Aid agencies often help fight corruption in recipient countries with support for good governance, the market economy and civil society. Corruption can be reduced, even eliminated, by changing the incentive structures, including better and performance based salaries for officials, improved public access to information and more competition for markets and customers. Political corruption, in which public resources are diverted for purposes of patronage and cronyism rather than for personal accumulation, is not a phenomenon aid agencies can address directly without getting unnecessarily involved in the quagmire of local politics. Yet if the political aspect of corruption is not addressed, it is difficult to see how the implementation of largely technical solutions to corruption can have a lasting impact.
Forms of corruption in aid
There are broadly three forms of corruption in aid: unilateral misuse of the funds on the part of the donor; misuse of the funds on the part of the recipient; and collusion between the donor and the recipient. Of these three, misuse of the funds by the recipient is the most common and widely known to most people. In general, bilateral agencies harbour the least internal corruption. As a rule of thumb, the extent of corruption in donor country politics and the quality of public accountability in national life determine the degree of corruption in bilateral aid. Some donor countries have a unique profile in this context: official financial and political support has helped promote national commercial interest, rather than addressing the needs of recipient countries.
Unilateral misuse of funds by recipient countries
Misuse of funds by recipients ranges from pervasive petty corruption to grand corruption and looting. As with donors, corruption among aid recipients reflects the degree of transparency and accountability in public affairs. Aid lends itself to the politics of patronage, but patronage, a common feature of politics in Africa , does not necessarily imply corruption. In practice, however, the dividing line is not easily identified. The important point is that aid creates many opportunities for patronage, including project implementation location, hiring project staff, training opportunities, procurement and consultancy. In the process, covenants and conditions for loans and grants may be systematically ignored or flaunted.
Corruption and patronage should be distinguished from bureaucratic waste, which characterizes much project and other aid. Bureaucratic waste is the use of aid resources for what might prima facie appear to be perfectly legal but unnecessary or non-productive purposes – vehicles, civil works, computers, office equipment, training activities, study tours, workshops and seminars of questionable utility.
The extent of official misuse of aid is not easily assessed since those managing the process are generally protected from public scrutiny. However, the huge amounts of unexplained and irregular public spending reported with alarming regularity in audit reports is an indication of the extent of the problem.
Who benefits from corruption in aid-funded projects?
Beneficiaries from corruption in aid-funded projects include project officials, private contractors and procurement agents, both local and foreign, who are awarded contracts through suspect tendering arrangements.
