Spending Siemens' Money

Last week the World Bank announced that Siemens will pay $100 million over the next 15 years to settle corruption charges involving a project in Russia. The money is supposed to go to anti-corruption groups, for compliance training and education programs, as well as helping governments recover assets stolen by crooked leaders.

What would we do with the money?

Simple: Cut red tape. As the World Bank's own International Finance Corporation has said, "Cumbersome entry procedures are associated with more corruption, particularly in developing countries. Each procedure is a point of contact—an opportunity to extract a bribe. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices; and fuel corruption."

Translation: Nothing good comes from too many regulations. Bureaucrats use them to shake down the public. And usually the poorest people are most victimized.

What can be done? The U.N.'s 2008 report, Tackling Corruption, Transforming Lives, describes low-cost tools that work. Here are two of them:

Case No. 1. In the 1990s, the Hyderabad (India) Metropolitan Water Supply and Sewerage Board consolidated applications for new connections – previously a major source of corruption. Customers can now skip their local district office and go directly to the Board’s headquarters, to a "Single Window Cell." The Board posts the fee schedule in its office and in the press. Customers rarely leave without an "application token number," the equivalent of a receipt for acceptance of the application.

Case No. 2. In Korea, the Seoul Metropolitan Government uses a public online application system for licenses and other permits. Launched in 1999, OPEN -- the Online Procedure Enhancement for Civil Applications -- covers 54 common procedures. Officials responsible for corruption-prone areas, such as permit or approval procedures, now have to upload reports and documents to enable citizens to monitor the progress of their applications.

We've said before that support for similar initiatives around the world would be a nice adjunct to corporate compliance programs. Opportunities abound. Even Russia's leaders get it. Minister of Mass Communications Igor Shchegolev said in a recent article posted on FutureGov, “An e-government will rid our citizens of the need to visit different offices. I certainly hope it gets somewhere -- for one thing, I can’t think of a surer way to stifle corruption than to increase the number of rules-based computer interactions between citizens and government."

The World Bank said Siemens has "agreed to co-operate to change industry practices, clean up procurement practices and engage in collective action with the World Bank Group to fight fraud and corruption." Supporting transparency programs that really help people by cutting red tape would be a good place to start.
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