International bribes measure corruption Lucio Picci University of Bologna Conference ANTIcorruption&fraud:DETECTION & MEASUREMENT Prague, April 7 2017
ESCHER S DRAWING HANDS 2
DRAWING WHAT? A fascinating, multi-faceted theme: international corruption An essential practical problem: measuring corruption new measure! 3
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 4
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 5
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 6
OBJECTIVE MEASURES Hard data Examples: Cost comparisons red flags on public procurements and.. The present cross-border corruption measure 7
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 8
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..) 9
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 10
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 11
A DATABASE OF CASES 945 cases, between (2000-2014) Where the case enforced first. It controls for judicial activity Most often: rd in the headquarters country (HQ) (or 3 country jurisdiction): 773 cases In the foreign country : 172 cases. 12
1 ST ENFORCED NOT IN FO: BY HQ COUNTRY 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 13
FIRST ENFORCED IN HQ: BY FO COUNTRY 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 14
INT. BRIBES MEASURE CORRUPTION st Cases 1 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) 15
PACI VS. WB-CCI 16
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? 17
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! 18
TI-CPI, SPAIN 68 TI-CPI, Spain 66 64 62 60 Ti-CPI 58 56 54 52 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 19
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 20
MEASURING THE PROPENSITY TO CORRUPT 21
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 1 st enforced in FO country BPCI. Expressing the propensity of firms in a country to bribe abroad 22
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) 23
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 24
ESCHER S DRAWING HANDS 25
BELVEDERE? 26
RELATIVITY? 27
Thank you! 28