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Anti-Corruption Group Targets Construction, Procurement

By Berta Gomez
Washington File Staff Writer

Washington -- Rampant corruption in the construction sector costs at least $300 billion a year and undermines sustainable development worldwide, says Transparency International (TI), the leading international anti-corruption organization.

TI's "Global Corruption Report 2005," released March 16, focuses on construction and post-conflict reconstruction, and includes sections on Iraq, Afghanistan and the countries devastated by the December 2004 Indian Ocean tsunami.

TI chose to concentrate on the construction sector because of the size, complexity and potentially huge cost of large construction projects -- and because problems in the sector affect both developed and developing countries, the report said.

The organization found that the construction sector is especially vulnerable to corruption, the report said.  Not only is there fierce competition for major contracts, but the need for multiple approvals and permits leaves the process open to abuse. The unique nature of some large projects makes price comparisons difficult, and contractors are often able to conceal poor-quality work under concrete or cladding, TI said.

Between $3 trillion and $4 trillion are spent on construction procurement annually and TI estimates that about 10 percent of the total is wasted through bribery and corruption, TI head of research Robin Hodess said at a March 16 panel discussion in Washington on the launch of the report.

"The stakes are just very high," she said.

And although TI surveys of business executives worldwide show that construction-related corruption is a problem in both rich and poor countries, the poorest are affected most dramatically because crucial infrastructure projects are never completed, or are built with shoddy equipment and under poor management, Hodess said.

In most cases, she said, "earthquakes do not kill people; collapsing buildings kill people."

TI advisory panel member Peter Vogel said that the organization's estimate that 10 percent of construction spending is lost to corruption is "very misleading."  That figure is a global average and reflects both extreme corruption in some countries and minimal waste in countries such as Finland, he said.

In some countries, the percentage of construction funds lost to corruption "may be huge" and procurement practices a form of "daylight robbery," Vogel said.  Widespread corruption in public procurement is one of the reasons there is so little electricity in much of Africa despite the billions of dollars that have been spent on electrification projects over the years, he said.

In the chapter on Iraq, the TI report calls for the adoption of more aggressive anti-corruption measures as the country rebuilds. "Corruption thrives in a context of confusion and change," the report says.  Iraq is especially vulnerable due to its recent history of conflict, tyranny and mismanagement as well as the sizable reconstruction funds that have been pledged by the international community.

TI urges the new Iraqi government, coalition forces and international donors to place more emphasis on decentralizing governance and aid projects and to support Iraq's local media as an independent watchdog.  The report also identifies management of Iraq's oil revenue as a priority.

"Funds poured into rebuilding countries such as Iraq must be safeguarded against corruption.  Transparency must also be the watchword as donors pledge massive sums for reconstruction in the countries affected by the Asian tsunami," TI Chairman Peter Eigen said in a news release accompanying the report.

To coincide with the publication of the "Global Corruption Report, 2005," Transparency International also launched an international initiative designed to prevent corruption in construction projects.

The full text of the TI report is available on the Internet.