corruption affect on the economic

Topics: Economic growth, Investment, Gross domestic product Pages: 4 (1088 words) Published: March 21, 2015
DOES CORRUPTION HAS NEGATIVE EFFECT ECONOMIC GROWTH?
HOW GOVERNMENT CAN CONTROL CORRUPT BEHAVIOR?

Most developing as well as developed countries are facing the problem of corruption, which is becoming one of the biggest concerns of all countries because it is an impediment to economical sustainable development. Corruption may be defined as the misuse of public resources by public officials for private benefit by different forms such as favors, tax evasion, bribes and payment in kind (Bai, Jayachandran, Malesky, and Olken, 2014). Different countries could have differing conceptions of corruption as well as differing perspectives on the cost and benefits of corruption. Some researchers justify that, in some countries having highly regulated, short- term consequences of corruption can have positive effects on economy and society by “greasing the wheels” of the economy, bypassing inefficient regulations and red tape, and counteracting government failure (Kutan, Douglas and Judge, 2014). Despite some positive effects, in the long- term, corruption has a significant effect on economic growth by reducing both private domestic and foreign investment, and decreasing government revenues. Governments should control corruption level by improving the management of public officials and streamlining customs procedures. These are likely to deal with the negative effects of corruption on economic growth. One of the significant negative impacts of corruption on economic development is a threat to domestic and foreign investment because corrupt acts as an additional business cost, reduces the investment project revenue and impact on business efficiency. According to Chêne (2014), a rising 3% in the corruption level could increase the total investment cost of the entire company by about 50%. For instant, in Vietnam, companies accept for bribes as part of the business cost such as business registration, government procurement contracts, and customs procedures. Most companies...
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