INTERNATIONAL TRADE AND CORRUPTION

A presentation by Professor Trevor Munroe, Executive Director, National Integrity Action, to the CSA’s 12th annual Caribbean Shipping Executives Conference, Freeport, Bahamas, 13th to 15th May 2013

I would like to congratulate President Grantley Stephenson and his organising committee for the choice of the subject on which you have asked me to speak, ‘International Trade and Corruption’. I congratulate you because, as you may be aware, the issue of corruption is a major concern of the global community and of our Caribbean people and hence must be of concern to you; not just as shipping executives but as responsible Caribbean and global citizens. 

Indeed, an international survey commissioned by the BBC World Service and issued on United Nations Anti-corruption Day 2010 found that corruption was the most discussed global issue and rated as the most serious global problem, second only to poverty, in the opinion of citizens in a wide range of countries across the world. Your Association and you executives are very much in step with the international community in your focus on this matter in this first business session.

Closer to home, in our hemisphere, the Caribbean and Latin American peoples perceive corruption to be at far too high levels in our respective countries. In fact, the Latin American Public Opinion Project last year on a scale of 0 to 100 found that in half of the 26 states surveyed, people perceived corruption at 70 or higher. And among those states where the people perceived corruption as extremely high were Jamaica (75), Guyana (79) and Trinidad and Tobago (81), the last named being second only to Columbia in the citizens’ perception on levels of corruption. In one survey in 2010 Jamaican people expressed the view that corruption was that which was most wrong with Jamaica. 

Moreover, these perceptions by our own nationals accord with the international communities’ view of us. Transparency International’s Corruption Perception Index ranks only three of 10 Caricom states surveyed, namely, Barbados, St. Lucia and the Bahamas, in the top quintile of those of the 176 countries ranked as very clean. In addition, our main partner in the hemisphere, the USA, agrees with our people in our assessment of the corruption problem. The International Narcotics Strategy Report 2013 assesses Jamaica in a way not dissimilar to other states in the region: “Corruption remains entrenched, widespread and compounded by a judicial system that is poorly equipped to handle complex criminal prosecutions in a timely manner.” 

Perception

Of course, you would be quick to observe that perception does not always equal reality; and, in fact, there is evidence to suggest that while people’s perception of corruption, particularly in the top brackets of our societies, remains high, their actual experience of and participation in corrupt acts is relatively low. In any event, hard data on the actual crime of corruption is particularly difficult to track; a corrupt deed more often than not involves a willing corrupter and an equally willing corruptee. Hence, unlike homicide or other crimes of that nature, there is rarely a victim complainant. Put more starkly, acts of corruption in and of themselves leave behind no corpse, fingerprints, DNA evidence or scene of crime to cordon off.

INSIDIOUS

But precisely because of its insidious nature, corruption is akin to a relatively invisible global epidemic affecting all states with more or less devastating impact. This is why the United Nations found it necessary to promulgate the UN Convention Against Corruption, now ratified by most Caribbean states in which the global community expressed concern that “the seriousness of the problems and threats posed by corruption” undermine “the stability and security of societies….the institutions and values of democracy, ethical values and justice….sustainable development and rule of law”. In effect, corruption undermines the very foundation of institutions on which you depend as shipping executives and our very way of life as Caribbean citizens.

One measure of the magnitude of this issue is reflected in the estimate of the World Bank Institute a few years ago that US$ 1 trillion was paid in bribes from private sector to public sector officials around the world, seriously damaging the integrity of procurement systems, discriminating against companies – including shipping companies – that refuse to pay bribes and often ensuring that public sector contracts went to less qualified people, thereby compromising the quality of goods and services provided for our people.

For our part, we come from a region in which our people suffer immensely from underdevelopment. Hence, your concern in your professional endeavours must ultimately involve helping to come to grips with this reality. I was therefore very pleased to learn that most appropriately the stated mission of the CSA is “to promote and foster the highest quality service to the maritime industry….for the benefit and development….of the peoples of the Caribbean region”. You must therefore be very concerned at the fact that, of the 14 Caricom states ranked in the 2013 UNDP Human Development Report, not one single country falls in the top quintile rank of the 186 states assessed, not even our best performers, Barbados (38), and the Bahamas (49). In this context it is essential to trace and to understand the link between low human development and high levels of corruption. That link is explained by the World Bank Institute, which concludes: 

“Countries that improve on control of corruption and rule of law can expect in the long run a fourfold increase in per capita incomes” and conversely a fourfold loss in per capita income for no improvement. The World Bank Institute further suggests that “the difference can be between 2 and 4% per annum in the countries’ annual income growth rates between countries with a different extent of corruption control”.

Targets

In respect of development aid, the World Bank again estimated that, far from all assistance reaching the targets to help improve education and schooling, water supplies and road infrastructure, clinics and hospitals, US$ 20 to 40 billion or 20 to 40% of all overseas development assistance is siphoned off into the pockets of corrupt public officials in developing countries. Your mission, ultimately to promote the development of Caribbean people, must make you determined to combat corruption not only in international trade but wherever it occurs once we fully appreciate the devastating impact on our people’s livelihood. 

One colleague scholar who has engaged in a deep study of this issue has found that one unit of improvement in political corruption in Jamaica would bring with it an “84.7% increase in gross national product, a US$ 1.7 billion increase in capital formation, a US$ 286.4 million increase in foreign direct investment and a US$ 761.6 million increase in domestic savings” (Michael Collier, 2002).

In other words, a one unit improvement in political corruption in Jamaica – and the same applies to some other Caribbean states – would facilitate a virtual economic miracle, extraordinary improvements in levels of human development and transformation in the lives of so many of our peoples, who remain in conditions of poverty. And, by the way, over 5% of the population in Jamaica has to survive on less than two US dollars per day, 18% in Guyana, 13% in Trinidad and Tobago, 40% in St. Lucia and over 77% in Haiti according to the latest figures in the 2013 World Development Indicators.

I therefore repeat, to the extent that you take your mission of promoting the development of the Caribbean people seriously, to that extent you are compelled to assist in dealing with corruption more effectively in our public institutions, in our private sector, in our societies more generally.

Effective

And you as shippers are well placed at an intersection that facilitates your effective intervention to build integrity and to combat corruption in a manner that benefits our people. This is so because, as you know, the welfare of our people in our open economies is largely linked to the effectiveness of our integration into the global supply chain, to the volume, value and legitimacy of merchandise trade. In fact, the ‘World Development Indicators 2013’ tells us that over 63% of the GDP of 13 Caricom states comes from merchandise trade. This is well above the average of upper middle income countries and greater than every region in the world with the exception of the Middle East and North Africa. And hence, because our raw material base is relatively shallow and our international markets so small, a great deal of our growth and development rests on facilitating international trade. 

Equally, much of our government revenues depend on the collection of – and dealing effectively with the corrupt evasion of – international trade taxes and hence the reduction of fiscal deficits, which bedevil almost every single Caribbean state. Much of our growth and development, therefore, as well, depends on the facilitation of international trade and the reduction of incentives to corruption in the process of that trade facilitation. 

Yet what do we find? The World Economic Forum in its annual Ease of Doing Business report examines ‘Trading Across Borders’ as one of 11 indicator sets. Of the 185 economies reported on in the 2013 Report on the Ease of Trading Across Borders, only one, namely, Barbados, of 14 Caricom states ranks in the top quintile. More importantly for our purpose, the difficulties facing importers and exporters in relation to such matters as the number of documents needed to export and import, the time to export and import, and the cost per container to export and import only makes trading more difficult than in the vast majority of countries with which we have to compete. 

But, more importantly for our purposes, the red tape, high costs and bureaucracy immensely complicate integrated logistics and transportation management and provide a huge incentive to engage in corruption. For example, in Singapore, which ranks number one in the world on the Ease of Trading Across Borders indicator, it takes five days to export, four days to import and four documents to export and import respectively. Compare that with Jamaica where, if all goes well, it takes 20 days to export and 17 days to import and six and seven documents to export and import respectively. Worst, it costs in Singapore US$ 456 per container to export and US$ 439 per container to import. Compare that with Jamaica, where it costs US$ 1,500 per container to export and US$ 1,506 per container to import. 

For our region overall, the average cost per container to export in the 14 Caricom states is a little under US$ 1,000 and to import over US$ 1,600 per container. Even forgetting Singapore, in Mauritius the comparable costs are US$ 660 and US$ 695 respectively. These challenges render the Caribbean a relatively uncompetitive link in the global supply chain and, comparatively speaking, a corruption-vulnerable site in the community of international trade

Assault on red tape

To reduce the temptation of corrupt facilitation payments in international trade in our region, to increase the ease of earning foreign exchange through merchandise exports, a critical lifeblood of our region – this clearly requires an urgent, frontal and sustained assault on red tape and bureaucracy, which both discourages international trade and facilitates corruption. To make advances in this area requires an assault on entrenched interests at all levels who benefit from corruption; and a coalition of importers, exporters, airlines, ports and airport authorities, trade consultants, customs officials and you, the shipping companies’ executives, with one primary purpose: to build integrity by making it easier and more cost-effective to engage in international trade. 

The elements of an integrity strategy are not rocket science; they are set out in many documents and policy proposals. For example, many imperatives for integrity are outlined in the revised Arusha Declaration of June 2003 of the World Customs Organisation. I mention four, transparency, automation, audit and investigation, and a known as well as enforced Code of Conduct. 

Overall, shipping executives need to be robust participants in the leadership of that coalition for integrity, to reduce corruption, build revenue and grow GDP to the benefit of our people.

Then there is your role in reducing illicit trade and its harmful effects in corrupting public officials; in facilitating organised crime; and in damaging the competitiveness of our region. In this regard, illicit trade in narcotics and arms trafficking, often using your vessels, remains a major scourge in our region. For example, in 2012 the authorities in Trinidad and Tobago made five major seizures at seaports during the year, contributing to the interdiction of over 146 kg of cocaine and 2.26 tonnes of marijuana. In Jamaica, smugglers continue to use maritime shipping containers, ships, small boats, aircraft and couriers, as the INCSR 2013 Report tells us, “to move drugs into, from and through Jamaica to the United States”. 

In Guyana, cocaine originating in Columbia is smuggled to Venezuela and onward to Guyana by sea and air. As you know, cocaine is often concealed in legitimate commodities and smuggled via commercial maritime vessels or air transport. The multi-million-dollar proceeds from this illicit trade fuel organised crime, contaminate state institutions, undermine confidence in the rule of law and underlie homicide rates such that the Caribbean has the highest murder rate of all regions in the world. 

In the context of this reality, you therefore cannot advance your mission to promote the development of the Caribbean peoples without finding more effective measures, along with the authorities, to investigate, arrest, convict and punish the smugglers as well as their facilitators.

Let us be clear: we cannot increase levels of human development in the Caribbean without rendering our region a more welcome, efficient, cost-effective, productive link in the global supply chain, without increasing licit international trade and without, at the same time, enhancing our global competitiveness. Raising investments, both foreign and local, is an important ingredient of this process. 

Yet the Global Competitiveness Report 2012/2013 ranks corruption among the top three most problematic factors for doing business in four of six Caricom nations surveyed, namely Jamaica, Guyana, Suriname and Haiti. In this regard, the World Bank points out that corruption and bribery in effect add a 20% transactional tax for investors. 

Less corruption means more investment

So let us be clear on a simple but critical equation: more integrity and greater efficiency equals less corruption; and less corruption means more investment, more international trade, more decent jobs, less poverty and higher levels of opportunity, of hope, particularly for our youth, and ultimately enhanced human development in the Caribbean. 

On your 40th anniversary of independence here in the Bahamas, and Jamaica’s 50th last year, let us renew our confidence in our capacity to cope with these challenges and to achieve these objectives. After all, we are a people of exceptional talent; we are in the top rank of the international community on many governance indicators: on freedom of the press we are invariably in the top 10%, very often ahead of mature democracies like the USA or the UK; moreover, there is no other region in the world where the people have more consistently, over many decades, ensured that governing parties demit office with little hesitation and oppositions assume the mantle of authority peacefully, through relatively free and fair constitutionally mandated elections, without one-party dictatorship, without military rule, without genocidal civil war. We can and need to urgently apply the talents which assure these and other accomplishments to the critical task of building integrity in our institutions, in our behaviours and our relationships within our region and with the international community.