Anti Corruption in Bangladesh

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Anti-Corruption in Bangladesh: A UNDP Case Study

Draft: May 2003

1. Corruption in Bangladesh
1.1. The System of Corruption
A predominant feature governing human relationships and transactions in Bangladesh is the patron-client relationship. Because of wide disparities in wealth and power, the majority of people in Bangladesh are obliged to seek one or more patrons who provide access to land, income, employment, or political and physical protection. Such relationships form the basis for political and economic order at the village level, in turn feeding into a wider network of patronages that link up to power centers in Dhaka. Although not strictly identical, kinship relationships forge similar ties. Patrons exert considerable social and political control on formal power structures, using their influence on public decision-making and services in order to reinforce their power base or to extract profits. These range from gaining access to preferential services, forgery of legal papers, nepotism in obtaining employment or securing business contracts. Opposition or non-compliance may result in intimidation or physical violence. Since patronages also extend their influence to law enforcement mechanisms, many abuses go unprosecuted. This reinforces the notion that personal loyalties are more important than the rule of law. There is an extremely high incidence of loan default in the banking sector (17% in private banks and 39% in public banks) for example, with about 78% of defaulters using connections to get their loans approved. Most bad debts cannot be recovered. Democratic pluralism has also lead to the creation of a new kind of patronage. The leaders of the major political parties hold almost absolute power, with party members remaining extremely loyal to their leaders at the cost of accountability and responsiveness to their constituencies and grassroots party activists. Corrupt practices such as misappropriation of party funds by senior party leaders therefore go unchallenged. Political competition has also managed to politicize the civil service. Parties award supporters with choice civil service positions in disregard to merit, and government initiatives can be channeled to promote the political interests of one or another party. Presidential Order No. 9 empowers the President to dismiss any civil servant at any time without justification and prevents any subsequent contestation in court, giving politics extraordinary power over bureaucracy. Lack of transparency and accountability in public institutions also contribute to conditions facilitating corruption. The Official Secrets Act of 1923 and Bangladesh Service Rules forbid the release of government information unless officially authorized. This culture of secrecy gives civil servants highly discretionary powers in business operations as well as making public scrutiny much more difficult. Since work procedures are complex and multilayered, there are multiple windows for abuse. Poor motivation, low salaries (pay of senior officers has eroded by around 70% since 1969 and the remuneration of junior staff has halved in real terms) and lack of career advancement opportunities also make rent-seeking an easy means to improve life for many civil servants. About 30% of public expenditure and up to 80% of foreign-assisted public expenditure must go through a procurement process. However, there is no government framework which controls procurement procedures, and it is estimated that 10-15% of public procurement is subject to corruption. Revenue losses from corruption and inefficiencies in the customs and income tax departments are estimated to exceed 5% of GDP. Lack of independent and effective corruption control mechanisms dilute accountability. Audits are often out-dated and there are no follow-up mechanisms that punish questionable actions. Law enforcement agencies such as the police are perceived as among the worst...
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