2016 - United Nations Economic Commission for …

1 2016 AFRICAN GOVERNANCE REPORT IVMeasuring corruption in africa : The international dimension mattersAFRICAN GOVERNANCE REPORT IV2016 measuring corruption in africa :The international dimension mattersiiAfrican Governance Report IVOrdering information:To order copies of this report, please contact:PublicationsEconomic Commission for Box 3001 Addis Ababa, EthiopiaTel: +251 11 544-9900 Fax: +251 11 551-4416E-mail: 2016 United Nations Economic Commission for AfricaAddis Ababa, EthiopiaAll rights reservedFirst printing March 2016 Title: measuring corruption in africa : The international dimension matters - African Governance Report IV Language: English Sales no.

2 : ISBN: 978-92-1-125125-8 eISBN: 978-92-1-057905-6 Material in this publication may be freely quoted or reprinted. Acknowledgement is requested, together with a copy of the designations used and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the United Nations Economic Commission for africa (ECA) concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its Economic system or degree of development.

3 Designations such as developed , industrialized and developing are intended for statistical convenience and do not necessarily express a judgment about the stage reached by a particular country or area in the development design, layout and graphics: Carolina Rodriguez, Pauline Stockins, Thad MermerMeasuring corruption in africa : The international dimension mattersiiiCONTENTSF oreword viAcknowledgements viiiExecutive Summary ixChapter 1: Economic governance institutions, corruption and structural transformation 1A.

4 Overview of structural transformation in africa 2B. Good governance as a requisite for africa s structural transformation 7C. Economic governance institutions in structural transformation 13D. Corruption as an impediment to Economic governance 16E. Conclusion 27 Chapter 2: Why are current perception-based measures of corruption inadequate for africa ? 28A. What are perception-based measurements of corruption and what methodologies do they use? 29B. How have African countries performed over the years based on the perception measures?

5 35C. Limitations of perception-based measures for policymaking 42D. Rationale for re-thinking perception of corruption measurements and broader issues 44E. Conclusions 48 Chapter 3: Critical review of non-perception-based measures and mixed indices of corruption 49A. Review of methodologies of selected governance-related measurements 51B. Analysis of strengths and limitations of the governance-related measurements 56C. Lessons learned 59D. Conclusions 60 Chapter 4: International dimension of corruption 61A.

6 Potential effects of foreign intervention on corruption 62B. Understanding cross-border corruption 64C. Cross-border illicit financial flows 70D. Consequences of the international dimension of corruption 79E. Conclusion 81 Chapter 5: Conclusions and policy recommendations 82A. Conclusions 83B. Policy recommendations 83 Appendix A 88 References 90ivAfrican Governance Report IVFiguresFigure 1: Trends in gross domestic product sectoral composition (percentage) 3 Figure 2: Real gross domestic product per subregion following the global crisis 4 Figure 3: Real gross domestic product per subsector following the global crisis 6 Figure 4: Different effects of governance on gross domestic product growth for African countries 7 Figure 5.

7 Changes in governance trends from 2009 to 2014, as per the Ibrahim Index of African Governance 9 Figure 6: Important dimensions for good Economic governance 13 Figure 7: Trends in performance on ease of doing business indicators 15 Figure 8: Aggregate expenditure out-turn compared to original approved budget 17 Figure 9: Non-parametric relationship between poverty headcount and control of corruption 24 Figure 10: Non-parametric relationship between gross domestic product growth rate and control of corruption 24 Figure 11: Google trends analysis of the Corruption Perceptions Index 35 Figure 12: Transparency International s Corruption Perceptions Index: comparable median relative rankings of africa 37 Figure 13: Corruption Perceptions Index: comparable relative rankings of African subregions 38 Figure 14: Transparency International s Corruption Perceptions Index.

8 Comparable relative rankings of africa and other regions 39 Figure 15: Performance on Economic management cluster by group, sub-Saharan africa 2007 2014 57 Figure 16: Official development assistance to africa 63 Figure 17: Entry modes for multinational corporations in corruption 68 Figure 18: Illicit financial flows sectoral break-up 71 Figure 19: Alternative estimates of illicit financial flows 79 Figure 20: Good Economic governance-structural transformation nexus 83 Figure 21: Linkage between institutions and Economic governance 85 Figure 22: Prerequisites for good governance institutions 86 TablesTable 1: Common perception-based measurements of corruption used for awareness-raising 31 Table 2: Ranking of South africa in various governance-related indices 33 Table 3: Transparency International s Corruption Perceptions Index country coverage 36 Table 4.

9 Summary of methodologies of governance indicators 51 Table 5: Ibrahim Index of African Governance subcategories and indicators 55 Table 6: Ibrahim Index of Governance Country Performance 2006 2014: Morocco 56 Table 7: Number of cross-border cases of corruption by foreign firms 69 Table 8: Public administration corruption index for africa and its subregions, 1995 2014 70 Table 9: Corruption-related illicit financial flows in the extractives sector in africa 72 Table 10: Financial secrecy top 25 secrecy jurisdictions in 2015 75 Table 11: Number of cross-border cases of corruption by public officials 80 measuring corruption in africa : The international dimension mattersvBoxesBox 1: African structural transformation success stories 3 Box 2: Principles of good governance of the United Nations Development Programme 8 Box 3: Natural resources governance initiatives 10 Box 4: African-owned governance initiative: African Peer Review Mechanism 11 Box 5.

10 African Peer Review Mechanism indicators for good Economic governance 14 Box 6: Examples of grand corruption in africa 19 Box 7: United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption: Enunciation of corruption 21 Box 8: Addressing systemic corruption in Singapore and Hong Kong 22 Box 9: Good practice from the Republic of Korea in fighting petty corruption 26 Box 10: Corruption and the international domino effect 35 Box 11: Cost of corruption in africa 40 Box 12: Possible institutional characteristics of a State 43 Box 13: Different approaches of measuring corruption 48 Box 14: Economic governance concepts assessed and corresponding indicators 53 Box 15: Country policy and institutional assessment clusters and indicators for the World Bank 54 Box 16: Importance of information and communications technology in combating corruption 54 Box 17: Fo