs of life to those poor in willpower. Those who are so jaded by our corrupt culture they have submitted to the belief that whomever we put in office will be corrupt. In a democracy, even the quasi-one in which we live, we still have the authority to push back.

Much has been said about corruption and the harm it does to a country economically and socially, but the average citizen doesn’t link it with poverty or feelings of fear and insecurity.

According to the United Nations Office on Drugs and Crime (UNODC), “Each year, over US$1.0 trillion is paid in bribes worldwide…Corruption reduces a government's ability to provide basic resources and services for its citizens. Investment in a relatively corrupt country compared to an uncorrupt one can be as much as 20 per cent more costly. Nations that fight corruption and improve their rule of law could increase their national income by 400 per cent. It allows organised crime and terrorism to flourish, facilitates drug trafficking, and it is associated with money-laundering.” 

Driving home links between public corruption and criminals, LifeSport monies benefitted persons charged with the assassination of Dana Seetahal, SC. Campaign financiers charged with Piarco fraud still get government contracts. If countries, especially small island states, can get rid of most of the public sector-generated corruption and gross inefficiencies facilitating fraud they would weather external shocks better and improve standards of living.

Much of the corruption is in the high-risk area of government procurement of goods and services—from stationery items to building roads and bridges to purchasing sophisticated security equipment. The bigger the projects, the more vulnerable to large-scale bribes linked to elections campaign financing and self-enrichment. However, the cumulative effect of fraud in high-volume small items purchases by health, education, and other essential services departments is equally significant. The volume makes these areas attractive targets. 

Criminal gangs of politicians cripple small economies. They stifle competition, kill entrepreneurship, distort markets, cause capital flight, undermine development, create poverty, and damage the environment. 

Based on UNODC research, it is estimated that public procurement accounts for about 15–20 per cent of a country’s Gross Domestic Product (GDP). Corruption accounts for an average of ten-25 per cent of a public contract’s value. That estimate is not far-fetched. Using merited allegations in the public domain, consider the cost of over $235 million per mile for the highway to Point Fortin. Factor in our culture of corruption and the reputation of the main contractor—OAS the Brazillian construction company. Life Sport was $625 million approximately (more than ten per cent of VAT income). The cost of the fire truck was $6 million. National Gas Company (NGC) corporate communications budget jumped from $67 to 200 million, a difference of $133 million—a figure not yet challenged by an independent investigative report. The legal fees wasted in the University of T&T ill-advised case was $48 million, and the illegal flying squad was $24 million. The Housing Development Corporation reportedly paid $175 million for land in Eden Gardens estimated at $35 million—a difference of $140 million. According to press reports, Super Industrial Services won the Beetham Wastewater project with a bid of US$167,755,329. That was US$72,530,686 more than its competitor Atlatec’s bid of US$95,224,643 and more than NGC’s estimate of US$149,999,000. An average difference of $45 million. The Joint Consultative Council (JCC) called for a halt to the project and recommended an independent investigation into the award of the contract. Its president, Mr Afra Raymond, pointed out that had the Water and Sewerage Authority (WASA) handled the project it would have had to go through the Central Tenders Board. By using the NGC, the country’s oversight mechanisms were circumvented.

Based on just these few events, there’s a cloudy sum of over $1.0 billion. That only scratches the surface of suspicious transactions.

For 2014, expenditure on goods and services was approximately $9 billion and capital expenditure $8 billion—a total of $17 billion or ten per cent of GDP. That excludes procurement by state enterprises. Accepting that we are not an exception to the UNODC’s averages, then it is highly likely that annual corruption is in the billions of dollars, and it didn’t start yesterday. That will account substantially for our consistently poor competitive ratings and corruption rankings of 89 out of 144 countries and 85 out of 175 respectively. It is a key indicator of other high crime rates.

Consider the price of cronyism that result in low employee morale, poor work ethic, low productivity, inefficiency in goods and services delivery, and the erosion of institutional capacity.

Imagine what service delivery and the quality of life could be like without the current levels of inefficiency and corruption. And would we be so worried about falling oil prices.

That is why Mr Afra Raymond is right. “When sitting politicians are prosecuted then everyone will know just how serious this country is about curbing corruption.” We pay a high price.


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