Q & A: Corruption and aid

Acehnese workers rebuild houses at village of Deah Baro in Banda Aceh. REUTERS/Supri

The Indian Ocean tsunami generated a record amount of aid -- more than $11 billion -- but the enormous inflow of cash to countries like Indonesia and Sri Lanka with a history of corruption has raised fears the money could vanish into the wrong pockets.

Have cases of corruption emerged?

The highest profile case involves accusations Sri Lanka's Prime Minister Mahinda Rajapakse misappropriated nearly $819,000, which he denies. The inquiry is on hold pending the Nov. 17 presidential election in which Rajapakse is a candidate.

Sri Lanka's auditor general said in his report in September that officials had misappropriated or misspent hundreds of thousands of dollars ' in one case $724,170 was paid to thousands of families not affected by the tsunami. But the auditor general said this was due to misunderstandings rather than corruption. However his report detailed other cases of apparent corruption, including the disappearance of aid materials.

In Indonesia there have been reports that the military in Aceh levied a small tax on trucks bringing supplies into the region and that some officials may have inflated the number of people needing aid in their districts. One aid worker reported seeing new equipment for a school being flogged in a market. But there have been no high level allegations.

Tsunami victims in the Indian state of Tamil Nadu complained junior government officials were taking a sizable cut out of compensation payments and an Indian TV station caught an official on camera diverting rice meant for victims to shopkeepers, apparently for payment.

None of the above complaints has been proved.

How big a problem is corruption in aid operations?

Many aid workers privately say corruption is inevitable, but agencies are extremely reluctant to concede it exists, let alone discuss it. If a charity were to admit losing money to corruption its ability to raise funds would be badly hurt. With hundreds of agencies competing for donations it is in no one's interest to rock the boat.

'There are no figures or estimates for how much is lost through corruption,' says Alex Jacobs of Mango, a British group that provides financial training to non-governmental organisations (NGOs).

'I don't think anyone will give you a solid example of corruption because it's so sensitive. NGOs recognise the risk to their reputation is really big and there's not much to gain about talking about it.'

However, the veil of silence is potentially damaging because it limits discussion on how to minimise the risks.

Two recent scandals have put the spotlight on corruption in the aid world. The U.N.'s Oil-for-Food programme enabling the sale of Iraqi oil to buy humanitarian items was plagued by fraud, and in West Africa and the Democratic Republic of Congo there has been evidence of sexual exploitation by relief workers and U.N. peacekeepers.

What are the risks in the immediate relief operation?

Emergency aid is channelled through a complex network of donor organisations, bilateral and multilateral agencies, NGOs, private contractors and military forces. Each layer creates opportunities for corruption.

After a disaster aid agencies turn up with a lot of money and are under pressure to carry out big programmes very fast, often in areas they have little knowledge of. They need to build rapid relationships with new staff, suppliers and partner organisations and buy goods in markets they are unfamiliar with.

Suppliers may inflate prices and the agencies' own staff, given responsibility for huge sums with little oversight, may come under pressure to help family members or others. Officials may likewise use their position to ensure projects benefit themselves and their friends.

In the field, relief providers may demand kickbacks from villagers before they register them for aid or shave off a portion when they deliver it. Agency workers may accept bribes to favour a particular supplier, agree to an inflated quote or turn a blind-eye to theft from a warehouse.

The destruction of local infrastructure in the tsunami along with the loss of administrators and disappearance of public records in the waves exacerbated the potential for corruption.

What are the risks in the reconstruction phase?

Reconstruction after disasters is particularly prone to corruption due to the number of contractors and subcontractors involved and a tendency to bypass standard procedures to speed up rebuilding.

Public officials may allocate tenders based on bribes and contractors may in turn cut corners, using cheap materials so they can pocket the difference.

In southern India, there were complaints that most contracts for building temporary shelters after the tsunami were given to people connected to Tamil Nadu's ruling party. Some victims complained the houses were shoddy as the contractors had only used part of the funds meant for the job.

Commercial interests can also exploit a disaster to acquire land at the expense of poor owners who are relocated. This is a fear among some tsunami survivors in Sri Lanka and Thailand who had been living on coastal areas with tourism potential.

What measures should be taken to prevent corruption?

The vast scope for corruption after the tsunami prompted anti-corruption watchdog Transparency International (TI), the Asian Development Bank and the Organisation for Economic Co-operation and Development (OECD) to organise a conference in Jakarta in April 2005. It recommended:

• Involving affected communities in planning, implementing and monitoring projects.

• Providing them with easy to understand information about projects and relief and compensation entitlements.

• Setting up systems to track aid flows.

• Independent monitoring of relief and reconstruction programmes.

• Establishing corruption reporting channels and protection for whistleblowers.

• Including an explicit anti-corruption clause in contracts with sanctions for any breach.

After the tsunami, international financial experts PricewaterhouseCoopers offered 8,000 hours unpaid work to U.N. agencies. It has helped with audits in the field, training on preventing corruption and the U.N.'s financial tracking system.

Indonesia's tsunami reconstruction agency, the BRR, set up an anti-graft unit in Aceh's capital in September. The BRR is using international accounting firm Ernst & Young to audit funds.

Who is keeping tabs on where the money is going?

The U.N. is monitoring funds pledged for its emergency appeal via its financial tracking website. It shows how much donor countries give for what as well as how the agencies are spending the money.

The U.N.'s development programme UNDP is also launching websites to allow governments and the public to monitor spending on reconstruction projects. The U.N.'s tsunami envoy, former U.S. President Bill Clinton, has been particularly keen to push for these tracking sites known as Development Assistance Databases (DADs).

Databases for Sri Lanka and Thailand are up and running and an Indonesian site is in the works. The sites aim to enhance transparency and improve coordination of long-term international support to the region.

Indonesia is one of the world's most corrupt countries ' should aid be held back?

Indonesia's top anti-graft official has said corruption is a bigger threat to his country than terrorism.

Decades of authoritarian government under President Suharto, a culture of cronyism, the involvement of the military in ministries and state enterprises and a large underpaid public workforce have created a climate where graft has flourished. On top of that, Indonesia has rich resources that have attracted a certain type of foreign investor with more money than scruples.

Indonesia is the sixth most corrupt country according to Transparency International (TI), but the anti-corruption watchdog says its global index should not be used to determine aid levels.

Contrary to many people's expectations, Indonesia is considered to be making progress in tackling graft. This may be partly because there is a new president, Susilo Bambang Yudhoyono, elected on an anti-corruption mandate.

Anti-corruption sources praised Indonesia's efforts to face up to the problem after the tsunami and said it appeared to have got to grips with the issue better than Sri Lanka.

J.C. Weliamuna, executive director of TI in Sri Lanka, said there was a lack of political will to tackle the issue in his country.

'There's a culture of secrecy ' there's no willingness on the part of the government to give any financial information or any other information,' he said.

One of the black marks against Sri Lanka is its history of abusing public resources during elections.

Weliamuna said there were allegations that tsunami funds were being used for possible party political purposes and there were reports that some new houses had been given to people with political affiliations who had not been affected by the tsunami.

By contrast, TI's Asia and Pacific regional director, Peter Rooke, said Indonesia's BRR agency had been very receptive to the involvement of affected communities in reconstruction and was well aware of the need to control corruption.

'Although it's a huge mountain to climb they are at least on their way up,' he said.

Picture captions

• U.N. tsunami envoy Bill Clinton and BRR chief Kuntoro Mangkusubroto. (REUTERS/Tarmizy Harva)

• An Acehnese woman receives her food ration in Lhok Kruet. (REUTERS/Beawiharta)

• Sri Lankan men survey their destroyed homes for construction materials in Telvatta.(REUTERS/Desmond Boylan)

• Acehnese workers rebuild a school in Lampulo.(REUTERS/Tarmizy Harva)

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