Walk the talk on corruption

As the new governments assume office in Tamil Nadu and West Bengal, one can't help noticing that along with promises of fixing everything that is wrong in the state, they have also promised to eradicate corruption. Given the track record of the same parties and/or their allies during previous stints at governance, one wonders if it is just wishful thinking.

Corruption has been uppermost in the minds of the people the world over. If outrage over corruption has begun to galvanise action within India, it has also been one of the grievances of the people in all the mini-revolutions in West Asia that managed to change some governments, and continue to threaten many others. Looking further back, when you consider all those ‘colour' revolutions in Eastern Europe, corruption again was one of those loudly voiced grievances of the people looking for a change in government.

DISINCENTIVE TO INVESTORS

Political parties, before they come to power, often promise to clean the stables, but how many of them live up to it after they take office? Georgia, the small former Soviet Republic of about 4.6 million people in the Caucasus, has been advertising its success. Full-page advertisements invite people to ‘grow with Georgia' and claim to be the ‘the world's number 1 in fighting corruption'. All the well known indicators show a fall in perception of corruption. Not only that, Georgians are also advertising that they are the ‘world's number one reformer', making the country the easiest place to do business in Eastern and Central Europe. Georgia wants you to come and invest there.

Research studies lean towards confirming that foreign direct investment (FDI) is affected by corruption in a country. The harmful effects of corruption are pretty obvious to most. Corruption raises the cost of doing business. It discriminates against poor and marginal groups who cannot afford to pay bribes. Of course, there is a clear relationship between administrative reforms and corruption. For example, cutting procedures for securing permits, reducing the role of the government in managing the business environment and streamlining procedures can contribute to reducing corruption.

GEORGIA'S TURNAROUND

Looking at published figures, Georgia does seem to have made an impact both in areas of corruption perception and in facilitating the business environment. In 2003, the public protests (‘rose revolution') that erupted in the country against what they called a fraudulent election brought a new government under the leadership of Mr Mikhail Saakashvilli into power. This, in itself, was unusual since Georgians were generally considered by many observers as being passive and having a tendency to accept the status quo. The situation must have really hit the bottom for them to revolt.

External triggers helped. Foreign aid donors were threatening to cut aid if the corruption was not tackled. The country realised that it needed to do something if it hoped to join the European Union. Since then, something has changed.

In 2003, Transparency International ranked Georgia 124 out of 133 in its corruption perceptions index. That number has been improving. After dropping to 130 in 2005, it improved to 67 in 2008, and is now 68 out of 178 countries in 2010.

The World Bank's data on the country in its Doing Business index shows that Georgia has significantly improved the number of days needed to get a permit, the number of procedures it takes to start a business, among other things, over the years and its ranking now is 12 out of 183 countries in ease of doing business. All this has seen significant increases in foreign investment inflows into the country, which tripled between 2004 and 2007.

INSTITUTIONAL REFORM

What did Georgia do? All the usual things, except that it put its words into practice. Both institutional reform and punitive measures are said to have helped Georgia. For instance, the entire police force was sacked and re-hired under fresh criteria. Legislation was adopted and implemented, new regulatory and supervisory bodies were established, and arrests of high-ranking officials in government were carried out.

A National Anti-Corruption plan was adopted in 2005 that included new legislation criminalising various acts of corruption and regulatory oversight, besides ushering in transparency in dealings and simplifying procedures.

Former ministers and senior members of the ruling party were arrested and charged with corruption. Businessmen have been arrested on charges of bribing officials. All this is said to have made life easier for the common man.

Governments often announce plans and reforms, but what is unique in Georgia is that people perceive reduced levels of corruption. In an opinion poll conducted in 2010, 77 per cent of the respondents reported that the government's efforts to reduce corruption were either ‘effective' or extremely effective'. (Compare that to 57 per cent of respondents, who in 2000 said that corruption was worse than four years ago.)

People in West Asia believe that democracy will cure their society of its various ills, including corruption. Certainly, in theory, one can expect more transparency in democracy and accountability towards the people, which will put a damper on corrupt activities. But major democracies also suffer from corruption. Indians know that for sure.

It is not that Georgia has eliminated corruption. There continue to be charges that while petty bribe taking has been reduced, corruption in high places continues. There perhaps is no country that is totally free from corruption. But there is an 80-20 rule in all such societal problems.

If 80 per cent of the activities are free of corruption, then the remaining 20 per cent don't seem to have such a devastating impact. Georgia, over a period of just about seven years, can claim to have reached that status and turned things around.

(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. >blfeedback@ thehindu.co.in )

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