Admitting the problem is first step in tackling corruption

 

Ireland’s perceived corruption levels place us at a competitive disadvantage with other small open economies

NORWAY ISN’T a country you normally associate with corruption. It’s a country we assume to have a strong work ethic, a long history of open, democratic government, and a competitive private sector.

Norwegians apparently have a low level of tolerance for wrongdoing in public office. Corruption doesn’t seem to be an issue. However, like a growing number of his compatriots, the head of Norway’s economic crime agency sees things a little differently. According to Trond Eirik Schea, corruption occurs in Norway “on a much wider scope than we’re able to reveal”.

Bribery scandals at Statoil, a municipal water facility in Oslo and even the Norwegian Red Cross have led to an increased awareness of the phenomenon there. They can be linked to a drop in Norway’s ranking on the Transparency International Corruption Perceptions Index (CPI) from 9th to 14th this year.

Yet Norway is still regarded as one of the least corrupt countries in the world and it consistently ranks higher than Ireland on the CPI. It begs the question: after 20 years of corruption scandals in Ireland, why can’t our own authorities admit that corruption is a problem here? After all, not only do we rank behind Norway, but we even trail some developing countries, including Ghana and Malaysia, in terms of the levels of perceived undue influence on politicians by special interests.

Negative perceptions and the underpinning reality are believed to be costing the Irish economy in a number of ways. Firstly it is estimated that the direct financial cost of corruption and economic crime to Irish business is €2 billion per year. This includes fraud, theft, embezzlement and bribery and the figure is equivalent to the loss of 50,000 jobs annually.

Just as startling is the potential loss of foreign direct investment. According to a PricewaterhouseCoopers survey in 2007, some 45 per cent of foreign businesses said they had not done business in a country or pursued an opportunity because of corruption risks. In a separate survey, 35 per cent of companies said they have been deterred from an attractive investment because of the host country’s reputation for corruption.

Such perceptions can be translated as a further €1 billion loss in investment each year to Ireland if research carried out at Passau University in Germany is to be believed. In 2008 Ireland’s position on the Corruption Perceptions Index improved marginally. Ireland now stands in 16th place out of 180 countries.

While this ranking isn’t all bad, it’s not all good either. Ireland scores 7.7 out of 10 on the index with a score close to 10 suggesting extremely low levels of corruption. However, some of our direct competitors for FDI, such as Finland and Denmark, consistently score above nine in the rankings. Investment agencies in Singapore and New Zealand regularly market themselves using their high scores on the corruption index.

Not only does this place us at a competitive disadvantage with other small open economies, but according to the Passau research, a one-point increase on the corruption index scale of 10 is linked with a 0.5 per cent increase in capital inflows as a proportion of GDP. With an estimated GDP of €200 billion per annum, we could be losing around €1 billion or more in lost foreign investment each year.

While the Government is attempting to bridge a €9 billion deficit by means-testing medical cards for the elderly, wouldn’t it make as much sense to concentrate on the billions we are haemorrhaging in lost investment opportunities and economic crime?

The Government doesn’t seem to think so. It has made it clear that it is not willing to make the changes needed to shore up our anti-corruption and public ethics safeguards. In spite of the undisputed risk of corruption from combining money and politics, a new ethics Bill aims to actually treble the value of gifts and loans that politicians can receive from anyone without declaring them – from €650 to €2,000 a year. At the same time, the bulk of donations to political parties go unaccounted for, and the majority of parties refuse to publish audited financial accounts.

The Government has also refused to introduce legislation to protect employees who wish to report wrongdoing in good faith. Its decision seems to be based on the conclusion that protecting whistleblowers will damage our competitiveness. Yet countries such as the United Kingdom and Sweden offer statutory protection for whistleblowers and still sit higher in the Global Competitiveness Index than Ireland does. Legislators in other jurisdictions seem to have recognised the massive reputational risk associated with discouraging the disclosure of misconduct in business. Yet after successive tax evasion and banking scandals here it appears that our own politicians are prepared to keep their heads stuck firmly in the sand.

The cases and substantiated allegations have continued to emerge. As of the end of 2007 two officials and a developer had been convicted of receiving and paying bribes in the Land Registry; while investigations have been launched into ethics breaches, fraud or corruption in at least six local authorities – leading in one case to the conviction of Galway councillor Michael Fahy. Meanwhile, the Auditor and Comptroller General has reported on financial irregularities in State agencies such as Fás and Bord na gCon.

Ireland is no less immune to corruption risk than Norway. Yet unlike Schea and his Norwegian colleagues we seem to believe that the problem no longer exists here. It’s time we faced up to the likelihood that corruption is a much bigger issue than our politicians would like us to think.


John Devitt is chief executive of Transparency International Ireland. A national study on corruption safeguards in Ireland will be published by Transparency International in February