Corruption and Governance in South Asia

(inSouthAsia2009publishedbyEuropapublications)
GeneralSurvey
CorruptionandGovernanceinSouthAsia
MushtaqH.Khan
Sincetheearly1980stheproblemofcorruptionandissuesofgovernancehavecometotheforein
allSouthAsiancountries.Internalpublicconcernovercorruption,andpressurefrominternational
agencies,suchastheWorldBankandtheIMF,andfrombilateralagenciesalarmedbythemisuseof
aid,hasbeengrowing.Closelylinkedtotheissueofcorruptionisawidersetofconcernsregarding
governance,includingtheoperationofthejudicialsystem,thestabilityofpropertyrights,andthe
functioningofdemocracy.Corruptionhasbeenforemostontheagenda,outofalltheseissues,asitis
widelyperceivedtobenotjustaprobleminitselfbutalsoanindicatorofotherfailuresofgovernance.
Inresponsetointernalandexternalpressures,politicalpartiesinSouthAsiahaveadoptedanti
corruptionprogrammes,althoughusuallyonlyaspopulistslogansortoattacktheiropponents.
Furthermore,citizensgroupsandlocalandinternationalnongovernmentalorganizations(NGOs)have
ledintensecampaignsand,significantly,amainstreamingofanticorruptionpoliciesbytheWorldBank
andotherinternationalagencieshasoccurred.However,theproblemofcorruptionpersistsinSouth
Asia,asmeasuredbytheintensepublicdebateonandmediacoverageofcorruption,theongoing
concernofinternationalagenciesandinvestors,aswellasthepoorshowingofthesecountriesin
internationalrankingsofcorruptionindicesconstructedbytheNGOTransparencyInternationaland
othersuchagencies.Ontheotherhand,thedebateongovernanceinSouthAsiahasalsobeenvery
narrowlydefined,withinsufficientattentionbeingpaidtomanyimportantaspectsofgrowth
enhancinggovernancecapabilities.
Sincetheearly1980sprimeministersandpresidentsinBangladesh,IndiaandPakistanhavebeen
legallyimplicatedin,andsometimesevenconvictedof,corruption,andinNepalandSriLankaprime
ministershavebeenregularlyaccusedofcorruptionbytheirpoliticalrivalsandthemedia.Provincial,
stateandlocalgovernmentsinallSouthAsiancountrieshavealsobeenaccusedofbeingequally
corrupt,withanumberofflamboyantchiefministersinIndiaacquiringaninternationalreputationfor
corruption.Theformofgovernmentalsoseemstohavehadlittleeffectonthemagnitudeof
corruption,withbothdemocraciesandauthoritarianregimesdisplayingequallyhighlevelsof
corruption.PublicdisclosuresoflargescalecorruptioninBangladesh,IndiaandPakistanhaveoften
beendominatedbymajorirregularitiesingovernmentprocurements.Whileinthepastpublicsector
industriesattractedthemostattentionfornepotismandclientelism,recentlyanumberofspectacular
corruptionrelatedscandalsandcrisesinprivatizationdealsandtheregulationoffinancialmarkets
havebeenexposed.Atalowerlevel,governmentfunctionariesofalltypesarewidelyengagedin
corruption;police,customs,landregistrationandirrigationofficialsreceivefrequentnegative
attentioninthemedia.Inpublicopinionsurveys,policeforcesthroughouttheIndiansubcontinentare
oftenaccusedofbeingthemostcorruptagencies,notnecessarilybecausetheyappropriatethe
greatestamountinbribesbutbecauseformostpeopletheircorruptionisthemostvisibleandirksome
onadailybasis.ThisqualitativeandjournalisticevidenceofwidespreadcorruptioninSouthAsiais
supportedbysurveysofpublicperceptionsofcorruptionthatarecollatedbytheWorldBankto
provideindicesforthe`controlofcorruptionindifferentcountries.Theseindicesareconstructedin
suchawaythattheyrangefrom2.5(thehighestlevelofcorruption)to+2.5(thelowestlevelof
corruption),withtheaverageofallcountriesindicesbeing0.0.Beloweachindexlistedinthe
followingtableappearsthestandarderror,whichshowsthedegreeofconfidencegiventhevariation
intheindicesavailableforeachcountry.
Control of Corruption Index for South Asia
(range: -2.5 to +2.5, standard error shown in brackets)
Country 1996 1998 2000 2002 2004 2008
Afghanistan na na -1.56 -1.32 -1.33 -1.64
(0.44) (0.27) (0.21) (0.21)

Bangladesh -0.47 -0.40 -0.60 -0.95 -1.09 -1.1
(0.24) (0.21) (0.16) (0.14) (0.14) (0.15)

India -0.31 -0.17 -0.25 -0.36 -0.31 -0.37
(0.17) (0.13) (0.15) (0.13) (0.12) (0.13)

Maldives na -0.55 -0.45 -0.05 0.12 -0.6
(0.37) (0.24) (0.22) (0.24) (0.26)

Nepal -0.28 -0.59 -0.56 -0.37 -0.61 -0.68
(0.47) (0.27) (0.20) (0.18) (0.16) (0.18)

Pakistan -0.98 -0.76 -0.80 -0.81 -0.87 -0.77
(0.23) (0.18) (0.16) (0.15) (0.14) (0.15)

Sri Lanka -0.23 -0.24 -0.09 -0.13 -0.16 -0.15
(0.24) (0.21) (0.15) (0.14) (0.14) (0.15)

Source: Kaufmann et. al. (2009)
Note: na =not available

Theseindicesshouldbeinterpretedcarefullyastheyarebasedonsubjectiveperceptionsandin
additionthescoresarenormalizedsothattheaverageofthescoresofallcountriesissetequaltozero
everyyear.Thereforetheimprovementintheindexforaparticularcountrydoesnotnecessarilymean
thatcorruptionhasreducedinthatcountry,itcouldbethatcorruptionhasworsenedinother
countriesorthesampleofcountrieshaschanged.However,totheextentthatthesescoresare
comparableovertime,theysuggestthatofficialpoliciesandpressurefromNGOsandcivilsocietyhad
minimaleffectonreducingcorruptionbetween1996and2008.Therehavebeensmallimprovements
intheindexoverthisperiodinPakistan,SriLanka,AfghanistanandBhutan,buteveninthesecasesthe
improvementswerenotsignificant,giventhestandarderrorintheindices.IntheotherSouthAsian
countriesthecorruptionmeasureworsened.Thereissomeconcern,particularlyinBangladesh,about
whetherthedeclineinthesesubjectiveindicatorsinrecentyearsrevealsthechangingsensitivitiesof
respondentsratherthanrealchangesinthedegreeofcorruption.Nevertheless,whilesubjective
perceptionindicesmaynotreflecttruechangesinthedegreeofcorruption,theydorevealgrowing
publicdisquietwiththeslowprogressindealingwiththeproblem.SriLanka,whichhasasomewhat
higherpercapitagrossnationalincomethanitsneighbours,thecorruptionindexwascorrespondingly
better.However,eveninSriLanka,corruptionhasbecomeoneofthemainissuestodominate
accusationsandcounteraccusationsmadebygovernmentandoppositionparties.TheMaldivesand
BhutanhadthelowestrecordedlevelsofcorruptionintheIndiansubcontinent,andweretheonly
SouthAsiancountrieswithcorruptionindicatorsthatwerepositivein1998,whichmeansthattheyhad
corruptionrankingsbetterthantheglobalaverage.By2007,however,theMaldiveshadrevertedto
theSouthAsianpattern,suggestingthattheearlyresultscouldhavebeentheresultoflowerpublic
awarenessofcorruptionasaproblemintheislands,ratherthanasignificantrealchangeinthedegree
ofcorruptioninlessthanadecade.Indeed,thestandarderrorsagainsuggestthattheremayhave
beenlittlerealchangeincorruptioninthiscountry.Afghanistanhasconsistentlyhadthehighest
corruptionindicatorinSouthAsia,reflectingthecontinuingroleofwarlordsandcriminalityinits
economy.Herethecorruptionislargelyofadifferenttypeandmagnitude,comparedwithits
neighbours,sinceanationwidestatestructuredoesnotyetexist.
TheextentofcorruptioninSouthAsiahasledtowiderconcernregardingpoorgovernance,which
inturnisresponsibleforpooreconomicperformance,persistentpoverty,thesubversionofdemocracy
andtheinabilitytoattractsufficientforeigninvestment.However,inassessingcorruptioninSouth
Asia,itisdesirabletorememberthatcorruptionisrifeinalldevelopingcountries,regardlessoftheir
economicgrowthrates;indeed,thelevelofcorruptionisstronglyconnectedtothecountryslevelof
development.Generally,thepoorerandlessdevelopedacountryis,themoreitsuffersfrom
corruption.ThisiseventrueofhighgrowthdevelopingcountriessuchastheRepublicofKoreainthe
1960sorthePeoplesRepublicofChinainthefirstdecadeofthe2000s.Thiscrosscountryevidence
suggeststhatstudyingtheaggregateevidenceofcorruptionislikelytobemisleading,sinceeven
rapidlygrowingeconomiesexperiencerelativelyhighlevelsofcorruptionintheirnascentstages.
Clearly,itisnecessarytodistinguishbetweendifferenttypesofcorruptionandtoidentifywhythe
moredamagingtypespredominateinlessdynamiceconomiessuchasthosefoundinSouthAsia.This
willalsohelptoassessthelikelihoodofsuccessforspecificanticorruptionstrategies.
A Typology of South Asian Corruption
Corruptioncanbedefinedinvariousways,butitistypicallyunderstoodtomeanaviolationoflaw
bypublicofficialsforprivategain.Theprivategainofthepublicofficialusuallyinvolvesaccepting
bribes,whichconstitutesadirectviolationofthelaw.Inaddition,thepublicofficialtypicallyoffersin
exchangedecisionsorservicesthatmaybelegalorillegal,andbeneficialordamagingforsociety.The
servicesthatthepublicofficialofferscanbelegaliftheyarelegalentitlementsbutbeneficiarieshave
tobribetogettheseentitlements.Ontheotherhand,corruptionmayalsoresultinfurtherillegalacts,
forinstancethroughtheprovisionofaproscribedserviceand/orthesubversionofstatepoliciesina
wayadvantageousforthebribepayer.Inaddition,theeconomiceffectsoftheseinterventionscanbe
sociallydamagingorotherwise.Asaresult,fourdifferenttypesofcorruptioncanbeidentified
dependingonwhethertheunderlyinginterventionorserviceprovisionthatfollowsislegalorillegal,
andwhetheritissociallybeneficialordamaging.Whilethebriberypartofcorruptionisalways
damaginginthesensethattimeandresourcesareusedup,theneteffectofcorruptionalsodepends
ontheunderlyinginterventionorserviceprovisionassociatedwiththecorruption.Moreover,unlike
taxes,thepaymentofabribedoesnotguaranteethepromisedserviceordecision,andthereisoften
littleredressifthepublicofficialtakingbribesdoesnotdeliver.Inaddition,corruptioncanhave
importantindirecteffectsonbusinessconfidenceandthusoninvestments.Forinstance,corruption
couldpotentiallyresultinsuddenchangesingovernmentpolicyorinthereallocationofproperty
rights,therebyadverselyaffectingtheinvestmentclimateandincreasingtheoverallcostsof
corruption.However,whilebriberyalwaysimposesacostonsociety,theneteconomiceffectof
corruptionalsodependsonthetypeofinterventionorsubversionofpolicythatisachievedasaresult
ofthebribe.Violationsofusefulandnecessarylawsareclearlydamagingfortheeconomy,and
examplesofsuchcorruptionarenotdifficulttofindinSouthAsia.Inthesecasescorruptionis
unquestionablydamagingfortheeconomy.However,therearealsomanyviolationsofthelawin
developingcountriesthatmaynotnecessarilybesociallydamaging.Forinstance,emergingcapitalists
mighthavetonavigatearoundpoliticallynecessarybutrestrictivelaws,ornecessaryinterventions
mightexistthathavenotyetbeenlegallysanctioned.Insomecasestheseinterventionscannotbe
legallysanctionedforpoliticalreasonseventhoughtheyareessentialformaintainingpoliticalstability
oreconomicgrowth.Inthesecases,theeconomiceffectsofcorruptionareanomalous;accordingly,
corruptioncouldbeassociatedwitheitherstagnationorgrowth.Thedistinctionbetweentypesof
corruptionisimportantinordertounderstandboththeeconomicandpoliticaleffectsofcorruption
andtheappropriatenessofdifferentanticorruptionstrategies.Itispossibletodistinguishbetweenat
leastfourtypesofcorruptioninSouthAsia,basedonwhethertheunderlyinginterventionsare
potentiallynecessaryforeconomicorpoliticalreasons,andwhetherthelawallowsthese
interventions.Thisclassificationisshownbelow.
i)Theunderlyinginterventionsarerequiredforeconomicdevelopmentorpoliticalstabilityandare
legallypermitted:thecorruptionassociatedwiththeseinterventionsmaybeassociatedwith
growthorstagnationdependingontheextenttowhichthenecessaryinterventions(market
regulation,promotionofindustries,subsidiesforpoliticalstabilization)aresubverted.Ifthe
underlyinginterventionsremaindevelopmental,corruptionhereoperatesmainlyasatax.If
howeverthecorruptionaffectsimplementationsuchthattheallocationofresourcesstops
beingdevelopmental,corruptioncouldbeassociatedwithverynegativeoutcomes.Anti
corruptionpolicyhereshouldseektoimproveimplementationandreducecorruption,butnot
toremovetheinterventions.
ii)Theunderlyinginterventionsarerequiredforeconomicdevelopmentorpoliticalstabilitybutare
legallyprohibited:Inthiscasesincetheinterventionsarebydefinitionillegalorextralegal,all
effortstoinfluencegovernmentarelikelytoinvolvecorruption.Thesetypesofcorruptionmay
againbeassociatedwithgrowthorstagnationdependingonthenatureandextentofthese
interventions(discriminatorybenefitsforpowerfulgroupstomaintainstability,preferential
accesstoresourcesforemergingcapitalists).Policyintheseareasshouldfocusongradually
legalizingnecessaryinterventionssothatthesecanbetransparentlyregulatedandonreducing
damaginginterventions.
iii)Theunderlyinginterventionsaredamagingforeconomicdevelopmentorpoliticalstabilitybut
arelegallypermitted:herecorruptionisassociatedwithattemptstoavoiddysfunctional
interventions(unnecessarypaperworkandpermissions,protectionofinefficientindustries)
andcorruptionisalwaysassociatedwithnegativeeffects.Corruptioncanparadoxicallyreduce
thedamagedonebybadregulationsandlaws,buttheoveralleffectoftheregulationandthe
corruptionisalwaysnegativecomparedtothesituationwherethedamaginginterventiondid
notexist.Policyshouldthereforeseektoremovethedamagingstate`functions(through
liberalizationandprivatization).Thishasbeenthefocusofmainstreamanticorruption
strategies,buttheyactuallycoveronlyasmallpartoftherangeofcorruptactivities.
iv)Theunderlyinginterventionsaredamagingforeconomicdevelopmentorpoliticalstabilityand
arelegallyprohibited:herepublicofficialsviolatethelawindamagingwaysfortheirpersonal
benefitandthecorruptionassociatedwiththesetypesof`interventionsareprimarilytheft
andpredatoryextortionsbypublicofficials.Whilesomeinstancesofpredatorycorruptioncan
befoundinallSouthAsianstatesintheformoftheftandfraudbypublicofficials,thistypeof
corruptiononlybeginstopredominateinfailedorfailingstateswherearmedgroupscan
extortfromsocietyregardlessoftheireffectsonpoliticalstabilityoreconomicperformance.In
ordertotacklethistypeofcorruption,effectivepolicyhastofocusonstrengtheningtheState
andinextremecasesofstatefailure,tostrengthenthecentralizedcoercivepowerofthe
State.
Thefirsttypeofcorruptionexplainedaboveisassociatedwithinterventionsthatarepotentially
necessaryfortheeconomyorpolity,andareallowedandregulatedbylaw.Examplesofthese
interventionsaresubsidiestomaintainpoliticalstability,differenttypesofschemestohelpdomestic
industrycatchupwithforeigncompetitors,andtheregulationoffinancialmarkets.Althougheconomic
liberalizationhasbeentakingplaceinallthemajorSouthAsiancountriessincethe1980s,awiderange
ofinterventionsremainsimportantandnecessaryforeconomicgrowthandpoliticalstability.
Individualsandgroupsmightbecomeinvolvedincorruptactivitytosubverttheimplementationof
theseinterventions.However,heretheproblemisnottheinterventionsthemselves,buttheStates
lackofcapacitytoimplementthem.Here,anticorruptionpoliciesshouldconcentrateon
strengtheningthecapacityoftheStatetoenforcethenecessarypoliciesanddevelopmentstrategies.
Thereareanumberofcriticalgovernancecapabilitiesthatneedtobestrengthenedinthisareato
enhanceorsustainthegrowthprospectsoftheseeconomies,butthisisoneareaofgovernancethat
hasreceivedfarlessattentionthanitdeserves.
Thesecondtypeofcorruption,concerningnecessaryinterventionsthatarenotorcannotbe
regulatedbylaw,ismuchmoreproblematic.InSouthAsia,muchofthewidespreadpoliticalcorruption
thatinvolvesallocatingresourcesinpartisanwaystomaintainpoliticalstabilityisanexampleofthis
typeofcorruption.Similarly,interventionstoaccelerateandpromoteemergingcapitalismincountries
wheredomesticcapitalismisweakoftenhavetobepartisanandcannotberecognizedinlaw.These
interventionsareverylikelytoresultincorruption,sincetheycannotbeexplicitlyrecognizedinlawfor
politicalreasons.Attemptstotargetthisformofcorruptiondirectlyhaveprovedfutile,sincesuch
actionthreatenstodamagethefundamentalinterestsoftheStateandisthereforenevereffectively
implemented.Amorefeasible,albeitlimited,policywouldbedamagelimitationintheshorttermand,
inthelongerterm,ensuringthecountrysrapidprogresstoapositionwhereitwouldbepossibleto
legalizesomeoftheseinterventions,orachievingpoliticalandeconomicdevelopmentsothatthese
interventionsarenolongeressential.Unfortunately,thisistheareainwhichfeasibleanticorruption
strategiesinSouthAsiaaremostlacking.
Thethirdtypeofcorruptionhasreceivedmoreattentionthantheothertypes.Itcomprisescorrupt
actsassociatedwithlawsthatenableinterventionsincontextswheretheinterventionsthemselvesare
notrequired.Typicalexamplesofthesearetariffprotectionforindustriesthatdonothavethe
potentialtoachievetheproductivityoftheircompetitors;orexcessiveregulationandrequirementsof
permissionsthathavenopurposeexcepttoenablebureaucratstoextractbribesfrombusinessmen.
SouthAsiancountrieshavebeenwellknownforthesetypesofregulations.Thesedysfunctional
interventionsnotonlycausedirecteconomicdamage,butalsocreatesecondarydamage,as
entrepreneursusecorruptmeansinanattempttogainmonopolyprofitsortocircumventfutile
restrictions.Inthesecircumstancestheliberalprescriptionofliberalizationandprivatizationismost
appropriate,combinedwithdirectanticorruptionmeasures.However,thisisnotthemostimportant
typeofcorruptioninSouthAsia,andanexcessivefocusonthistypehithertohashindered,ratherthan
aided,thedevelopmentoffeasibleanticorruptionstrategies.
Finally,theworsttypeofcorruptionisthefourthone,whichismostprevalentinareaswherethe
enforcementofsocialorderbytheStatehasbrokendowncompletely.Illegalinterventionstakeplace
thatdonotserveanyeconomicorpoliticalpurposesforanygroupsapartfromtheavaricious`officials
involvedinthisformofcorruption.Thus,thistypeofcorruptionisbasedsolelyonthecoercivepower
ofsmallgroupsofofficialstoextortfromthepublic.Whilethereareaspectsofsuchextortionsinevery
SouthAsiansociety,itisonlyinAfghanistanthatittakesonsignificantproportions.
Political Corruption
Politicalcorruptionreferstothecorruptionoperatedbypoliticians.Politicalplayerscanbe
involvedinalltypesofcorruption,butpoliticalcalculationsareparticularlyimportantforthesecond
typeofcorruptionwherecorruptionisdirectlyinvolvedinthepoliticalprocess.InallSouthAsian
countries,politicalcorruptioncanbetracedfromthehighestlevelsofthepoliticalestablishment,
downtothelowest.Unsurprisingly,ithasproveddifficultforthepoliticalsystemtoengagecrediblyin
anticorruptionactivitieslowerdownthehierarchy.IndemocraticBangladesh,India,NepalandSri
Lanka,primeministershavebeenfrequentlyaccusedofcorruption,andhavesometimesbeen
convictedofcriminaloffences,ashavetheirauthoritariancounterpartsinBangladeshandPakistan
duringmilitaryorauthoritarianregimes.Inthelattercountries,wheretherehavebeencyclesof
democracyanddictatorship,nosignificantlongtermdifferenceisobservedintheextentofcorruption
undereithertypeofregime.Thisevidencecompelsustoquestionthewidespreadbeliefthat
corruptioniscausedbythelackofaccountabilityofpublicofficials.InfacttheevidencefromSouth
Asiashowsthatelectorsareveryawareofthecorruptionandevencriminalityoftheirpolitical
representativesbutstillvoteforcorruptpoliticians,oftenattheexpenseof`cleancampaignerswho
occasionallystandagainstthem.
In1997theIndianElectionCommissionconservativelyestimatedthat40membersofparliament
and700stateassemblyrepresentativesinIndia,altogetherequalto10%ofalllegislators,hadbeen
convictedofseriouscriminaloffencesorfacedseriouscriminalcharges,rangingfromextortionto
murder.Inthe2002Indianstateelectionsasmanyas20%ofthecandidatesincertainstateswere
convictedcriminalsorhadbeenchargedwithcrimes.Thetruenumberoflegislatorsinvolvedincrime
islikelytobeconsiderablyhigherthanthesefigures,whichaccountforlegislatorswhohavealready
beenconvictedorwhosecasesarebeingprocessedinthecourts.Itisfairlycertainthatmanyother
legislatorsinthefirstdecadeofthe2000sareengagedincriminalactivitieswithoutbeingindicted.Itis
alsowidelyperceivedintheIndianpressandinopinionsurveysthattheproportionofcriminals
involvedinpoliticsisincreasing.ThevisibilityofpoliticalcorruptionreachedanewlevelinIndiainJuly
2008whentherulingCongressledcoalitionGovernmentachievedanarrowvictoryinthe
parliamentaryvoteofconfidenceprecipitatedbytheIndoUSnucleardeal.ThreeoppositionMPsof
theBharatiyaJanataPartycarriedbagsofmoneyintotheLokSabhaandaccusedtherulingcoalitionof
attemptingtobribethemwithRs10m.toboycottthevote.Whateverthefindingsoftheinquirythat
wassubsequentlyinstituted,theincidentwasunprecedentedandwillberememberedasaparticularly
lowpointinthehistoryoftheLokSabha.InNovember2006aninterimGovernmenttookpowerin
BangladeshanddeclaredastateofemergencyinJanuary2007.Morethan200politicians,including
theheadsoftwopreviousgovernments,werearrestedonchargesofcorruption.Severalprominent
politicianswereconvicted,butinthemajorityofcasessufficientevidencewasnotavailableandmany
ofthecasesweredropped.Bylate2008boththearrestedformerprimeministershadbeenacquitted
markingtheendoftheanticorruptiondrive.Oneofthereleasedformerprimeministerswasthen
electedintheDecember2008elections.Thefrontalattackoncorruptionbytheemergency
GovernmentinBangladeshwasbadlyconceivedbecauseitdidnotdistinguishbetweenthedifferent
typesofcorruptiondiscussedearlieranddidnotprioritizealimitednumberofobjectives.By
attemptingtodoawaywithallcorruptioneventhoseassociatedwiththeoperationofthepolitical
systemitsetitselfuptofail.Atbestitmayprovetohavesomelastingiflimitedimpactonthe
operationofpoliticalpartiesinthefuture.Despiteallthis,thefreedomofthemediainreporting
politicalcorruptioninIndiaiscomparabletoadvancedcountries,andeveninBangladesh,Pakistanand
otherSouthAsiancountries,theevidenceofcorruptactivitybyleadingpoliticiansiswellknownand
freelyavailable.
Whenaskedtoexplaintheirvotingdecisions,SouthAsianvotersfrequentlyreportthattheyvote
for`mafiastylepoliticiansbecausetheyhaveprovedabletodeliverresourcesandsecurityto
powerfullocalconstituents,whointurnprovidetheorganizationalweighttoensureelectoralvictories
andenforcepoliticalorder.Thelogicdrivingthispatternofpoliticscanbebetterunderstoodoncethe
constraintsfacingthedeliveryofservicesandtheprovisionofsecurityarestudied.Asisthecasein
otherdevelopingcountries,SouthAsianstatesgenerallylackthefiscalresourcestoperformthese
functionseffectivelybecausetheircentralbudgetsareinstructuraldeficit;fundsarenotavailableto
provideeventhemostessentialservicesadequately.Inthesecircumstancesconflictsoverresources
areintense;`intermediateclassgroupsoftenorganizethemselvesaroundfactionalsymbols,basedon
ethnicity,religionorcasteincompetingfortheseresources.Politicianssubsequentlyfindthattheycan
onlybesuccessfuliftheyofferselectivebenefitstoatleastsomeoftheseeffectivelyorganized
factions.Sinceprovidingpreferentialbenefitstosomebutnotothersisnotlegal,thedegreetowhich
thepoliticianfollowsthelawisnotofgreatconcerntohisorhermostcriticalsupporters.Indeed,a
trulyhonestpoliticianwouldfinditimpossibletosecureanyorganizedsupportfromthesecritical
factionalgroups,andwithouttheirsupport,powercannotbeattained.Thegrowingmalaiseof
criminalityinpoliticsandtheriseoffactionalpoliticsinSouthAsiaisatleastpartlyduetothe
`prisonersdilemmaproblem,wherecrediblepoliticiansareexcludedbythecompetitionfromless
scrupulouspoliticalentrepreneurswhocanoffermoretofactionsthatareinsearchofapatron.Thus,
whiledemocracyisdesirableinitself,ithasanomalouseffectsontheextentofcorruption.Alongterm
changeinthispatternofpoliticsisunlikelybeforeeconomicdevelopmenthasproceededtothepoint
wherethecentralbudgetcanprovidesufficientresourcesforhonestpoliticianstostayinpower
throughprovidingwidespreadservicedeliveryandredistribution.Meanwhile,inthefirstdecadeofthe
2000sasymbioticrelationshipbetweenpoliticianswhousepoliticalpowerforpersonalenrichment
andtheenrichmentoftheircloseallies,andthepowerfulsocialfactions,whichrequireaccessto
resources,jobsandcontracts(allservicesthathonestpoliticianscannotpossiblyprovide)remainsa
dominantcharacteristicinSouthAsianpolitics.Thiswouldexplainwhyallmajorpoliticalparties
regularlyaccuseeachotherofcorruptionwhileeagerlyrecruitingcriminalswhocanofferresources
andsecurethesupportofpowerfulfactions.Italsoexplainswhyordinarycitizenscriticizetheir
politiciansforbeinginvolvedincorruptionwhilesimultaneouslyvotingforcorruptleaderswhothey
thinkaremostlikelytoprotecttheirconstituencyandprovidetheirownfactionwithdisproportionate
benefits.
SouthAsianpoliticalcorruptionislargelyofthesecondtype(seeabove),sincethecurrent
strategiesofmaintainingpoliticalpowercannotbelegalized,andtheapproachoflegitimately
maintainingpowerthroughtheprovisionofgeneralizedbenefitsisnotviablegiventhelevelof
economicdevelopment.Thistypeofpoliticalcorruptionmayeventuallyresultinsufficientpolitical
stabilityforrapideconomicgrowthtotakeplace,asdidhappeninsomeEastandSouthEastAsian
countries.Thiswould,subsequently,permitthegrowthofformalbudgetaryredistributionsand
servicedeliverytotakeplace,therebyallowingmorehonestpoliticsandpoliticianstoemergeinthe
future.However,inSouthAsiathecontinualemergenceofnewgroupsandfactionshasmeantthat,
overtime,politicshasbecomemorefactional,fragmentedandcrimedriven.Asthiscontinuesto
happen,theriskisalwayspresentthatmoreandmorepoliticalcorruptionwillconvertintothefourth
type,wherethecriminalactivitiesofpoliticiansenrichonlythemselves,usingthecoerciveforceof
privatemafiastoextortfromtherestofsociety.InAfghanistaninthefirstdecadeofthe2000san
extremeversionofthisfragmentationexists,whereregionalmilitarycommanderscanextortfrom
societyandengageincrimeandthecentralStatecontinuestofinditdifficulttoconstraintheir
activities.However,thisdegreeofsocialfragmentationandtheuseofcoerciveforceshouldbe
distinguishedfromtheclientelistpoliticsofotherSouthAsiancountries,wherelocalmafiashavehad
toengageinapoliticalprocessofsuborningpowerfulgroupsandformingpoliticalcoalitionsthat,
howeverimperfectly,hasmaintainedsomeformofsocialstability.Butinallthesecases,where
politicalcorruptionisdrivenbythedemandsofpoliticallypowerfulgroups,greatertransparency,
democracyorcivilsocietyparticipationwouldbeunlikelyontheirowntohaveasignificantimpacton
reducingthistypeofcorruptioninSouthAsia.Thereisnoreasontosuggestthatdemocracyor
transparencywouldreducethepoliticalrequestsofpowerfulgroups.Indeed,thefocusongreater
democracyandtransparencyasamethodofcounteringcorruptioninBangladeshandPakistanhas
yieldedverydisappointingresults.InBangladeshadecadeofdemocracywitnessedarapidrisein
politicalcorruption.TheextrememeasuresadoptedbythemilitarysupportedemergencyGovernment
in200708inBangladesh,includingthearrestofleadingpoliticiansfromallmajorpoliticalpartieson
corruptioncharges,reflectsfrustrationwiththisdemocraticprocess.Thesemeasureswereinitially
widelysupportedbythegeneralpublic.However,preciselybecausepoliticalleadersdodeliverto
criticalconstituencies,itisnotcrediblethattheycanbeincarceratedforlong.Asaresult,the
emergencyGovernmentfoundthatitwasnotpossibletoobtainsignificanttestimoniesandevidence
incourtfromindividualswhoheldthisinformation,possiblybecausethosewhocouldprovide
convincingtestimonywerehedgingtheirbets.Consequently,themajorityofcorruptioncases
collapsed.Thisexperienceshowsthatasoundanalysisofthedriversofpoliticalcorruptionisrequired
beforeundertakinglargescaleanticorruptioncampaigns.Amuchmorenarrowlyfocusedattackona
smallnumberofhighrankingpoliticiansmayhaveprovedmoresuccessfulinsignallingthatthereare
limitstotheextentofpoliticalcorruptionthatwouldbetoleratedbyothersocialconstituenciessuch
asthearmy.TheonlysignificantimmediateresultoftheBangladeshianticorruptiondrivewasa
decreaseinbusinessconfidence,sincemanybusinessmenwerechargedwithtaxevasionandthe
briberyofpoliticians.Thesolepositivenoteisthepossibilitythatthisexperiencewillsetsomelimitsto
thetypesandextentofcorruptionthatsubsequentgovernmentswillengagein.Theironyisthatthe
realproblemthatledtotheimpositionofthestateofemergencyinJanuary2007wasnotdirectlydue
topoliticalcorruptionbutwascausedbyapoliticalimpassebetweenthemajorpoliticalpartieswhere
therulingpartywasengaginginactivitiesthattheoppositionconsideredwouldcompromiseitsability
towintheforthcomingelection.InPakistanthereturnofmilitaryrulein1999appearedtoreduce
corruption,althoughthesustainabilityofthisdevelopmentprovedquestionableonceitbecame
necessaryfortheGovernmenttobeginconstructingwiderpoliticalsupportbasestoremaininpower.
Thegreaterfiscalcapacitynecessaryforgovernmentstoprovidelegallythedemandsofits
constituentswillbegeneratedonlyoncetheregionundergoeslongertermeconomicdevelopment.In
themeantime,therapidgrowthandnegativeeffectsofpoliticalcorruptioncouldconceivablybe
reducedthroughthedevelopmentoflarge,inclusivepoliticalpartiesthataimtoimposesocial
disciplineinordertoachievelongtermdevelopmentgoals.Suchpartieswouldnotentirelycurb
politicalcorruption,butmightsucceedincounteringthegrowingfragmentationandfactionalizationof
politicsacrossSouthAsia.ItisnotsurprisingthattheIndianstatesthatperformrelativelybetterthan
othersarethosethatarerunbydisciplinedandcentralizedparties.Tosomeextenttheresurgenceof
theCongressPartyinthe2009Indianelectionsrepresentsatirednessoftheelectoratewithhighly
fragmentedcoalitionpoliticsandtheimprovedbudgetarypositionoftheIndianstatethatallows
partiesliketheCongresstooffermoretopoorercitizensthroughfiscalredistribution.However,
whetherthe2009electionswillmarkastepdeclineinthefragmentationofIndianpoliticsalong
patronclientlineswilldependonhoweffectivelyCongresscandeliverredistributionthroughfiscal
mechanismsratherthanconventionalpatronclientnetworksoverthenextfiveyears.Eveninthe
muchsmallerandmoreethnicallyhomogenouscountriesofSouthAsia,nationalpartieshavebecome
loosecoalitionsoffactions,witheachfactiondemandingevergreaterrewardsfornotdefectingtothe
opposition.Thisexplainstheescalatingcostofpoliticsinthesecountriesandtheescalatingcostof
politicalcorruption.
Further,albeitlimited,progresstowardsmitigatingtheextentofpoliticalcorruptionwouldalsobe
possiblethroughthelegalizationoflargedonationstopoliticalparties.Allowingpoliticalpartiestopay
legallyforsomeoftheirexpensesduringandafterelectioncampaignswouldnotremovetheproblem
entirely,sincepoliticalorganizersdemandmuchmorethanthecostoforganizingelectionsin
exchangefortheirsupport;nevertheless,itwouldreducetheneedforpoliticalpartiestoengagein
corruptorcriminalactivitiessimplytoraisefundsforelectioncampaigns.InBangladeshandIndia
politicsisincreasinglyfundedbysocalled`blackmoney(moneygeneratedbycrimeorfrom`grey
activitiesthatarenotdeclaredtoavoidpayingtax).Ithasbeenestimatedthattheblackeconomyhas
burgeonedtoapproximatelyonethirdofthesizeoftheofficialeconomiesinthesecountries.
However,attemptstoregularizeelectionfundinghavebeenblockedbyotherpoliticalconsiderations.
InIndiatheproposedElectionandOtherRelatedLawsBillwasintroducedinParliamentin200102to
provide,amongothermeasures,incometaxexemptionsforprivateandcorporatedonationsto
politicalparties.ThislegislationwasstalledinParliament,partlybecauseitchallengedthedominant
politicalideologysharedbyallmajorpartiesthatrejectsany`disproportionatepoliticalinfluencefor
therich.Asidefromideology,inanemergingeconomyitisalsoproblematictolegalizedonationsfrom
suchsourceswhenmuchofthewealthofthisemergingrichliteistaintedbyassociationwith`sharp
practices(alargeproportionofthe`newrichhasengagedincorruptactivity,suchasillegally
obtainingland,orusingpoliticalconnectionstogainlucrativecontracts).However,althoughthereare
problemssurroundingpoliticalfundraisingreform,thecurrentsystemisfarworse.Thus,whenthe
IndianElectionCommissionattemptedtoprohibitcriminalsfromcontestingelections,theGovernment
alsodelayedthisproposal.TheIndianElectionCommissionhasimposedlimitsonelectionspendingby
candidates,buttheserestrictionshaveproveddifficulttoenforce;inanycase,thelimitscurrently
applyonlytospendingbyindividualcandidatesandnottoexpenditurebytheirpoliticalparties.
Indeed,ratherthanshowinganysignsofbeingconstrainedbytheseattempts,itiswidelyperceived
thatelectionexpenditureisincreasing.However,underanewlawenactedin2003,allcandidatesfor
electionnowhavetosubmitdetailsofanycriminalcasependingagainstthem,arecordoftheirassets
andliabilities,andtheireducationalqualifications.Thesemeasuresmayhelptoencouragepolitical
partiesnottofieldquestionablecandidates,butitisnotclearhowreportedassetsandliabilitiescan
becrosscheckedtoconfirmtheiraccuracy.Indeed,ithasproveddifficulttomakeanyprogresson
takingactionagainstthemorethan700incumbentlegislatorswhoactuallyhavecriminalcases
pendingagainstthem.
SimilartendenciesofentrenchedpoliticalcorruptionareobservedinBangladesh,Pakistan,and
otherSouthAsiancountries.In2002thePakistaniPresident,Gen.PervezMusharraf,enforcedastrict
electoralrulebarringpoliticiansconvictedofcriminaloffencesfromcontestingelections.However,
criticsarguedthattherealintentionbehindtheenforcementofthisrulewastoexcludethetwo
prominentcivilianpoliticalleadersofthecountryfromstandingagainstthemilitaryregimeinelections
heldlaterthatyear.Thepossibilityofenforcingsucharuleunderafuturecivilianadministrationis
arguable,giventhepressuresoutlinedabove.EventheNationalAccountabilityBureau(NAB)in
Pakistan,whichhasachievedconsiderablesuccessinrecentyearsinprosecutingpublicofficialsand
retrievingtheirmisappropriatedfunds,isconsideredtobeanagencyofthearmedforcesratherthan
anindependentauthority.Itissignificantthatthemilitary(andthejudiciary)areexcludedfromits
mandate.AlthoughPresidentMusharrafcametopowerostensiblytosavethecountryfromthe
corruptionofthepoliticallites,thecentralizationofpowerintheexecutivearguablycreatedgreater
instabilityinPakistan.Inmid2007thePakistanjudiciaryachievedasignificantvictoryoverthe
executiveheadedbyPresidentMusharrafwhenitsucceededinreinstatingtheChiefJustice,Iftikhar
MohammadChaudhry,whohadbeensuspendedfromhispostbythePresident.Thiscasewas
expectedtohaveanimpactonbroaderquestionsofgovernanceinPakistanandmayevenbe
consideredtohavemarkedtheonsetofthetransitiontocivilianruleandgreaterchecksonexecutive
power.Followingaperiodofseriouspoliticalunrest,ademocraticallyelectedGovernmentcameto
powerinPakistaninFebruary2008and,underthreatofimpeachment,PresidentMusharrafresigned
fromthepresidencyinAugust.InBangladeshanIndependentAntiCorruptionCommission(IACC)was
establishedin2004withthepowertoinvestigateallegationsofcorruptionagainstanypublicofficial
withoutfirsthavingtoseekgovernmentpermission,aswaspreviouslythecase;inpractice,however,
theIACCprovedtobefairlyineffectual.TheemergencyGovernmentthattookpowerin2007
reconstitutedtheAntiCorruptionCommissioninBangladeshandaccededtotheUnitedNations
ConventionagainstCorruption;however,theeffectivenessofthesemeasureswilltakesometimeto
assess.InNovember2007,inamovethatwasintendedtostrengthenthepowerofthejudiciarytoput
ontrialandconvictcorruptpoliticiansandbureaucrats,theemergencyGovernmentalsoimplemented
aneightyearoldrulingoftheSupremeCourtthatdemandedtheformalseparationofthejudiciary
fromtheexecutive.Again,whethertheimplementationofthismeasurewillactuallyenablethe
judiciarytoprosecutethemostseriouscasesofpoliticalandadministrativecorruptionremainstobe
seen.InIndiatheCentralVigilanceCommissionisregardedasautonomous,butitsremitcoversonly
stateemployeesandnotpoliticians.Mostimportantlythough,ifitisacceptedthatmuchpolitical
corruptioninthesecountriesisentrenchedand`societydriven,thetaskofanyanticorruption
commissionwouldatbestbepartialintheshortterm,andthiswouldmakeitdifficultforittodefend
itselfconvincinglyasnonpartisan.Indiasgreatadvantageoveritssmallerneighboursisthat
paradoxicallyitsverysizeandcomplexitymakeitimpossibleforanyonefactiontomonopolizepower
fortoolong,andelectoralcompetitionimposesnaturalchecksonthedegreeofappropriationthat
factionsinpowercangetawaywith.CitizenactivisminIndia,intheformofcivilsociety`election
watcheswhichpublicizetheaffidavitsoncriminalcases,assetsandliabilitiessubmittedbycandidates,
hasplayedaroleinthiscontext.
Bureaucratic Corruption
CorruptioncommittedbybureaucraticofficialsinSouthAsiarangesfromthepettycorruptionof
policeofficerscollectingnominalbribesforminortrafficoffences,tomultimilliondollarbribes
collectedbyseniorarmyofficersanddefenceofficialsinmajormilitarycontracts.Onceagain,
bureaucratsarelikelytobeinvolvedinalltypesofcorruption.Muchbureaucraticcorruptionisofthe
firstandthirdtypediscussedearlier:therearelegalregulationsandservicesprovidedbythestate,
somesociallybeneficialandothersnot,andcorruptionisofteninvolvedintheevolutionand
managementoftheseinterventions.Somebureaucraticcorruptionisalsointimatelyconnectedwith
politicalcorruption,thesecondtypeofcorruptiondiscussedearlier.Atthehighestlevelspoliticians
andbureaucratshavetocolludeinlargescalecorruptactivitythatprovidesresourcesorcreates
politicalsupportforpoliticians.Thesedifferenttypesofbureaucraticcorruptionareinterrelated;the
persistenceoflowlevelbureaucraticcorruptioncannotbeunderstoodwithouttakingintoaccountthe
absenceofpoliticalwilltocombatcorruptiononthepartofhighlevelpoliticalofficeholderswhoare
themselvesvulnerabletoattackfortheirowncorruption.Forexample,newspapersinSouthAsian
countriesfrequentlyreportstoriesofpoliceforcesbeingpreventedfromprosecutingheadsofcriminal
organizationsorofcrimecartelsprotectedbypowerfulpoliticians.Finally,somebureaucratic
corruptionisalsoofthefourthtype,predatorycorruptionortheftincontextswherethecentralstate
haslostcontroloverindividualofficials.
AcommonargumentinSouthAsiaisthatlowbureaucraticpaycontributestohighlevelsof
bureaucraticcorruption.Thisisundoubtedlytrue,butitisnotclearthatraisingbureaucraticsalaries
wouldnecessarilyreducecorruption.Higherpaidbureaucratswouldonlyconsiderrefrainingfrom
corruptactivityifitwerepossibletoidentifytheperpetratorsanddismissthosewhowereoccasionally
caught.However,ifthepoliticalcapacitytoattackbureaucraticcorruptionisabsent,highersalaries
mayhavelittleeffect.Furthermore,bureaucraticcorruptiontakesmanydifferentformsinSouthAsian
countries,andthereareinstancesofeachofthefourtypesidentifiedabove.First,the
misappropriationoffundsbybureaucratsengagedintheoperationoflegallyrecognizedregulatory
structuresthathavenecessaryorusefuleconomicorpoliticalfunctionsiscommon.Theseinclude
structuresestablishedtoregulatemarkets,promoteindustryandagriculture,andmanagesubsidies
andredistributionsthataimtomaintainpoliticalstability.Althoughthesesystemsofstateintervention
orregulationarebeneficialforsociety,theyinevitablyconferbenefitsonsomeandcostsonothersand
arethereforesusceptibletoeithertheattemptsofbureaucratstoextractashareofthebenefitby
demandingbribesfromintendedbeneficiaries,orattemptsbynoneligiblerecipientstoobtainsomeof
thesebenefitsbyofferingbribes,orboth.Thedegreetowhichstatepolicyissubvertedandthe
magnitudeofthebribesdetermineswhethertheactofcorruptionhasencouragedordiscouraged
reasonableeconomicperformanceornot.Ifbureaucratsweretoimplementwhatwasintendedby
policyandthenextractbribes,theresultwouldbemuchmorefavourablethaniftheyweretoaccepta
bribetosubvertwhatwasintended.
Unfortunately,inmanypartsofSouthAsiabureaucraticcorruptionhasseriouslysubverted
numerouscriticalstatefunctions,includingregulatoryfunctionsandtheprotectionofpropertyrights.
Forinstance,corruptactivityhassubvertedtheoperationofwelfaresubsidiesandofpoliciesto
encourageindustrializationorregionaldevelopment.Factoriesthatneverproduceanythingcontinue
toreceiveproductionsubsidiesorarepermittedtorollovertheirdebttopubliclyownedbanks,for
example.Afurtherproblemistheabsenceofafunctioningjudicialsystem.InSouthAsiamanycivil
casestakemorethanadecadetoresolve.Thejudicialprocessissusceptibletomanipulation:those
whowanttopreventajudgmentcanpayrelativelysmallbribesonaregularbasistodelayacaseor
forceanadjournment.Someattemptshavebeenmadetoaddresstheseproblemsthroughstate
withdrawalintheformofliberalizationandprivatization.However,progresshasbeenslowandinthe
caseofeffectivestatefunctions,interventionsandregulations,statewithdrawalisnotasolution.
Somecasesofcorruptionintheawardingofcontractsandinpublicpurchaseshaveelementsof
outrighttheftandpredation.InApril2009IndiasCentralBureauofInvestigation(CBI)uncovereda
potentiallybroadrangingnetworkofofficialsinvolvedinsignificantcorruptioninthegrantingof
defencecontracts.Oneoftheofficialsunderinvestigationwastherecentlyretiredheadofthe
OrdnanceFactoryBoard(OFB),makinghimthehighestrankingIndiandefenceofficialtohavebeen
arrestedongraftcharges.AnumberofinternationalarmsmanufacturesincludingIsraelMilitary
IndustriesLimitedandanumberofIndiancompanieswereblacklistedaspotentialparticipantsinthe
racketoncetheinvestigationbegan.AsIndiabecomesamajorinternationalarmspurchaser,the
stakesinthisgamehaverisensignificantly,anditisunlikelythatsuchhighrankingofficialscouldhave
beenactingentirelyontheirown.
StrategiesofliberalizationandprivatizationwereintroducedinthemajorSouthAsiancountries
fromthe1980sonwards;anaccelerationofliberalizationoccurredinthe1990s.InIndiatheaverage
tariffratewasreducedfrom87%in1990to25%by1998.Licensingofindustriesandcontrolsover
importswerealmostentirelyremoved.InBangladeshandPakistanthenationalizationprocessthat
tookplaceinthe1970swasreversedthroughextensiveprivatizationprogrammes.Someofthe
restrictionsthatwereremovedhadnopotentiallypositivefunction,andlittlewaslostasaresult.
However,otherpartsoftheregulatorystructurehadbeenintendedtoacceleratethedevelopmentof
localentrepreneurialcapacitythroughindustrialpolicyandprotection,ortomaintaininternalregional
andsocialbalance,andherestatewithdrawalwaspotentiallydamaging.Eventheprivatizationoflarge
enterprisesinBangladeshandPakistan,intheabsenceofeffectiveregulatorystructuresand
safeguards,oftenresultedininefficiencyandsubsidyappropriationintheprivatesectorreplacingthe
inefficiencyanddeficitsofthepublicsector.InIndialiberalizationoffinancialmarketsresultedin
dramaticallegationsin2001ofwidespreadsharepricemanipulationinthestockmarketandmulti
milliondollarirregularitiesinIndiaslargestinvestmentfund,theUnitTrustofIndia.Moreover,the
withdrawaloftheStatefromtraditionalredistributiveandregulatoryfunctionshasresultedinthe
developmentofillegalredistributivemechanismsgovernedbythetypeofcriminalorganizations
describedinthesectiononpoliticalcorruption.Thegrowthoftheprivatesectorhascreatedtheneed
forsignificantregulatorycapacitiesthatarestillveryweak.Indianregulatorswerecaughtentirelyoff
guardbythemassivefraudinlate2008inSatyamComputerServices,oneofIndiaslargestITfirms.Its
reportedoperatingprofitsof$137m.turnedouttobefraudulentlyoverstatedbyafactorofmore
than10.ItsCEOadmittedthishadbeengoingonforyearsthoughthecompanywasauditedby
PricewaterhouseCoopersandhadindependentdirectorsonitsboard.Finally,inthecaseofthepolice
forceandjudiciary,statewithdrawalisnotevenpossible.Infact,theappropriateresponseinallcases
ofcorruptionassociatedwiththesubversionofessentialstatefunctionsistostrengthenstate
capacities.ProgressonthisfronthasbeenlimitedacrossSouthAsia.IftheStatehadthecapacityto
enforcedecisionsthatwerebeneficialforsociety,briberycommittedbypublicservantsevenwhenit
tookplacewouldbeundesirablebutwouldnotsubvertdevelopmentgoalscompletely.However,
wherecorruptionunderminestheenforcementofnecessaryregulations,theresultsaremuchmore
detrimental.Thisisanimportantaspectinthedifferencebetweencorruptionineconomieswherehigh
growthissustainedandthosewhereitisvulnerable.
Thesecondtypeofbureaucraticcorruptionthatemergesbecausealegalframeworktoenforcea
largenumberofnecessarystateactionsordecisionsdoesnotexistismoreprevalentandcauses
greaterproblemsforgovernmentanticorruptionpolicy.Inthesamewaythatpoliticalstabilityin
SouthAsiaispartiallydependentonpowerfulfactionalgroupsreceivingdisproportionatebenefits,
rationingscarceresourcesoftenrequiresdisproportionateamountsofresourcesbeingallocatedtothe
rich,ortoemergingcapitalists.Althoughdevelopingcountriesareoftenlegallycommittedtogranting
equalaccesstopublicresourcestoallcitizens,ifpublicresourcesbecomeveryscarce,notonlywillthe
richbewillingtopayahighpricetogainprivilegedaccess,butitmayalsobedesirabletogive
emergingcapitalistsprivilegedaccesstosomeresourcestoaccelerategrowth.However,stateagencies
involvedintheallocationofpublicresources,suchaslandrights,credit,andotherscarceresources,or
indeedanyaspectofregulationorservicedelivery,arelegallyboundtooperateaccordingtorulesthat
arefarremovedfromtherealityofstarkdifferencesinthepurchasingpower,economicpotential,
socialstatusorpoliticalinfluenceofclaimants.Inallthesecases,alternativerationingdevicesareused
inpractice,basedeitheronwillingnesstopayorpoliticalpower.Thiskindofcorruptionisubiquitous,
rangingfromtheillegalsaleofformallyfreehospitalservices,totheallocationofgovernmentlandfor
newdevelopmentsinexchangeforcontributionstopoliticalpartiesorpoliticians.Thesetypesof
corruptionaredifficulttodealwithbecausestatecapacityaloneisnottheissue.Therealobstacleis
that,forpoliticalreasons,realisticcriteriaforresourceallocationcannotbelegallyrecognized.Some
legalchangescouldbeenforcedtoimprovethesituation,forinstanceintroducinganominalfeefor
someservices.Inmostcases,however,chargingwouldnotsolvetheproblembecausethemarket
pricethatwouldbalancedemandandsupplywouldnotbepoliticallyacceptable.Inanycase,itisnot
desirablethatallpublicresourcesshouldbeallocatedthroughthemarket;however,whereresources
arepubliclyallocatedonthebasisofneedoranyothercriteria,sufficientresourceshavetobe
availabletomeetthedemandsfromallthosewhosatisfythesecriteria.Sincethisrequirementis
generallynotmetindevelopingcountries,theremaybenoalternativebuttoenduresomeofthis
corruptactivityuntiltheeconomyisdevelopedenoughtoprovidetheStatewithsufficientfundsto
allocateresourcesinthewayexpectedbylaw.Inthemeantime,theonlypolicyresponsewouldbeto
strengthenstatecapacitiesandpreventegregiousviolations,althoughtheseactionsaloneclearly
wouldnotentirelyremovethistypeofcorruption.
Muchoftheanticorruptionstrategyadvocatedbyinternationalagenciesisdominatedbythe
assumptionthatthethirdtypeofcorruptionisthedominantforceinSouthAsia.Thisisthecorruption
associatedwithunnecessarylegislationthathamperstheoperationofmarketsandcreates
opportunitiesforcorruptionamongrelativelypoorlypaidpublicofficials.Thistypeofcorruptionis
associatedwithentirelyunnecessaryanddamagingstateinterventionsintheformoflegislation,and
couldeasilybedealtwithbyremovingsuchrestrictions.Itisnothardtofindmanyexamplesof
excessivelyrestrictiveandapparentlysuperfluousregulationsinallSouthAsiancountries.These
includerequirementstofillinmanydifferentformsforallkindsofpermissions,whicharethensubject
toinordinatedelays.Whetheritisanapplicationforapassportorevenanattempttopaythecorrect
amountoftaxontime,theordinarycitizenfacesendlessdelaysandfrustration.However,whilethis
typeofcorruptionistiresome,itisonlyapart,andperhapsasmallpart,oftheoverallproblem.The
conventionalpoliciesofliberalization,privatizationandgreateraccountabilitywouldappeartobethe
mostrelevantsolutionstothistypeofcorruption,buttheymayhavelittleoveralleffectineither
reducingcorruptionormitigatingitsnegativeeffectswhenweconsideralltypesofcorruption
together.Moreover,manyoftheproceduresofbureaucraticrecordkeeping,onwhichthistypeof
corruptionisbased,areverydifficulttochangerapidlyevenwithliberalizationandprivatization.After
morethanadecadeofliberalizationinanumberofSouthAsiancountries,thedailyproceduresofthe
bureaucracyhaveundergonesomesimplification,butagreatdealmoreprogressneedstobe
achieved.Furthermore,liberalizationhasaddednewregulatoryburdensontheStatewithrespectto
financialmarketsandthecorporatesector.Liberalizedmarketsrequirestrongandeffectiveregulatory
frameworkstooperateproperly,andtheabsenceofadequatestatecapacityintheseareashas
createdaparadoxwherebycorruptionofthefirsttypehasincreasedintheaftermathofliberalization,
aswesawearlier,evenifcorruptionofthethirdtypedecreased.Thisexplainswhy,whenalltypesof
corruptionarestudiedtogether,journalisticreportsorcorruptionperceptionindicesrecordrapidly
worseningcorruptioninSouthAsiainthe1980s,preciselywhenliberalizationbegantobeintroduced.
Finally,SouthAsiancountriessuffertovaryingextentsfromcorruptionlinkedtoextortionand
otherformsofcrime.Bydefinition,extortionoffersnoeconomicorpoliticalbenefitstoanyoneother
thantheextortionists.TherearemanylowlevelexamplesofthistypeofextortioninallSouthAsian
countries,particularlyinvolvingthepoliceforce,customsofficialsand,increasingly,criminal
organizationsassociatedwiththepoliticallite.Individualswithoutpoliticalconnectionsandpatrons,
forexample,areregularlyforcedtopaypoliceofficersbribesinexchangefora(temporary)endto
harassment.Also,politicalmafiasseizelandfromtheweak,encouragedbytheknowledgethatthe
criminaljusticesystemrepeatedlyfailstheaggrieved.However,onlyinAfghanistanhasthecentral
stateapparatuscollapsedtothepointwherethistypeofcorruptionplaysasignificantroleinthe
operationoftheeconomyasawhole.InotherSouthAsiancountriestherearepocketsofextortion,
buttheStatestillretainsenoughcentralizedcoercivecapacitytolimititsextentandisableandwilling
occasionallytousethiscapacityforthesimplereasonthatextortionisathreattothesurvivalofthe
dominantlitesandtheStateitself.Itisnotenoughtoexpectdemocraticpressuretolimitthistypeof
corruptionbecauseunarmedcitizensarenotlikelytobeabletostopextortionthroughademocratic
process.ThecoercivecapacityofthecentralStateisthecriticaldeterminantoftheextenttowhichthis
typeofcorruptioncangrow.Sofar,atleast,mostSouthAsiancountriesstillhavecentralStatesthat
havebeenabletolimittheuncontrolledgrowthofextortion.
Prospects
Alargenumberofmechanismshavecontributedtotheentrenchmentofcorruptionandthe
associatedproblemsofgovernanceinSouthAsiancountries.Foremostamongthesehasbeenthe
deeprootedphenomenonofpoliticalcorruption,anditsgrowthovertime,closelyconnectedtothe
growingfragmentationofpoliticsinSouthAsia.Sincepoliticalcorruptionhasbecomeembeddedinthe
democraticprocess,itsremovalislikelytobealongtermeffort.Significantprogressislikelytodepend
oneconomicdevelopment,whichwillallowtheStatetoenhancetaxcollectionandredistributemore
resourceslegallyinordertoachievepoliticalstability.Aswellasbeinganimportantissueinitself,the
reductionofpoliticalcorruptionwouldalsoallowthediminutionofdifferenttypesofbureaucratic
corruption.Bureaucraticcorruptionpersistsandthriveslargelybecausethepoliticalliteisdependent
oncorruptionforitssurvival.Anexaminationofthesignificanceofdifferenttypesofbureaucratic
corruptioninSouthAsiashowswhymovestowardsliberalizationandprivatizationhavehad
anomalouseffectsoncorruption;intheshortterm,atleast,theeconomicdevelopmentshave
appearedtocontributetoanincreaseincorruption.Thepublicconcernwithcorruptionandtheroleof
themediaandofNGOshavesofaralsohadlimitedeffectsonreducingcorruptioneveninthemore
democraticcountriesofSouthAsia.ThemoreprevalenttypesofcorruptioninSouthAsiahave
particularlydamagingeffectsoneconomicperformanceforanumberofreasons.First,political
fragmentationhasalwaysbeenprevalentinthesecountriesandappearstobeincreasing.Greater
fragmentationislikelytoleadtomoreextensivepoliticalcorruptionandreducetheabilityofcentral
Statestocontrolthepredatorytendenciesofcompetingfactions.Second,bureaucraticcorruptionhas
beenparticularlydamaginginSouthAsiabecausestatecapacitieshavenotbeenstrongenoughto
preventthesubversionofessentialstatefunctionsandinterventions.Enhancingstatecapacitiesacross
theentirerangeofstatefunctionsisaparticularlyimportanttaskinallSouthAsiancountries.
Expandingstatecapacityisnotlikelytoreducealllevelsofcorruptionintheshortterm,butis
expectedtoenhancegovernancebyensuringthateconomicdevelopmentandpoliticalstabilityare
achievedtoagreaterextent.Finally,theproblemofmilitaryfactionalismorwarlordism(althoughitis
prominentonlyinAfghanistan)hasemergedinthemilderformofmafiadominatedpoliticsinallthe
majorSouthAsiancountries,drawingattentiononceagaintotheimportanceofenhancingcentral
statecapacitiesinallthesecountries.
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