International bribes measure corruption

Lucio Picci

Conference ANTIcorruption&fraud:DETECTION & MEASUREMENT Prague, April 7 2017

University of Bologna

ESCHER’S DRAWING HANDS

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DRAWING WHAT?

• A fascinating, multi-faceted theme:

international corruption • An essential practical problem: measuring

corruption • → new measure!

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INTERNATIONAL BRIBES

• A firm from the “headquarters country” (HQ) bribes public officials in a “foreign country” (FO)

We do not consider other types of “international

corruption”

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WHY IS IT IMPORTANT?

Linked with other crimes, such as: Illegal Financial Flows (IFFs)

IFFs out of Africa > Aid to Africa! Corporate gov, & compliance Complex int. law issue, etc. Complex policing

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MEASURES OF CORRUPTION

• Perception-based (TI-CPI, WB-CCI) Whose perceptions? Self-fulfilling?

• Judicial stats: not cross-country • Victimization stats: problematic, also for petty

corruption • “Objective measures”: the future

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“OBJECTIVE” MEASURES

• • Hard data • Examples: Cost comparisons “red flags” on public procurements and.. The present “cross-border corruption”

measure

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WHY IT IS IMPORTANT

• We need measures to assess causes/effects

of corruption & to assess anti-corruption policies Differences in space vs. changes in time

→ a measure might be ok for the former but not for the latter

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INTERNATIONAL BRIBES

• In the old days, it was not a crime

• Then (‘70s), the Watergate and the Lockeed scandals came….

Lockeed bribed in several countries to sell its airplanes (JP, NL, BE, IT..)

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1977: FCPA

• 1977: Foreign Corruption Practice Act A crime in the US to bribe abroad Transparency provisions Expansive interpretation of jurisdiction

US firms were not happy: 1999: OECD Anti-Bribery Convention

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1999: OECD ANTI-BRIBERY CONVENTION • 41 members • Agreed to make it a crime in the home

jurisdictions to bribe abroad • Incentive not to enforce, particularly for

“national champions” • Monitoring: mixed success • But: US “stepped in” by prosecuting many

cases

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A DATABASE OF CASES

• 945 cases, between (2000-2014)

• Where the case “enforced first”. It controls for judicial activity

Most often: in the “headquarters country” (HQ) (or 3

rd

country jurisdiction): 773 cases In the “foreign country”: 172 cases.

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1ST ENFORCED NOT IN FO: BY HQ COUNTRY

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Total Cases Positive Cases Ongoing Cases

N. of cases: 773 390 300

By HQ country

United States 319 204 92

Germany 61 26 35

United Kingdom 58 19 32

France 53 26 25

Switzerland 43 37 6

others 239 78 110

FIRST ENFORCED IN HQ: BY FO COUNTRY

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Total Cases Positive Cases Ongoing Cases

N. of cases: 773 390 300

By FO country

China 94 49 39

Nigeria 36 26 5

Russia 31 14 14

India 28 11 14

Lybia 24 6 16

others 560 284 12

INT. BRIBES MEASURE CORRUPTION

• Cases 1st

enforced in a given jurisdiction, to assess corruption elsewhere.

• • Not subject to same criticisms of judicial

statistics! • Two applications: measure of corruption

(PACI) and of propensity to corrupt (BPI)

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PACI VS. WB-CCI

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PACI VS. PERCEPTION-BASED

• Levels of corruption: high correlation • • → WB-CCI (or TI-CPI) and PACI roughly tell the

same story • • What about changes in time, within

countries?

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PACI VS. PERCEPTIONS

• Changes in time, within country • • PACI: 19 World regions, 3 5-year periods • TI-CPI, WB-CCI: comparable measure • • No correlation: • • → they tell a different story! • • •

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TI-CPI, SPAIN

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TI-CPI, Spain

Ti-CPI

TI-CPI, SPAIN / 2

• But: After 2007, the two main sources of

corruption in Spain dried out: Building sector, public investments

Why perceptions deteriorated ? Spate of highly visible, high profile cases,

referring to pre-2008 crimes

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MEASURING THE PROPENSITY TO CORRUPT

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BRIBE PAYERS CORRUPTION INDEX

• TI-BPI: asks entrepreneurs: “(select countries you do business with)”

“For each of the countries you have selected, could you please tell us, using a scale of 1 to 5 where 1 means never and 5 means almost always, how often do firms headquartered in that country engage in bribery in this country?”

• Cases 1st enforced in FO country • → BPCI. • Expressing the propensity of firms in a country

to bribe abroad

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TI-BPI VS BPCI

• TI-BPI: developed countries where (perception of corruption) is higher, also “corrupt” more abroad

• → “Corruption as national guilt” • BPCI: Not so! Countries with more MNEs

corrupt more abroad (they have more chances to do so)

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UNDERSTANDING CORRUPTION: WHERE ARE WE?

• PACI, BPCI: first “objective” cross-country measures of corruption

• Part of an important effort to better a) measure b) understand corruption

• A multifaceted reality: Corruption, not a “cancer”, but a “dimension” of

governance

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ESCHER’S ‘DRAWING HANDS’

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BELVEDERE?

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RELATIVITY?

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Thank you !

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