15th April 2001
Front Page
Editorial/Opinion| Plus
Sports| Mirror Magazine
The Sunday Times on the Web

Corruption corrupts absolutely

Recent allegations of corruption in high positions such as against the Chairman of the Board of Investment and the Chairman of the Ceylon Electricity Board have once again raised the issue of how rampant corruption is in high positions. These accusations imply that there was a possibility of vital decisions regarding the economy having been taken to the detriment of the economy. 

Anecdotal allegations of corruption are widespread. If these allegations have a high percentage of truth, a whole range of economic decision-making may have been taken at huge costs to the economy. 

There is no longer any doubt that corruption retards economic growth. The old theories of corruption greasing the wheels of the economy and enabling faster economic growth have been largely rejected. No longer is the concept of "good corruption" acceptable. Many recent studies including a World Bank Study published in 1996 have made this clear. We are not sure of the implications of the allegation of corruption against the Board of Control of Cricket for the economy. Even corruption in such a body could have economic implications that may not be immediately clear.

Corruption is not the monopoly of any country. Nor is it a disease of underdeveloped countries. In fact corruption of a very high order has been witnessed in developed countries of the East as well as the West. There appears to be some connection between high expenditures and government contracts and high-level corruption. No doubt massive election expenditures are a root cause of corruption not only of politicians but their appointees in high positions. One of the underlying causes of the Asian economic crisis of 1997-98 was corruption in many areas of economic activity. 

Corruption destabilizes economies and retards long-term economic growth. It distorts economic decision-making. It raises the cost of public expenditures. Ultimately the costs of corruption have to be borne by the people. Corruption can be particularly disadvantageous to economies that rely on foreign investment and trade. Foreign investors look to countries which have systems which are transparent and officials with whom they could deal openly and directly. Where corruption is known to exist investors are hesitant to come in as it is often difficult to cope with the nuances of corruption in a country and their efforts could be costly in terms of effort, time and money. This does not mean that big foreign firms, especially sellers of large expensive equipment in particular, do not indulge in corruption. Once they feel that corruption exists, they make it a fine art to indulge in it. The result is wrong decisions and higher costs to the country.

There is little doubt that corruption is widespread in the country. What is most disturbing is that recent allegations are with respect to corruption at high places. The allegations are with respect to persons who are highly paid, not poor public servants. Even organizations, which are formed to do good and comprising persons with a high profile, appear to be indulging in it. In fact the public perception appears to be that powerful people are invariably corrupt in a big way. 

Even if this perception is not factually completely correct, such a perception itself is damaging as it influences the general levels of integrity of a society. There is therefore an urgent need to take remedial action and cleanse our society of this debilitating factor. 

We can be encouraged by the fact that countries, which were once corrupt, have reformed themselves and thereby been the beneficiaries of the change. Singapore and Hong Kong are the supreme examples. Hong Kong, which was once well known for its corruption has been transformed to such an extent that in 1998 Transparency International's Corruption Perception Index placed it above the United States. Singapore's exemplary anti-corrupt character and particularly the very high integrity among civil servants are well known. The latter is guaranteed by a high code of ethics, regulations and high salaries for public servants. Other countries in Asia are painfully trying to reform themselves after the heavy costs of a crisis. Their success is still to be seen.

Philip Segal, a Hong Kong based journalist has argued that "Once corruption takes hold, these economies (Hong Kong and Singapore) have found, it can rage out of control and threaten the entire fabric of a society, weakening development prospects in a disturbing, dangerous way." Several recent studies have pointed out that corruption has been the single most significant factor for economic decline. If foreign investor dependent economies like Sri Lanka are perceived to be corrupt then some of the best investments may be denied to the country. If corruption is in agencies, which are directly involved in foreign investment and critical areas of infrastructure development such as in power, then the damage is likely to be even more serious.

There are a number of ways in which corruption could be monitored. One method, which has been hardly used in Sri Lanka, is to track down the assets and expenditures of officials. It is true that public servants make periodic declarations of assets, which remain in sealed envelopes in most instances. The highly corrupt have means by which they can hide their ill-gotten wealth. The monitoring of corruption must be much more widespread and imaginative than at present.

One of the problems in controlling and eradicating corruption is that the agencies and commissions charged with the responsibility of tracking and punishing corrupt officials are often politicized. They are often demoralized by political interference. Once this happens they exist only in name and with little impact on cleaning up corruption. 

If the levels of corruption in our society are to be brought down, the government must lead by example. There must be a far greater sense of urgency and recognition that it is a serious problem and that it affects the economic performance of the country. Civil society must recognise the need to eradicate this evil. It must bring pressures to bear on the government to have a meaningful programme to check corruption, particularly in high places. No doubt the press and other media must be relentless in their search and exposure of corruption. They must ensure that the corrupt would not sleep comfortably.

SriLankan voted central Asia's Airline of the Year

SriLankan Airlines has become the Airline of the Year 2001 - Central Asia, its first, major accolade since revitalising its services to a world-class calibre, an airline press release said. 

In the largest ever global survey of airline passengers, conducted by the UK's SKYTRAX Research, 2.7 million votes were submitted over a period of nine months from around the world - culminating in the awards process in March 2001.

The survey asked customers to rank airlines by the quality of the product and service provided to passengers.

Peter Hill, SriLankan's Chief Executive Officer said: "We are thrilled that SriLankan has been recognised as the top airline for the Central Asia region.

"This award is the seal of approval from our customers that our efforts to revitalise the airline have been successful, but that does not mean we can become complacent in our work to continue to provide a top-quality service to our customers for a long time to come. SriLankan Airlines, based in Colombo, flies to 35 destinations in 26 countries using the latest aircraft, including the Airbus A330-200 and the A340-300.

SKYTRAX Research is he operating name for In-flight Research Services UK, an independent organisation specialising in Qualitative Research for the airline industry since 1990.

REEL houses for middle income groups

The Ministry of Urban Development Construction and Public Utilities through its management arm, Real Estate Exchange (Pvt) Ltd (REEL), has launched a housing project designated "Thirasara Pura Programme" with the participation of private sector investment.

This project will provide 66,000 apartments for residents living in 1,506 under- served settlements like slums and shanties, which represent 51 percent of the total population of the city of Colombo.

The new programme will mainly target the middle class income category including professionals, who are unable to buy a property in Colombo, said REEL managing director Dr. C.K.M. Deheragoda.

He said REEL was planning to liberate nearly 650 acres of lands and thereby utilise such lands for urban redevelopment projects with private sector financing.

This specialised stock exchange shall deal with the buying and selling of securities in the form of Trust certificates issued by two Trusts already listed with REEL. The Namal Courts, Trusts and Merchant Towers Trust are pioneering Real Estate Investment Trust (REIT), which will be traded at the REEL office floor.

Point of View I 

Should DFCC and NDB go commercial?

The two long term lending institutions in Sri Lanka, DFCC Bank and NDB, are both openly showing their interest in entering commercial banking. But none of them has made it clear why they really want to do so.

It is undoubtedly the short term profits available in commercial banking that is luring them. What should be remembered is that the profits from commercial banking are not sustainable. 

While a few commercial banks have made good profits recently, many more are struggling to show any return to shareholders. 

Even the few that have been successful have no long term record of high profitability which is understandable given the short term nature of their lending and the very high investments in IT needed merely to remain in the reckoning.

On the contrary, development lenders can render a highly profitable service with a minimum investment in technology. The performance of commercial banks are also overly dependent on different sectors quite in contrary to the long term lenders which has a strong base of small and medium customers giving steady profits. The work cultures and their ethics of commercial banking too will not go well with the long term relationships development lenders are famous for.

All this goes to show that development lending and commercial banking are two totally different disciplines. By trying to merge with commercial banks, development banks will only be taking up risks they are not familiar with and these mergers are bound to end up in failures as it happened in Germany and many other European countries. The impact of some of these failures was so great that a few Regional Central Banks in Germany had to impose restrictions on mergers between commercial banks, savings banks and development banks.

The case in Sri Lanka too, will be no different. The final losers will be the shareholders of the DFCC and NDB who have remained faithful during the difficult early years. It is imperative that the proposed ill-considered forays into commercial banking by NDB and DFCC be halted before further damage could be done to the two institutions which was set up to engage in development banking and not to dabble in short term lending.

Dr. S. Devarajan


Point of View II

Hopes of SMIs dashed

Both development lenders, DFCC and NDB, expressed their desire to get into commercial banking and have even identified their partners.

All these years the development lenders did an extremely good job in meeting the long-term investment needs of many small and medium scale industrialists, agriculturists and other entrepreneurs. 

The keen competition between these meant that the borrower got the best terms and even expert advice on projects was forthcoming.

Many leading entrepreneurs of today owe their success to timely help by DFCC and NDB. They showed a positive attitude towards risky but promising projects, which would have been totally rejected by commercial banks because of their undue concern for short term profitability. 

Changes of the nature proposed will definitely destroy or at least severely compromise the positive risk taking culture of development lenders and the whole country stands to lose.

L.P. Athuraliya


Index Page
Front Page
Mirrror Magazine

More Business

Return to Business Contents


Business Archives

Front Page| News/Comment| Editorial/Opinion| Plus| Business| Sports| Mirror Magazine

Please send your comments and suggestions on this web site to 

The Sunday Times or to Information Laboratories (Pvt.) Ltd.

Presented on the World Wide Web by Infomation Laboratories (Pvt.) Ltd.
Hosted By LAcNet