The Globalisation of Corruption

Continued from last week

Bribing high-level officials ensures profits and helps off-load risks. In many power projects in Asia, for example, there has been, according to the World Bank, both “a high level of corruption” and a tendency to overestimate demand for electricity.
In Pakistan, some 21 Western companies were investigated by the national anti-corruption agency in 1998 for alleged kickbacks to the previous government of Benazir Bhutto and for over-pricing. Bhutto’s government had signed so many contracts with power companies some of which were for installations in totally inappropriate locations that Pakistan was set to produce far more energy than it could possibly consume until 2010. Yet the government was contractually bound to buy all the electricity produced.
Although all the companies filed sworn statements denying corruption, six of them subsequently confessed to offering bribes. So serious were the allegations that the World Bank sent in a special team of investigators. Yet far from receiving support from Western governments for its anti-corruption efforts, Pakistan was warned by the British, US, Japanese and Canadian governments that its clash with the power companies would put off other investors. The IMF, meanwhile, went so far as to make a new package of loans at the end of 1998 conditional on the government’s dropping the charges against the companies.
Bribery can be a useful way of getting around local opposition to a project and of bypassing the usual democratic processes involved with awarding contracts. Take, for example, the Norwegian mining company, MINDEX, which wants to carry out nickel and cobalt strip mining on the Philippine island of Mindoro. The local population believes the mine will seriously damage the environment and ruin their communities. MINDEX has responded by attempting to buy off local leaders.
It gave gold watches to politicians in local authorities at a critical stage of the project’s Environmental Impact Assessment, which had to prove that the mine was socially acceptable to local people. MINDEX has also paid for local district leaders to go on a “study tour” to a luxurious holiday island, built a new house for a local priest, and paid local journalists to write articles favourable to the company. MINDEX claims its gifts are a “sign of friendship”. Local people, who oppose MINDEX, believe that such gifts are an attempt to manipulate the local tradition of “debt of gratitude” towards those who carry out small acts of generosity, and could be against Filipino law.
MINDEX has also gathered local signatures given to mark attendance at a meeting and used them to indicate local support for the project. At least one signature was actually a protest against MINDEX’s project. The Mindoro Clergy felt obliged to issue a disclaimer:
“We refute the categorical statement of MINDEX that the local population of Oriental Mindoro welcomes the mining project. Our people have consistently manifested their strong opposition to mining operation in a series of protest actions ... We are one with our people in declaring our vehement opposition against mining activity in our province.”
Some companies use bribes as a way of getting round environmental regulations. A report into logging in Papua New Guinea in the 1980s reported that companies were “roaming the countryside with the self-assurance of robber barons: bribing politicians and leaders, creating social disharmony and ignoring the laws in order to rip out and export the last remnants of timber”. In May 2000, meanwhile, the Asian Development Bank warned that the forests in Cambodia were in an “alarming state” because of corruption. Environmentalists have warned that, at the present rate of destruction, Cambodia’s forests will be gone by the year 2003.
Sometimes such bribes come in the form of illegal political donations. A 1999 audit by the Nicaraguan government revealed that a Canadian mining company, Greenstone Resources, which controls 70 per cent of the mined areas of Nicaragua, donated $20,000 to President Arnoldo Aleman. The company was alleged to have made further donations to other people in Aleman’s Constitutional Liberal Party and bribes to local officials in the area where Greenstone was mining. Nicaraguan law states that donations can be given only by Nicaraguan citizens from within the country.
In return for its money, Greenstone has consistently been allowed to get away with flouting environmental laws and regulations. It carries out massive illegal logging around the mining area, and pollutes water sources and the local environment at the expense of local people’s health.
Says Magda Lanuza, a Nicaraguan activist: “You can smell the cyanide when you are near the mine. Children have headaches, and there are other health problems. The technicians who visited the area with us say the water is harmless, but when we ask them to drink it, they refuse.”
Despite such evidence, Greenstone has received favourable environmental impact assessments from Nicaraguan officials. Ministry of Environment personnel visit the firm’s sites only when the company wants them, and pays them, to do so.
Half the bribery complaints received by the US Commerce Department concern international defence contracts. A 1999 report noted that allegations of bribery were made in 55 contracts between 1998-1999 worth some US$37 billion (£23.6 billion) in total.
Swedish armaments manufacturer Bofors was involved in “the biggest bribery scandal in the history of independent India”. In 1986, the Indian government paid Bofors $1.3 billion (£802 million) for 400 Howitzer field guns for the Indian army. Within months of the weapons being delievered, Swedish radio claimed that £30 million worth of kickbacks had been paid to Prime Minister Rajiv Gandhi and his associates.
In June 1988, the Indian press published documents from the Swedish auditor-general identifying shell companies that had allegedly channelled Bofors’ pay-offs. In October 1999, the Indian Central Bureau of Investigation brought charges of “criminal conspiracy” against Indian business people and Bofors middlemen and employees.
Whatever the outcome of this court case: “the affair has been disaster for the sub-continent. With all the juicy allegations of larceny and intrigue to savour, it is easy to forget that Bofors guns added to the ever-growing armouries of India and Pakistan, which now face each other in an unstable nuclear ‘balance of power.’ The consequences for Indian democracy have been as dire. The Bofors scandal led to Rajiv Gandhi’s defeat in the 1989 general election and the emergence of the BJP as the dominant Indian party.”