Infrastructure and Corruption

Some policy implications about reducing corruption in infrastructure projects from a recent working paper by Charles Kenny;

“A lens that focuses on the development impact of corruption suggests that a single project-focused and in particular a procurement-focused approach may be inappropriate. O&M budgets in many developing countries are too low to sustain existing stocks of infrastructure –as reflected in poor indicators of quality. At the same time, donor projects are ‘cherry picked’ –the most attractive investment projects from the point of view of economic returns. These two facts help to reconcile high ERRs estimated for donor projects in Africa with very low overall returns to public investment and limited macroeconomic returns to aid. Low OM budgets and many poor project choices are both likely to be in some part connected to incentives created by poor governance and corruption. Taking a project approach to corruption would miss both of these impacts, which are frequently at the core of corruption’s overall development impact.

Furthermore, a procurement-centered approach is likely to miss a good deal of the corruption directly related to a project, including some of the most harmful forms. Theft of materials and bribes to cover up construction code violations both occur after the procurement process is complete, for example. The project may also generate downstream corruption in the form of petty bribes for connections, or tax and customs avoidance. As we have seen, these forms of corruption can make up the bulk of bribe payments and may also account for a considerable proportion of the economic harm caused.

Any comprehensive anti-corruption strategy in infrastructure should start at the level of the sector rather than the project or the procurement, then. The usual focus on the scale of improper payments and theft centers attention on particular anti-corruption strategies in projects --methods to benchmark construction prices to detect overbidding, for example. We should additionally focus on tools to reduce the most damaging consequences of corruption, because if these consequences are avoided, we will know that the impact of corruption in infrastructure on overall development will be comparatively small.”

I’ll put some detailed comments on the paper later.

It’s heartening to see the author of the paper, Charles Kenny, an economist at the World Bank writes a blog about happiness and purpose in life.

Updated some related links;
Charles Kenny pushes the corruption debate forwards
World Bank Corruption Strategy: An Impolitic View (ex World Banker)