Preventing Corruption in Asia

Institutional Design and Policy Capacity

Ting Gong, Stephen K. Ma

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781134014101
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Despite intensified governmental and public efforts at corruption control in recent years, official transgression continues to surface in various ways of abusing the unique power and trust that a government holds.

Preventing Corruption in Asia addresses a number of crucial questions:

-What institutional arrangements are necessary to ensure a clean and honest government?

- What self-regulatory capabilities must government institutions develop in order to maintain integrity?

-How should a sense of ethical responsibility be instilled in the civil services?

-Do special anti-corruption agencies help keep government clean?

-How will a regulatory framework of official conduct work properly?

-How useful are anti-corruption campaigns in containing corruption?

Focusing on a number of carefully selected countries in the Asia and Pacific region, the book sets as its focal point the choice of institutional design in preventing corruption, rather than treating corruption as a practical or technical problem to be corrected by strong political will and good anti-corruption policy measures. While focusing on institutional designs and policy choices, the book also examines other aspects of clean government such as the social environment, legal and regulatory framework, role of the public, and the impact of culture.

1 Beyond enforcement

Anticorruption reform as a problem of institutional design*

Melanie Manion

Corruption, defined here as the abuse of public office for private gain, is at the core of the study of governance and political economy. In her early analysis of the political economy of corruption, Rose-Ackerman (1978) observes that all theories of the state implicitly or explicitly draw a normative line between market and nonmarket mechanisms of allocating scarce resources. Legislative decisions are not supposed to be for sale to the highest bidder in a liberal democracy, for example, even though democracy coexists with markets for many goods. A generic research problem is to describe and explain the microfoundations of exactly how market forces undermine whatever normative line has been drawn. A practical policy problem is to design measures so that widespread corruption does not become institutionalized as its own “informal political system” (Scott 1972), with the attendant social, political, and economic costs.

The organizing impetus of this volume is a policy perspective on corruption, with a particular focus on institutional sources and remedies. It draws together the perspectives of a diverse range of scholars with expertise on corruption and good governance. Individual chapters investigate policy efforts to reduce, control, and especially prevent widespread corruption across a number of Asian countries. This is not to suggest, however, anything distinctively Asian about the corruption targeted by these efforts. Indeed, where the chapters address this issue, they reject the notion of Asian exceptionalism.

Part I of the volume is an intensive study of the past quarter-century of anticorruption efforts in mainland China, which features what Johnston identifies in this volume as one of the most “disruptive syndromes” of corruption—yet is nonetheless emerging as an economic superpower. Part II extends the study to anticorruption efforts, both highly successful and less successful, in other Asian contexts. The purpose of this introduction is to illuminate the institutional perspective, to provide some background for the focus on Chinese anticorruption reform, and to preview the chapters to follow.

An institutional perspective

Telling a plausible causal story about choices to engage in corruption often seems trivial compared to the formidable task of telling such a story about forbearance from venality. This is especially the case where corruption is already widespread. Yet, it is precisely in contexts of widespread corruption that a story about clean officials or pockets of clean government becomes really interesting and important. The most interesting and important stories, of course, are about change: transformations from widespread corruption to clean government, especially. In such stories, governments are typically the key players just as they are key obstacles in the many stories that highlight the stickiness of corruption. Although grassroots players in society are also crucial to successful transformation, the story is usually one of anticorruption reform initiated by governments. Such reform requires governments to change corrupt payoffs and the “folklore of corruption” (Myrdal 1968)—commonly shared beliefs, among public officials and ordinary citizens alike, about the ubiquity of corruption and the unreliability of government as anticorruption enforcer.

What are the prospects for success in anticorruption reform? There is no shortage of policy prescriptions in the growing literature on good governance. Here I focus on two of the most commonly recognized broad policy instruments: enforcement and institutional design. Anticorruption experts generally agree on the importance of enforcement, just as they agree that an exclusive role for enforcement is a losing strategy. Building appropriate institutions has become part of nearly every clean government policy bundle. It was at the center of the major shift in the World Bank strategy in the mid-1990s. Institution building is not necessarily the same as institutional design, however, a distinction I clarify below.

Enforcement strategies reduce corrupt payoffs by increasing the likelihood that corrupt players are detected and then punished with a severity commensurate to the corrupt act. Both features are important (see Di Tella and Schargrodsky 2003). Enforcement strategies increase resources for monitoring and detection, increase punishments for corruption, or both. The Singapore and Hong Kong experiences, which prominently feature independent anticorruption agencies, have been emulated in many other countries, often unsuccessfully (Johnston 1999; Meagher 2005). A major reason is that generous resources and the reliable political support that ensures their supply, which are key features of the Singapore and Hong Kong models, are often not found in other contexts, especially in developing countries.

As to increasing punishments, this is not as trivial as it may seem. In China and Vietnam, for example, officials can be executed for corruption—but in both countries, enforcement is by no means certain. Even extraordinary penalties must be accompanied by a reasonable likelihood of detection and punishment to be effective. A less extreme way to increase punishments is to alter the legal structure of penalties. For example, in many countries it is illegal for officials to solicit or accept bribes, but not for private citizens to offer or pay bribes.

Policy interventions that enhance anticorruption enforcement but leave unchanged the basic conditions that encourage corruption are unlikely to yield lasting results. Changing corrupt payoffs must take into account the incentives that promote corruption in particular contexts. Anticorruption reform through institutional design restructures transactions to lessen incentives and opportunities to transact corruptly. Clearly, the most drastic institutional reform is program elimination. It may be warranted for programs with no sound policy justification that operate mainly to generate bribes (Rose-Ackerman 1999). Examples of such programs include many of the licenses and permissions required to set up businesses in developing countries. Similarly, a study of corruption in post-communist countries considered whether or not traffic police serve any useful purpose there: “Far fewer traffic police and rather more speed cameras might produce more revenue for the state as well as both tighter and fairer control of traffic” (Miller et al. 2001: 338). Legalizing activities that generate corruption is another way to redesign incentives. For example, when off-track betting in Hong Kong was legalized, payoffs for police protection were no longer necessary, which helped to reduce syndicated police corruption.

Another institutional design to reduce corruption is the “competitive” reorganization of bureaucracies, so that several officials supply the same government service. When officials lack monopoly power, bribes are driven down as clients seek the least corrupt officials (Rose-Ackerman 1978, 1999), unless the situation offers a possibility of corrupt collusion between clients and officials to deprive the state of revenue (Shleifer and Vishny 1993). Multiple veto points in government—such as separation of executive and legislative powers, legislative supermajority requirements, and constitutional courts—similarly limit the power of any single government institution, making it difficult to exert influence to obtain illegal benefits, as every decision point must be purchased. In government procurement, sealed competitive bidding requirements and the use of private market prices as benchmarks can also reduce corruption. Statutes that provide rewards and protection for whistleblowers can supply incentives for officials to come forward to reveal corruption (Rose-Ackerman 1999).

The decline of electoral corruption, such as treating and money bribes, from a usual practice in mid-nineteenth century England to a rare and generally disparaged practice by the end of that century reflects the distinct impacts of enforcement and institutional design in anticorruption reform (see Gwyn 1962, 1970; O’Leary 1962; King 1970: Nossiter 1975; Cox 1987).

An enforcement perspective is represented in the 1854 Corrupt Practices Prevention Act, 1867 Second Reform Act, and 1883 Corrupt and Illegal Practices Act, all of which were designed to reduce corrupt payoffs by improving monitoring and increasing punishments. These statutes created an election auditor in each district to record money spent by candidates, established a practice of decisions by independent judges on petitions protesting electoral corruption, increased penalties for bribery to disqualify candidates from holding office for seven years, and introduced candidate liability for bribery practiced by election agents. The statutes prescribed standards for elections and made more salient the illegality of electoral corruption, thereby also playing a role in educating the mass public about what was appropriate.

Other legal changes reduced corrupt payoffs through institutional design, effectively changing the structure of incentives for electoral corruption. The 1872 Ballot Act introduced the secret ballot, which created uncertainty about the return on particular payments for votes. It also made it difficult to judge the closeness of an election until the end and, therefore, difficult to judge whether bribery was a worthwhile investment. While scholars generally agree that the Ballot Act contributed to the decline of electoral corruption, they view it as only one of a number of structural influences. The persistence of widespread vote-buying in the 1880 election is widely acknowledged.¹ The 1884 Third Reform Act and 1885 Redistribution of Seats Act reduced corruption by increasing the size of voting districts. Larger voting districts required extensive vote-buying for it to be efficient at all, especially with the uncertainty introduced by the secret ballot. At the same time, extensive vote-buying was also more easily detected, raising the probability of winning the election but losing the seat as a punishment for corruption.

Considering the magnitude of change required when corruption is commonplace, policy interventions that reduce corrupt payoffs are likely to take years to produce clean government. In such a setting, modest interventions that target certain sectors for change may be more successful, although success may be unsustainable without continuous attention. The notoriously corrupt Marcos regime in the Philippines targeted its Bureau of Internal Revenue for reform in an effort to stem declining revenues due to collusive tax evasion and outright embezzlement by bureau officials (Klitgaard 1988). Under new bureau leadership, grossly corrupt officials were dismissed, strict regulations were introduced, work procedures were reorganized, controls were enhanced, and discretionary authority was reduced. Within a few years, impressive results were achieved. Collected revenues notably increased and corruption in the bureau apparently decreased. Yet, these results were quickly reversed after the bureau experienced another change in leadership.

Where corruption is widespread, which is where such strategies are most needed, implementing anticorruption strategies such as enforcement and institutional design is inherently problematic, however. Consider enforcement. Enforcement to detect a higher proportion of officials engaging in corrupt practices strains limited resources. Most important, enforcement strategies assume clean enforcers—a fantastic assumption, especially (but not only) when corruption is widespread. This is especially relevant when the enforcement strategy focuses on increasing the probability of detection and punishment. In Argentina, for example, Ocampo (2000) points out that increasing the likelihood of punishment requires reversing a history of no legal precedent of conviction for bribery, although the law carries a sentence of up to six years for private agents who give or offer gifts to officials and a similar sentence for officials who receive gifts to do (or not do) something relating to official duties. Focusing on the other component of the calculus by introducing draconian punishments is not necessarily a feasible alternative if many officials are corrupt. Even in China and Vietnam, notable for high levels of corruption and extreme penalties for corrupt acts, the government can only execute so many.

Institutional design presents a different sort of problem. Restructuring procedures to reduce incentives and opportunities for corrupt activities must take into account the near irrelevance of rules, which practically defines situations of widespread corruption. The problem here is not that some officials are bound to discover loopholes in redesigned procedures and take advantage. Rather, officials do not need to search for loopholes. It is taken for granted that rules, organizations, and procedures pose few obstacles because they are quite unimportant to actual practice. Put differently, many institutional design interventions assume that formal institutions matter in guiding actions, but this correspondence is itself an “informal institution.” That is, if institutions are the “rules of the game” that constrain the actions of individuals (North 1990; Calvert 1995), then the emergence of the underlying constraining relationship may be preliminary (or at least integral) to any tinkering with design to reduce corrupt payoffs. This problem of weak institutionalization is also pertinent to enforcement strategies that essentially involve new rules, prohibiting certain activities as corrupt acts—which should not be confused with changes in institutional design. It goes without saying that the relevance of rules cannot be mandated. Obviously, many institutional design strategies, such as the introduction of competition as a substitute for regulation, do not depend so much on rules that matter. These sorts of strategies may be better suited to contexts with weak institutions (Broadman and Recanatini 2002).

At some point, tinkering with institutions to create incentive structures that guard against corruption may come up against lines set by constitutional design. Indeed, this is the crux of the problem identified in many of this volume’s chapters on anticorruption agencies’ corruption in mainland China. Is effective institutional design to reduce and prevent corruption possible in the context of the constitutional design of single-party authoritarianism?

Anticorruption reform in mainland China

Anticorruption reform in mainland China began in earnest with an explosion of corruption in the early 1980s. Despite serious (if seriously flawed) efforts, the country still ranks among the more corrupt in the world.² For about the first two decades of the war on corruption, the Chinese mainly implemented an enforcement strategy, buttressed by fairly ineffectual moral education, but neglecting institutional design (see Manion 2004). In a document issued in late 2004, the Central Committee announced a major policy shift, introducing a set of comprehensive guidelines to govern anticorruption reform for the next five years (Xinhua, 16 January 2005). The guidelines called on different agencies in the party and government to come up with institutional innovations to prevent corruption at its roots. The document was the culmination of an incremental shift that began in the late 1990s and became especially prominent in this century. The Chinese essentially rejected campaign-style enforcement for an approach emphasizing institutional change and corruption prevention.

Preview

The six chapters that make up Part I of this volume mainly investigate the institutional reforms aimed at anticorruption in mainland China. The broad consensus of the authors as to the status and direction of these reforms is skeptical, if not always completely pessimistic. They find institutional tinkering, not changes in institutional design. The incentives remain essentially the same in the government–business relationship, anticorruption coordination, and mechanisms governing official careers. Moreover, although the authors see a number of possibilities for improving the institutions they investigate, the suggested improvements often cross the line into changes in constitutional design, which makes them unlikely if not entirely unimaginable.

Wedeman asks whether the Communist Party is winning its war on corruption, now entering its 25th year. In recent years, judging from anticorruption enforcement statistics and corruption perception measures, the corruption rate appears to have leveled off. Yet, as Wedeman recognizes, such measures are problematic. Both sorts of data are imperfect reflections of actual volume and severity of corruption. Wedeman focuses instead on another measure, which reflects risk of corrupt actions—the lag time between corrupt action and apprehension, with a shorter lag time reflecting higher risk. He compares lag times for large numbers of corruption cases in 1993–96 and 2005–06 and finds much longer lag times for cases in the most recent period.

Ngo examines government–business collusion in rent creation and rent seeking, one of the most common sources of corruption in mainland China since the inception of market reform. In recent years, Chinese anticorruption enforcement has focused on the government–business relationship, but the effort has failed to address the root causes of collusive corruption. The creation, allocation, and pursuit of economic rents have become institutionalized in the state licensing system. Ngo demonstrates that rent production under the prevailing framework of state licensing is a fertile ground for corruption because of significant policy discretion in allocation of rents. Effective measures to reduce this common and costly form of corruption require basic changes in the licensing state.

Sun considers the surge in revealed corruption by local Communist Party and government leaders in recent years, despite efforts to reform the means by which leading officials are appointed and promoted. She finds that the reforms have not fundamentally transformed the incentive mechanisms of leading officials. Even in the more broadly consultative process, the Communist Party committees and their powerful organization departments dominate. This institutional deficit is aggravated by implementation gaps of varying degrees. This is reflected in manipulation, superficial compliance, non-compliance, and even fraud by those with the power to appoint and promote. At the same time, the intermediate accountability measures introduced in the reforms may be a promising bridge to deeper and broader procedural changes.

Gong analyzes the structure of the key anticorruption agencies in mainland China, the party’s discipline inspection committees. She demonstrates that the discipline inspection system has gone through continuous institutional conversion, structurally and functionally, as the party has adapted it to changes in the policy environment. At the same time, the basic goal of discipline inspection has remained unchanged: it aims to improve the moral conduct of party members through disciplinary measures imposed from the top down. Yet, as Gong points out, discipline inspection committees are constrained by generalist party committees, which exercise leadership over them but are ostensibly the objects of their moral scrutiny. Freeing the discipline inspection committees from their party committee bosses is not necessarily a solution. In the current political context, without functioning channels for public surveillance, who would inspect the inspectors?

Ma takes up the question on which Gong concludes. He widens the focus to consider the entire set of anticorruption agencies—in the party, government, and criminal justice system. None of the anticorruption agencies is well designed to meet the challenges of policing others and policing themselves. Ma points to a combination of weak supervision over the agencies and weak agency autonomy to police others. The crux of the problem is similar to the one identified by Gong: a multiplicity of measures, including public surveillance, to supervise anticorruption agencies would effectively terminate the party’s control over the agencies.

Chan and Gao analyze the target-based performance responsibility system which clarifies responsibilities of local leaders in performance contracts that become the basis for penalties and rewards affecting official careers. Evaluation against performance measures does not seem to have prevented local networks of corrupt leaders across organizations. Chan and Gao argue that the system can in principle serve as an effective means to control corruption. They investigate why in practice it has not played this role and point to the concentration of power. An effective solution is not simply to separate and share powers to increase participation in decisions. Rather, this must be combined with effective oversight and review of decisions. In the absence of this fundamental change in governance institutions, the mechanisms of the performance responsibility system cannot be expected to check local corruption.

The six chapters in Part II look beyond mainland China to other Asian experiences with anticorruption reform. Just as the authors agree that there is no single variant of Asian corruption, they also agree that there is no single anticorruption strategy that can be effective everywhere. Instead, while they recognize that reducing and preventing corruption depends on building institutions and are skeptic...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of Illustrations
• List of contributors
• Foreword by David H. Rosenbloom
• Acknowledgments
• Abbreviations
• 1 Beyond enforcement: anticorruption reform as a problem of institutional design
• Part I Anticorruption reform in the People’s Republic of China
• Part II Corruption and institutional design: learning across regions
• Index