Corruption In An Egyptian Public Administration Project Accounting Essay

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It is no longer questioned that corruption has a negative impact on development. The world's evidence confirms that corruption excessively impacts the poor. Corruption encumbers economic development, diminishes social services, and diverts investments in infrastructure, institutions and social services. Furthermore, it leads to uncertainty, unpredictability, deteriorating moral values and disrespect for legal institutions and authority; all of this promotes and shapes an anti-democratic environment. Consequently, corruption "reflects democracy, human rights and governance deficit that negatively impacts on poverty and human security" (UNDP, 2003, p.1)

The early 1990s witnessed the shifting away from traditional public administration reform concerns, to dealing with more politically sensitive areas that are at the core of good governance. This shift happened as a consequence of globalisation and increased pressures for improving governing institutions. Since then, a rapidly growing area of assistance was fighting corruption as well as improving accountability, transparency, and integrity. (UNDP, 2003)

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What is Corruption?

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Corruption is mainly a governance issue - a failure of institutions and inability to administer society through a framework of social, judicial, political and economic checks and balances. When these formal and informal systems collapse, it becomes difficult to implement and enforce laws and policies that ensure accountability and transparency (UNDP, 2003). Transparency can be defined as;

A principle that allows those affected by administrative decisions business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes. It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably (Transparency International, (n.d.)).

Many definitions have been out to describe corruption, yet there is no a single, comprehensive, universally accepted definition for what is a corrupt behaviour is (United Nations Office on Drugs and Crime, 2004). Corruption can be simply defined as "the misuse of public power, office or authority for private benefit - through bribery, extortion, influence peddling, nepotism, fraud, speed money or embezzlement" (UNDP, 2003, p.2)

Bribery "is an offer or promise of money or advantages in return for benefits that are under the discretion of a public official". (World Bank, (n.d.), p.71) Accorrding to law, it is usually considered to be a civil or criminal offence, when someone attempt, promise, give, solicite, or accept a bribe. (World Bank, (n.d.))

Fraud is another common corrupt practice. Fraud "is an act of misrepresentation or deception" used by people to gain illegal and unearned income. Fraud occurs when charging for goods and services never delivered, changing the specifications or timing on goods and services and their dates, or overpricing goods and services to cover the cost of bribes. A loss of state revenue is the consequent of fraud. (World Bank, (n.d.))

Corruption is not only entitled to public sector, it is considered to be a private concern too. However, more attention is usually given to corruption in the public service. When an official accepts, solicits, or extorts a bribe, public office is abused for private gain. (World Bank, (n.d.))

Corruption in Egypt:

Corruption is devastating the Egyptian economy. This is reflected on the Corruption Perceptions Index.

The Corruption Perceptions Index (CPI) "measures the perceived level of public-sector corruption in 180 countries and territories around the world" (Transparency International, 2009). The diagram below shows CPI all over the world, the lighter the blue, the lower the perceived level of public sector corruption (Transparency International, 2009).

http://www.transparency.org/var/portal/storage/images/media/images/map_screen/761771-1-eng-GB/map_screen.jpg

The Corruption Perceptions Index (CPI) table illustrates four things; first, the country's ranking which shows how one country compares to others included in the index. Second, CPI score which indicates the perceived level of public-sector corruption in a country/territory. Third, the number of surveys used to determine the score, and lastly confidence range of the scoring (Transparency International, 2009). The table below shows only 15 countries from 180 including Egypt as some of the countries has been omitted.

Rank

Country/Territory

CPI 2009 Score

Surveys Used

Confidence Range

1

New Zealand

9.4

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6

9.1 - 9.5

5

Switzerland

9

6

8.9 - 9.1

8

Canada

8.7

6

8.5 - 9.0

14

Germany

8

6

7.7 - 8.3

16

Austria

7.9

6

7.4 - 8.3

17

United Kingdom

7.7

6

7.3 - 8.2

49

Poland

5.0

8

4.5 - 5.5

84

India

3.4

10

3.2 - 3.6

111

Egypt

2.8

6

2.6 - 3.1

120

Vietnam

2.7

9

2.4 - 3.1

126

Tanzania

2.6

7

2.4 - 2.9

130

Lebanon

2.5

3

1.9 - 3.1

154

Yemen

2.1

4

1.6 - 2.5

168

Iran

1.8

3

1.7 - 1.9

180

Somalia

1.1

3

0.9 - 1.4

(Transparency International, 2009)

According to (CPI) table, Egypt was ranked number 111 from 180 countries, and CPI Score for 2009 was 2.8 out of 10, which means that Egypt falls within the most corrupt countries.

The following diagram shows the ranking comparison between Egypt and other regional countries (Middle East and North Africa);

Rank

Regional Ranking

Country/Territory

CPI 2009 Score

90% confidence interval

22

1

Qatar

7

5.8

8.1

30

2

UAE

6.5

5.5

7.5

32

3

Israel

6.1

5.4

6.7

39

4

Oman

5.5

4.4

6.5

46

5

Bahrain

5.1

4.2

5.8

49

6

Jordan

5

3.9

6.1

63

7

Saudi Arabia

4.3

3.1

5.3

65

8

Tunisia

4.2

3

5.5

66

9

Kuwait

4.1

3.2

5.1

89

10

Morocco

3.3

2.8

3.9

111

11

Algeria

2.8

2.5

3.1

111

12

Djibouti

2.8

2.3

3.2

111

13

Egypt

2.8

2.6

3.1

126

14

Syria

2.6

2.2

2.9

130

15

Lebanon

2.5

1.9

3.1

130

16

Libya

2.5

2.2

2.8

154

17

Yemen

2.1

1.6

2.5

168

18

Iran

1.8

1.7

1.9

176

19

Iraq

1.5

1.2

1.8

(Transparency International, 2009)

As shown above there is a serious problem in CPI with the Middle East and North America where only six countries out of the thirteen countries score 5 and above. (Transparency International, 2009)

Corruption perceptions index for 2009 shows poor results that reflect how the effectiveness of anti-corruption efforts are seriously hindered by the conflict and political chaos in the region. The governance gap in the region is clarified to a certain extend by the treat to political and institutional infrastructures, while other factors continue to increase corruption for instance lack of transparency, insecurity and oil wealth. (Transparency International, 2009)

Even though corruption is explicitly addressed as a major barrier to development and the issue of enhancing integrity and accountability in all sectors - whether private or public is now being addressed. Egypt is still perceived as one of the highly corrupt countries along with other countries such as Morocco, and Lebanon. (Transparency International, 2009)

Reasons for Corruption:

From an institutional perspective, corruption occurs when public administers have wide authority, little accountability and perverse incentives, or when their accountability responds to informal forms of regulation rather than formal one (UNDP, 2003).

A simple equation has been developed by Robert Klitgaard - a leading expert in this field, which shows that;

C (Corruption) = M (Monopoly) + D (Discretion) - A (Accountability)

(UNDP, 2003, p.2)

The equation identifies that monopolistic control of public administers who exercise discretionary powers without having accountability systems are the causes of corruption (UNDP, 2003).

According to UNDP source Book on Accountability, there are two other dimensions that should be taken into consideration in order to balance Monopoly and Discretion:

Corruption = (Monopoly + Discretion) - (Accountability + Integrity + Transparency)

(UNDP, 2003, p.2)

This formula shows that corruption is basically a consequence of weak governance, where there is a lack of Accountability, Integrity, and Transparency besides Monopoly and Discretion. (UNDP, 2003)

Reasons for Corruption in Egypt:

To ensure that any planned interventions or reforms address the roots of problem, it is important to consider and understand the causes of corruption in Egypt at first.

Rule of Law:

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(World Bank Group, 2009)

The above diagram indicates a good position of the rule of law in Egypt compared to selected countries. While the below diagram shows the percentile rank of rule of law in Egypt from 1996 till 2008. Generally, Egypt handles a powerful position.

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(World Resource Institution, 2009)

Egyptian laws include; new tax law and the law of construction projects, as well as the new public service law and the law of information disclosure, which are considered vital for achieving greater transparency and integrity in Egypt. (MSAD, (n.d.))

Control of Corruption Index:

The corruption Index is defined as "a measure of perceptions of corruption, conventionally defined as the exercise of public power for private gain". (Kaufmann, Kraay, & Mastruzzi as cited in World Resource Institution, 2009, p.1). Values are indexed to a mean of zero and a standard deviation of one index unit. Better governance is shown by positive scores and the values almost fall from 2.5 to -2.5. (Kaufmann, Kraay, & Mastruzzi as cited in World Resource Institution, 2009).

ISO

2008

Country

Egypt

EGY

-0.67

(World Resource Institution, 2009)

As shown in the above diagram Egypt's control of corruption index is -0.67 in 2008 which indicates a failure in governance.

(World Resource Institution, 2009)

The above diagram shows the control of corruption in Egypt from 1996 till 2008, which is gradually drifted downward from 60% to 30 %. This also indicates the failure of governance.

Aggregate Indicator: Voice & Accountability:

One of the major tools to fight corruption is the accountability of the government. Egyptian government is considered to have low percentage in accountability this is shown in the following diagrams;

(World Resource Institution, 2009)

The above diagram shows the percentage of Voice and Accountability in Egypt from 1996 till 2008. Generally the percentile rank is the same during that period which ranged from 25% to 15% and ending as 10% in 2008, however, it is gradually drifted downwards.

chart.png

(World Bank Group, 2009)

This diagram shows the comparison between the accountability percentage between Egypt and selected countries, where Egypt scores low percentage of accountability.

Administrative Organisation and Civil Service Systems:

Typical Manifestations and Possible Weak Points:

Where is corruption manifested?

A systematic weak point opened up by the structures and procedures of administrative organisation and civil service system is frequently attributed to corruption. It should be highlighted that organisational structures themselves can possibly be a result of corrupt interests, and thus should not be treated as an external variable, for instance defectively defined divisions of competence and the macro level, which can then - in the form of unnecessary agencies or areas of competence - serve as sources of support. The political will at the level of management is equally essential for eliminating weak points to implement administrative reform and avoid corruption. (Pech, 2005)

Typical Manifestations of Corruption in a Civil Service System:

Considerable proportions can be assumed by irregularities in the administration of personnel affairs, such as false salary payments, supplementary remunerations or pensions. Among the most widespread or "cross-cutting" forms of corruption are the appointments and promotions that are based on nepotism or bribery, rather than qualifications and performance. Furthermore, administrations are often politicised, specifically following political elections large sections of them are exchanged with incoming party members, which adds the risk of officials being subject to political influence. Lastly, corruption can become a dominant or systematic part of the administrative culture. If officials attempt to acquire corrupt practices "through official channels", they have to fear negative consequences. (Pech, 2005)

What are the signs of corruption?

The definition and division of functions and responsibilities, or the hierarchical relationship structures is not the only item comprised by the administrative organisation, but also the organizational "rules of the game" that govern decision-making. Moreover, it embraces the structures and processes for implementation of those decisions, in addition to knowledge and information management, performance management, evaluation and in-house monitoring. (Pech, 2005)

Beside internal administrative organisation, the aspect of "freedom of information for citizens" points to an interface with the public environment. Other critical interfaces for democracy and the rule of law, which is interfaces with the legislative and judiciary such as functioning audit offices, and anti-corruption agencies, and with civil society, are dealt with in detail somewhere else. (Pech, 2005)

Possible Weak Points of Administrative Organisation:

First of all, the size and degree of centralisation of the state, A little indication about any tendency towards corruption can be obtained, if it only depends on empirical data on the number of employees and the degree of centralization. Application of the subsidiarity principle does, but, help identify reform potentials for corruption prevention. (Pech, 2005)

Second point is the competences and decision-making structures at the macro level. Monitoring opaque decision making processes and procedures at the macro or policymaking level is almost impossible, thus it's a highly problematic. Objective forms of cooperation with parliament - the key body for political monitoring of governance - are avoided. Defectively defined divisions of competence not only reduce the uniformity of policy, but also the distribution of responsibilities, including responsibilities for the supervision and monitoring of subsidiary levels. (Pech, 2005)

Thirdly, structures and processes within individual agencies at the implementation level. It is difficult to assign responsibilities when competences are inadequately defined both internally and externally. Often there is an actual concentration of competences besides incomplete or mutually conflicting procedures and rules. These weak points create opacity, reducing the possibility of corrupt practices coming to light. Simultaneously, decision-makers gain unduly wide discretionary scope. Moreover, complexity and bureaucratic obstacles in terms of the number, duration and costs of the procedural steps, concerning a large number of officials, create a risk of corruption. In various cases, obstacles of this kind and extra veto points are created for the single purpose of creating additional earnings. (Pech, 2005)

Furthermore, mechanisms of internal evaluation and control, it include inadequate mechanisms of internal financial control; inadequate professional supervision and quality management. At this point, there is a lack of effectively developed and published quality standards, suitable information systems and/or methods and indicators to measure service delivery. The deterrent effect of disciplinary sanctions is usually unsuccessful because of the lack of implementation of those sanctions. (Pech, 2005)

Lastly, public accesses to information, citizens often have insufficient public access to information on the administration. As a result they have hardly any chance to challenge decisions and monitor the administration. (Pech, 2005)

Possible Weak Points in a Civil Service System:

The first weak point can be inadequate legal foundation. The legal framework is often vague, incoherent and does not cover all public officials. Frequently, there is no precise separation between political and non-political government officials, which creates a risk that any position can actually be subject to political influence. Anti-corruption laws and guidelines are often incomplete and vague. Serious problems are usually posed while enforcing them. (Pech, 2005)

Secondly, lack of performance incentives, and poor transparency of appointments, promotions and remuneration. In civil services, salaries can be low especially in the lowest levels where desired additional earnings are created either by officers taking moonlighting job or through corruption. A lacking of salary based incentive at higher levels leads officials to perform unsatisfactory as well as maintaining dishonesty. Additional possible weak points include vague and/or non-performance-based, non-publicised criteria and procedures for appointments and promotions. This makes decisions less easy to supervise and contest, and at the same time is conducive to a politicisation of the administration. The remuneration system is only inconsistent and opaque rather than performance based. (Pech, 2005)

Lastly, poorly integrated supervisory and monitoring systems for the civil service, the absence or ineffective internal competences and procedures to expose and pursue cases of corruption, as well as the nonexistence of legal and institutional foundations for politically and operationally independent complaint and monitoring systems. (Pech, 2005)

Corruption Prevention Measures:

After looking at the weak point analysis, measures to reform the structures and procedures of administration organisation which can be one of the possible development cooperation activities for administrative reform. Such measures can be both at the fundamental that is structural level and at the level of individual administrative units. Concretely, this would imply activities to reduce government officials' bargaining power and influence, to increase transparency and to improve effective supervision and monitoring. Secondly, a contribution can be made toward depoliticising the civil service, raising performance incentives and increasing the transparency of appointment, promotion and remuneration practices. The introduction of an integrated monitoring and evaluation system, in addition to improving training and upgrading should take place to complement such measures. (Pech, 2005)

The presence of laws defining corrupt activities and conflicts of interest is the most important measure against corruption. The second measure is law enforcement against the briber and the bribed. Finally, it is necessary that a reform of the public service that includes a cut in the level of benefits to be controlled by public officials. (World Bank, (n.d.))

Corruption Prevention Measures In Egypt:

Although Egypt is rich in laws, decrees and relevant regulations concerned with fighting corruption and decrease the chances of its emergence as well as promoting integrity and transparency. (MSAD, (n.d.)) it seems that efforts need to be taken to support reducing corruption. Such efforts include;

Promoting good governance, for achieving better transparency and accountability of public administrations through reforms of legal, structural, and management. In addition to that enhance institutional capabilities through establishing high standards of public services ethics for public officials. (World Bank, (n.d.))

Strength legislation and promoting the rule of law, by ensuring effective separation between the three government branches - executive, legislative, and judiciary - and the independence of investigative and judiciary bodies. (World Bank, (n.d.))

Promoting transparency and integrity in business operations, through enactment and effective enforcement of laws on accepting and soliciting bribes, conditions for domestic and foreign investment should be open and transparent, corporate responsibility and internationally accepted accounting standards should be established. (World Bank, (n.d.))

Promoting an active civil society, by empowering civil society and independent media to stimulate community action, create political commitment, making a pattern of honesty in business transactions and a culture of lawfulness throughout society. (World Bank, (n.d.))

Conclusion:

Corruption will take a lot of time to see it away, because it is chronic. Although, there are some honest, hardworking, sincere and committed Egyptians around the world, the change will take place in Egypt when such people take place.

Egyptian government needs to form an efficient performance evaluation system in the public service as well as creating incentives for good performance which will reduce corrupt activities and institutionalizing such measures is essential so that they cannot be changed with changes in government. In such systems accountability and transparency are musts. Another crucial step in curbing corruption is forming institutions like an ombudsman for hearing and dealing with complains. The complaint system must work efficiently and speedily. (World Bank, (n.d.))