Corruption and Post-Conflict Peacebuilding: Selling the Peace? [1 ed.] 9780415620482

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Corruption United Nations and Peacekeeping Post-Conflictin the Peacebuilding Post-Cold War Era Selling the peace?

EDITED BYTERENCE CHRISTINE S. CHENG DOMINIK ZAUM JOHN O'NEILL ANDAND NICHOLAS REES

Corruption and Post-­Conflict Peacebuilding

This edited volume explores and evaluates the different roles corruption can play in post-conflict peacebuilding. The problem of corruption has become increasingly important in war to peace transitions, eroding confidence in new democratic institutions, undermining economic development, diverting scarce public resources, and reducing the delivery of vital social services. Yet conflict-affected countries lack the capacity to effectively investigate and punish corrupt behaviour. While corruption imposes costs and compromises on peacebuilding efforts, opportunities for exploiting public office can also be used to entice armed groups into signing peace agreements, thus stabilising postwar environments. This book explores the different functions of corruption both conceptually and through the lens of a wide range of case studies. It also examines the impact of key anti-corruption policies on peacebuilding environments. This analysis highlights that fighting corruption is only one of several important peacebuilding objectives, and that due consideration must be given to the specific social and political context in considering how a sustainable peace can be achieved. This book will be of great interest to students of peacekeeping and peacebuilding, criminology, political economy, war and conflict studies, international security and IR. Christine S. Cheng is Bennet Boskey Fellow in Politics and International Relations at Exeter College, University of Oxford. Dominik Zaum is Reader in International Relations at the University of Reading and author or editor of several books, including The Sovereignty Paradox: The Norms and Politics of International Statebuilding (2007).

Cass Series on Peacekeeping General Editor: Michael Pugh

This series examines all aspects of peacekeeping, from the political, operational and legal dimensions to the developmental and humanitarian issues that must be dealt with by all those involved with peacekeeping in the world today. Beyond the Emergency Development within UN peace missions Edited by Jeremy Ginifer

Peacekeeping and Conflict Resolution Edited by Tom Woodhouse and Oliver Ramsbotham

The UN, Peace and Force Edited by Michael Pugh

Managing Armed Conflicts in the 21st Century Edited by Adekeye Adebajo and Chandra Lekha Sriram

Mediating in Cyprus The Cypriot communities and the United Nations Oliver P. Richmond Peacekeeping and the UN Agencies Edited by Jim Whitman Peacekeeping and Public Information Caught in the crossfire Ingrid A. Lehmann The Evolution of US Peacekeeping Policy under Clinton A fairweather friend? Michael G. MacKinnon Peacebuilding and Police Reform Edited by Tor Tanke Holm and Espen Barth Eide

Women and International Peacekeeping Edited by Louise Olsson and Torunn L. Tryggestad Recovering from Civil Conflict Reconciliation, peace and development Edited by Edward Newman and Albrecht Schnabel Mitigating Conflict The role of NGOs Edited by Henry F. Carey and Oliver P. Richmond Ireland and International Peacekeeping 1960–2000 A study of Irish motivation Katsumi Ishizuka

Peace Operations after 11 September 2001 Edited by Thierry Tardy Confronting Past Human Rights Violations Justice vs peace in times of transition Chandra Lekha Sriram The National Politics of Peacekeeping in the Post-­Cold War Era Edited by David S. Sorensen and Pia Christina Wood A UN ‘Legion’ Between utopia and reality Stephen Kinloch-­Pichat United Nations Peacekeeping in the Post-­Cold War Era John Terence O’Neill and Nicholas Rees The Military and Negotiation The role of the soldier–diplomat Deborah Goodwin NATO and Peace Support Operations 1991–1999 Policies and doctrines Henning-­A. Frantzen International Sanctions Between words and wars in the global system Edited by Peter Wallensteen and Carina Staibano Nordic Approaches to Peace Operations A new model in the making? Peter Viggo Jakobsen

Kosovo between War and Peace Nationalism, peacebuilding and international trusteeship Edited by Tonny Brems Knudsen and Carsten Bagge Laustsen Clinton, Peacekeeping and Humanitarian Interventionism Rise and fall of a policy Leonie G. Murray Political Ethics and the United Nations Dag Hammarskjöld as Secretary­General Manuel Fröhlich Statebuilding and Justice Reform Post-­conflict reconstruction in Afghanistan Matteo Tondini Rethinking the Liberal Peace External models and local alternatives Edited by Shahrbanou Tadjbakhsh Peace Operations and Organized Crime Enemies or allies? Edited by James Cockayne and Adam Lupel Corruption and Post-­Conflict Peacebuilding Selling the peace? Edited by Christine S. Cheng and Dominik Zaum

Corruption and Post-­Conflict Peacebuilding Selling the peace?

Edited by Christine S. Cheng and Dominik Zaum

First published 2012 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 Christine S. Cheng and Dominik Zaum for selection and editorial matter; individual contributors, their contributions The right of the editors to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-­in-Publication Data Corruption and post-­conflict peacebuilding: selling the peace?/ edited by Christine Cheng and Dominik Zaum. p. cm. – (Cass series peacekeeping; 29) Includes bibliographical references and index. 1. Nation-­building–Corrupt practices. 2. Postwar reconstruction– Corrupt practices. 3. Peace-­building–Moral and ethical aspects. 4. Corruption–Prevention. 5. Nation-­building–Corrupt practices– Case studies. 6. Postwar reconstruction–Corrupt practices–Case studies. 7. Corruption–Prevention–Case studies. I. Cheng, Christine. II. Zaum, Dominik. JZ6300.C67 2011 327.1′72–dc22 2011011104 ISBN: 978-0-415-62048-2 (hbk) ISBN: 978-0-203-80378-3 (ebk) Typeset in Baskerville by Wearset Ltd, Boldon, Tyne and Wear

Contents



List of illustrations List of contributors Acknowledgements List of abbreviations

  1 Selling the peace? Corruption and post-­conflict peacebuilding

ix x xiv xvi

1

C hristine S . C heng and D omini K Z aum

Part I

Corruption and peace-building: concepts and questions

27

  2 Conceptualising corruption in peacebuilding contexts

29

M ar K P hilp

  3 Corruption and government

46

S usan R ose - ­A c K erman

  4 Corrupting peace? Corruption, peacebuilding and reconstruction

62

P hilippe L e B illon

  5 Aiding the state or aiding corruption? Aid and corruption in post-­conflict countries

80

S arah V on B illerbec K

Part II

Case studies

97

  6 The political economy of corruption in Bosnia and Herzegovina

99

M ichael P ugh and B oris D i V ja K

viii   Contents   7 From ownership to imposition: the process of creating a legally accountable Bosnian judiciary

114

P er B ergling

  8 Anti-­corruption efforts in Liberia: are they aimed at the right targets?

126

W illiam R eno

  9 Corrupting or consolidating the peace? The drug economy and post-­conflict peacebuilding in Afghanistan

144

J onathan G oodhand

10 Reconstruction and peacebuilding under extreme adversity: the problem of pervasive corruption in Iraq

162

R obert L ooney

11 The nexus of militarisation and corruption in post-­conflict Sri Lanka

180

Z achariah M ampilly

Part III

Anti-­corruption measures in peacebuilding contexts

199

12 Post-­conflict reconstruction, legitimacy and anti-­corruption commissions

201

J ohn H eilbrunn

13 Part of the problem or part of the solution? Civil society and corruption in post-­conflict states

218

R oberto B elloni

14 International campaigns for extractive industry transparency in post-­conflict settings

237

A lexandra G illies and P age D y K stra



Bibliography Index

257 290

Illustrations

Figures   4.1 Corruption perception trends, PRS dataset   4.2 Corruption Perception Index trend in Côte d’Ivoire (1998–2006) 10.1 Iraq virtuous circle of demand-­led private sector activity 11.1 Map of Sri Lanka during the war

67 68 178 191

Tables   4.1 Corruption Perception Index trends in ‘post-­conflict’ countries (1990–2006) 10.1 Iraq: measures of relative governance, 1996–2009 10.2 Iraq: Corruption Perception Index 2003–2010

66 164 164

Contributors

Roberto Belloni is Associate Professor of International Relations at the University of Trento, Italy. Previously, he held research and teaching positions at the University of Denver, Harvard, Johns Hopkins and Queens University Belfast. His main research interest is on post-­conflict international intervention in deeply divided societies, with particular reference to Southeastern Europe. He has published extensively on this topic, including the book State Building and International Intervention in Bosnia (Routledge 2007). Per Bergling is Professor of Law at Umeå University, Sweden, and Principal Legal Adviser at the Folke Bernadotte Academy, Sweden. He conducts research on international rule of law, security sector reform and anti-­corruption strategies in development, transition and post­crisis environments. His book, Rule of Law on the International Agenda was published by Intersentia (2006). Bergling is also an expert adviser to international organisations and development agencies concerned with the rule of law, human rights and state building. In 1999–2002, he was Rule of Law Adviser to the High Representative to Bosnia and Herzegovina. Sarah von Billerbeck is a doctoral student in Political Science, Nuffield College, University of Oxford. Her research focuses on national ownership and UN peace operations, with a focus on DR Congo. She previously worked as a political officer for the UN peacekeeping mission in DR Congo and in refugee relief in Guinea, and she has conducted research for the World Bank and political consulting firms. Christine S. Cheng is the Bennett Boskey Fellow in Politics and International Relations at Exeter College, University of Oxford. Her Oxford DPhil addressed the emergence, development and entrenchment of extralegal groups in post-­conflict Liberia. She has published on corruption, natural resources and women in politics. Christine was the 2009 Cadieux-­Léger fellow at the Canadian Department of Foreign Affairs and International Trade. She has commented on international affairs

Contributors   xi for BBC News World and the BBC World Service. Her op-eds have appeared in The Wall Street Journal, The Times of India and Online at Real Clear World. She blogs at christinescottcheng.wordpress.org and tweets at @cheng_christine. Boris Divjak has been Chair of the Board of Directors of Transparency International Bosnia and Herzegovina (BiH) since its foundation in late 2000. He has worked on numerous international reconstruction projects in BiH and was the Director of the Aid Co-­ordination and Development Unit in BiH. Page Dykstra is Program Coordinator at the Revenue Watch Institute, a non-­profit organisation that promotes the responsible management of oil, gas and mineral resources for the public good. Prior to joining Revenue Watch, Page was a Princeton in Africa Fellow with the International Republican Institute in southern Sudan. She has also worked as a Project Evaluator for the Impumelelo Innovations Award Trust in South Africa and has completed training with the International Institute for Mediation and Conflict Resolution in Cyprus. Page has been with Revenue Watch since February 2008 and is currently the focal point for the Extractive Industries Transparency Initiative (EITI) for the organisation. She graduated from Princeton University with a Bachelor of Arts from the Woodrow Wilson School of Public and International Affairs and a Certificate in African Studies. Alexandra Gillies is the Governance Advisor at the Revenue Watch Institute. She holds a PhD from the University of Cambridge, where her dissertation addressed the political economy of oil sector reform in Africa. She was a 2008 Fulbright Fellow to Nigeria. Alexandra has consulted for the World Bank, DFID and other organisations on natural resource governance. She previously served as Assistant Director for the Program of African Studies at Northwestern University. Alexandra has published on Nigerian politics and petroleum governance issues, and co-­edited Smart Aid for African Development (Lynne Rienner 2009). She also holds degrees from the University of Ghana and Emory University. Jonathan Goodhand is Reader in Conflict and Development Studies at the School of Oriental and African Studies, University of London. He managed humanitarian and development programmes in conflict situations in Afghanistan/Pakistan and Sri Lanka, and has extensive experience as a researcher and adviser in South and Central Asia for NGOs and aid donors, including DFID, SDC, ILO and UNDP. His research interests include the political economy of aid and conflict, NGOs and peacebuilding, and ‘post-­conflict’ reconstruction. John Heilbrunn is Associate Professor for the Graduate Program, the International Political Economy of Resources, at the Colorado School

xii   Contributors of Mines. He is also a research fellow (Chercheur associé) at the Centre d’Etudes d’Afrique Noire at SciencesPo-­Bordeaux. John’s research interests include the political economy of oil in Africa, anti-­corruption and governance strategies in developing countries, and the political economy of Africa. Heilbrunn has served as a consultant to the AfDB, DfID, Norad, the OSCE, UNECA, USAID, the US State Department and the World Bank. Prior to joining Mines, Heilbrunn was a Senior Public Sector Reform Specialist at the World Bank. He has worked in Africa, Southeast Asia, MENA and Central Europe and has published extensively in professional journals and edited volumes. Philippe Le Billon is Associate Professor at the University of British Columbia with the Department of Geography and the Liu Institute for Global Issues. Before joining UBC he was a Research Associate with the Overseas Development Institute (ODI) and the International Institute for Strategic Studies (IISS). Working on linkages between environment, development and security, he has published widely on natural resources and armed conflicts, the political economy of war, and corruption. His publications include: Fuelling War: Natural Resources and Armed Conflicts (Routledge 2005), Geopolitics of Resource Wars (Cass 2005), and Wars of Plunder: Conflicts, Profits and the Politics of Resources (Hurst forthcoming). Robert Looney is Distinguished Professor of Economics, at the Naval Postgraduate School, Monterey CA, USA. He has been a development economist at the Stanford Research Institute as well as a faculty member at the University of California at Davis, and the University of Santa Clara. He has been an adviser to the governments of Iran, Saudi Arabia, Panama, Jamaica and Mexico. His regional interests are government budgets, defence expenditures and economic planning in the Middle East and South Asia. He has published 20 books and over 200 articles on various aspects of economic development. Zachariah Mampilly conducts research on the nature of contemporary conflict processes with an emphasis on Africa and South Asia. Based on extensive fieldwork in the conflict zones of the Democratic Republic of Congo, Sri Lanka and Sudan, his book, Rebel Rulers: Insurgent Governance and Civilian Life during War, was published by Cornell University Press (2011). It focuses on the construction of systems of governance by contemporary rebel organisations. He is also interested in the field of conflict resolution and is the co-­editor of a forthcoming two-­volume collection on peacemaking. Zachariah is an Assistant Professor of Political Science at Vassar College. Mark Philp is Fellow and Tutor in Politics, Oriel College and former head of the Department of Politics and International Relations, University of Oxford. He works mainly on late eighteenth century political

Contributors   xiii thought and on political corruption and standards in public life in the contemporary world. His Political Conduct was published by Harvard University Press in 2007. Michael Pugh is Professor of Peace and Conflict Studies, University of Bradford, UK, Leverhulme Emeritus Fellow and editor of International Peacekeeping. He has published articles on the political economy of transformation in the Balkans, and on peacekeeping and peacebuilding. He edited with W.P.S. Sidhu The UN and Regional Security (Lynne Rienner 2004) and is the author, with Neil Cooper, of War Economies in a Regional Context: Challenges of Transformation (Lynne Rienner 2004). He has edited, with Neil Cooper and Mandy Turner, Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding, (Palgrave 2008). William Reno is Associate Professor at Northwestern University, Evanston, USA. He is a specialist in African politics and the politics of ‘collapsing states’. His current work examines violent commercial organisations in Africa, the former Soviet Union, and the Balkans and their relationships to state power and global economic actors. He has talked to government officials, foreigners and insurgents (including so-­called ‘warlords’) in Sierra Leone, Congo and Central Asia. His books include Corruption and State Politics in Sierra Leone (Cambridge 1995), Warlord Politics and African States (Lynne Rienner 1998) and Warfare in Independent Africa (Cambridge 2011). Susan Rose-­Ackerman is the Henry R. Luce Professor of Jurisprudence at Yale University, New Haven, USA, with joint appointments between the Law School and the Department of Political Science. She has taught and written widely on corruption, law and development, administrative law, law and regulatory policy, the non-­profit sector and federalism. She holds a PhD in Economics from Yale University and has held Guggenheim and Fulbright Fellowships. Dominik Zaum is Reader in International Relations at the University of Reading. His books include The Sovereignty Paradox: The Norms and Politics of International Statebuilding (OUP 2007); The United Nations Security Council and War: The Evolution of Thought and Practice (OUP 2008); co-­edited with Vaughan Lowe, Adam Roberts and Jennifer Welsh; and together with Mats Berdal, The Political Economy of Statebuilding: Power after Peace (Routledge forthcoming).

Acknowledgements

This volume emerged from a conference on corruption and peacebuilding held in 2007 at Oxford University’s Centre for International Studies. In light of the many questions that the conference discussions raised, we decided to publish some of the papers from this conference as a special issue of the Journal of International Peacekeeping in 2008. This edited volume draws on the original journal articles, but advances the discussion much further through the addition of five new chapters. Where appropriate, previously published chapters have been revised and updated. We are grateful to Taylor & Francis for their permission to use earlier versions of Chapters 2, 3, 4, 6, 7, 8, 9 and 10, which were originally published in the special issue. In addition to the chapter contributors, who thoughtfully and patiently revised and polished their articles to make them engaging and accessible, there are many others who deserve our thanks. We are very grateful to Richard Ponzio with whom we organised the original conference in 2007, and whose comments and contributions to the development of this project have been invaluable. We would also like to thank Laurens van Apeldoorn for his help with the organisation of the original conference, and Laurens and Stephanie Churchill for their valuable help with the editing of the chapters and their preparation for publication. For their enthusiastic support of this project, we would like to acknowledge Anupama Dokeniya, John English, Andrew Hurrell, Steve Ndegwa and Michael Pugh. Finally, we would like to thank all those who participated in the conference or commented on the different papers, in particular Dame Margret Anstee, Nathaniel Barnes, Alix Boucher, Richard Caplan, Marcus Cox, Lorenzo Delesgues, Qasim Hashimzai, Anke Hoeffler, Khwaga Kakar, Kawun Kakar, Iain King, Robert Krech, Madalene O’Donnell, Emily Paddon, Michael Pugh, Ricardo Soares de Oliveira, Martin Tisne, Michael Urban and two anonymous reviewers. We would also like to acknowledge the generous financial support that this project has received from the World Bank, the Centre for International Studies (Oxford), the Department of Politics and International Relations (Oxford), the Centre for International Governance Innovation

Acknowledgements   xv (Waterloo, Ontario), Nuffield College (Oxford), the African Studies Centre (Oxford), Exeter College (Oxford), and the Leverhulme Liberal Way of War Programme at Reading University. Without their generous contributions, this volume would not have been possible. Finally, we would like to thank our spouses, David Scott and Helena Zaum, who have supported us, and this project, from its very inception. 14 February 2011

Abbreviations

ACC ADB AREU BEEPS BiH CERP CIA CIABOC CN CNDP COPE CPA CPI CPIB DFID DRC EC ECOWAS EITI EU EULEX EUSR FBiH FDI FDLR G8 GAO GDP GEMAP GFAP GNI

Anti-­corruption commission Asian Development Bank Afghan Research and Evaluation Unit Business Environment and Enterprise Performance Survey Bosnia and Herzegovina Commander’s Emergency Response Program Central Intelligence Agency Permanent Commission to Investigate Allegations of Bribery or Corruption Counter-­narcotics Congrès National pour la Defense du Peuple Committee on Public Enterprises Coalition Provisional Authority Corruption Perception Index Corrupt Practices Investigation Bureau Department for International Development Democratic Republic of Congo European Commission Economic Community of West African States Extractive Industries Transparency Initiative European Union EU Rule of Law Mission in Kosovo EU Special Representative Federation of Bosnia and Herzegovina Foreign direct investment Forces Démocratiques de Libération du Rwanda Group of Eight US Government Accountability Office Gross domestic product Governance and Economic Management Assistance Program General Framework Agreement for Peace Gross national income

Abbreviations   xvii HDZ Croatian Democratic Union [Hrvatska demokratska zajednica] HJPC High Judicial and Prosecutorial Council HR High Representative IASB International Accounting Standards Board ICAC Independent Commission against Corruption ICO International Civilian Office ICVS International Crime Victims Survey IFI International financial institutions IJC Independent Judicial Commission IMF International Monetary Fund INGO International non-­governmental organisation IOC International oil company ISAF International Security Assistance Force KLA Kosovo Liberation Army KM Konvertibilna Marka LEITI Liberia Extractive Industries Transparency Initiative LPC Liberia Peace Council LTTE Liberation Tigers of Tamil Eelam LURD Liberians United for Reconciliation and Democracy MOCKY Movement of Concerned Kono Youths MODEL Movement for Democracy in Liberia NATO North Atlantic Treaty Organisation NGO Non-­governmental organisation NPFL National Patriotic Front of Liberia NTGL National Transitional Government of Liberia OECD Organisation for Economic Cooperation and Development OHR Office of the High Representative OSCE Organisation for Security and Development in Europe PETS Public Expenditure Tracking Surveys PLO Palestinian Liberation Organization PNA Palestinian National Authority PR Proportional representation PRS Political Risk Service PRT Provincial Reconstruction Team PTA Prevention of Terrorism Act PWYF Publish What You Fund PWYP Publish What You Pay RENAMO Resistência Nacional Moçambicana RS Republika Srpska RUF Revolutionary United Front SAR Special Administrative Region SDA Party of Democratic Action [Stranka Demokratske Akcije] SDS Serb Democratic Party [Srpska Demokratska Stranka] SIGIR Special Inspector-­General for Iraq Reconstruction SLFP Sri Lanka Freedom Party

xviii   Abbreviations SME SNACC TWRA ULIMO UN UNCAC UNDP UNITA UNMIBH UNMIK UNMIL UNMISET UNODC UNODCCP UNOTIL UNP UNSG USAID WBES

Small and medium sized enterprises Supreme National Authority for Combating Corruption Third World Relief Agency United Liberation Movement of Liberia for Democracy United Nations United Nations Convention against Corruption United Nations Development Programme União Nacional para a Independência Total de Angola United Nations Mission in Bosnia and Herzegovina United Nations Interim Administration Mission in Kosovo United Nations Mission in Liberia United Nations Mission in Support of East Timor United Nations Office on Drugs and Crime United Nations Office of Drug Control and Crime Prevention United Nations Support Office for Timor-­Leste United National Party United Nations Secretary-General United States Agency for International Development World Business Environment Survey

1 Selling the peace? Corruption and post-­conflict peacebuilding Christine S. Cheng and Dominik Zaum

Corruption has become an increasingly salient issue in war to peace transitions, both for the populations of war-­torn countries and for the donor governments, NGOs, and international and regional organisations involved in peacebuilding efforts. Conflict-­affected countries feature prominently in corruption surveys as having the most serious corruption problems (Transparency International 2010; World Bank 2010). They offer an ideal environment for pervasive corruption: with their weak administrative institutions and often broken legal and judicial systems, they lack the capacity to effectively investigate and enforce prohibitions of corrupt behaviour. Moreover, the social norms that are expected to contain corruption tend to be weak or non-­existent; and divisions within societies affected by conflict weaken shared conceptions of the public good (Sandholtz and Koetzle 2000: 36; Philp in this volume). Further, the sudden inflow of donor aid and the desire of external actors to disburse it quickly create ample incentives and opportunities for corruption (Wilder and Gordon 2009). That countries with weak institutions and weak shared conceptions of the public good are more prone to corruption is not a new insight (see for example Nye 1967: 418). The fact that it has become a major preoccupation for peacebuilding actors and analysts in recent years is a consequence of the broad scope of peacebuilding (Barnett et al. 2007), defined in Boutros Boutros-­Ghali’s Agenda for Peace as ‘actions to identify and support structures which will tend to strengthen and solidify peace in order to avoid a relapse into conflict’ (UN 1992). In particular, peacebuilding’s focus on socio-­economic development and the reform and strengthening of political and administrative structures are strongly affected by corruption. This focus reflects two intellectual developments in particular. The first is the recognition of the importance of war economies in perpetuating conflict, and of the persistence of power structures rooted in war economies well into peacetime, where they become entrenched and consolidated through corruption (Berdal and Malone 2000; Berdal and Zaum 2011; Cheng 2011; Cramer 2006; Pugh et al. 2004). In addition to contributing to the outbreak of war and sustaining it, the political

2   C. Cheng and D. Zaum economy of conflict also shapes the possibilities and the character of the peace that follows, as well as the efforts of local and external actors to shape that peace. The second is the increased focus by many donor governments and international organisations on statebuilding as an essential part of peacebuilding, even though the latter encompasses a wide range of practices. As the weakness or even collapse of state institutions came to be seen as sources of conflict, peacebuilding and statebuilding have also been used interchangeably at times. Functioning institutions that can help to manage conflicts over power, resources and identity in divided societies, and that can effectively deliver key public goods such as security and justice are undoubtedly central to post-­conflict stability (Call and Wyeth 2008; Paris 2004; Zaum 2007).This emphasis on the role of political institutions and political economy in post-­conflict peacebuilding has increasingly shifted the attention of peacebuilders towards the issue of corruption. Closely associated with market distortion and the malfunction of political institutions, corruption is considered a key challenge to consolidating peace, hindering economic development, perpetuating the unjust distribution of public resources and undermining the legitimacy and effectiveness of government (Mauro 1997b; Rose-­Ackerman 1999; Seligson 2002; Senior 2006). In recent years, there has been a growing literature on the impact of corruption after conflict (Boucher et al. 2007; Large 2005; Le Billon 2003, 2005; O’Donnell 2008). This book aims to contribute to this debate by examining the specific conceptual and political challenges that corruption poses to post-­conflict peacebuilding. In referring to ‘post-­conflict’ countries, it is important to clarify that we are referring to states that have reached a formal peace agreement, even though violence, including armed conflict might still be pervasive. While peace agreements do not necessarily end violence, and the distinction between conflict and post-­conflict might not be as meaningful to individuals on the ground who continue to experience violence in the ‘post-­ conflict’ period, peace agreements set a framework under which peace can take hold (Höglund 2008). Thus, despite the obvious shortcomings of the term, post-­conflict remains a useful descriptor for our purposes. Across the different chapters in this volume, a complex set of issues emerges to shape our understanding of post-­conflict corruption, its impact on stability and development, and the consequences of anti-­corruption initiatives in the context of peacebuilding efforts. The chapters explore several questions: • •

What specific forms does corruption take in conflict and post-­conflict environments? How do different forms of corruption affect the outcomes of peacebuilding efforts?

Selling the peace?   3 • •

How, and to what extent, do particular peacebuilding practices fuel corruption? What have been the main efforts to address the challenge of corruption in peacebuilding contexts, and how effective have these efforts been?

While the focus of this book is predominantly on political corruption, engaged in by persons exercising some form of public authority, we do not want to suggest that corruption in the private sector or amongst international actors does not exist, or that it is mostly benign and of little consequence. As reports into corruption amongst contractors and international military personnel in Afghanistan and Iraq have suggested, these forms of corruption have serious implications for international peacebuilding and stabilisation efforts (Madhani 2010; Bowen 2009). However, given that successful and sustainable peacebuilding undoubtedly requires trusted local institutions – be they formal or informal – corruption within this context seems an appropriate focus for this inquiry. To frame the contributions to this volume, and to identify some of the core themes that feature across the chapters, the remainder of this introduction examines four issues. First, it will briefly explore some of the problems arising from efforts to define corruption and their implications for our analysis. The second section discusses the impact of corruption on peacebuilding outcomes, while the third highlights the impact of peacebuilding practices on corruption. The fourth section discusses why anti-­corruption measures taken during post-­conflict transitions have often not achieved their objectives. The chapter concludes with a brief overview of the book. Corruption is a complex and contested issue. The different definitions of corruption employed by the contributors to this book and their differing assessment of the consequences of corruption for peacebuilding testify to this. These differences reflect diverging views on the role of governance and institutions, different conceptions of peace, and in the case studies, the particular social and political structures of the countries under study. Moreover, these differences merely underline that both context and perspective matter when examining complex social phenomena like corruption, and that care needs to be taken in any effort to apply insights from one case to another.

Conceptualising corruption Corruption has become a key lens through which peacebuilders observe the political, institutional and social dynamics in post-­conflict societies. Yet growing awareness of corruption as a problem in post-­conflict peacebuilding has also resulted in the concept becoming a catch-­all term. Invocations of corruption have encompassed very distinct social problems including the mismanagement of public assets, weak and dysfunctional government

4   C. Cheng and D. Zaum institutions, complex relationships between political actors and public economic assets, and surviving war-­time networks. Some of the most popular and widely used definitions of corruption can appear tantalisingly simple and clear, masking a more complex and contested reality. Thus, both the World Bank’s (1997a) classic definition of corruption as ‘the abuse of public power for private gain’, or Transparency International’s ‘the misuse of entrusted power for private gain’,1 have been popular with donor agencies, not only because they are relatively broad definitions that capture a wide range of corrupt practices, but possibly also because they suggest that corrupt behaviour can be easily identified, classified and addressed through neat institutional solutions. The analysis in this volume, however, suggests that such broad understandings of corruption not only undermine the analytical usefulness of the term, but they also make the development of effective peacebuilding policies more difficult. While the many different social problems often subsumed under the label ‘corruption’ could challenge a peaceful and prosperous order, each one requires a distinct response and cannot be understood through the same conceptual lens and addressed using the same instruments. Defining corruption is also complicated by the fact that as a social concept, its content changes across different social and cultural contexts. Practices that are considered corrupt in some countries might be considered as proper and legitimate in others. For example, in some countries, there are societal expectations of an office holder which arise from family or kinship ties; and some actions, even if they are popularly described and regarded as ‘corrupt’, constitute an essential part of social and political life (Jordan-­Smith 2009; Blundo and de Sardan 2006). As James Scott (1969) and other anthropologists have argued, most contemporary understandings of corruption require a clear and well-­ established distinction between private and public spheres with public authority organised and legitimised along the lines of Weberian legal-­ rational authority (for an overview, see Sissener 2001). Where alternative sources of political authority, in particular authority based on traditions of kinship, are competing with state institutions, and the distinctions between public and private are blurred, corruption is more difficult to identify, as public and private duties often overlap. The difficulty of comparing cases and developing policy prescriptions becomes plain when there is not even agreement on the content of the basic concept under discussion. Despite this recognition of the cultural specificity of the content of corruption, a range of scholars have identified what Mark Philp in his contribution to this volume has called an ‘objective core’ of corruption that can help to capture the essence of the concept across different social contexts. Philp suggests that common to all understandings of corruption is its subversion of norms and rules governing public office. Similarly, Wayne Sandholtz and William Koetzle (2000: 34–35) identify three core elements of corruption:

Selling the peace?   5 • •

•

Corruption relies on the existence of a well-­developed distinction between the public and private sphere, which breaks down in cases of corruption. Corruption involves administrative or political favours in exchange for inducements, which can be financial, but can also take other forms, not least the form of refraining from violence against the official or politician providing the favour.2 Corruption involves a violation of shared norms of public office.

While such an approach to defining corruption does not get around the problem that different actors can have different perceptions of whether an act is corrupt or not based on varying societal and cultural norms (as exist between intervenors and local populations), this approach does suggest that a qualified systematic and comparative analysis of corruption is possible. An alternative path to defining corruption focuses not on its structure, but argues that what distinguishes corruption from other forms of malfeasance is that it is a moral concept. Laura Underkuffler (2009: 37), for example, claims that what is missing from most definitions of corruption is that it ‘is an explicitly moral notion; corruption describes, in general parlance, a powerful, all-­consuming evil’. There are several problems with such an approach. First, it suggests the existence of a set of universal norms that corruption violates. The existence of such a strong normative consensus on the content of corruption, however, is doubtful. Second, and equally important, such a moral approach deprives us of analytical focus and precision. It excludes a priori the possibility that different forms of corruption might be harmful in different ways and to different degrees; or that corruption might even be beneficial, if only in the short term, and at a certain cost, for example by sustaining a relatively stable order that might be unequal and unjust, but which minimises violence (see for example Nye 1967: 420; see also the contributions by Goodhand, Le Billon, Philp and Reno in this volume). It also ignores the possibility that corruption might be a very rational response to the situation within which individuals find themselves, and be a central part of their coping and survival strategies (see Philp in this volume; Goodhand 2004). Third, such a conceptualisation of corruption brings with it major problems for peacebuilding policy. While post-­ conflict environments appear to be especially prone to corruption, and while corruption can compromise peacebuilding efforts, fighting corruption is not the only objective of peacebuilding actors – nor is it necessarily the most important one. Enabling corruption might be a price peacebuilders have to pay to ensure the participation of warring factions in a peace agreement and to end large-­scale violence. If corruption were to be seen as an ‘all-­consuming evil’, akin to genocide, rape and other war crimes, it is difficult to see how such trade-­offs could ever

6   C. Cheng and D. Zaum be morally justified. Peacebuilding involves difficult political and moral choices, and by turning corruption into an absolute moral question, it effectively becomes impossible to prioritise amongst different peacebuilding objectives. Differentiating forms of corruption In light of the complexity of the concept of corruption, one way to improve the understanding of its consequences for peacebuilding efforts is to distinguish between different forms of corruption. Three possible ways of refining the concept stand out: first, by contrasting grand and petty corruption; second, by differentiating corruption across sectors; and third, by examining different practices classed as being corrupt. One of the most common distinctions that is made in the literature and by policymakers is between ‘grand’ and ‘petty’ corruption, at times also referred to as political and administrative corruption (Andvig et al. 2001: 10–12), or as state capture and administrative corruption (World Bank 2000b). Despite the misleading terminology, the grand–petty distinction is not concerned with the scale of corrupt activity, but rather the level at which it takes place – either in the political leadership, or the bureaucracy that implements and administers policy. While the former has undoubtedly had a greater impact on the practices and functioning of the political system because it sustains networks of patronage and distorts the laws and procedures of government (rather than just their implementation), it is petty corruption that is experienced more directly by the population in its daily interactions with the state, for example through favours granted and bribes paid regularly to officials (Delesgues and Torabi 2010). While the impact of these individual acts of corruption on the overall peacebuilding process may be minimal, it undermines citizens’ trust in the state. Additionally, petty corruption can become a vehicle for targeting ethnic and political groups; in this way, the routine nature of petty corruption can destroy the perception of state neutrality. The second way to refine the analysis of corruption is to distinguish between corruption in different sectors (justice, security, procurement) as they differ in importance between different post-­conflict countries. In jurisdictions with substantial natural resources such as oil or diamonds, corruption in the regulation of these sectors and the trade in these commodities is likely to be a central challenge to peacebuilding efforts (see Gillies and Dykstra in this volume; Le Billon and Levin 2009; Ross 2004). In countries without substantial natural resources, such as Kosovo, government procurement and control of publicly-­owned enterprises are key sites of corruption (Kosovar Stability Initiative 2010). In many post-­conflict countries, it is the police and the justice system which are weak and often perceived to be among the most corrupt institutions.3 Corruption in these sectors is particularly problematic as it creates

Selling the peace?   7 the (often justified) perception that some groups or individuals can act with impunity. This limits trust in the state and creates a sense of insecurity, thereby undermining peacebuilding efforts. In the aftermath of the 1999 war in Kosovo, for example, Albanian judges and prosecutors displayed a strong bias in favour of Albanians and against ethnic minorities, especially Serbs. While minorities could barely get a fair trial (sometimes facing detention without charges), former Kosovo Liberation Army (KLA) members literally got away with murder – a situation tacitly condoned by parts of the Kosovar political leadership (Lawyers Committee for Human Rights 1999; O’Neill 2002). Importantly, the reason for this behaviour was not financial gain but threats of violence against judges and prosecutors by former fighters from the KLA, and a more general perception among elements of the Kosovar-­Albanian elite that the judiciary was simply an instrument to promote the goal of independence. Finally, one can distinguish between different practices classified as corruption. The UNODCCP distinguishes between eight different forms of corruption: fraud, illegal political bargains, embezzlement, bribery, favouritism, extortion, the abuse of discretion and conflicts of interest (UNODCCP 2002). Andvig et al. (2001: 8–10) limit themselves to five main forms of corruption – bribery, embezzlement, fraud, extortion and favouritism; while Giorgio Blundo and Olivier de Sardan identify seven basic forms of corruption from a detailed comparative study of corruption in West Africa (Blundo and Sardan 2006). These include commissions for illicit services, unwarranted payment for public services, gratuities, string-­ pulling, levies and tolls, sidelining and misappropriation. Broadly, these different lists agree on the kinds of practices that constitute corruption, but importantly many of them, such as favouritism, the abuse of discretion, or string-­pulling can only be meaningfully examined and judged in their specific social context. Therefore, focusing on different forms of corruption does not avoid the pitfalls of specific societal understandings of the concept. It can help, however, with analysing the specific pathways of corruption in different post-­conflict environments, and their impact on peacebuilding efforts.

The impact of corruption on peacebuilding outcomes There is a common assumption that corruption has a negative impact on peacebuilding and statebuilding outcomes (i.e. Doig and Tisne 2009). Indeed, the harmful impact of corruption on peacebuilding and reconstruction has been a dominant discourse amongst policy makers and in the media (see for example (CNN 2008; Cockburn 2009; Rubin 2009; PBS Newshour 2010), in particular with regard to Afghanistan and Iraq. Much of the general scholarly literature on corruption further underscores its harmful effects (see for example Mauro 1997a; Rose-­Ackerman 1999; Heineman and Heimann 2006; Uslaner 2008).

8   C. Cheng and D. Zaum There is no doubt about the substantial social and economic costs of corruption, such as lower economic growth (Mauro 1995; Kaufmann and Kray 2002), increased cost of capital for firms (Kaufmann and Kray 2002), and growing inequality (Glaeser et al. 2003). In addition, corruption has been associated with the undermining of trust in society (Seligson 2002; Uslaner 2002), the increase in political instability (Mo 2001), how citizens feel about the performance of their democracy (Anderson and Tverdova 2003), and the entrenchment of patronage networks and wartime elites (Cheng 2011). Despite the fact that corruption poses a strong threat to economic development, political stability, good governance and state legitimacy, in post-­conflict countries the costs of corruption need to be seen in the wider context of peacebuilding, and the additional competing priorities that arise from such environments. As many of the contributions to this volume highlight, inquiries into the impact of corruption on transitions from war to peace require a more nuanced discussion that acknowledges the difficult trade-­offs that need to be made in a peacebuilding context. In evaluating the impact of corruption, this discussion will take these priorities into account to argue for a more nuanced understanding of the impact of corruption on peacebuilding outcomes. Corruption can have limited positive effects on peacebuilding through facilitating the ‘purchase of peace’ and in its redistributive effects. However, these positive short-­term effects are accompanied by a high long-­term price because ultimately, the legitimacy of a post-­war state and the health of its political institutions are likely to be undermined by corruption. Ending violence and cementing peace To bring an end to the fighting, peace agreements and power-­sharing arrangements that implicitly allow for corruption may be a necessary, if unpalatable feature of peacebuilding. Recent research has suggested that creating institutions that incorporate power-­sharing between rival factions helps to resolve the security dilemma that arises at the end of war when factions are still mistrustful of each other (Hartzell and Hoddie 2007), and that power-­sharing can help to build trust between warring parties and contribute to a more enduring peace.4 In some post-­conflict settlements, it has been the opportunities for corruption and patronage that were negotiated as part of the power-­sharing agreements that have literally helped to ‘buy out’ potential spoilers in a conflict. Faced not only with the calamity of war, but also enormous pressures to put an end to it, the goal of international actors is usually to negotiate a settlement that ends the violence as quickly as possible. However, in these situations, there was also a tacit understanding that officeholders would be permitted to exploit the economic opportunities provided by government positions. The economic benefits arising to participants in power-­sharing agreements have included assuming control of state resources, building patronage networks and political power

Selling the peace?   9 structures (see Belloni, this volume), allowing illicit economic activities to continue (Cheng 2011), and being able to extract bribes in the awarding of public contracts or concessions (Galtung and Tisne 2007).5 However, reaching a deal could mean accepting that the opportunities offered by a settlement could be exploited by corrupt actors. The situation in Liberia, as discussed by William Reno in this volume, is an important case in point. The conclusion of the Liberian civil war resulted in the divvying up of cabinet positions between the three warring factions which effectively gave them a two-­year period to reap the full economic benefits of holding official positions. Western diplomats made this trade-­off consciously because they felt that it was the only way to bring an end to the civil war.6 Corruption was a price that Western negotiators were willing to pay given the number of people who were being killed at the time. The fact that Liberians were piling up corpses in front of the American Embassy in Monrovia sent a clear message to Western negotiators: do whatever you need to do to end this war immediately. Thus, the first goal of the international community was to stop the fighting. When it comes to the implementation of peace agreements, international actors tend to prioritise stability over ambitious governance reforms, even if there is a substantial long-­term cost of doing so for the post-­conflict country (Barnett and Zürcher 2009). The problem, as William Reno points out (p. 139), is that international actors do not have any appetite for genuine political reform if it includes the risk of further destabilising the country; instead, the international community ‘may tolerate the incorporation of elements of patrimonial politics with only partial reform’. Even after a settlement is reached and a country has entered the ‘post-­ conflict’ stage, accepting corruption can still have useful stabilising effects. In 2005, for example, when the governor of Helmand province in Afghanistan, Sher Muhammad Akhunzada, was found with nine tons of opium and heroin in his basement, the British government (whose forces were deployed in Helmand) pressured President Hamid Karzai to dismiss the governor from his post. However, with his departure the security situation in the province deteriorated dramatically, especially after he directed 3,000 of his followers to join the Taliban when he could no longer pay their wages (McElroy 2009). While Akhunzada’s dismissal was not the only factor that contributed to increased violence in Helmand, both Karzai and observers in the United Kingdom have argued that his departure played a critical role in the deterioration of security in the province (Nelson 2008; Lloyd 2008). The Akhunzada quandary suggests that Britain paid a high price for its anti-­corruption and anti-­narcotics stance. This example illustrates why donors place such a premium on stability. It also illustrates how stabilisation as a priority has made donors’ intentions to crack down on corruption much less credible: those engaged in corruption know that international actors would much rather co-­opt potential peace spoilers than confront them and risk a return to violence.

10   C. Cheng and D. Zaum Thus, one unintended consequence of ‘buying’ the peace is that international actors have typically condoned the institutionalisation of corruption because of overriding concerns about stability (see also Keen 2000). The other problem with ‘buying’ the peace is that it is difficult to know what exactly is being bought. Returning to the Afghanistan example, the consequences of ceding control of wide swaths of the country to be ruled by corrupt local leaders in the aftermath of the 2001 invasion may have ultimately been the undoing of Western military operations in the country. There are other potentially dangerous consequences of such an approach. The prospect of sharing in a ‘peace dividend’ can spark the proliferation of armed groups who seek to be included in the peace agreement, as happened for example in Burundi (Uvin and Bayer 2011). Similarly, factions (both the leadership and ordinary ‘foot-­soldiers’) feeling that they are not getting their fair share of the peace dividend might resort to violence to enhance their bargaining position, thereby destabilising the political situation and even leading the country back to war. Redistributive effects Corruption can also have a stabilising effect in another way: through its local redistributive effects. In countries where patronage politics structure political relationships and interactions, these structures can also be stabilising if managed well (see, for example, Reno 1995), no matter how objectionable they may seem to international peacebuilders. When the proceeds of corruption flow through these networks during a period of political instability, then these funds can be used to cement loyalties and relationships which can, in turn, help to stabilise the emerging post-­war order. The key to this reasoning hinges on how widely and deeply the benefits are redistributed and whether this redistribution can be linked to the broader social order. The latter depends on the particular local norms of public office and citizens’ expectations of office holders (Jordan-­Smith 2009). For example, if a significant sum from an important bribe is redistributed widely through political patronage networks, then the redistribution of these funds should serve to strengthen an existing political order. Certainly, if the proceeds of a bribe are not redistributed, the effects can be violent. An example from Liberia illustrates this tension. The management of the Sinoe Rubber Plantation, one of Liberia’s largest, had historically been a contentious issue for local residents. When the war ended, RUBREMICCI, the company that officially held the management contract was eager to evacuate those who were illegally occupying the plantation. The company allegedly offered three key individuals a bribe to buy their cooperation. One of these three individuals (Paulson Garteh) reportedly returned and shared his bribe with the community, turning himself into a local hero in the process. The other two people, who chose not to share their bribes, were rumoured to have received death threats from

Selling the peace?   11 community members (UNMIL 2005a). This example illustrates that while corruption in itself is an important consideration, the question of whether a bribe is retained solely by the individual who receives it or whether it is redistributed locally can affect peacebuilding outcomes. The Liberian example reveals that relying on corruption to lead to stabilising redistributive effects is a risky proposition. In his chapter, Philippe Le Billon points out that as ‘groups empowered by the outcome of the war continue to sustain dominant political and economic positions through corruption, they may prevent the redistribution of power by stifling institutional checks and balances’ (p. 72). As a result, inequalities become entrenched and could give rise to new grievances and sources of conflict between and within groups. You and Khagram (2005) argue that these types of entrenched inequalities create vicious cycles which are difficult to break out of because inequality creates a greater social tolerance for corruption, which in turn further reinforces inequality. While this particular dynamic may not result in an immediate return to war, the quality of peacebuilding outcomes will certainly suffer. Corrosive effects While corruption can have stabilising effects in the short term, researchers generally agree that its long-­term impact is overwhelmingly negative. Thus, in most peacebuilding contexts there is an implicit trade-­off whereby corruption is tolerated in the short-­term in order to end violence and aid stability, but the foundations for long-­term development of state institutions are undermined as the capacity and legitimacy of the state suffer damage. These effects are corrosive in nature; they affect people’s perceptions of the state, creating expectations of corruption and bribery not only at the highest levels of government, but throughout a state’s institutions. Once people’s expectations are gradually recalibrated to anticipate corrupt interactions, these norms of corruption will perpetuate themselves. If one takes the long view, it is possible to see how the institutionalisation of these interactions can lead to deeply-­entrenched patterns of state corruption as described in several studies of African politics (Bayart 1989; Bayart et al. 1999; Chabal and Daloz 1999; Jordan-­Smith 2009). As the state comes to be seen as increasingly predatory, corruption becomes a rational response to the context. Uslaner suggests that where there is a culture of corruption, ‘people make payments because there is no way out’ (2008: 6). These attitudes are further reinforced when civil servants take their cues on the integrity of holding public office from politicians and senior officials who regularly accept bribes. As people come to perceive their officials as generally corrupt, it becomes correspondingly difficult in the aftermath of conflict to re-­establish trust in government. Citizens lose faith in the justness of their institutions and turn to non-­state mechanisms to meet their needs. Escaping this cycle becomes all the more difficult

12   C. Cheng and D. Zaum because citizens are more likely to disengage from the political process once they believe these institutions have been compromised (Seligson 2002; Anderson and Tverdova 2003). In environments rife with corruption, the problems accompanying political self-­selection become further amplified: corruption becomes central to the maintenance of patronage networks on which political power is based, making it difficult for those without such networks to compete for power, and potentially dangerous for those who want to fight corruption to do so. In the extreme, there is a danger that those who are benefiting from corruption will exploit their position by using state resources to violently defend their patronage networks. Even in a democratic system, any outsider entering electoral competition would need sufficient financial resources to campaign against those who are part of the corrupt system; this dynamic then makes getting elected an even more expensive proposition which further fuels corruption. Thus, when a government’s reputation for corruption starts to affect the selection of political leaders, the quality of political leadership will decline.

The impact of peacebuilding on corruption The international community can play a critical role in the post-­conflict transition process of most states, especially by sustaining peace operations and through its funding of humanitarian and development assistance. While the involvement of international actors shapes the post-­war environment, it also structures opportunities for corruption. Thus, to understand the character of corruption in post-­conflict countries and its impact on peacebuilding operations, and to be able to develop strategies to contain it, it is critical to fully understand how contemporary peacebuilding policies and practices can fuel it. Ultimately, these policies and practices are under the control of international peacebuilding actors and can be changed if they encourage corruption; in contrast, peacebuilders have little influence over corrupt practices of local elites, in particular if they are rooted in local culture or tradition. This section examines five key dimensions of contemporary peacebuilding that have further fuelled or entrenched corruption. These factors are deeply embedded in how the international community provides assistance to post-­conflict countries and are extremely difficult, if not impossible, to change. They include the rapid disbursal of aid in the immediate aftermath of conflict, the reliance on local partners in the implementation of peacebuilding efforts, the primacy of stability, the dominance of counter-­ terrorism policies and peacebuilders’ emphasis on democratisation, in particular the holding of elections soon after the end of a war. This section ends with a discussion of several peacebuilding practices and policies that should mitigate corruption and could realistically be implemented by any individual donor state.

Selling the peace?   13 The early and rapid disbursement of aid As von Billerbeck highlights in her chapter in this volume, the rapid inflow of large amounts of aid, with the economic distortions that it involves, and the rent-­seeking opportunities it offers, ‘makes post-­conflict settings rife with opportunities for corruption’ (p. 82). While external assistance is needed, these funds usually cannot be fully absorbed immediately after the signing of a peace agreement (Collier and Hoeffler 2004b). Given that there is more aid money than capacity to absorb it, the ‘excess’ money is more likely to be misspent, creating greater scope for corruption. Often, the amounts of money that are brought in as a result of peacekeeping missions and humanitarian aid are so large relative to the local economy that peacebuilding itself becomes a local industry (Ignatieff 2002). For example, in 2004–2005, the budget for Liberia’s peacekeeping mission was set at US$865 million – this amount dwarfed the country’s official GDP which was approximately US$511 million.7 This figure does not even include any form of bilateral or regional aid, nor does it include funds spent by any of the UN agencies. After years of conflict, it is easy to see how the arrival of the international community can turn a fragile local economy upside down (Carnahan et al. 2006) and how opportunities for corruption are created. It is also worth noting that for the local population, the dollar amount of international assistance will be even larger after taking purchasing power parity into account. While an expatriate NGO worker or UN programme officer, for example might not consider US$5,000 or US$10,000 to be huge amounts of money, in many post-­conflict countries, this amount could be enough to buy a plot of land and build a respectable family house. Amounts that seem insignificant as part of multi-­million dollar aid projects actually loom large over local livelihoods: having an opportunity to secure one’s future, pay for medical treatment for loved ones, or guarantee access to higher education for one’s children makes corruption much more tempting. Indeed, the amounts of money that the international community brings with it to a post-­conflict environment are so large that some observers have argued that in the case of Afghanistan, there is now a strong incentive to maintain an environment of insecurity because so much of the local economy is dependent on the flow of international assistance (Wilder and Gordon 2009). Analysts have argued that the problem of corruption associated with development aid could be addressed by gradually phasing aid in and building it up over several years as the capacity of a post-­conflict government increases (i.e. Collier and Hoeffler 2004b). However, the reality is that there is only a limited window of time for raising large amounts of aid after a conflict comes to a formal end, as other crises soon capture the attention of donors. Moreover, in the case of humanitarian aid, quick

14   C. Cheng and D. Zaum delivery is prioritised, as people’s lives are at stake.8 However, time pressure also creates opportunities for corruption. In some cases, if ‘speed money’ is not paid, then food and medical supplies are not delivered, container cargo remains stuck in customs warehouses, and NGO operating licenses get stuck in red tape. When the situation is critical, international actors might feel compelled to make that payment, thereby fuelling an expectation that corruption is acceptable, feeding existing cultures of corruption and strengthening those actors who have the power to control access to those in need of humanitarian assistance (Shearer 2000). This sort of inconsistent behaviour signals to the political elite and the local population that donors are not serious about fighting corruption. Reliance on local elites While the relationship between external and local actors is often characterised by unequal power, dependency and the denial of local autonomy (Chandler 2010), it is important to note that international peacebuilding actors are also highly dependent on the cooperation of local actors, especially elites. Establishing control over territory requires substantial military forces that intervenors are normally unwilling to provide and sustain, therefore local political elites need to be co-­opted to sustain stability and to implement various peacebuilding objectives. However, for international peacebuilders, part of the price of co-­opting local elites could mean a greater tolerance of local corruption. Successful peacebuilding and statebuilding relies also on local knowledge and support for establishing policies and institutions – something that external intervenors will inevitably lack. As local elites are likely to have interests that diverge from those of external peacebuilding actors (not least a keen interest in maintaining their power), this reliance leads to classic principal–agent problems, and in particular to the problem of information asymmetries, as local partners become gatekeepers, controlling the flow of aid money into the community ( Jackson 2005; Nakaya 2008). This type of information asymmetry creates opportunities for corruption: assistance can be re-­directed from those in need to those who are loyal, and projects can be sub-­contracted to cronies. The information asymmetries and the difficulties of monitoring these practices and understanding the complex social relations that fuel them reduce the risk of corrupt actors getting caught, and make it extremely challenging to eliminate corruption from a post-­conflict environment. The primacy of stability In a post-­conflict situation, international actors are worried most about a country returning to war. Peacebuilders worry that renewed violence would threaten the legitimacy of peacebuilding efforts and the credibility of the organisations involved. As the political situation grows calmer and

Selling the peace?   15 the chance of war diminishes with each passing day, the stakes for keeping a country violence-­free grow ever higher. This has often made peacebuilding actors unwilling to tackle corruption amongst actors with a capacity for violence because they might directly threaten the peacebuilding process if the corrupt structures and practices sustaining their power or their wealth are challenged. This dynamic is evident in Kosovo where the EU Rule of Law Mission (EULEX) and the EU’s International Civilian Office (ICO) have allowed parallel authority structures to persist in the Serb-­populated north of the country even though these structures are widely acknowledged to be rife with corruption and associated with organised crime elements. Similarly, EULEX and the ICO have been mostly unwilling to confront notoriously corrupt members of the Kosovo Albanian political elite for fear that their arrest and prosecution could lead them to mobilise violent protest. Counter-­terrorism In Afghanistan and Iraq, the prioritisation of counterterrorism and counterinsurgency over peacebuilding and statebuilding has come at the expense of safeguarding the power of all those who are willing to fight al Qaeda, the Taliban, and any other ‘terrorist’ group, and a tacit acceptance of their often corrupt behaviour. A financial crisis at the largest bank in Afghanistan illustrates how the counterterrorism imperative competes with corruption concerns. In January 2011, experts warned about the potential collapse of Afghanistan’s banking system, as Kabul Bank tried to cope with potential losses of US$900 million resulting from fraud, mismanagement and corruption. Contributing to these losses were loans and grants made to government ministers, as well as millions of dollars spent by the bank on helping to re-­elect President Karzai (Rubin 2009). Importantly, US State Department cables released by WikiLeaks reveal that both Afghan and Western regulators knew broadly about the massive fraud and corruption problems but chose to concentrate their attention on terrorist financing. Addressing corruption was not a priority, even though it undermined the legitimacy and stability of the central government. The emphasis on counterterrorism has also permitted key public figures central to counterterrorism efforts in Afghanistan to enrich themselves by exploiting their public positions. Democratisation and early elections The establishment of democratic institutions has been a central pillar of international peacebuilding efforts. Specific elements of post-­war democrat­ isation, in particular the holding of elections early in the post-­war period, have been criticised for fuelling violence and entrenching and democra­t­ ically legitimising war-­time elites (Carothers 2007; Paris 2004; and Snyder 2000). Democratisation, and in particular early elections, however, can also

16   C. Cheng and D. Zaum fuel and entrench corruption. Studies show that clientelistic politics, the increased ability of rent-­seekers to access public officials, and weak institutional checks and balances associated with democratisation processes all increase opportunities for corruption and reduce the risk of getting caught (Rock 2007). In addition, rapid democratisation in post-­conflict countries can lead to what Paul Collier has termed the ‘selection effect’,9 whereby the most corrupt individuals end up controlling government. The reasoning is simple: electoral campaigns require money, and those most able to fund such campaigns in the aftermath of civil war are also the people who are most likely to be powerful and corrupt.10 The result is government leadership that tends toward corruption, and an electoral process that is likely to entrench and democratically legitimise war-­time elites. In light of this dynamic, it might be tempting to call for the postponement of elections to create opportunities for the emergence of a more diverse range of political candidates (including non-­corrupt ones). However, this argument ignores the fact that it is often very difficult for external actors to postpone elections. There is usually strong popular demand for elections (as highlighted by the high voter turnouts that often characterise the first post-­conflict election in a country). Also, promoting democratic governance is central to the legitimacy of peacebuilding interventions; denying or significantly delaying elections would undermine the legitimacy of external peacebuilding actors and their practices. Who, in the absence of elections, would have the legitimacy to govern (Reilly 2004; Zaum 2007)? Thus, the politics of sovereignty and legitimacy often make it unfeasible to significantly delay elections. Nevertheless, international peacebuilders could do more to level the electoral playing field, facilitate the emergence of non-­corrupt actors, and discourage corrupt behaviour during the election campaign. This could include laws to control the financing of political parties and election campaigns, as suggested by the head of Iraq’s Commission on Integrity (Karim 2011); the provision of free media coverage (e.g. via UN radio and TV stations) to all serious candidates; supporting the development of political parties with programmatic agendas (as opposed to parties based on ethnicity or individuals); and pushing for independent national electoral commissions with robust powers. Mitigating corruption Some of the ways in which international peacebuilding is currently organised makes it difficult to entirely eliminate corruption. However, some international peacebuilding practices could be altered or better managed to reduce corruption. This section briefly examines several practices that, with some effort, can realistically be changed to mitigate corruption. The first issue is the poor monitoring of donor-­funded projects by donors. Donors do a poor job of monitoring their money and evaluating

Selling the peace?   17 whether the intended objectives have been achieved. In part, this is because development projects are often sub-­contracted out to local NGOs by donor agencies; making accurate monitoring of progress and assessing outcomes more difficult. The information asymmetries arising from this makes corruption more tempting because the agent has a lower risk of getting caught. The problem is compounded when donors hire international NGOs who in turn hire local NGOs, creating a nested principal–agent problem. In Afghanistan and Iraq, the general problem of poor monitoring has been exacerbated by the decision to conduct many transactions on a cash basis. This has resulted in unbureaucratic practices which vastly increased the opportunities for corruption, fraud and waste. For example, Stuart W. Bowen Jr., the United State’s Special Inspector-­General for Iraq Reconstruction, has written about how the US government’s Coalition Provisional Authority (CPA) was conducting official business using duffel bags full of cash in January 2004 (DeYoung and Pincus 2009). Bowen referred to the mismanagement of US$50 billion of reconstruction money as resembling the work of a giant ‘ad hoc-­racy’ (ibid.). However, the problem can be mitigated to some extent through effective monitoring and evaluation. Despite the fact that outsourcing to local partners increases the likelihood of funds being misspent, donors often deliberately choose not to expend resources and effort on monitoring their projects. For example, a field experiment conducted by Ben Olken (2007) demonstrated that for a World Bank road-­building project, informing project managers that the central government would audit all of the projects (instead of just 4 per cent of projects) and then making the results of the audit public at a village meeting actually reduced corruption by 8 per cent in highly-­corrupt Indonesia. This result suggests that top-­down audits combined with the threat of social sanctions can have a powerful effect, yet most donors have chosen not to invest their resources in this way. The second issue concerns donor states’ own departmental budget practices. Typically, budgets are set annually and funds that have been allocated to a particular line item must be spent by the end of the fiscal year. If there is any unspent money, then that particular line item is likely to be reduced by the unspent amount in the budget for the following year. For a programme officer in a donor state, the goal is to give the money away and get it out the door; she is evaluated on whether that money is spent, not on the impact that the money has had. Ultimately, the officer does not want her budget to be cut so there is pressure to turn a blind eye if and when corruption, fraud and waste become problematic. Given competing demands on her time, she has little incentive to follow up and be seen within her organisation as a ‘troublemaker’. If donors were to change how internal budgets are set each year and how programme officers are evaluated, this should help mitigate corruption. Finally, the international community does not have a strong record when it comes to punishing governments, or even local partners, for acts of

18   C. Cheng and D. Zaum corruption (but see Dwan and Bailey 2006). Organisations are rarely held to account and there are few repercussions for the individuals responsible for project implementation or project monitoring. There are a variety of factors which contribute to this poor record. From a practical perspective, there is usually no point in trying to prosecute the individual given that the judicial system in a post-­conflict state is unlikely to be functioning properly. Because donors, IOs and NGOs are concerned about the implications for their reputations (both domestic and international) that would accompany any hint of corruption on their projects, they are also unlikely to press charges or make public the inadequacy of their monitoring systems. Finally, irrespective of corruption, international actors will need to continue working with these organisations and individuals because the alternatives are limited; they cannot afford to lose access to critical local partners so it becomes easier to stay silent. For these reasons, those who work directly for international peacebuilding actors and are caught accepting or demanding bribes are usually dismissed from their position with no further consequences; for local partners found to be corrupt, all that donors can realistically do is to exclude them from a specific project. The fact that international peacebuilders are unwilling or unable to institute any kind of meaningful deterrent makes engaging in corruption a low-­ risk, high-­reward activity. Research by Alesina and Weder (2002), for example, finds that at the macro-­level, there is no evidence that despite some variation between donors, less corrupt countries receive more bilateral or multilateral aid. While donor rhetoric has heavily promoted transparency, good governance and anti-­corruption efforts, donor behaviour has shown that corruption levels do not, on the whole, affect levels of development assistance.11 Peacebuilders have often structured the environment in ways that have facilitated corruption. While some amount of corruption is inevitable in a post-­conflict setting, peacebuilding actors can still control how and when they disburse aid; they can choose who to partner with and institute appropriate deterrents; and they can change their policy priorities. As discussed, the premium placed on stability, the emphasis on early elections, and the dominance of the counterterrorism agenda each contribute to a permissive environment where corruption is more likely to thrive. These factors are under the control of international actors. Yet until donors credibly signal that corruption really matters, the rhetoric on corruption will not be taken seriously by local partners.

Obstacles to anti-­corruption efforts and peacebuilding operations As the case studies and chapters show, anti-­corruption efforts in post-­ conflict countries have focused on strengthening state capacity; on increasing transparency in decision-­making, especially in spending decisions; and

Selling the peace?   19 on the accountability of public actors, through both formal and informal monitoring processes. However, despite the substantial resources dedicated to these efforts, the impact on corruption has been limited, with most post-­conflict countries lingering at the bottom of global corruption and governance indices. Looking at some of the characteristics of international anti-­corruption efforts in peacebuilding operations can shed some light on why corruption has remained such a problem. Four issues stand out: internationalising governance functions; an emphasis on formal institutions; a focus on host-­state institutions; and a reliance on executive fiat. The internationalisation of governance functions A substantial number of peacebuilding operations have witnessed the internationalisation of governance functions, either comprehensively, as with international transitional administrations in Kosovo or East Timor (Caplan 2005; Zaum 2007) or the CPA in Iraq (Fox 2008), or more selectively, with internationals controlling the police, budgetary powers, or the justice system. Examples of the latter include the Governance and Economic Management Assistance Program (GEMAP) in Liberia that introduced international experts with co-­signature authority into key ministries and public enterprises to enhance transparency and accountability, especially with regard to revenue collection, procurement and spending decisions (see Reno’s chapter in this volume); or the EU’s Rule of Law Mission EULEX in Kosovo, whose international police force, judges and prosecutors have the authority to investigate and prosecute corruption cases (Zaum 2009). While aiming to enhance transparency and accountability, such internationalised set-­ups also aim to strengthen the capacity of these institutions and train local officials. In some respects, such mechanisms have been quite successful: GEMAP contributed to a tripling in Liberian tax revenues, while EULEX has begun to investigate a senior government minister and popular former commander of the KLA for corruption associated with road building. However, all such mechanisms face obvious problems of sustainability, for if they fail to address the underlying organisation of corruption and the social and economic structures that fuel it, corrupt actors can simply choose to wait out the international presence. Because of the fact that these types of intrusive anti-­corruption mechanisms compromise norms of sovereignty and self-­governance, they can be politically costly to maintain and fuel local resistance to the wider international peacebuilding effort.12 Focus on formal institutions In their anti-­corruption efforts, peacebuilding operations have focused on building and strengthening formal anti-­corruption institutions, such as

20   C. Cheng and D. Zaum anti-­corruption commissions (ACCs) (see Heilbrunn’s chapter in this volume), the judiciary, and procurement systems based on international best practices. However, these efforts often fall short as anti-­corruption institutions are insufficiently resourced and insulated from political influence. As John Heilbrunn highlights in his chapter, ACCs can only be effective if they have strong political support, have adequate financial resources, and are given a strong official mandate. However, it is rarely in the interests of local elites to establish independent and well-­resourced institutions that threaten the networks that sustain their power. In Kosovo, for example, the anti-­corruption agency has lacked substantial political support, and has been starved of funds: with a budget of merely half a million euro and a small staff it has no capacity to investigate corruption allegations (Kosovar Stability Initiative 2010: 19). In addition, the focus on strengthening anti-­corruption institutions is rooted in the idea that weak formal institutions fuel corruption. However, as the case studies show, corruption in post-­conflict countries is also the consequence of concomitant informal power structures that fuel and shape relationships of corruption. Such efforts to strengthen formal institutions are rarely accompanied by similar efforts to weaken or co-­opt these informal structures, limiting the impact of anti-­corruption reforms, as highlighted in the chapters on Liberia and Sri Lanka. Focus on host-­state institutions Peacebuilding operations tend to focus their anti-­corruption efforts predominantly on the actions and institutions of the host state, rather than on the practices of public or private international actors such as businesses, NGOs, or international organisations. However, in post-­conflict countries one cannot really understand – let alone successfully fight – corruption without attending to the role of international actors and structures. As discussed earlier, the scale of aid and the way in which it is disbursed, has important consequences for corruption (see also von Billerbeck’s chapter). Similarly, the exploitation of natural resources and the networks of corruption that accompany it are inextricably linked to international markets. Yet, with a few notable exceptions, international anti-­ corruption efforts have focused predominantly on the role of the post-­conflict state – despite the fact that external actors and structures play an important role. While there has been a strong campaign for greater transparency in aid programmes, some donors have been less than forthcoming in detailing how their aid money is spent. A recent assessment by the Publish What You Fund (PWYF ) campaign notes a glaring lack of primary data that would allow for comparisons between countries and programmes on how and where donors have allocated funds (PWYF 2010). While civil society has undertaken similar efforts through Publish What You Pay (PWYP) to

Selling the peace?   21 encourage transparency and accountability in the natural resource sector, Alexandra Gilles and Page Dykstra argue in their chapter that with the growing international competition for natural resources, the desire of Western governments to put pressure on their mining companies has declined. Instead, the emphasis has shifted to encouraging recipient developing country governments to be more transparent about their natural resource income under the Extractive Industries Transparency Initiative (EITI). On the other hand, as a consequence of an effective campaign by anti-­corruption NGOs in the United States, the 2010 financial reform bill included provisions requiring resource extraction companies to disclose all payments made to governments for oil, gas or minerals. As the bill takes effect, it will become clearer whether these efforts to enhance transparency will have the desired effect on corruption. Anti-­corruption by executive fiat In peacebuilding contexts where external actors exercise executive authority, some of their envisaged anti-­corruption measures were notable for their sweeping nature, and characterised by little regard for proper procedural safeguards, and in some instances, for flaunting rule of law principles. As such measures are often intended to demonstrate the decisiveness of either the government or of international actors, they run the risk of being based on simplified perceptions of the sources of corruption rather than a clear understanding of how corruption is actually working, and to compromise the very principles of good governance that peacebuilding actors purport to support. The lack of procedural safeguards and the scope of the actions can have important consequences for a country’s institutions. Two examples highlight the problems with these measures. The first relates to the judicial reform efforts in Bosnia and Herzegovina (BiH), as described by Per Bergling in his chapter. When the original programme to weed out corrupt judges (based on complaints from the public and formal investigations into these complaints) yielded only seven dismissals of judges and prosecutors, the Office of the High Representative replaced it with a new programme in 2002, requiring all judges and prosecutors to re-­apply for their jobs. This reversed the burden of proof on the individual applicants, even if they had been promised life tenure following a review of the judiciary two years earlier. As a report from the Independent Judicial Commission (staffed with international experts) noted with disarming honesty, the problem was that the original programme required ‘a certain amount of proof be produced to support a finding that a judge/prosecutor is not fit to hold office’ (Knaus and Martin 2003: 65). This kind of anti-­corruption project did little to advance the rule of law, or to promote the general liberal democratic principles which the OHR and the wider international community have used to justify their presence and intervention in BiH. Not surprisingly, the

22   C. Cheng and D. Zaum programme was widely criticised both locally and internationally, though some analysts note that it contributed to a decline in corruption in the justice system (see Per Bergling’s chapter in this volume). The second example concerns a proposal to reform the procurement system in Kosovo in 2010. Procurement had previously been identified by donors and local analysts alike as one of the key focal points of corruption in Kosovo (EC 2010). In 2010, leading government members proposed to address the problem by firing and replacing all procurement officers. For a while, this proposal had substantial support from major donor countries,13 but was ultimately abandoned. A closer analysis of the procurement system (2010) by the Kosovar Stability Initiative highlights that such a policy – had it been implemented – would actually have made corruption worse in the procurement system. The mass firing and replacement of the officers would have failed to address two important underlying factors contributing to the corrupt character of the system: the poor quality and limited training of procurement officers, and their vulnerability to pressure from local and national politicians. As civil servants, procurement officers should have been protected from the threat of political dismissal. However, local and central government agencies chose to ignore the existing legal framework, leaving procurement officers vulnerable to pressure, including threats of violence and in some cases, actual violence. Firing all of the procurement officers would only have reinforced their vulnerability to political pressure.

Conclusion Ultimately, there is no simple way to summarise the relationship between corruption and peacebuilding; it is at once deep, complex and varied. Instead, we offer two concluding ideas. First, corruption is a political problem that requires a political solution; a technical approach will not succeed on its own. In practice, this means that establishing anti-­corruption institutions and passing reforms are unlikely to be effective without real political support from both donors and post-­conflict governments – no matter how well-­funded they are or how well-­designed the anti-­corruption programme is. Corruption is difficult to tackle because there are underlying structural imperatives that make it a rational strategy in post-­conflict societies. In the post-­conflict context, the approach that is most likely to achieve long-­term success is to embed anti-­corruption reforms within efforts to create legitimate political institutions. Ideally, these two agendas should be seen as complementary; certainly, anti-­corruption reforms will be more credible if the implementing institution is also credible. Finally, corruption is a double-­edged sword. It can be used in the short-­ term to craft a peace where the spoils of war are divided amongst the fighting factions; in some cases, it may be the only way to provide the stability

Selling the peace?   23 needed to achieve other peacebuilding objectives. But in its tacit acceptance, it also sows the seeds for undermining the capacity and legitimacy of state institutions. The challenge is for international actors to balance the imperatives of putting an immediate end to the violence without undermining the sustainability of the long-­term peace.

Organisation of the book This book is divided into three Parts. The first Part addresses how corruption is conceptualised in a peacebuilding environment. Mark Philp begins this volume with a theoretical exploration of corruption and how a post-­ conflict environment can shape what is or is not considered corruption in different contexts. Susan Rose-­Ackerman then examines in greater depth what corruption in a post-­conflict government might look like and what needs to be done by domestic and international leaders to successfully achieve reforms. The next two chapters focus more directly on the impact of the international community; first, by examining how liberal peacebuilding fosters corruption in Philippe Le Billon’s chapter, and then by analysing how international aid affects corruption in the domestic context in Sarah von Billerbeck’s chapter. The second Part consists of a series of case studies illustrating many of the peacebuilding dynamics identified in the first Part. The country cases highlight the contested character of corruption, and illustrate how factors such as culture and tradition, historical context, and human agency contribute to the relationship between peacebuilding and corruption. In BiH, Michael Pugh and Boris Divjak discuss the persistence of informal local networks in the aftermath of the war; while Per Bergling examines how perceptions of local corruption gradually created the impetus for the wholesale firing of the Bosnian judiciary. William Reno takes a comparative approach to analysing corruption in Liberia, contrasting its destabilising effects with the stabilising influence of corrupt networks in East Asia. In his chapter on Afghanistan, Jonathan Goodhand shows how corruption is deeply wrapped up with drug trafficking. Using the concept of joint extraction regimes, he argues that drugs and corruption have given the central government a degree of influence in the north that it does not have in the south. In the chapter on Iraq, Robert Looney focuses on how the disintegration of generalised trust played into the country’s political corruption. The final case study by Zachariah Mampilly takes a historical perspective to argue that the changes that occurred in Sri Lanka’s political economy during the civil war ultimately informed the nature of corruption in the post-­conflict period. The third Part of the book focuses on anti-­corruption measures. In his chapter on ACCs, John Heilbrunn suggests that these institutions, rather than offering a quick fix to corruption, can contribute to the consolidation of anti-­corruption and transparency norms through processes of

24   C. Cheng and D. Zaum socialisation. He concludes that a more long-­term perspective is needed when assessing the success of anti-­corruption efforts. In the next chapter, Roberto Belloni examines the dual role that civil society has played, in some cases leading the fight against corruption by publicly exposing corrupt activities, but in other instances being co-­opted by dominant patron–client networks. In the final chapter of the book, Alexandra Gillies and Page Dykstra scrutinise the reasoning and logic that underpin two important transparency initiatives in the management of natural resources: the EITI and PWYP. Their analysis suggests that the success of these programmes can ultimately be attributed to committed leadership, a supportive governance environment and optimal timing in implementation. Both peacebuilding actors and analysts continue to wrestle with the problem of corruption and how it impacts efforts to end violence and build or rebuild a reasonable and stable political order in war-­torn countries. As the contributions to this volume show, it is too simplistic to frame this debate in terms of tensions between clear categories, such as corruption versus development, or anti-­corruption versus stability (see also Jarstad and Sisk 2008). In this book, we have included a wide range of opinions on the character of corruption, on its consequences for peacebuilding and on the best ways to address these problems. While not all contributors to this volume necessarily share the assessments in this introductory chapter, they concur that the reality of both corruption and peacebuilding is too complex to be captured in simple, catch-­all concepts, and that this relationship is too varied to be addressed with universalist policy prescriptions.

Ackonwledgements We would like to thank Emily Paddon, Michael Urban, and the participants of the first Oxford Conference on Governance and Transparency for their helpful comments and suggestions on earlier drafts of this chapter.

Notes   1 See Transparency International website. Online, available at: www.transparency.org/news_room/faq/corruption_faq, accessed 18 January 2011.   2 Arguably an official acting against the public interest because she was threatened with violence is not corrupt, however, the person threatening her would be considered corrupt, and so would the transaction itself.   3 See for example Delesgues and Torabi (2010: 30) for perceptions of corruption in rule of law institutions in Afghanistan.   4 For critical views on the costs of power sharing, see Tull and Mehler 2005; and Mehler 2009.   5 Examples include the 2002 Global and All-­Inclusive Agreement in the Congo, and the trust fund set up to buy the RENAMO rebels’ assent to the peace agreement in Mozambique.   6 American official familiar with Liberia’s peace negotiations. Personal interview, May 2007, Monrovia.

Selling the peace?   25   7 See UNdata website. Online, available at: http://data.un.org/CountryProfile. aspx?crName=Liberia.   8 On the complex moral issues and political issues raised by the delivery of humanitarian aid, see Keen 1994; and Anderson 1999.   9 ODE Talks Podcast: Interview with Professor Paul Collier, 24 November 2010, AusAID, Office for Development Effectiveness. Transcript online, available at: www.ode.ausaid.gov.au/publications/pdf/transcript-­colliernov2010.doc accessed 8 February 2011. 10 For example, in the 2009 Afghanistan election, voting cards were being sold for US$10 each (about £6) by Kabul traders. In the north of the country, one tribal leader claimed that ‘he had been offered thousands of dollars by campaign teams in exchange for delivering large blocks of votes’ (see Pannell 2009). 11 One important exception has been the Millennium Challenge Corporation which explicitly challenged this practice. See Millennium Challenge Corporation website, online, available at: www.mcc.gov/. 12 This was reflected in the cautious response from other African leaders to the GEMAP in Liberia, seeing it as ‘a threatening precedent for eroding African Sovereignty’ (McGovern 2008: 341). 13 Personal interviews with representatives from major donor countries, Prishtina, July 2010.

Part I

Corruption and peacebuilding: concepts and questions

2 Conceptualising corruption in peacebuilding contexts Mark Philp

In the long and difficult process of peacebuilding in post-­conflict states, corruption has increasingly been identified as a major obstacle to success. In this chapter I argue that behind the seemingly practical questions of how best to eliminate corruption in peacebuilding contexts lie a number of substantial conceptual problems linked to how we define corruption and how we understand its place in unstable political contexts. These problems are rarely squared up to in the peacebuilding literature, and the corruption literature rarely deals with peacebuilding as a distinct problem area.1 In an attempt to bridge the two areas, I begin by identifying a set of problems with current definitions of corruption and by developing a definition of corruption that has a number of key advantages over those current in the literature. The case for reconceptualising corruption is based on the need to capture an objective core to the concept and to ensure that both this universal element and a range of more local and cultural standards are recognised. The proposed definition focuses squarely on the idea that there are norms, rules and expectations of public office and that corruption involves their transgression and the consequent subversion or distortion of public office. Given this understanding of corruption, peacebuilding contexts will be uniquely prone to corruption because of the existence of multiple, competing sets of rules, norms and expectations of public office. In attempting to impose order, we are effectively seeking to make one set of rules hegemonic. This inevitably results in a disjunction between peacebuilders’ standards and the expectations of many of those with whom they work, in a context in which there are powerful incentives for factions to secure personal or sectional interests. This combination makes corruption almost inevitable and dramatically complicates the task of those in post-­conflict situations. I use this analysis to raise fundamental issues about the rationality of corrupt practices and to draw some more subtle distinctions between types of corruption relevant to anti-­corruption efforts. I conclude with a discussion of whether it makes sense always to give priority to the eradication of corruption.

30   M. Philp

Problems of definition Difficulties with corruption begin with its definition. Michael Johnston’s recent major work on the subject starts from the suggestion that the core components of corruption can be captured by the following definition: ‘the abuse of public roles or resources for private benefit’ (2005a).2 That definition is widely used within corruption studies and a similar definition is adopted by many anti-­corruption agencies, such as Transparency International – whose definition is ‘the misuse of entrusted power for private gain’.3 These definitions fail to distinguish corruption from other types of malfeasance, such as straight theft or misappropriation.4 Stealing breaks the law, but it is over-­generalising to regard an accounts officer who helps himself to the contents of the till as engaged in corruption rather than theft. Although the phrases ‘the abuse of public office’ and ‘the misuse of entrusted power’ point to the idea that some public position is being misused in some way, they capture only half the story: it is a particular type of misuse (or subset of abuses) that distinguishes corruption from other types of misdemeanour, and existing definitions provide no basis for such a distinction. Moreover, these definitions all emphasise private gain, yet the use of office to benefit one’s party, sectional interest, or some organisation or group, as has been all too common in the political parties of Western Europe, is certainly a form of corruption. Both issues, the need to distinguish misdemeanours from corruption and to recognise corruption where the benefits accrue more widely to social or ethnic groups, networks, or organisations, are important in peacekeeping situations. We must avoid inflating the amount of corrupt activity by incorporating all self-­serving rule breaking, but should not overlook deeply entrenched activities that serve group rather than individual interests. The other point to note is that the terms ‘abuse’ and ‘misuse’ are question-­begging: what counts as corruption becomes the problem of ‘what counts as the “misuse” of public office?’ For these definitions, then, what distinguishes corrupt behaviour from other behaviour in which private gain arises from public office (such as earning a salary, deriving an income, or receiving benefits and honours), is that there is some misuse; but what counts as ‘misuse’ is left open. We can fill in this lacuna either by treating the standards as clear and universal (which is deeply implausible and would ignore the complex ways in which different political systems operate), or by turning to the rules and norms in each particular political system to distinguish acceptable from unacceptable (and thus corrupt) gain. However, if these standards are almost entirely a local matter, rather than something that is shared across the different cultures and countries, corruption becomes simply a matter of ‘what we regard as misuse around here’ and that renders the definition wholly relative. Worse, where there is no set of agreed norms or rules governing public office, these definitions prove inadequate for filling out the content of ‘abuses or misuses’; and in

Conceptualising corruption   31 failing to do that, we seem forced to say that there is no corruption. In post-­conflict situations this lack of clarity around the norms of public office could make it difficult to identify corruption even when it is obvious! The objective core The alternative definition I am proposing draws on the conceptual history of corruption in the West.5 This conception is concerned with actions, decisions and processes that subvert or distort the nature of public office and the political process. What it is to have a concept of corruption in politics is to recognise standards and functions of political office that people can systematically subvert so as to suborn the political process for personal, sectional or partisan gain. The sense of a fundamental change or decay in the process or practice gives a common core to cases of corruption (distinguishing them from other types of misdemeanour), even while recognising that the precise understanding of the norms and rules upon which public trust rests will be in part a local one.6 Local judgements help determine people’s understandings of the standards and of the behaviours they take to be compatible or incompatible with them. Nonetheless, the objective core to corruption (centred on the subversion of the standards of the political process) means that we can identify situations where local norms and rules are either under- or over-­demanding. One problem with the standard definitions of corruption is that they regard all types of misdemeanour committed in public office as involving corruption, rather than acknowledging that only certain relationships and practices serve systematically to subvert the rules, norms and spirit of the political process. In my conception a petty official caught with his hand in the till is a thief, rather than corrupt, because his or her actions do not distort the political process; a political leader who systematically siphons funds into his foreign bank accounts is corrupt because he distorts the political process. Of course, if each and every petty official is putting his or her hand in the till, the process of exercising official responsibilities becomes deeply distorted and this can be identified as corruption.7 Tracking these distinctions is by no means easy. Treasonous conduct, for example, meets all the standard definitional criteria for corruption – misuse of office and private gain – and may also involve something like systematic distortion. But it is termed treason rather than corruption because it is understood as a more serious threat to the political system than corruption and poses a different type of challenge (since it concerns issues of national security). We need to make some effort to capture these differences and distinctions while recognising that any definition is likely, at best, to identify a set of core cases around which will be found a wider penumbra of instances that fail to meet all the conditions but may nonetheless be corrupt.

32   M. Philp

Corruption and peacebuilding: definitional challenges Each of these dimensions of criticism is serious for those interested in peacebuilding. The standard definition that emphasises private gain would lead us to overlook activities undertaken in the interests of one’s political party, ethnic group, or familial network, each of which can be a source of major corruption in post-­conflict situations. Nor would it recognise activities that aim at the public good but subvert the formal political process as corrupt. It is also crucial to have a concept that picks out a clearly delineated set of cases, and muddling corruption with one-­off cases of theft or other self-­serving misdemeanours starts that process off badly. In any post-­conflict situation there are likely to be very divergent understandings of the norms structuring public office. Those entrusted with enforcing peace are likely to be working, to some extent, against local norms. But attempting to build some consensus on appropriate norms for public office requires a sense of the points at which peacebuilders might connect with local norms and expectations. Recognising the importance of the objective core allows us to identify the most serious threats to the peace process and to the process of constructing a modus vivendi for the various parties with respect to the emerging institutions of administration and political rule. It gives a broad sense of what should be targeted in the reconstruction process. That said, no single system of authority will be optimal for every situation in which peacekeeping forces have to be deployed; and the objective core has to be coupled with sensitivity to local norms, standards and expectations. A condition for war is the breakdown or absence of a political order and its associated system of norms and values that can mediate conflict within or between communities. Consequently, peacebuilding by definition takes place where such norms are largely absent, extremely weak, or deeply contested, and where people’s conception of a legitimate political order and its associated standards in relation to offices and positions of trust may be inchoate or largely missing. Insofar as people can and do use the concept of corruption intelligibly in such contexts it is by believing that some sort of order is, counterfactually, possible. The challenge for peacebuilders is to develop and enforce standards for public office that link with local norms and expectations to command some support, while simultaneously extending those norms and expectations to sketch a political order and set of requirements that can command legitimacy across group boundaries, despite a legacy of deep disagreement and conflict. One danger for peacebuilders is that different people will imagine different potential orders and standards and that the work to establish the necessary levels of consensus and commitment to a particular vision will face insurmountable obstacles. In the broadest terms corruption cheats people of their legitimate expectations; it results in outcomes that cannot be legitimated; and it

Conceptualising corruption   33 thereby weakens authority. Where it is widespread, it may exacerbate inequalities in wealth, hamper economic development, undermine growth, subvert attempts to direct aid to the most vulnerable, and lead to increasing isolation in world markets and in the international political community. In post-­conflict societies its impact is potentially still more serious, since it can undercut the emergence of stable expectations and the pro­ cesses by which these expectations are legitimated; it can maintain or further exacerbate situations in which outcomes lack legitimacy, making it difficult for any serious form of authority to emerge; it can lead to the squandering of aid and external political will; and it can make the weak weaker, the poor poorer, and the vulnerable still less secure. The core definition These complexities in the definition of corruption are deeply rooted.8 They arise because the ascription of corruption involves both a descriptive and a normative judgment and these judgments work in tandem all the way down to the root sense that the political order may be subject to subversion or systematic distortion. As a result we are not likely to find a one-­ line definition of corruption. The conditions may be present without corruption being the appropriate term, as the case of treason shows, or we might fall short of the conditions and yet still want to use the term corruption (as when we describe as corrupt a situation where a public official distributes contracts because his family is being threatened by a mafia organisation – so that, rather than gaining, he acts to avoid a major private loss). What we need is to identify the major elements of corruption, which can then be combined into a rough definition – one that sketches a core conception while acknowledging that cases without all the core features may nonetheless count as corruption. The key elements of a definition of corruption are: •

•

•

A conception of public office with rules and norms for the conduct of that office – the office being defined partly in terms of a broader public interest that it serves, which may run against the personal interests of the office-­holder or against interests that are deemed illegitimate but are not strictly personal. A view that corruption involves the distortion or subversion of the exercise of public office so that it meets private, partisan or sectional rather than public interests – so that some people gain who should not and some lose who should not. The idea that three actors are normally involved in or affected by corrupt activity: the occupant of the public office (A); the intended beneficiary of that office (B); and the actual beneficiary of the particular exercise of that office (C).9 This triadic relation does not always hold (in a kleptocracy, for example, A and C are the same; whereas

34   M. Philp with administrative payments B and C may be identical) but the identification of three distinct roles – the occupant of public office, the intended beneficiary and the actual beneficiary encourages us to distinguish theft or fraud from corruption, and helps capture how corruption distorts the exercise of public office and power. Combining these elements in a suitably tentative definition gives us Corruption in politics occurs where a public official (A), acting in ways that violate the rules and norms of office, and that involve personal, partisan or sectional gain, harms the interests of the public (B) (or some sub-­section there-­of ) who is the designated beneficiary of that office, to benefit themselves and/or a third party (C) who rewards or otherwise incentivises A to gain access to goods or services they would not otherwise obtain. Note, the definition does not assume that A’s behaviour must break the law. Legal definitions of corruption can fail to capture some of the worst cases of corrupt activity because corrupt transactions can be institutionalised in the laws of the state or economy – as recognised in recent work by the World Bank on ‘state capture’ (2002a) – that is, where corrupt relations are used to pass laws that entrench, extend and render legitimate corrupt gains. Not all corruption involves the corruption of politics – we can talk of economic corruption, or corruption in a range of public services, such as health or education. But all corruption has the same conceptual structure: a recognition of certain formal responsibilities attached to an idea of office or a position of trust, which imply certain responsibilities and constraints on self-­interested behaviour; the violation of rules and norms concerning the exercise of that office or trust; the harming of one set of interests identified by the rules and norms as legitimate, to serve others deemed illegitimate; and the benefiting of those not formally entitled to benefit – thereby subverting the ends of the office.10 Norms and rules Corruption is, then, a complex concept. It has a hard conceptual core based around the idea that public office can be systematically subverted for private or sectional gain, but that core must be fleshed out by local norms and practices that identify the standards and rules those in office should follow. The concept becomes more difficult to apply the less consensus there is as to which values, norms and rules should be applied. Where there are competing norms, alternative conceptions of public office, and radically different views of what is viable, the standards for identifying corruption become increasingly partisan or abstract. Moreover,

Conceptualising corruption   35 a lack of consensus on standards can make it difficult for those engaged in wrongdoing to recognise it as such. A central task of peacebuilding is to create a shared set of rules and norms to govern the exercise of formal positions within a society. In such situations the two questions facing any sub-­group or organised force in a state will be ‘whose rules will be imposed?’ and ‘how far will those rules be backed by credible threat?’ That calculation is itself indicative of the absence of shared norms that have any kind of grip on the minds of those who participate: people will comply when it is in their interests to comply and will fail to do so when it is not. In the absence of any such grip, opportunism is wholly rational and is likely to be endemic.11 Moreover, by setting standards of conduct that have few adherents in the community and lack adequate enforcement, peacebuilding may exacerbate corrupt activity and ensure that most people will respond to those standards entirely opportunistically. Indeed, the understanding that local community leaders have of their responsibilities, jurisdiction, and rights and powers may vary widely from that of peacekeeping forces, and those of other communities. Moreover, in their interactions with local communities, peacekeepers are not always well placed to articulate and impose their expectations for these communities. Indeed, even where there are strong incentives for local leaders to sign up to the broad terms of an agreement, the acceptability of such terms may be a function of not pressing the small print. No matter how committed people seem to be, when things fail to work out they are likely to fall back on tactics and strategies that worked in the past. Where common norms are lacking, the judgment that people are acting corruptly depends largely on externally imposed standards of office that are extremely fragile.12 Rationality and rogues It is not simply that people may have different norms and expectation in post-­conflict states; it is also that their incentives may further undermine the prospects for probity in public office. There is a tendency in the literature to treat corruption as the actions of criminals, but this assumption ignores the collective action problems that people may face in post-­conflict situations. We might think of their behaviour as a function of stable but sub-­optimal Nash equilibria – that is, situations where A’s behaviour is the best response to B’s behaviour and B’s behaviour is the best response to A’s, but where the outcome is sub-­optimal in comparison to other equilibria that cannot be reached from where they are (Hargreaves, Heap, and Varoufakis 1995: 51–79; Kreps 1990: 28–36). Why should Kosovars expose themselves to risk by trusting Serbs, or vice versa, rather than systematically acting to protect their group interests? Why should either regard the presence of an external force as permitting an alternative strategy? Even if

36   M. Philp people do think that the external force has the opportunity to make a difference (as I am assured people in Bosnia did and probably also in Kosovo), that force needs to have the power and the will to enforce these changes. Kosovars may have been much more optimistic about the peacekeeping force, but in many respects that simply underlines the difficulty. Even if nearly everyone prefers X to Y, if there is no power to impose X unconditionally on all groups then Y may remain the natural equilibrium point. Wanting the situation to be different does not make it rational to act as if it is different. People do not need to be rogues for this to happen, yet the result will be the appropriation of resources on the basis of community-­ based norms rather than wider public norms: the awarding of contracts to people within one’s own community; the shoring up of key elites; tacit support for those who might be needed should the peace fail; and the spread of a culture of reciprocity, networks and favours. This can happen in a divided community of not very self-­interested but rational people. In practice, this outcome is still more likely where there are genuine rogues, and post-­conflict environments offer precisely the kinds of context is in which rogues can rise to power and prominence, further exacerbating the size of the leap that needs to be made to reach a new equilibrium point. That said, we must also ask how similar post-­war contexts are – national reconstruction for a country that has not been internally divided may prove less traumatic than peacebuilding and reconstruction where the warring communities continue to exist side by side. But we need good comparative material of the type developed by Michael Doyle and Nicholas Sambanis on peacebuilding efforts and post-­war outcomes to make any such judgments with any confidence (2006).13

Priorities All corruption is bad in some way because some people benefit when they should not, and some fail to benefit when they should (although some corrupt practices might also be good in some ways) (Le Billon 2003).14 But corruption is not always the worst that can happen. Having to pay grease money to obtain official documents is relatively trivial compared to living with the realities of ethnic violence, starvation, or the breakdown of peace into renewed armed conflict. That something is worse does not make the other thing good, but it does raise the question of what is to be targeted, and what can be tolerated and for how long. Thus in many cases, especially where there are major threats to personal security and survival, ‘corrupt’ transactions may be the lesser of evils (although corruption and insecurity can be strongly related). The International Committee of the Red Cross/Red Crescent is rumoured to deliberately write off about 20 per cent of its funding in post-­ conflict areas to corruption, essentially on the primacy of humanitarian

Conceptualising corruption   37 goals and that if one waits for corruption control to be effective then the humanitarian aims will have been defeated. So there is a trade-­off: what proportion of spending is it acceptable to lose to corruption? What effect does bowing to corruption have on those administering programmes? How far does it entrench future risks to humanitarian aid? The line between these activities is not easily drawn, but there is something to be said for the view that advancing reconstruction (by whatever means) will be a major factor in equipping a state to deal with both its humanitarian and its corruption problem. Corruption can be a reasonable response to certain contexts. Even if the net outcome of falling back on corruption is worse for all, it does not make it any less rational as a strategy for individuals. The reign of procedures, rules and due process is a complex achievement that is difficult to bring off or sustain when people face life and death decisions, impoverishment, or persecution. If an aid programme results in scarce resources being rationed in ways that reflect family and ethnic loyalties this is regrettable but not incomprehensible – and if there are simply not enough people on the ground to distribute aid without fear or favour, then we have to mitigate these effects, without supposing that we can eliminate them. And we have to be clear what our objective is – a clean aid delivery system, or one that delivers aid most effectively. Sometimes these two things go hand in hand; sometimes they part company.

Varieties of corruption: reach, depth and entrenchment Corruption is bad, but not all forms of corruption are equally bad. Recent work on ‘state capture’ distinguishes between administrative corruption (where non-­elected officials misuse their office) and state capture, where laws and procedures are the result of corrupt influence. But we should also distinguish between the types of institutions that can be captured: the executive, legislature, judiciary, independent regulatory agencies, the police, the army, or peacekeeping forces; the agents who undertake the capture: private firms, interest groups, political leaders, local warlords, sections of the bureaucracy or state services; and the type of benefits provided to public officials in the process of capture: bribes, equity stakes, informal control rights, or protection from violence. Capture can also occur across state boundaries, by foreign firms and investors, or by the activities of foreign governments; peacekeeping and reconstruction can be very susceptible to this. Also, in contrast to the common emphasis on financial gain, many corrupt transactions or forms of capture are effected or sustained through the use or threat of violence and the marketing of ‘protection’, the results of which are more harmful than purely monetary transactions since they destroy people’s basic sense of security. Hence the importance of identifying the extent to which corrupt relations are symmetrical (where both are in it together), or

38   M. Philp asymmetrical (where one side is expropriating or extorting from another and where we need to identify which side is playing the dominant role and what weapons or incentives they are using).15 There is also the partly asymmetrical ‘throffer’, a combination of threat and offer (‘do x and you’ll get y, fail to do x and we’ll impose sanction z’). Two further distinctions concern the depth of the penetration of the institutional structure of the state, and its duration. Buying a member of parliament’s vote on a single issue is less corrosive than being able to design and have passed a law (depth of reach). The ability to buy a vote or have a law passed at will is more corrosive than only being able to do so exceptionally (duration or the degree of entrenchment of reach). Where capture is deep and entrenched, so that an office and its regulatory or law-­making powers become wholly subordinate to the private interests of some individual, group or organisation, it is more likely to be part of a network of relationships and transactions in which monetary exchange plays a lesser role, although it might rely heavily on intimidation, protection and violence. To understand corruption we need to capture these different dimensions of depth, entrenchment, symmetry vs. asymmetry, to identify the various currencies of corrupt transactions – money, goods, favours, services, violence and protection – and to deepen our appreciation of the ‘reach’ of corrupt practices, their costs to a state and their costs to the victims of such exchanges. We also need to know more about under what conditions corruption tends to become entrenched. For example, does corruption in the initial distribution of food in a post-­conflict situation form the basis for systemic corruption later on or is it largely a short-­term problem? In assessing the impact of corruption we also have to distinguish between its intrinsic costs (that is, the direct cost of a given corrupt transaction to those involved), and its impact on other processes, such as peacebuilding, political reconstruction and economic development. Some forms of corruption may not be seriously harmful to these processes, but may have very high personal costs to individuals (as with complicity in human trafficking16) while some moderate forms of corruption may have a very serious impact on the process (such as extensive favouritism in redistributing resources and government positions). Similarly, we need to ask who gains and in what ways. Are these actors essentially Mancur Olson’s ‘roving bandits’ (2000) who have no interest in investing in a community but expropriate as much as possible before exiting; or are they more like stationary bandits who recognise the need to control their predatory behaviour to maximise their returns? The former need to be prevented from saving or exporting their gains for future use; the latter might consider trading aspects of legitimacy in exchange for modifying their predation. Similarly, what happens to the wealth expropriated? Is it salted away in foreign bank accounts, or is it in circulation, making a contribution to the economy – and if it is, is that contribution simply inflationary or is it being used to build and reconstruct?

Conceptualising corruption   39

Making corruption possible In complete chaos there can be no corruption. For corruption to exist there must be forms of office and positions of trust and responsibility with rules and norms, and these must form part of a ‘to some degree’ intelligible and hegemonic system of order and rule. Or those rules and norms may be projected but potentially realizable standards where the projection is appropriate to the conditions it addresses. That is what allows us to talk about corruption when a group maintains a state of disorder to destabilise or prevent the emergence of a political order that could challenge its dominance or its gains. It is not complete chaos so long as there is some potentially realizable alternative. It is this potential alternative that peacebuilding hopes to realise, but one consequence of projecting that alternative is that it will identify a range of existing behaviour as corrupt. This makes it important to use the language of corruption with care. We can have a clear sense that certain groups are systematically subverting the creation of a stable political order to protect their sectional interests, and many will take that as sufficient evidence of corruption. But, if there is no secure route by which this group can be accommodated in the projected political order or if they would be systematically exposing themselves to unacceptable levels of risk in accepting that order, then we are not offering them a viable solution. In the absence of a viable order, their response is not best described as corrupt, even if the consequences are destructive. It is not just that those involved could not recognise that description of their behaviour (although that is a significant obstacle to progress); it is also that we have no warrant to ascribe corruption to those who have no feasible alternative. There is no corruption in chaos because the term implies that there are reasonable alternatives and that the corrupt reject them in favour of strategies that systematically pursue their advantage irrespective of shared procedures, rules and norms. What peacebuilding aims to do is to create a coherent set of reasonable alternatives for the various ‘players’, enabling us to stigmatise the unmitigated pursuit of individual, group or sectional advantage as corrupt. But that process is clearly not an easy one, and for these alternatives to be feasible they must be recognised as such by those on the ground – even if they are acknowledged in large part only because they are backed by the required degree of commitment and force. Indeed, the thresholds for feasible alternatives are complex and coercion is central to them. In the absence of political order those attempting to broker peace and reconstruction must deal with people, groups and organisations, each with their own sense of what is right, legitimate, necessary, or possible – as well as with those who know how to exploit their tactical advantages, subvert initiatives or intimidate their opponents. Actors will vary from those who systematically pursue their own interests, to those concerned with protecting the interests of their family, or group

40   M. Philp or community. Cutting across that line will be another continuum marking a willingness to use violence, intimidation and bribery; at one end will be those who are unwilling to resort to such means and at the other will be those who turn easily to corruption and violence. But few emerging from a war will see such options as wholly out of bounds. Given the range of people’s motives and their different levels of tolerance and opportunism, the process of projecting a political order must be backed by the capacity to sanction and enforce. ‘Feasible alternatives’ in this sense must mean realistically achievable and enforceable. In the modern state, the enforcement and habituation of rules and norms supply much of the motivation for conformity. But these resources are largely absent in most post-­conflict states and for those attempting to build peace the most powerful incentive to ensure compliance is the threat and use of force.17 However, the reluctance of intervening countries to use Leviathan’s sword to force peace (and the difficulties they have in committing to its long-­ term use) means that peacekeeping forces are generally constrained to negotiate their demands with a range of different social, cultural and political norms and expectations, and sometimes they are simply forced to accept the realities of existing political and military capacity in a given context. In both cases, the capacity to impose order is dramatically weakened and will result in a mismatch between peacebuilding ambition and capacity that leaves people falling back on norms of exchange because no alternative can be secured. For the peacebuilders it will seem that corruption is rife; for those who must live in such conditions there seems to be no choice. This is an extreme form of a central paradox for corruption: that it is the rules of office that define the criteria for deviance. Corruption is predicated on a standard of ‘health’ that simultaneously defines deviations from that standard. When we attempt to build peace and establish an order for the negotiation of conflict and the distribution of goods and services, we lay down standards and rules that, once in place, can be broken (and are likely to be broken most frequently where they depart from local understandings or are substantially out of line with other incentives). In this sense peacebuilding makes corruption possible, so we should not be surprised that it is there.18 A further dimension of paradox, concerns Robert Klitgaard’s formula that ‘corruption equals monopoly plus discretion minus accountability’. Precisely what peacekeeping forces need if they are to create and impose order is monopoly and discretion. Moreover, the distance between peacekeepers and those who support and fund them already implies relatively low levels of accountability, and their accountability is very rarely to the community on which they seek to impose order (Klitgaard 1988).19 We might suggest that we should use a less ‘Leviathan-­like’ intervention force, but the less Leviathan-­like it is the more it will leave local patterns of monopoly and discretion untouched. If we acknowledge that there is some validity in Klitgaard’s view, we must also see that peacebuilding (and politics more

Conceptualising corruption   41 generally) inevitably and ineliminably contains a combination of such elements.20 As such, it creates its own temptations, opportunities and vulnerabilities amongst those who lead the process. Even if those who are chosen to lead their country to peace are committed, they may find that the sheer weight of expectations and the accompanying access to financial resources, borrowing rights and national resources can make it difficult for them to do business in ways that do not proliferate corruption.21 Tolerating corruption? This does not mean that we should ignore corruption in post-­conflict situations. Not at all. But, we should focus our concerns strategically: on those we can hold to clear standards (foreign firms and their contractors) – identifying which groups use power to augment their control and which distribute benefits throughout the community (although these are not always exclusive, since benefits can be used to build client networks). We can also choose to worry less about petty corruption and one-­off deals, and instead try to establish a system with high personal security, minimum use of violence and coercion, and without entrenched and deep corruption. I do not for a moment suggest that any of this is easy. But I am not convinced by Frederik Galtung’s argument that we should reject the idea that post-­conflict states are in some ways exceptional and that corruption may be an inevitable feature of them.22 His rejection is, I believe, based on the view that clear, self-­evident and rational norms are available for determining the distribution of benefits and burdens in communities, and for identifying the conduct appropriate for those who hold public office in all its detail – and I think that view implausible. Indeed, if we think of politics in a post-­war situation as dealing with multiple stable Nash equilibria, we get, in my view, a much more plausible and compelling picture of the difficulties that peacebuilding faces. Galtung’s rejection also underestimates a further difficulty facing the task. Even if, in the abstract, we have some clear ideas as to the principles that underlie public office and positions of trust, in practice the rules and norms that translate these ideas into particular contexts have to be built and inculcated. They require time and the development of authority and legitimacy and a change in people’s attitudes and expectations, and they are fragile and easily succumb to opportunism. Peacebuilding tries to create those rules and to enlist people’s support without falling prey to those elements in the community whose interests are wholly exploitative or criminal. In many cases, it also has to achieve other humanitarian and reconstructive goals – providing basic electricity, communications, and water and sewerage systems – before these more ambitious political tasks can get off the ground. Where peacebuilding faces such a long-­term task, starting with a zero-­tolerance approach to corruption seems unrealistic even though not doing so will complicate things in the future.

42   M. Philp

Realistic policy priorities If we understand corruption in the way I have proposed, we have to be realistic about what we can achieve in post-­conflict contexts. Tactically we need to try to spread resources widely to diminish the costs that any particular corrupt agent can cause; we should work with local communities and aim for transparency in our interactions with them; we should use fiscal tracking and report back to local communities to show where the money has gone; we should negotiate clear rules of conduct with those entrusted with contracts or responsibilities and then make those public; we should aim to inform and empower victims of corruption at every possible stage; and we should ensure that the conduct of international organisations, NGOs and other external organisations is open, transparent and intelligible to their intended beneficiaries. But we should not think that this will deal with it all. And while we should be concerned about the extent to which we are seen as tolerating corruption, we also have to be aware that it cannot all be tackled at once (Elster 1989: 268–271). In all this we should be aware that there are many graded steps from rank self-­interest and greed through to a willingness to comply with the demands of public trust. The path from one to another in post-­conflict societies is a long one, intimately tied to people’s discount rate for time – in war the future is cheap, the present is everything, and rules and norms are either non-­existent or are treated wholly opportunistically; in peace we have to try to change that rate so that the future begins to matter, and alongside the future, people’s reputations, their standing, their legitimacy, and hence the propriety of their conduct. Changing the discount rate is extremely difficult: it relies on building trust where it is in short supply, with materials that often fail to inspire it. But that is what peacebuilding must try to do – whether it does so more or less cleanly, depends in part on the exact situation on the ground and the kinds of forces with whom a peace must be brokered, and in part on the way that aid and reconstruction services are delivered. But there is no guaranteed easy fix to these problems – they are intractable because the normative situation in post-­conflict states is replete with deep divisions, opportunism and self-­protective strategies. And in such contexts corruption cannot always be a priority and it cannot always be avoided.

Acknowledgements Thanks to Liz David-­Barrett, Christine Cheng, Vera Devine, Quentin Reed and Dominik Zaum for their reactions to and comments on earlier versions of this chapter. Indeed, only recently has literature emerged that addresses both problems: see, for example, Large (Tiri website, online, available at: www.tiri.org) and Le Billon (2003).

Conceptualising corruption   43

Notes   1 See also Rose-­Ackerman (1999: 91): ‘Corruption is the misuse of public power for private gain.’ But see also Johnston (2005a) for an excellent general discussion on definition.   2 See Transparency International website, online, available at: www.transparency. org/news_room/faq/corruption_faq. See also the Stimson Centre definition ‘the abuse of entrusted authority (public or private) for illegitimate private gain’, in Boucher et al. (2007).   3 The Oxford English Dictionary gives as its general definition: ‘Destruction, dissolution of the constitution which makes a thing what it is’. Nicholls et al. (2006: 1) takes the Latin root, corruptus, to mean ‘to break’, but that is certainly only one dimension of its meaning, and the sense of a thing’s state being changed is certainly not foreign to Roman thinking. Most current international conventions against corruption (such as those of the OECD, the Council of Europe, and the UN) do not define corruption, but identify certain corruption offences, for the most part orchestrated around bribery. This has clear operational advantages, although bribery raises many of the same problems of definition as does corruption more generally. See OECD (2007).   4 Why should we take the Western interpretation over other senses used worldwide? The value of a concept is its ability to pick out a certain range of ‘objects’ that have a fundamental similarity, and that are susceptible to similar explanations. Without a clear grasp of the concept of corruption we lack that basis for explanation. The definition I am proposing offers that, while capturing a reasonably wide range of core intuitions about the nature of corruption and about the difference between corruption and other acts that might seem superficially similar. At the same time, other cultures may have variant readings (although my intuition is that the link to decay and subverting the ends of office is widely shared). But even where cultures disagree, there is good reason to stick to the core I identify on the basis suggested above. What we cannot do is to hold the view that however a culture defines corruption must be right, since that would introduce a basic collapse of translatability across cultures, and would mean that when we talk about corruption we would not be talking about the same thing. To preserve the value of the term it needs a universal core.   5 This emphasis on local interpretations and meanings can be found in Jordan-­ Smith (2007). However, he is often not clear on whether the local understandings of certain practices that give them a certain legitimacy mean that they are not corrupt, or whether some objective account of corruption is being retained by which they are deemed corrupt.   6 Clearly, a single act of theft marks one end of a continuum, while each and every actor engaging in corruption marks the other; and the point at which we stop thinking in terms of theft, fraud or embezzlement and start thinking about corruption is not precise – indeed, it suggests the Sorites paradox. But the point is to track the distortion of the functioning of political office, so we become concerned when the incidence of theft becomes indicative of a systematic development in the exercise of public office.   7 Further difficulties with definition arise simply from conventions in the anti-­ corruption community. Thus ‘corruption’ tends to be used in relation to political office, although it is occasionally used in relation to economic institutions, while ‘political corruption’ is, in some areas, thought of as identifying high level corruption among political leaders and elected officials, as against ‘administrative corruption’, which concerns those in more junior offices who are, for

44   M. Philp the most part, engaged in smaller scale corruption, such as ‘grease payments’, and informal taxes on official decisions. There is no easy way of settling use, so, in what follows, I have tended to refer to corruption simpliciter, as encompassing all misuse of public office or positions of public trust, irrespective of their precise domain.   8 On definition see Heidenheimer (1970), Heidenheimer et al. (1989), Heidenheimer and Johnston (2002). See also Michael Johnston’s ‘Keeping the Answers, Changing the Questions’; and my ‘Defining Political Corruption’, in Heywood (1997); also my ‘Corruption Definition and Measurement’, in Sampford et al. (2006: 45–56).   9 On the corruption of economic actors responsible for managing companies and privatising them see Devine (Tiri website, online, available at: www.tiri.org). 10 On the idea that norms have a ‘grip on the mind’ see Elster (1989: 100). 11 This situation contrasts with that described by Jordan-­Smith (2007) in Nigeria, where people systematically condemn corruption in public life and regard their own use of contacts for favours and so on as entirely legitimate exceptions. Here we see a clash between normative systems, whereas in post-­conflict situations the sense of corruption associated with public office may be almost entirely lacking and one may simply face competing networks of obligation, reciprocity and power. 12 See for example, the discussion of the impact of ethnic identity conflicts, which, while they do not make war more likely, do extend the duration of civil war and make its recurrence more likely. Nonetheless, there are different dimensions of ethnic conflict that are also extremely salient (Doyle and Sambanis 2006: 37). 13 Le Billon’s account, however, needs care: in some cases he suggests positive effects of corruption, for example serving hierarchical functions and contributing to the political order (Le Billon 2003: 414), where he is relying on an entirely objective and external account of what corruption is – jobs for the family and ‘the boys’, may be part of the political order (and not corrupt) or it may be a corrupt strategy that goes against explicit norms. Much depends on whether things like ‘informal codes of conduct associated with reciprocity ties within particularist and communitarian social networks’ (ibid.: 415), are in fact the shared criteria for acceptable use of public office, or a sectional alternative that subverts the official order. But, as Le Billon points out, the other issue is who decides on these norms and their legitimacy. On the positive effects of corruption see also his comments on p. 421. 14 On forms of symmetry and asymmetry see my chapter ‘Political Corruption, Democratization, and Reform’, in Kotkin and Sajó (2002: 57–79). 15 Extensive human trafficking is, however, likely to have a serious economic and social impact. 16 For example, consider Michael Doyle’s (2001: 534) comments on the programmes in Somalia: ‘Only a Somali “Leviathan” with a monopoly of violence or a “Superwarlord” capable of playing warlord against warlord could restore order and end the famine.’ The UNITAF (United Nations Task Force in Somalia) force was able to break the famine (because the warlords knew the intervention was temporary); while UNOSOM (United Nations Operation in Somalia) failed because it threatened the warlords but lacked the military capacity and will necessary to repress them. 17 Note, however, that within partial orders, such as a domain governed by a particular group of insurgents, a conception of corruption is possible insofar as there are rules or norms concerning the exercise of that authority. The difficulty peacebuilding faces is that it seeks to impose foreign rules and expectations across a range of such communities.

Conceptualising corruption   45 18 Moreover, their accountability is very rarely to the community on which they seek to impose order. 19 On the limitations of Klitgaard’s approach see my ‘Modelling Political Corruption in Transition’, in von Alemann (2005). We should also note that the creation of monopoly peacekeeping institutions also skews the incentives of those holding institutional positions in the new order; simply by having a back­up force with its own agenda encourages those who are nominally taking responsibility for their country to leave the difficult issues to outside forces, further weakening their own position. 20 See Thomas Pogge’s comments on the temptations and costs of the international borrowing privilege that developing states face, (2002: 114–116). 21 See Tiri website, online, available at: www.tiri.org.

3 Corruption and government Susan Rose-­Ackerman1

In a state with very weak institutions, corruption may be a short-­term way to hold the system together and prevent violent disintegration. Political leaders buy off powerful private actors with patronage, and powerful private actors, including criminal groups and wealthy business interests, buy off weak politicians with money or promises of future jobs and business ventures. Unless care is taken, a sharp break with a corrupt status quo can breed instability and violence as those who benefited from the corrupt system struggle to maintain their position (Le Billon 2003). If conflict prevention and peacebuilding are supported by outside funds from the UN or other institutions, these funds may simply be diverted into the pockets of the powerful with some trickling down to the mass of the population as a way to keep them quiet. Corruption undermines the reform agenda, and it may be the crutch on which existing leaders rely to maintain power in a chaotic environment. The goal is a well functioning system where violence is seldom intertwined with politics and where allegations of corrupt self-­dealing lead to a scandal that has political consequences. In such a system revelations of corruption may tip the balance against incumbents implicated in the wrongdoing. In contrast, when democracy is entwined with endemic corruption, and where public order is less well established, elections can be an opportunity for violence against opponents, individualised payoffs to voters and corrupt payoffs to politicians. In countries where threats of violence originate in the private sector, efforts to limit the threat can lead to an increase in violence if the crackdown means that a truce between competing gangs or mafias breaks down. This is especially likely if the truce was brokered by corrupt police and government officials. The government’s role as a corrupt peacekeeper ends, but it lacks the capacity to be an honest peacekeeper. Police and other law enforcement officials may be unprofessional and poorly paid, and the judiciary may be unable to handle effectively the increased caseload. As private groups fight for control of illegal businesses, such as drugs or smuggling, violence may escalate. The fighting

Corruption and government   47 may be mostly between competing criminal groups, but ordinary citizens will be caught in the crossfire, and the provision of government services may suffer. Similar problems can arise when the groups capable of using violence are not only criminal mafias, but also include guerrilla groups, para-­ military organisations, or even the nation’s regular armed forces. Credible threats of violence can be used to extort payoffs from ordinary people, businesses and politicians. Kidnapping may develop into a business in which threats to harm the victim generate ransom payments. Groups with the capacity to use violence may combine political and economic strategies. Inside the government a powerful military may leverage its ability to use force against the civilian government into a device for engaging in illegal businesses. These might include the smuggling and resale of luxury items, the purchase of excessive levels of military equipment as a way to hide kickbacks to top brass, or the use of soldiers as workers in private business ventures. If such systems are working ‘well’ from the point of view of the extortionists, there may be little actual violence. Those who are extorted or threatened simply play along and do not rock the boat. Threats of violence can be costly to the growth and democratic legitimacy of a fragile democracy even, or perhaps especially, when little actual violence occurs. A calm status quo does not necessarily indicate that a good governance programme can be easily implemented. Reformers need to ask what is likely to happen if they decide to upset established corrupt relationships or those based on intimidation and fear. When reform begins, new structures of government and control need to be available quickly or reforms meant to produce good governance and the rule of law can degenerate into a spiral of violence and corruption as citizens seek to deal with the uncertainty generated by reforms. The rule of law is meant to introduce clarity and certainty into economic, social and political relationships. However, if the rhetoric is not matched by a real improvement along these dimensions, the stage is set for chaos and a new set of corrupt incentives. Although it may be risky and difficult to counter corruption in post-­ conflict peace-­building, if the problem is allowed to fester, it can undermine other efforts to create a stable, well-­functioning state with popular legitimacy. This chapter first outlines the underlying conditions that create corrupt incentives. Next, I document the costs of corruption for ordinary citizens and for state legitimacy. Third, I review the empirical work on the causes of corruption, and fourth, I expand the frame to consider crony capitalism. I conclude with some reform proposals that may be especially worth considering in weak, post-­conflict states.

48   S. Rose-Ackerman

Conceptual underpinnings Corruption occurs where private wealth and public power overlap. It represents the illicit use of willingness-­to-pay as a decision-­making criterion. Frequently, bribes induce officials to take actions that are against the interests of their principals, who may be bureaucratic superiors, politically appointed ministers, or multiple principals such as the general public. Pathologies in the agency/principal relation are at the heart of the corrupt transaction. I differentiate between low-­level opportunistic payoffs, on the one hand, and systemic corruption, on the other, that implicates an entire bureaucratic hierarchy, electoral system, or governmental structure from top to bottom. Of course, when corruption reaches the highest levels, it is also likely to prevail lower down as a way of buying the support of petty officials. In countries emerging from civil war or with very weak governments, low-­level bribery demands will be used opportunistically by officials operating under unclear rules that allow them to invent offenses or simply extort funds from ordinary people. Furthermore, many people may engage in illegal activities, such as smuggling or illicit trade in arms, and may need the protection of public authorities to continue to operate. It may be easier to co-­opt public officials than to hide from them. Low-­level corruption occurs in several generic situations. I consider four. First, a public benefit may be scarce, and officials may have discretion to assign it to applicants. Then the qualified applicants with the highest willingness to pay and the fewest scruples will get the benefit in a corrupt system. This would seem the least problematic case. The payoff is a transfer, and the benefits go to those who value it the most in dollar terms. The obvious policy response is to sell the benefit legally. For example, in a post-­conflict environment a country might regulate the rebuilding effort by issuing a limited number of construction permits and allocate them legally through sales to the highest bidders. This will assure that the permits are allocated to those who value them most and will usually be the efficient strategy. Second, suppose that a benefit is to go only to the qualified. For example, in allocating aid to the victims of the conflict, low-­level officials are asked to select needy applicants, but their exercise of discretion cannot be perfectly monitored. The overall supply may be scarce (for example, temporary housing materials such as tarps or material to repair damaged dwellings) or open-­ended (for example, a programme to buy back ‘weapons’ where officials must determine whether a broken old rifle should count). In such cases, the officials’ discretion permits them to collect bribes and kickbacks from both the qualified and the unqualified. Incentives for payoffs will depend upon the ability of superiors to monitor allocations and upon their own honesty. It will also depend upon the options for the qualified. For example, can they approach another, potentially dishonest, official?

Corruption and government   49 Third, the bureaucratic process itself may be a source of delay. Incentives for corruption arise as applicants try to get to the head of the queue or manoeuvre through a complex set of requirements. To exploit their corrupt opportunities, officials may create or threaten to create more delays as a means of extracting bribes. This may be a particularly effective strategy in the emergency conditions that prevail in the immediate aftermath of violent conflict. For example, in Afghanistan, according to Delesgues and Torabi, ‘the transitional administration was characterised by multiple procedures, uncoordinated structures, outdated laws, etc. . . . Lack of rationalisation and reform transformed the administration into an opaque system at the service of civil servants for predation on state customers’ (2007). Fourth, some government programmes impose costs – for example, tax collection or the possibility of arrest by the police. Officials can then extract payoffs in return for overlooking the illegal underpayment of taxes or for tolerating illegal activities such as smuggling of both contraband and ordinary goods that are subject to rationing. Even if people are not evading the rules, officials can demand payoffs in exchange for refraining from arresting them on trumped-­up charges. Low-­level corruption can lead to the inefficient and unfair distribution of scarce benefits, undermine the purposes of public programmes, encourage officials to create red tape, increase the cost of doing business and lower state legitimacy. In post-­conflict countries, trying to attract investment capital and avoid capital flight, corruption can make these efforts difficult, further slowing down the process of economic recovery. ‘Grand’ corruption shares some features with low-­level payoffs, but it can be more deeply destructive of state functioning – bringing the state to the edge of outright failure and undermining the economy. A post-­conflict state that is already fragile can be a breeding ground for high-­level malfeasance. First, a branch of the public sector may be organised as a bribe generating machine. For example, top police officials may organise large scale corrupt systems in collaboration with organised crime groups. Tax collection agencies, lotteries, public utilities and regulatory inspectorates can degenerate into corrupt systems managed by high-­level officials. Examples include customs collection in Afghanistan and Sierra Leone, and the National Power Authority and the State Lottery in Sierra Leone (Delesgues and Torabi 2007: 23; Jabbi et al. 2007: 29–31). This is a particular risk in post-­conflict situations where the formal rules are not well known and cannot be enforced, and where the judiciary is weak and corrupt. Second, a nominal democracy may have a corrupt electoral system. Corruption can undermine limits on spending, get around limits on the types of spending permitted, and subvert controls on the sources of funds. Third, governments regularly contract for major construction projects, allocate natural resource concessions and privatise state-­owned firms.

50   S. Rose-Ackerman High-­level politicians can use their influence to collect kickbacks from private firms. If the conflict destroyed a country’s infrastructure, this type of corruption will be a particular risk because of the high costs of the reconstruction effort (and the potential for high kickbacks). All of the post-­conflict reconstruction surveys sponsored by the NGO Tiri include examples of problems such as these.2 Some organisations have conflated the varieties of corruption into a single index number for each country. These indices capture the overall scale of the problem but are not much help in directing reform efforts to the most vulnerable sectors in post-­conflict settings. First, such countries are not usually included in the indices, and even if they are, a country’s ranking before and during the conflict may not be relevant to the new peacetime government. Second, the indices are merely general impressions of the level of corruption that tell one nothing about where it is most pervasive and harmful. Nevertheless, these data do help to document the broad consequences and causes of corruption understood as a proxy for dysfunctional state/society relations built on illicit payoffs and favouritism. I  summarise some of that work below before suggesting particular directions for reform in post-­conflict states.

Consequences of corruption Modern empirical work began with the development of cross-­country indices measuring the perception of corruption. The most widely used are compiled by anti-­corruption NGO Transparency International and by the World Bank Institute.3 Richer countries and those with high growth rates, on average, have less reported corruption and better functioning governments (Kaufmann 2003). However, it is unclear whether low levels of income and growth are a consequence or a cause of corruption. Most likely, the causal arrow runs both ways, creating vicious or virtuous spirals. High levels of corruption are associated with lower levels of investment and growth, and corruption discourages both capital inflows and foreign direct investment. Thus, Wei finds that an increase in the corruption level from relatively clean Singapore to relatively corrupt Mexico is the equivalent of an increase in the tax rate of over 50 percentage points (Wei 2000). Corruption lowers productivity, reduces the effectiveness of industrial policies and encourages business to operate in the unofficial sector in violation of tax and regulatory laws. According to Lambsdorff, if a country such as Tanzania could achieve the corruption score of the United Kingdom, its GDP would increase by more than 20 per cent and net annual per capita capital inflows would increase by 3 per cent of GDP (2003a). Highly corrupt countries tend to under-­invest in human capital by spending less on education, to over-­invest in public infrastructure relative to private investment, and to have lower levels of environmental quality (Mauro

Corruption and government   51 1997a: 88–108; Esty and Porter 2002; Tanzi and Davoodi 2002). High levels of corruption can produce a more unequal distribution of income and can undermine programmes designed to help the poor.4 Corrupt governments lack political legitimacy (Anderson and Tverdova 2003). This loss of legitimacy can lead to violence in the form of anti-­ government riots by people who are frustrated by the venality of public officials. For example, according to Delesgues and Torabi, riots in Afghanistan in May 2006 reflected this lack of trust in government and helped catalyse donors’ concern with corruption and the government illegitimacy that it spawned (2007: 31). Political supporters of corrupt incumbent governments, not surprisingly, express more positive views of the government. Presumably, this difference depends upon the individualised benefits that flow to these supporters. Surveys carried out in four Latin American countries (El Salvador, Nicaragua, Bolivia, Paraguay) in 1998 and 1999 showed that those exposed to corruption had both lower levels of belief in the political system and lower interpersonal trust (Seligson 2002). In Nicaragua, respondents were asked if the payment of bribes ‘facilitates getting things done in the bureaucracy’. Interestingly, those who agreed that corruption gets things done were less likely to believe in the legitimacy of the political system (Seligson 2002: 429). Surveys of firms in countries making a transition from socialism provide complementary findings. Firms with close connections with the government did better than other firms, but countries where such connections were seen as important for business success did worse overall than those where political influence was less closely tied to economic success (Fries et al. 2003). In circumstances of low government legitimacy, citizens try to avoid paying taxes, and firms go underground to hide from the burden of bureaucracy, including attempts to solicit bribes. Using data from the World Values Survey and Transparency International, Uslaner shows that high levels of perceived corruption are associated with high levels of tax evasion with countries falling into two distinct groups (2003). His survey data from Romania show that those who believe that one has an obligation to pay taxes have more trust in government. Similarly, Torgler’s study of attitudes toward tax evasion in Central and Eastern Europe shows that when individuals perceived that corruption was high, they were less likely to say that people have an obligation to pay taxes (2003). Thus, one indirect impact of corruption is to persuade people that it is acceptable not to pay taxes because government has been captured by corrupt officials and those who support them. As a consequence, corrupt governments tend to be smaller than more honest governments, everything else being equal (Friedman et al. 2000; Johnson et al. 2000). Thus, in corrupt governments, individual projects are excessively expensive and unproductive, but the overall size of the government is relatively small.

52   S. Rose-Ackerman Another way to understand the impact of corrupt officials on ordinary citizens is through the International Crime Victims Survey (ICVS) compiled by the United Nations Inter-­regional Crime and Justice Research Institute.5 Individuals are asked if during the past year any government official had asked them or expected them to pay a bribe in return for services. Naci Mocan used this data, which is available for 49 countries, to show that both personal and country characteristics determine the risk of exposure (2004). Those of higher wealth and education reported more frequent requests, presumably because they interact more frequently with public officials and have a greater ability to pay. Low levels of reported corruption are related to high levels of institutional quality, uninterrupted democracy and an absence of war. Poor institutional quality leads to both high perceptions of corruption under the Transparency International or World Bank indices and high levels of victimisation. The study confirms the claim that corruption is a symptom of underlying institutional weaknesses and a special concern in post-­conflict societies. Law enforcement policies that target corruption alone without touching the underlying institutional weaknesses are unlikely to be effective either in changing perceptions or in improving growth. This is an especially important lesson for post-­conflict societies. In diagnostic exercises the World Bank has used household surveys to narrow down anti-­corruption efforts to areas of most concern to the population. These surveys isolate pressure points where corruption is widespread, but they do not measure the cost of bribery in terms of the inefficient or unfair allocation of public services or burdens. The ICVS does not provide this kind of information either. It simply reports the proportion of people who were asked for a bribe in four areas. The next step in the diagnostic exercise, therefore, should be an estimate of the relative costs of tackling different types of corruption that affect daily life. The answer is likely to be different in a stable country compared to one just emerging from a period of violent confrontation.

Causes of corruption and poor governance Given the costs of corruption and poor governance, reformers need to isolate the causes of these phenomena. Cross-­country data permit one to obtain a broad overview of the underlying causes of corruption and weak governance. I have already mentioned the role of income and wealth as both a cause and a consequence of corruption. However, that simultaneity often is not well handled in the empirical work. Nevertheless, it seems possible to conclude, first, that poor governance contributes to low growth and to the other harmful outcomes noted above, and that weak underlying economic conditions facilitate corruption. The exception is a very poor country with weak institutions that is so badly off that there is little for anyone to steal.

Corruption and government   53 Some studies find that trade openness and other measures of competitiveness reduce corruption (Ades and Di Tella 1999; Sandholtz and Koetzle 2000; Blake and Martin 2002), suggesting that societies with fewer rents to share are less corrupt. However, once again the causation is unclear; countries that do not favour corrupt firms may be able to establish a policy of open and competitive markets. Lambsdorff, for example, finds that weak law and order and insecure property rights encourage corruption which in turn discourages foreign capital inflows (2003b). Inequality contributes to high levels of corruption. In democracies in particular, inequality facilitates corruption, a result consistent with the state capture variant of corruption. The negative effect of inequality on growth may be the result of its impact on corruption taken as a proxy for government weakness (You and Khagram 2005). Here too the causal arrow goes both ways. These results for competitiveness and inequality suggest the importance of peace-­building strategies that avoid vicious spirals. An economy that is jumpstarted by giving monopoly powers to a few prominent people may produce a society that is both lacking in competition and is unequal. Early stage decisions can lock in the power of a small elite whose vested interests then hold back efforts to increase competition and enhance fairness. For example, in Afghanistan President Karzai ‘repeatedly stated that he preferred peace to justice’ with the result that the government accommodated elites and ignored ordinary citizens’ needs (Delesgues and Torabi 2007: 25). This led to a vicious spiral with an estimated 35–50 per cent of aid money wasted (Delesgues and Torabi 2007: 28). Similar situations prevailed in Mozambique, Bosnia and Herzegovina (BiH), and Sierra Leone (Nuvunga and Mosse 2007; Car and Papic 2007: 19; Jabbi et al. 2007: 36). Historical and social factors help explain cross country differences. For example, Acemoglu et al. use the mortality rates of European settlers as an instrument for the type of colonial regime put in place by the imperial power and find that it does a good job of predicting expropriation risk (and corruption levels) at the end of the twentieth century (2001). La Porta et al. consider legal origin, religion, ethno-­linguistic fractionalisation, latitude and per capita income as determinant of a range of features of economic, social and political life (1999). Corruption, as well as other measures of institutional weakness, is worse in countries with higher ethno-­linguistic fragmentation, few Protestants, and Socialist or French legal origins (Sandholtz and Koetzle 2000; Treisman 2000). Colonial heritage, legal traditions, religion and geographical factors seem to be associated with corruption and other measures of government dysfunction, but these are not policy variables that present-­day reformers can influence. The key issue is whether these historical regularities directly affect government quality or whether they help determine intermediate institutions and attitudes that present day policies can affect. In La Porta et al., the historical variables are not always significant and become entirely

54   S. Rose-Ackerman insignificant when they add income and latitude (1999). Thus, these historical patterns may operate through their impact on underlying institutional structures, not as direct determinants of corruption. If so, that may be good news for reformers in post-­conflict settings who seek to create new institutions that facilitate economic growth and high income (Rodrik 2005). Latitude and history need not be destiny especially if a conflict has created a space for the creation of a new institutional framework. Less optimistically, the destruction of mediating state institutions can open the way for old ethnic, tribal and religious rivalries to flare up. Witness the difficulties of state building in such places as BiH, Lebanon, Afghanistan and Iraq (Car and Papic 2007; Delesgues and Torabi 2007; Khayat 2007). The impact of democracy on corruption is complex. Low levels of corruption are associated both with high levels of economic freedom and with stronger democracies (Sandholtz and Koetzle 2000; Blake and Martin 2002; Kunicová and Rose-­Ackerman 2005). Governments with more female participation in politics are less corrupt; this is consistent with survey evidence suggesting that women are more disapproving of corruption than men (Swamy et al. 2001; Crook and Manor 1998: 42). Within the universe of democracies, features of government structure, such as presidentialism, closed-­list proportional representation, and federalism, facilitate corruption (Kunicová and Rose-­Ackerman 2005; Treisman 2000).6 Presidential systems that use proportional representation (PR) to elect their legislatures are more corrupt than other types of democracies. Many parliamentary democracies that elect legislatures by plurality rule have a heritage of British colonial rule, and many PR systems had French or Spanish rulers. Present day levels of freedom also have historical roots. However, if constitutional form, protection of rights, women’s rights and electoral institutions are important determinants in and of themselves, then countries have policy levers available even if they cannot change their histories.

Crony capitalism and the links between political and economic power The World Bank distinguishes between administrative corruption and what it calls ‘crony capitalism’ or ‘state capture’. Research on such countries as Russia, Albania, Indonesia and Malaysia confirms the importance of the distinction, and it is likely to be especially relevant in the peace-­ building process. So far, I have mostly been discussing administrative corruption which includes the use of bribery and favouritism to lower taxes, escape regulations and win procurement contracts. ‘State capture’ implies that the state itself can be characterised as largely serving the interests of a narrow group of business people and politicians, sometimes with criminal elements mixed in. Even if the group with influence changes when the government changes, most of the citizens are left out. Michael Johnston

Corruption and government   55 proposes a taxonomy that includes political systems that manipulate private firms for personal gain (2005a). He calls this ‘power chasing wealth’ as opposed to ‘wealth chasing power’. The World Bank would probably put both types in the ‘state capture’ category, but they may have different implications. In post-­conflict settings, case studies of the reconstruction process highlight the way existing elites are frequently able to capture the political and economic benefits of reconstruction. To the extent they can maintain their power bases intact into the post-­conflict period, they may be able to position themselves to benefit because other sources of power and institutional constraint are weak. Tiri’s Reconstruction National Integrity System Survey provides a number of examples. In Afghanistan several warlords have re-­emerged as powerful figures after the fall of the Taliban. According to Delesgues and Torabi, the democratisation process gave these warlords ‘the opportunity to be integrated as part of the country’s political elites’ (2007: 20). In addition to benefiting from being part of the government, regional bosses collect most of the customs revenue (ibid.: 23–24). In BiH smuggling networks developed during the war that benefited many high officials. These networks remained intact after the war. Reconstruction aid then consolidated the power of these local warlords and ethnic power structures (Car and Papic 2007: 18–19, 27, 67–69). As Car and Papic argue, in the initial phases ‘the reconstruction program was inadvertently and simultaneously aiding the system of governance it was ultimately hoping to do away with’ (ibid.: 11). In Mozambique both military elites and belligerents were bought off (Nuvunga and Mosse 2007: 29). Even if such compensation is the price of peace, it needs to be done in ways that do not undermine the state-­building project. In Sierra Leone traditional patterns of patronage and gift giving persist, and political power remains the surest route to wealth in the post-­conflict period with its influx of aid (Jabbi et al. 2007: 36). Case studies of reconstruction in Lebanon show how the need to divide the spoils among the different religious factions undermined efficiency and broad-­based accountability. Each politician was only accountable to his or her own group (Khayat 2007: 4–5). Favoured firms may not have secure property rights in the legal sense but may be able to obtain special treatment because of their insider status (Hellman et al. 2003). This can promote economic growth at least for a period of time. Rock and Bonnett conclude that between 1984 and 1996 the large East Asian countries (China, Indonesia, Korea, Thailand, Japan) were characterised by strong centralised governments with long time horizons that were able to control corrupt networks (Rock and Bonnett 2004). Rulers promoted growth by providing privileges to capitalists in return for kickbacks. These are special cases, however, that do not apply to most post­conflict situations. Frequently, reconstruction funds are diverted into the private bank accounts of both politicians and business people, making reconstruction, if it occurs at all, excessively costly. For example, a case

56   S. Rose-Ackerman study of post-­conflict Mozambique notes a ‘symbiotic and often corrupt relationship between the authorities and segments of the business sector in the award of contracts’ (Nuvunga and Mosse 2007: 67) and in the privatisation of state-­owned assets (Nuvunga and Mose 2007: 31). Detailed research has been carried out on the former Communist states in Europe and Central Asia. The World Bank and the European Bank for Reconstruction and Development show that although administrative corruption is a problem throughout the former Communist states, state capture is a particularly serious problem in the countries of the former Soviet Union. In such situations the firms that do the capturing perform well, but overall economic growth suffers (Hellman et al. 2003). Fries et al. document the differences between ‘captor’ firms with insider status and ‘non-­captor’ firms (2003: 31–32). The former have higher growth rates of fixed capital, revenue and productivity. Slinko et al. obtain similar results using data from the Russian provinces (2004). If top political figures themselves exploit their position for private gain, the effectiveness of government programmes and the impact of foreign aid and lending suffer. Even if those with good political connections are also good economic managers, there is a long term risk that they will exploit their dominant positions to squeeze out potential competitors (Acemoglu 2003). This inequality of influence can extend beyond special treatment by the executive and the legislature to include the courts as well. World Bank researchers define ‘crony bias’ as the difference between the reported influence of one’s own firm and business association, on the one hand, and the influence of those with close ties to political leaders, on the other. This type of bias might be especially likely in post-­conflict situations simply because there are no other criteria for making such choices. Alternatively if the conflict has destroyed existing patterns of influence, it may paradoxically represent an opportunity to recreate the state on a fairer and more democratically legitimate basis. This was Mancur Olson’s view in The Rise and Decline of Nations (1982), but it seems a rather optimistic claim even in terms of his own examples that draw heavily on the post-­ Second World War experience (Rose-­Ackerman 2003; Olson 1982). As Jabbi et al. observe, at least in the case of Africa, ‘the challenges faced by countries emerging from conflict in Africa, . . . are completely different from those faced by Europe after the Second World War’ ( Jabbi et al. 2007: 19). The conflicts erupted after years of one-­party rule and require rebuilding or establishing the entire machinery of the state anew ( Jabbi et al. 2007: 20). If businesses perceive crony bias, this will create problems for the rebuilding effort. In a study using firm level data from the 2002 Business Environment and Enterprise Performance Survey on former socialist countries (BEEPS), Hellman and Kaufmann find that firm managers who believe that the state is unduly influenced by a narrow set of ‘cronies’ are

Corruption and government   57 more likely to withhold taxes, pay bribes and avoid using the courts (2004). These actions then help keep state institutions weak. Bribery and extortion are mostly a problem for medium-­sized businesses. Large dominant firms have close relationships with top political leaders so that mutually beneficial deals are possible. These deals are often harmful to the overall growth and prosperity of the country and undermine efforts to establish the legitimacy and trustworthiness of the state. In the geographically broader WBES survey of 80 countries there is a marked relationship between the measure of crony bias and survey responses on the size of the unofficial economy and the degree of democratic voice and accountability. A large unofficial economy indicates that the regulatory and taxation powers of government are low and that many firms cannot obtain outside financing because they are off the books. Low levels of voice and accountability suggest that the state is not responsive to its citizens’ interests.

Reform proposals Much has been made of the importance of moral leadership from the top, but this is not sufficient. Too much moralising risks degenerating into empty rhetoric – or worse, witch hunts against political opponents. Policy must address the underlying conditions that create corrupt incentives, or it will have no long-­lasting effects. Some argue that the main cure for corruption is economic growth and that economic growth is furthered by good policies, especially the promotion of education (Glaeser et al. 2004; Glaeser and Saks 2006: 6–7). However, that claim reflects an overly simple view of the roots of both economic growth and corruption. Particularly in post-­conflict situations, policy recommendations that concentrate only on macro-­economic aggregates are pointless. No growth can occur unless institutions are restored to at least a minimal level of competency. Corruption is a symptom indicating that state–society relations are dysfunctional so that they undermine the legitimacy of the state and lead to wasteful public policies. Good policies are unlikely to be chosen or to be carried out effectively without honest institutions. The ordinary options for institutional reform fall into several broad categories: programme redesign, polices that increase transparency and accountability, and, in severe cases, constitutional change. These will be needed in post-­conflict statebuilding, but sometimes they will not be sufficient or even possible because of the remaining levels of violence and the weakness of institutions. I conclude with some proposals that are more directly targeted at post-­conflict situations. The first line of policy response is the redesign of programmes to limit the underlying incentives for payoffs. This might mean eliminating highly corrupt programmes, but, of course, the state cannot abandon its

58   S. Rose-Ackerman responsibilities in many areas where corruption is pervasive. One response is to limit official discretion by, for example, streamlining and simplifying regulations, expanding the supply of benefits, making eligibility criteria clear, introducing legal payments for services, giving officials overlapping jurisdictions to give citizens choices, or redesigning systems to limit delays. Reformers should consider if cleanups in one area will just shift corruption to another part of the government. Programmes may need to be comprehensive to have any impact. In addition, service delivery can be improved by civil service reforms that provide better salaries, improved monitoring and the use of incentives. The second collection of reform strategies focuses on the accountability and transparency of government actions. For example, a freedom-­ofinformation law can give people access to government information, and many government decision-­making processes should be open to public scrutiny and participation. Other options to improve accountability are the creation of independent oversight agencies and the use of external and internal benchmarks. Ongoing experiments with grassroots democracy need more study to determine their impact and their transferability to other contexts (Rose-­Ackerman 1978, 2006). Open government also depends upon a vigorous and free media that can perform a watchdog function. International treaties and organisations such as Transparency International, the World Bank and the United Nations can help create an environment in which multinationals limit their corrupt activities. Third, some countries may need to consider more radical reforms in government structure. Democracy is valuable for many reasons, but, taken by itself, is hardly a cure for corruption. Some evidence suggests that presidential systems, above all those using proportional representation in the legislature, may be especially corrupt (Kunicová and Rose-­Ackerman 2005). Furthermore, elections are not sufficient. The state must protect civil liberties and establish the rule of law. Rules must be clear and fair and be administered competently and fairly. This implies an honest, professional and independent judiciary, and police and prosecutors who have integrity and competence. With these more conventional reform options as background, what are the particular factors that must be considered in post-­conflict polities? What can international bodies do beyond providing peacekeepers to create a window of opportunity for reform? Each case is different, but here are some quite general suggestions. Seek peace agreements that incorporate measures to limit corruption. This condition, however, will only be valuable if combined with other policies such as those suggested below. Anti-­corruption and government reform efforts can either set the stage for more reforms or destabilise a fragile equilibrium (Le Billon 2003). Thus international peacekeepers may be needed to create a space in which reform can occur. They can only do this, however, if they have the

Corruption and government   59 resources to operate effectively. O’Donnell makes this point by comparing the relatively well-­resourced and effective body in Liberia in 2005 with the poorly funded and ineffective force in the Democratic Republic of the Congo (2008). Pick your fights carefully to achieve some early and visible victories and to fit reform programmes to the capacities of the country. Start simple. For example, be sure primary systems of financial control inside agencies are in place before creating secondary bodies such as anti-­corruption commissions (O’Donnell 2008). Do not simply pour in funds without clear checks on their use. One option for international actors is to use trust funds to administer aid programmes with the ultimate goal of turning over programmes to government. For example, the Afghan Reconstruction Trust Fund, operated by the World Bank, channels funds to the government from 24 countries (Delesgues and Torabi 2007: 17). In Mozambique a trust fund for the funding of political parties accepts foreign donations (O’Donnell 2008). International bodies can help buyoff and arrange exile for corrupt top leaders. This is superior to incorporating them into the government (Le Billon 2003) as was done in Afghanistan for warlords with involvement in smuggling and the drug trade. The result has been destabilising and undermines government legitimacy in the eyes of its citizens (O’Donnell 2008; Delesgues and Torabi 2007). Review the training and integrity of law enforcement officers and military personnel. This may involve mass firings followed by universal training opportunities with testing before people are hired or rehired. International aid can help integrate former rank and file combatants with financial aid and training. Involve ordinary people and local businesses in oversight and participation, and provide safe havens for whistleblowers. But eliminate self-­help vigilantes and replace them with the regular police. Oversight can be facilitated by involving established local organisations such as religious bodies. In Afghanistan, for example, one decentralised aid programme uses local mosques as places to display results and financial accounts (Delesgues and Torabi 2007: 17). Restrict the armed forces’ and other security services’ ability to participate in legal businesses and to engage in illegal businesses and the accep­ tance of kickbacks. This may need to go along with a one-­time buyout strategy. Create bodies both inside government agencies and independent of the executive for the administration of a freedom of information law, to audit and monitor government spending, etc. Strengthen the independence of prosecutors and courts. International technical assistance can help for programmes such as the creation of internal financial controls and independent agencies, the development of methods to incorporate public input, or the training of government personnel or media. Stress the

60   S. Rose-Ackerman creation of systems to monitor public spending and policymaking in general, not just to control the disbursement of aid funds. These institutions are especially important in states, such as Mozambique, where political party competition is weak. A case study of that country points out how the overlap of state and party limits accountability and undermines both nominally independent public bodies, such as the judiciary and the Central Office for the Control of Corruption, and civil society groups (Nuvunga and Mosse 2007: 74–76, 82). In contrast, a positive case is an effort by an aid-­financed NGO to limit payoffs in river transport in the Democratic Republic of the Congo. It achieved slow success over time with a mixture of information provision, consultation with local actors and the introduction of two-­way radios (Brown et al. 2004). Another example is the control of education subsidies in post-­conflict Sierra Leone. Losses of 45.1 per cent of the total were controlled by hiring an independent auditor to deliver the funds to local schools. This apparently cut loses but was itself expensive, costing the Ministry 12 per cent of the funds dispersed (Jabbi et al. 2007: 100). More systematic study of interventions by international bodies is needed to see what works and what does not, including the gathering of baseline data so that donors can track programmes as they develop and document progress or setbacks. At the global level, international organisations should work to develop stronger international controls on money laundering to make it more difficult for corrupt officials to export their gains. Violence and corruption are often deeply intertwined. In such cases, proposals for reform may just produce more violence and corruption in a vicious spiral. Thus, care must be taken in starting down the road to reform. Strong leadership from the top is needed that moves toward the goal of a more legitimate and better functioning government and sidelines those who have in the past been using the state as a tool for private gain through threats and intimidation. International assistance can, in principle, help, but it needs to be tailored to avoid exacerbating the underlying problem created by the mixture of corruption and threats of violence from those inside and outside the government.

Notes 1 This contribution draws on Rose-­Ackerman (1978, 1999, 2004, 2006). Comprehensive references to the literature in the field can be found in these sources. See also Bardhan (1997), Glaeser and Goldin (2006) and Svensson (2005). 2 The studies can be accessed at the Tiri website. Online, available at: www.tiri. org. 3 Websites, online, available at: www.transparency.org and www.worldbank.org/ wbi/governance. See also the website of the U4 Utstein Anti-­Corruption Resource Center, online, available at: www.u4.no. 4 The connection to income distribution may be complex. See Gupta et al. (2002) and Li et al. (2000).

Corruption and government   61 5 See United Nations Crime and Justice Research Institute website, online, avail­ able at: www.unicri.it/documentation_centre/publications/icvs/. 6 Odd-­Helge Fjeldsted provides a literature review on decentralisation and corruption that cites studies that contradict the results for federalism found in the sources listed in the text. In any case, it is important to distinguish between federalism and explicit policies designed to empower those at the grassroots. I discuss the latter below.

4 Corrupting peace? Corruption, peacebuilding and reconstruction Philippe Le Billon

Introduction Corruption has recently become a major item on the international security agenda (United Nations 2005). Many conflict-affected countries figure among those perceived to be the most corrupt in the world, and corruption is reported among the key concerns of local populations during the so-called post-conflict reconstruction period.1 Concerns among rich countries about corruption and security have largely focused on terrorism, narcotics, organized crime and ‘state failure’.2 Corruption is further perceived as an impediment to peacebuilding.3 By weakening the effectiveness and legitimacy of public institutions, undermining economic recovery, and jeopardizing international aid and foreign direct investment (FDI), corruption increases the risk of renewed violence and undermines the wellbeing and political empowerment of local populations (Bolongaita 2005; Le Billon 2005a, 2005b; Boucher et al. 2007; O’Donnell 2008). The pervasiveness of corruption in Bosnia, for example, is widely portrayed as a major cause of the country’s political and economic setbacks since the 1995 Dayton Accord (GAO 2000; International Crisis Group 2002a; Devine 2005). The most prominent United Nations report on peace operations argues that ‘support for the fight against corruption’ is the first priority among the ‘essential complements to effective peacebuilding’.4 Concerns about the effects of corruption on the transition to peace add to a growing literature on corruption and armed conflict (Bolongaita 2005). Research on the political economy of corruption and collective violence has yielded important insights on the relationships between corruption, regime types and processes of transition (such as rural protests and agricultural modernization in India) (Gupta 1998). Yet until recently, few analytic works have been conducted on post-conflict corruption, and much of the research derives from the work of aid agencies themselves or policy-oriented research institutes (Large 2005; Andvig 2007). Relevant literature mostly comes from the sub-fields of the political economy of war, corruption in transitional processes, and econometric studies of conflicts (Collier 2003; Keen 1998; Reno 1998; Hellman et al. 2003; Andvig

Corrupting peace?   63 2006). Critiques of the ‘good governance’ agenda have also pointed at the pathologization of ‘domestic’ corruption in relation to state failure arguments and liberalization policies, for example in the context of post-conflict and post-natural disaster countries such as Nicaragua (Brown and Cloke 2004, 2005). It has also been suggested that different forms of corruption have different effects on conflict likelihood and peacebuilding (Le Billon 2005b: 679–698, 2003). In this chapter, I engage with debates about peacebuilding and corruption. I first present standard explanations for the reported prevalence of corruption in ‘post-conflict’ countries, which largely focus on the ‘domestic’ roots of corruption. In short, corruption resulting from the legacies of war economies and a culture of impunity undermines liberal reforms, resulting in sub-optimal outcomes. Using a preliminary analysis of selected corruption perception indicators, I then investigate post-conflict corruption patterns, finding tenuous and divergent evidence. I then discuss arguments linking corruption and ‘liberal peacebuilding’ – a widespread form of international intervention that seeks to consolidate peace through political and economic liberalization. Three major arguments are presented for further consideration: •

•

•

First, liberal peacebuilding can exacerbate and transform corruption, to the point of undermining its objectives of democratization and economic liberalization. The risk is that more competitive forms of corruption within a weak institutional setting result in greater instability and chronic conflict, with donors and populations then acquiescing to the institutionalization of more monopolistic forms of corruption for the sake of economic and political stability. Second, corruption is institutionalized within peacebuilding and reconstruction initiatives. Although it may not be corruption stricto sensu, nepotism, fraud, over-invoicing, lack of transparency and accountability, and tax avoidance have characterized various forms of foreign engagement during the transition process. The risk is that these types of ‘corruption’ undermine the integrity, efficiency, legitimacy, and role-modelling of peacebuilding and reconstruction initiatives. Third, there is a frequent dilemma faced by donors and recipients with the ‘corruption problem’, most notably with bureaucratic corruption. Donors do not directly support recipient governments because of their presumed corruption; in turn, recipient governments rely even more heavily on corruption to supplement government incomes.

Each of these arguments requires detailed research, and a more balanced treatment of the issues that they engage. I thus conclude with some thoughts on a future research agenda.

64   P. Le Billon

Corruption, peacebuilding and reconstruction Between 1989 and 2002, international donors have spent in excess of US$60 billion to ‘reconstruct’ 32 conflict-affected countries.5 Unprecedented since the reconstruction efforts following the Second World War, this amount seems large, but in fact averaged out to only US$14 per conflict-affected person per year, with major differences between recipient countries. This figure leaves little room for wastage and embezzlement.6 This entire amount has since been surpassed by three years of ‘peacebuilding and reconstruction’ in the context of the US-led ‘war on terror’. Iraq’s reconstruction budget alone was about US$60 billion between 2003 and 2006. The wastage, fraud and lack of transparency in this context have been denounced as staggering.7 Official overseas development assistance by OECD members to Afghanistan climbed from US$87 million in 2000 to US$2.2 billion in 2005. In Lebanon, international donors pledged US$7.6 billion after the destruction wrought by the Israeli military in 2006. Overall, peacebuilding and reconstruction monies have been ‘disbursed’ in countries with some of the poorest corruption indicators, often falling well below the average ‘corruption level’ for their income group (Kaufmann and Mastruzzi 2006). Afghanistan, like Iraq, Burundi, Somalia and Sudan, ranks supposedly among the 10 per cent most corrupt countries in the world according to the 2010 Transparency International (TI) compilation of surveys. Anecdotal evidence also suggests that corruption sharply increases during post-conflict transition (Large 2005). A prevalent explanation for high levels of corruption in post-conflict contexts lies in their historical ‘domestic’ context. Corruption often predates the conflict, sometimes having contributed to it. Wartime generally sees an entrenchment and diffusion of corrupt practices as governmental structures break down and the ‘politics of survival’ take over any semblance of ‘public ethics’. Armed factions often justify corruption through reference to the war while using corrupt practices – equivalent to ‘protection rackets’ by state security agencies and government militias – to strengthen their hold on power (Tilly 1985; Stanley 1996).8 For lack of an alternative, ordinary people also resort to corruption and illegal economic activities to cope with the hardships of war or economic sanctions (Keen 1998). Corruption by local and regional authorities along with participation in the informal economy by ordinary people can also sustain chronic conflicts (Keen 1998).9 The ‘weakness’ of institutions is another recurring theme in the postconflict literature. Economic and political transition often takes place in a weak or highly politicized institutional framework. Recurrent problems affecting the level of corruption include poor fiscal leverage, judicial backlogs and bias, corruption related to low wages, and shadow economic control. Anti-corruption institutions frequently remain weak or instrumentalized, and critics are often silenced or co-opted. In a context of scarcity

Corrupting peace?   65 and high demand, the position of suppliers is privileged, resulting in rapid inflation, predatory pricing and corrupt practices. Yet reconstruction is also generally a moment of great opportunity, with improved economic flexibility and rapid improvements to freedom of movement, and increases in transportation capacity and imported goods. Immediate private gain is undeniably attractive when facing the uncertainties and opportunities of transition. The threat of dismissal, electoral loss and short-term postings in transition governments all increase the incentives of corruption. Personal financial wealth also becomes a greater symbol of social status in a peaceful era. For war veterans and exiles freshly brought to power, reconstruction can become a pay-back scheme, with wartime ‘sacrifices’ justifying the misuse of newly controlled public offices and positions. Years of discrimination, repression and fraud, however, can mobilize the political will of progressive politicians and citizens to ‘fight’ corruption. If much of the blame is frequently ascribed to ‘local’ factors, corruption should be recognized as a highly politicized issue, to be fought not only at the domestic state level, but at multiple sites, interconnections and processes. This chapter only addresses some of these concerns, by raising issues with the ‘empirics’ of corruption measurement instruments, the roles of liberal peacebuilding in post-conflict corruption and their consequences.

Measuring corruption perception trends There is no systematic and comprehensive study of corruption trends in relation to post-conflict transition and liberal peacebuilding.10 I attempt to draw some preliminary findings from two publicly available sources: TI and Political Risk Service (PRS)/International Country Risk Guide. Table 4.1 provides a first attempt, using publicly available Corruption Perception Index (CPI) data from TI.11 The table shows 22 major ‘peacebuilding and reconstruction’ operations since 1989, with data available for only 17 cases. According to data available, in ten out of these 17 cases, corruption was generally perceived to be worsening in the period following these operations (data is sometimes available after the operation has concluded and for only a few years). Perceptions of corruption reported an improvement in only four cases (Angola, El Salvador, Croatia and Haiti). This data may suggest that peacebuilding operations in these countries generally did not reduce perceptions of corruption. Yet the data is clearly insufficient to support the argument that peace operations increased corruption, notably due to methodological limitations in comparing the CPI over time and other alternative explanations. Nor is it possible to draw suggestions about the possible impact of corruption perception trends on conflict recurrence, as the data is historically incomplete. Of the ten countries in which perceptions of corruption worsened, six of them did not experience renewed conflict, while hostilities recommenced in the other four countries. Again, the criteria for statistical significance limit the validity of these observations.

1989–1990 1989–1992 1991–1993 1991–1997 1991–1995 1992–1995 1992–1995 1993–1996 1995–1998 1995–present 1995–present 1997 1999–2005 1999–2005 1999–present 2002–present 2002–present 2003–present 2003–present 2003–present 2004–present 2005–present

Namibia Nicaragua Cambodia Angola El Salvador Mozambique Somalia Rwanda Croatia Bosnia Palestine Guatemala East Timor Sierra Leone Kosovo Congo, D.R. Afghanistan Liberia Iraq Côte d’Ivoire Haiti Sudan

No No Yes Yes No No Yes Yes No No Yes No No Yes No Yes Yes No Yes Yes No Yes

Return to war* –0.15 –0.05 –0.2 –0.1   0.05 –0.1   n.a. –0.6   0.1 –0.1 –0.3 –0.06   n.a.  0   n.a.  0   n.a.   n.a. –0.1  0   0.15 –0.1

Annual corruption trend 4.1 2.6 2.1 2.2 4 2.8 n.a. 2.5 3.4 2.9 2.4 2.6 n.a. 2.2 n.a. 2 n.a. n.a. 1.9 2.1 1.8 2

Corruption index (2006) 5.3 (1998) 3 (1998) 2.3 (2005) 1.7 (2002) 3.6 (1998) 3.5 (1999) 2.1 (2005) 3.1 (2005) 2.7 (1999) 3.3 (2003) 3 (2004) 3.1 (1998) n.a. 2.2 (2003) n.a. 2 (2004) 2.5 (2005) 2.2 (2005) 2.2 (2003) 2.1 (2003) 1.5 (2004) 2.1 (2005)

Corruption index (year)*

Notes * Refers to UNSC authorization for international forces, peacebuilding mandate provided by UN; return to war includes renewed or prolongation of hostilities after a peace settlement was reached and troops deployed, including after troop departure, but does not account for one-sided violence (e.g., Haiti in 2005), based on Uppsala Conflict Data Program; in corruption index, 1 represents the highest level of perceived corruption; standard deviation can range from 0.3 to 1.9. Peacebuilding in Palestine had no international military component; military presence in Iraq governed by a Status of Forces Agreement between US and Iraqi government from 2008; Sudan refers to post-CPA.

Source: CPIs from Transparency International (online, available at: www.transparency.org/policy_research/surveys_indices/; www.icgg.org/downloads/ overview05.csv).

UN-authorized forces w/PB mandate*

Location

Table 4.1  Corruption Perception Index trends in ‘post-conflict’ countries (1990–2006)

Corrupting peace?   67

�2.0

Higher corruption

�1.5

�1.0

Cessation of hostilities

The utility of the analysis presented in Table 4.1 is notably limited by the lack of historical data, which prevents the analysis of trends in perceptions of corruption according to the timeframe of the peacebuilding and reconstruction operations. Such data are available for only four cases – Guatemala, Iraq, Haiti and Côte d’Ivoire – and no obvious trend can be observed. The second attempt at examining quantitative data builds upon survey data collected by PRS, which offers the advantage of a longer time series, and greater time consistency allowing for comparative assessment. However, data is not available for all countries having experienced postconflict peacebuilding and the dataset is limited to 14 countries and suffers from time series gaps.12 Figure 4.1 presents an average of the variation in the perception of corruption across countries with available data for these years, both before and after the cessation of hostilities (time = 0). The findings suggest that corruption perception is relatively stable before the end of hostilities, and tends to decline during the first six years after the conflict. After six years this trend seems to reverse (with the noticeable exception of Sierra Leone, where corruption was perceived as having increased immediately after the end of hostilities in early 2002). Several methodological biases could explain this pattern. First, the PRS corruption assessment focuses on investor confidence. This may explain why this trend conflicts with the CPI dataset and much of the literature: corruption may not be perceived as threatening for investors during the initial post-conflict period due to the presence of peacekeeping forces and the backing of foreign donors. After the departure of troops and decreasing donor interest and leverage, this confidence may disintegrate. The apparent perception that corruption increases six years after the end of

�0.5

0 Lower corruption �14 �13 �12 �11 �10 �9 �8 �7 �6 �5 �4 �3 �2 �1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

0.5

Years before or after cessation of hostilities

Figure 4.1  Corruption perception trends, PRS dataset.

68   P. Le Billon

1.5

UN troops

Army rebellion north–south partition French troops Peace agreement

Post-election riots

Coup d’état

hostilities could also reflect a selection bias resulting from data availability, as well as a ‘built-in’ PRS survey bias that the longer a regime is in place the more corrupt it is supposed to be (Thompson and Shah 2005). In order to compare the two datasets, I examine the case of Côte d’Ivoire. Both the CPI and the PRS have corruption data available for this country prior to the conflict (see Figure 4.2).13 For both CPI and PRS datasets, corruption is perceived to have increased since the 1999 coup d’état and to have momentarily decreased around 2002, prior to the signing of the Linas–Marcoussis Accords in January 2003, although the PRS data suggest a larger and longer reduction than the CPI. The conflict has remained in a stalemate with a de facto partition of the country. The northern part is controlled by an army rebel faction and experiences recurrent violence. In 2004, the initial UN observation mission was replaced by the United Nations Operation in Côte d’Ivoire, mandated with peacekeeping, the demobilization of combatants, as well as providing electoral, human rights, and law and order support. Between 2005 and 2006, corruption was perceived to have stabilized (PRS) or even decreased (CPI). This single case suggests the importance of considering multiple surveys and country-specific longitudinal studies that can differentiate between different types of corruption perceptions.

High corruption

CPI

Corruption perception

2.0 2.5

PRS

3.0 3.5 4.0 4.5 5.0 5.5

Low corruption 1998

1999

2000

2001

2002

2003

2004

2005

2006

Figure 4.2  Corruption Perception Index trend in Côte d’Ivoire (1998–2006).

Corrupting peace?   69

Corruption and liberal peacebuilding The number of armed conflicts has declined since the early 1990s at the same time as there has been an increase in liberal peacebuilding interventions. Yet political scientist Roland Paris argues that the political and economic liberalization characterizing these interventions has had destabilizing effects through increased societal competition and weakened domestic institutions (Paris 2004; Duffield 2001; Richmond 2005). Indeed, more wars (re)started and (re)ended in the 1990s than in any previous decade since 1946, suggesting that violent political instability had increased, although in most cases, large-scale organized violence in the form of war was not sustained (Fraser 2006). For Richmond and Franks, liberal peacebuilding has, in practice, ‘created very weak states and institutions that are dependent upon foreign support and subject to tests over power-sharing and corruption’ (Richmond and Franks 2007: 30). Beyond simply being ‘tested’ by corruption, liberal peacebuilding has had contradictory relationships with corruption. On one hand, peacebuilding interventions may provide the resources and institutions to curtail corruption. On the other hand, these may motivate and create opportunities for new forms of corruption. I briefly discuss below three main arguments linking liberal peacebuilding with higher levels of corruption. Corruption and democratization The transition from war to peace, at least since the end of the Cold War, has generally been shaped around negotiated settlements and democratization. This ‘negotiated democracy’ has potential impacts on corruption. First, ‘national reconciliation’ in the context of a peace process often results in a politically driven distribution of state assets and positions, with a tacit agreement on corruption included within the peace accords (Le Billon 2005a: 413–426). The resulting mix of electoral politics and powersharing arrangements can undermine institution building and reduce accountability as each faction asserts ‘sovereignty’ over its territorial or institutional turf. The biased control of public assets by political factions has been characteristic of many transitions to peace. Eager to not ‘jeopardize the peace’, international donors often turn a blind eye on such practices or even portray them as a ‘normal route to capitalist development’ (Hanlon 2004). There is therefore a high risk that a transition to democracy increases political corruption, notably in the absence of formal instruments for party financing. More generally, political liberalization represents a critical moment in terms of political party financing and the mode of governance in ‘authoritarian’ regimes. A shift from overtly coercive modes of political control to more democratically savvy forms of clientelism and vote-buying may aggravate the intensity of corruption and cause it to change forms. Deleterious

70   P. Le Billon forms of political corruption include illegal (or dubious) political donations and economic activities, misappropriation of public funds, or the abuse of state resources (Moran 2001; Walecki 2004; Doig and Marquette 2005). Corruption and economic liberalization The process of economic liberalization offers major corruption opportunities that post-conflict institutions may be unwilling or unable to address. This process often results in the ‘spontaneous’ or unregulated privatization of state assets, and the liberalization of markets and landholding. Corrupt practices spread in some former socialist countries, such as Algeria and Mozambique, at least partly as a result of economic liberalization (Talahite 2000; Harrison 1999). Like in other transition countries, prioritization of private over public ownership by international agencies may unintentionally play into the hands of local corrupt elites. The post-conflict context is often dominated by informal and sometimes criminal activities. Greater ‘market’ access to land and other assets along with a booming private sector favours local actors with access to seed capital, often generated by the proceeds of wartime criminal activities and corruption (Naylor 2004). In some cases, Western donors and international financial institutions are aware and even accepting of this evolution, characterizing this process as ‘normal’. More controversially, the ‘endgame’ of liberal peacebuilding may not be peace but market access, and corruption is tolerated or even promoted (by donors and investors), if it fosters the ‘right kind’ of stability (for geopolitical and economic objectives). This type of donor behaviour was particularly noticeable towards governments – such as Mozambique and Uganda – which were ‘successfully’ carrying out (neo-liberal) donor-sponsored reforms (Hanlon 2004: 747–763; Tangri and Mwenda 2006). Liberalization policies are opportunistically imposed and manipulated, imposing heavy and unequal social and environmental burdens on populations still recovering from war (Klein 2007). In this regard, there is a vast literature on the economics of ‘civilizing missions’. There is also some good evidence that FDI ‘follows the flag’, at least in the case of US corporations investing following US troop deployments (Biglaiser and DeRouen 2007). The evidence is more ambivalent in the case of peacebuilding, where FDI does not immediately increase with UN peacebuilding missions, but rather follows the departure of UN troops (Ahern 2005). This window of 3–5 years provides a period of market and investment project ‘maturation’ and signals improving political stability.

Corrupting peace?   71 Donors, exceptions and a corruption dilemma Donors and governments frequently face a mutually constructed corruption dilemma as assistance results in ‘rent-seeking’ through two main possible channels. Using a broader definition of corruption, the first channel links revenue windfalls with not only domestic authorities, but also the peacebuilding apparatus itself. The ‘urgency’ of political and economic transformations can take priority over democratic modes of governance, prudent management and due process, thereby creating a ‘state of exception’ for the organizations involved (Galtung 2004; Agamben 2005). Much has been written on the abuses of the so-called ‘disaster industry’, ranging from cronyism in sub-contracting and direct collusion in corrupt practices by local authorities to issues such as poor transparency and lack of accountability.14 As demonstrated by the ‘state of exception’ in Iraq during the rule of the Coalition Provisional Authority (CPA), spending rules are far from systematic and reflect in part the sources of available funding and the mix of political and corporate interests at play. Iraqi government funds were sent in cash by the planeload and disbursed without much regard to accountability. In contrast, funds allocated by the US Congress ‘trickled’ because of red tape, constraining reconstruction activities by USAID and the State Department (reflecting in part an internal power struggle). From March 2003 to the end of June 2004, the US-run CPA was directed by US presidential executive order and a resolution of the United Nations Security Council to manage Iraqi government funds representing US$20.6 billion.15 Over that period, the CPA disbursed or committed 85 per cent of the funds, including US$11.8 billion in freshly-minted US bills shipped to Iraq. This was hailed by the US Under Secretary of Treasury for International Affairs as ‘one of the most successful and carefully planned operations of the war’, before adding that the lack of accountability did not matter so much because it was ‘Iraqi’ money (Taylor 2007). The management of this massive cash transfer was repeatedly criticized by auditors, who suggested that there was a systematic haste to spend Iraqi funds before the Iraqi interim government ‘took over’ from the CPA (Kahn 2007; Waxman 2007). In contrast, only 20 per cent of US taxpayers’ reconstruction money was actually expended over the same period, in part because of much stricter disbursement rules. Beyond the lack of accountability over Iraqi funds, the relative imbalance between the disbursement of Iraqi and US funds also conveniently allowed the United States to use future aid monies as leverage over Iraqi authorities (and the subsequent redirection of funds to the ‘security’ budget), without having to ask for more money from Congress (Le Billon 2005a).16 The corruption dilemma also comes about because donors often distrust the government and prefer not to directly support it while still imposing significant demands upon the state. Simultaneously faced by a limited

72   P. Le Billon supply and increased demand for funds, governments turn to corruption. Part of this ‘anti-state’ liberal inclination relates to donor assessments of government corruption. This ‘corruption dilemma’ leaves most of the reconstruction resources in the hands of private sub-contractors and nongovernmental organizations. Unfortunately, this strategy does not put assistance monies out of the reach of ‘grabbing hands’ so much as divert it away from public sector actors and towards private sector actors. If a broad definition of corruption is adopted, the ‘brain drain’ from government departments to the private sector actually undermines the public interest and corrupts the ‘statebuilding’ agenda. Even the inflationary effects of aid flows and personnel can prove propitious for corruption. The arguments presented above can help to explain high levels of corruption in many post-conflict countries. However, only a detailed analysis of socio-economic contexts and power relations can provide a nuanced understanding of the specific context, motivations and mechanisms behind multiple forms of corruption during transition.

Assessing the consequences of corruption The first major consequence of corruption is a higher risk of renewed conflict. To the extent that economic variables such as the level, structure and growth of income influence the risk of armed conflict, corruption can undermine peacebuilding (Collier 2003). Corruption often plays a major role in informal economic activities, having negative effects on public revenue, economic formalization, and the protection of workers and the environment. Yet any attempts at tackling corruption by formalizing the economy should consider the social consequences and the possible impact on conflict, since informal economic activities support local livelihoods and act as a valuable ‘social pressure valve’. In many countries, the formalization and legalization of the economy would do more harm than good. Another political consequence of corruption may be the entrenchment of an imbalance of power or the political status quo inherited from the conflict. As groups empowered by the outcome of the war continue to sustain dominant political and economic positions through corruption, they may prevent the redistribution of power by stifling institutional checks and balances. At the extreme, donors may end up dealing with war criminals as official interlocutors – a situation that has been avoided in some cases by granting executive powers to international agencies through trusteeship and transitional authority mandates as in the case of the Office of the High Representative in Bosnia (Caplan 2002).17 Post-conflict mismanagement and embezzlement of reconstruction assistance can also delegitimize the local government and lead to social unrest. To cover this up, local political leaders may, once again, resort to a divisive politics of hatred and fear, pushing corruption issues into the

Corrupting peace?   73 background. Following Hurricane Mitch in 1998, the US administration, for example, was eager to prevent a repetition of the political fallout resulting from the 1972 earthquake assistance offered to Nicaragua. In this case, the Somoza regime embezzled international emergency assistance monies, thus contributing to its forceful demise and the rise of the Sandinistas. The US Congress and USAID took strong measures to prevent the diversion of this assistance, with some degree of success in terms of the probity of the operation (Seligson 2001; Cox 2001). Critics have pointed out, however, that whereas these measures may have limited cases of narrowly defined corruption (‘abuse of public office for private gain’), US assistance failed to challenge this narrow definition, thus perpetuating high levels of inequality and undermining the public interest (Brown 2000; Brown and Cloke 2005; Wisner 2001). Corruption also facilitates criminality and violence in post-conflict societies by compromising the conduct and independence of the police and judiciary and by recycling former combatants into the private militias of corrupt politicians or organized crime. In extreme cases, corruption can help turn post-conflict countries into criminal hubs, as in Cambodia, Liberia or some of the Caucasus states in the 1990s. Corruption in the police and judiciary – along with weapons availability, endemic poverty and score settling – may also help to explain the higher homicide rate in post-conflict situations (Collier and Hoeffler 2004a). According to the ‘good governance’ agenda and ‘aid selectivity’ principles of key Western development agencies, the most immediate consequence of corruption should be a negative effect on the volume, quality and targeting of reconstruction assistance provided by international donors and local authorities. However, an empirical test of the effect of corruption on aid provision between 1975 and 1995 indicates that this relationship is only valid for Scandinavian and Australian bilateral donors, and that the United States actually provided more aid to more corrupt countries (Alesina and Weder 2002). When local politicians make decisions about aid delivery based on politically or economically corrupt premises, rather than on competence and/ or need, this results in inadequate infrastructure and services, higher costs and sometimes delays, and the entrenchment of inequalities (Ewins et al. 2006). A lack of commitment towards reconstruction goals and corruption in local public finances often deters donors, particularly when local authorities appear to have the resources to finance some of the reconstruction. For example, despite massive needs for reconstruction in Angola, Western donors have expressed reluctance to assist a government that has been accused of large-scale corruption in the oil and mineral industries – a position that facilitated ‘constructive’ engagement by China (NRC 2004; HRW 2004). In Liberia, the cynicism and greed of fighters and politicians who were willing to jeopardize peace to secure a hoped-for lucrative position in the new government undermined donors’ confidence

74   P. Le Billon in and support for the reconstruction process, eventually leading to quasitrusteeship measures (International Crisis Group 2003, and Will Reno’s chapter in this volume). Aid projects set up under circumstances of corruption will feel the effects for a long time. Beneficiary targeting for political purposes, incompetent or wasteful contractors, rigged bidding processes favouring certain political interests – these will impair security and negatively affect overall economic growth. For example, the privatization of the reconstruction of Beirut’s Central District through Solidere, a company in which late Prime Minister Rafik Hariri and his associates were shareholders, led to widespread suspicion of conflicts of interest and corruption. The priority of the first Hariri government was not to provide public services for the poor, but to promote highly visible, prestige construction projects which fanned the resentment of the have-nots and left the country with a staggering debt of US$33 billion.18 Finally, as argued earlier, corruption should be thought of more broadly, reaching beyond the ‘domestic’. In this regard, a critical feature of peacebuilding concerns the fiscal aspects of market liberalization. Postconflict transitions offer renewed economic opportunities that require careful fiscal management in order to consolidate the state and improve the well-being of the population (Boyce and O’Donnell 2007a; Addison and Roe 2006). Liberalization policies can broadly be interpreted as ‘corrupting’ such fiscal priorities. The taxation of FDI projects is key here, precisely because these projects often benefit from a ‘liberal’ transition to peace. Following recurring calls by civil society and opposition politicians for contractual reviews, a government commission in the Democratic Republic of the Congo concluded that out of 61 mining contracts, many of them signed during the ‘transition’ period, 38 contracts had to be renegotiated and 23 cancelled because of irregularities (Clayton 2007). Another example was provided through the renegotiation of a US$900 million dollars international iron ore mining contract signed by the transitional government in Liberia. Whereas the country’s new elected government has since been under tight anti-corruption supervision through GEMAP, it was an NGO that highlighted contractual problems that would harm the Liberian public interest.19 In both the DRC and Liberia, the transition period thus proved to be an opportune moment to capture lucrative contracts while potentially undermining the public interest. Although the main consequences of corruption are overwhelmingly negative, functionalist arguments about corruption suggest that some forms of corruption may occasionally have positive effects. Corruption may help in securing some degree of political, economic and social stability. Although corruption needs to be ‘rooted out’ as early as possible, it is often very difficult to rapidly and effectively address local sources of grievances and conflict. In this respect, some of the political and social effects of corruption may provide a short-term solution – such as buying out

Corrupting peace?   75 ‘peace spoilers’ or authorizing illegal but licit economic activities that sustain local livelihoods (Le Billon 2003; Van Schendel and Abraham 2005). Donors should thus ensure that reconstruction programmes and interventions are sensitive to local contexts. Many examples, however, suggest that such ‘quick fixes’, tempting though they may be, may have long-lasting negative effects. Buying out spoilers is a risky venture, as impunity and economic rewards can sustain rebel movements, as demonstrated in Angola with UNITA or in Sierra Leone with the RUF. Informal economic activities strengthen the grip of quasi-criminal groups in the economic and government sphere, as well as negatively affecting future economic development. In this light, every effort should be made to move beyond ‘buying peace’ to ensure short-term stability, to achieve the goals of social justice and sustainable peace. The difficulty, of course, is in achieving these goals.20

Discussion The challenges faced by conflict-affected countries are formidable. Less corruption in ‘post-conflict’ peacebuilding and reconstruction not only means better-targeted, higher quality and more efficient development assistance, but also a greater contribution to the positive transformation of the local political economy as well as the consolidation of state institutions and legitimate political parties. In short, less corruption should help build a stronger peace. Corruption, however, should not only be ‘fought’ in domestic governance, but must also be addressed in a broader sense at multiple sites and interconnections. A very broad definition of corruption encompasses ‘abuses of the public interest by narrow sectional interests’, rather than simply ‘the abuse of public office for private gain’, as often stated (TJN 2006). From this perspective, a definition of corruption should encompass profiteering from peacebuilding and reconstruction, as well as the drastic economic policies that frequently end up serving narrow interest groups (Klein 2007). Rethinking the concept of corruption would thus promote the public interest of post-conflict countries by addressing the lucrative sub-contracting networks, the tax-free salaries of overpaid consultants, donor agencies’ aggressive promotion of FDI ventures over domestic entrepreneurship, the fire sale privatization of public assets, and the liberalization of trade and tax policies (Carnahan 2007; Szeftel 2000). Defining corruption more broadly means engaging with a large number of non-domestic actors, ranging from aid agencies to foreign investors and international banks. In fact, the policies of some international agencies and financial institutions have compounded and transformed corruption, notably through economic sanctions, structural adjustment and the privatization of state assets (Cooksey 2003). In Iraq, the Oil-for-Food programme exacerbated corruption while demonstrating a politically

76   P. Le Billon motivated lack of oversight by both the United Nations Secretariat and the Security Council (Le Billon 2005a). In the private sector, many companies investing in post-conflict countries also seek to minimize the amount of tax they pay. For reasons of incapacity or vested interests, transitional governments often do not maximize the public interest, signing highly lucrative contracts that favour the private sector. More generally, the geography of post-conflict corruption should encompass the vast financial apparatus deployed in the creation and redistribution of wealth during transition, ranging from large commercial banks and well-established tax havens to fly-by-night financial intermediaries (Naylor 2004; Baker 2005; TJN 2005). To conclude, this chapter has presented some of the arguments linking liberal peacebuilding with higher levels of corruption. Alternative arguments, however, have not been discussed and the preliminary evidence collected begs further enquiry. The most basic ambivalence suggested relates to the effect of anti-corruption efforts on short-term political stability. The first priority in this regard is to maintain security for the population. An assessment of the capacity of corrupt peace spoilers is thus required before moving against them. The international community may wisely let corruption buy a temporary peace when the risk of renewed conflict is too high. However, the legacy of such an approach is risky. Rather than risk complacency or complicity, a better tactic is to drive a wedge between peace spoilers and their sources of power, including their economic interests. Amnesty and enticing demobilization, disarmament and reintegration packages can ensure the cooperation of middle and lowranking combatants, while war crime indictments can isolate leaders. International supervision can help to protect public finances and key economic sectors from embezzlement and secure a smoother transition towards accountable and transparent economic management. The other ambivalences suggested concern the ‘democratic institutions’ and ‘markets’ that are likely to foster competitive corruption resulting in deteriorating legitimacy with the population. A second priority in this regard is to restore the confidence of the population, most notably in the government and the political process. A corrupt government rarely has the support of its population, but in many cases patronage and clientelism are the legitimating link between individual rulers and the ruled. In order to move beyond corruptly financed modes of redistribution, both institutional arrangements and political culture have to change. Accusations of corruption are also a prominent political dimension in the reconstruction period: better detection and accountability mechanisms should prevent manipulation. Foreign interveners also need to have greater confidence in the local population and political parties to ensure an optimal partnership. Institutional reforms are key to building transparency and accountability, but implementation can be slow and difficult. Thus, a short-term priority needs to be placed on informing the public: about what is being done, how and by whom, and how it affects the

Corrupting peace?   77 average citizen. Too often a climate of fear, (feigned) ignorance, and opportunism pervades so-called post-conflict situations. Widely broadcast and high quality information is crucial to ensure that the goals of transparency and accountability are more rapidly achieved. From a research agenda perspective, further empirical studies should track trends in corruption perceptions according to the timeframe of peacebuilding and reconstruction operations. For quantitative approaches to succeed, a broader dataset (covering the entire period and all countries) and multivariate analysis would be required. But the reliability of this data should be closely examined, insofar as reported corruption data relies heavily on perceptions, and thus to some extent on expectations and informational context as well as the survey targets. For example, those surveyed may expect less corruption after the transition to peace (and thus rank corruption levels higher) and they may be exposed to more media information about corruption (thanks, for example, to the work of anticorruption ‘watchdogs’ and a more open public media). Perceptions are nevertheless important in understanding possible links between corruption and renewed conflict. Survey data should thus be disaggregated according to the characteristics of informants. Alternative methods of data collection have included tracking media reporting of corruption-related conflicts. Sub-national surveys and media reporting can also be particularly useful, especially in the case of separatist conflicts such as Aceh.21 Future enquiries into corruption and liberal peacebuilding projects should pay particular attention to the differentiating effects of corruption and anti-corruption programs. The reworking of sovereignty, place-based politics and ‘fast-track’ integration into global markets provide grounds for detailed field-based and archival research. Ethnographic and social survey studies of post-conflict violence could also yield more insights into the political geography of the ‘state of exception’ at work during recent liberal peacebuilding operations. Not only could this research be of interest in assessing the risk of renewed armed conflict, but it could also provide a better understanding of the broader relations between violence, conflict and corruption.

Notes   1 For example, see South East Europe Democracy Support (2002) for opinion polls in the Balkan region. For Nicaragua see CIET International (1998). For Sierra Leone, see World Bank (2003b). For Cambodia, see World Bank (2000).   2 In the UK, a new anti-corruption and anti-bribery measure was enacted as part of the Anti-terrorism, Crime and Security Act 2001, and new anti-bribery legislation was introduced in 2009 and went into effect in July 2011. In the United States, see the 1998, 2002 and 2006 National Security Strategy of the United States; see also US State Department, Terrorism, Corruption and War, posted in justification of the war in Iraq by the US State Department; Kaufmann (2004); Reno (2002); Thachuk (2005).

78   P. Le Billon   3 I refer to peacebuilding as complementary to peacemaking (bringing an end to hostilities) and peacekeeping (maintaining peace through military force to separate conflicting parties). As such, peacebuilding aims to create a ‘self-sustaining’ peace, one that does not require external peacekeeping.   4 Yet the report does not locate the ‘fight against corruption’ within effective peacebuilding, and only refers to corruption in two other instances: first, as an ‘economic’ cause of conflict, and second, in discussing the employment of UN volunteers as cheap labour potentially ‘corrupting’ the programme since these volunteers ‘work alongside colleagues who are making three or four times their salary for similar functions’ (UN 2000: 24).   5 OECD Creditor Reporting System for the period 1989–2002, this figure includes reconstruction and development assistance and excludes food aid, emergency relief, debt relief, and military intervention or peacekeeping costs.   6 While conflict situations grab the attention of the media, aid has been lower than usual in non-conflict situations over the past decade (Collier 2003).   7 The ‘reconstruction’ budget for the period 2003–2006 amounted to more than US$62 billion (Development Fund for Iraq: US$28.2 billion; US government Iraq Relief and Reconstruction Fund: US$20.9 billion; Official Development Assistance from other donors: US$13 billion (for 2003–2005 only), including World Bank Iraqi Trust Fund: US$0.4 billion.). Sources: US Department of State website, online, available at: www.state.gov/p/nea/rls/rpt/60857.htm, accessed 14 March 2007; World Bank Operations in Iraq, 28 February 2007. See R. Looney, Chapter 10, this volume.   8 Ideals and strict discipline among armed movements have also limited corruption, as with the Eritrean People’s Liberation Front. In Afghanistan, the Taliban regime was initially well received by the population for putting an end to the corruption of mujahedin warlords, see Cramer and Goodhand (2002).   9 Widespread participation in ‘illegal’ logging in Cambodia helped sustain the conflict for several years, see Le Billon (2000). 10 Several donor agencies have streamlined assessments of corruption in many ‘post-conflict’ governance analyses, most notably USAID, through its ‘Office of Democracy and Governance’, and the World Bank. 11 TI’s CPI is a composite index, PRS’s corruption index essentially measures the risk posed by corruption to the private sector (and especially foreign investors). 12 Including: Angola, Côte d’Ivoire, Croatia, DR Congo, El Salvador, Ethiopia, Guatemala, Haiti, Liberia, Mozambique, Namibia, Sierra Leone, Somalia, Sudan. 13 The CPI data is available from 1998–2006. Note that PRS data was included into the CPI until 2000, and that PRS data is converted to match CPI index range (0 to 10). 14 For a recent survey of the issue with respect to humanitarian relief, see WillittsKing and Harvey (2005). 15 Cash inflow represented close to US$20.6 billion; half of that amount came from oil sales, the rest coming from transfers from the Oil-for-Food program and repatriated funds from the Saddam Hussein regime. Online, available at: http://www.iamb.info/auditrep/CashReceipt101204.pdf. 16 For example, Deputy Defense Secretary Paul Wolfowitz stressed to Congress that: ‘There’s a lot of money to pay for this [reconstruction] that doesn’t have to be US taxpayer money, and it starts with the assets of the Iraqi people.’ House Committee on Appropriations Hearing on a Supplemental War Regulation, 27 March 2003 (emphasis added). 17 If international transitional administrations helped keep peace spoilers and war criminals out, they also struck bargains with corrupt politicians deemed non-threatening to the political status quo.

Corrupting peace?   79 18 The plan was replete with ‘irregularities such as under-pricing and buying real estate under the guise of rebuilding the city’, i.e. predatory expropriation. The Hariri government was suspected of having initiated an anti-corruption administrative reform only to pressure coalition politicians and MPs to approve the plan. The plan was approved and no high ranking official or politicians faced sanctions. See Carlson (2003); Marlowe (1996); El-Gazzawi (2002). 19 The initial contract gave Mittal Steel ‘complete freedom to set the price of the iron ore’ which affected the amount to be paid in taxes to the Liberian government. See Global Witness (2006: 7). Mittal’s parent was domiciled in Netherlands Antilles, and later in the ‘tax-friendly’ Swiss canton of Zug; its Liberian subsidiary was domiciled in Cyprus; on GEMAP, see W. Reno, this volume. 20 A detailed discussion of anti-corruption initiatives in ‘post-conflict’ countries falls outside the scope of this chapter. See Part III, this volume. 21 See Aceh Conflict Monitoring Update, online, available at: www.conflictanddevelopment.org.

5 Aiding the state or aiding corruption? Aid and corruption in post-­conflict countries Sarah von Billerbeck The preamble of the UN Convention against Corruption (UNCAC) opens with a declaration of concern regarding ‘the threats posed by corruption to the stability and security of societies’ (UN 2003). While corruption can exist in any society – wealthy or poor, developed or underdeveloped, integrated into the world economy or isolated – it is an issue of particular importance in those countries recently emerged from civil war, where the risks of renewed conflict remain acute. However, though the link between corruption and instability is made explicit by the UNCAC and others, efforts to combat corruption after conflict are less well developed. This is partly because one of the most important forms of post-­conflict intervention, international aid, may actually exacerbate corruption and imperil the ultimate goal of peacebuilding: building state capacity to peacefully manage and prevent conflict.1 More specifically, the way in which aid is given after conflict introduces a trade-­off between the goals of peacebuilding and corruption: aid that is delivered through the state may strengthen the state, but it may also trigger increased corruption and decreased accountability; aid that is delivered outside of state channels may be protected against corruption, but weaken the state and prevent the consolidation of peace. Understanding the link between corruption and aid in post-­conflict states is critical, as aid disbursements in post-­conflict countries are large, sometimes exceeding the recipient country’s gross national income (GNI). For example, official development assistance was 99 per cent of DR Congo’s GNI in 2003 and 186 per cent of Liberia’s GNI in 2008.2 Such large-­scale aid disbursements in the aftermath of civil war reflect the increasing recognition by donors of the link between economic recovery and stability. Poverty and economic inequality are considered key sources of conflict, and jumpstarting economic activity and macroeconomic growth after war are perceived as critical to the consolidation of peace.3 Aid is central to achieving this goal. However, less has been said about the particular processes that can bring about conflict transformation through economic assistance (Donais 2005: 16–17; for exceptions, see Del Castillo 2008, Boyce and O’Donnell

Aid and corruption in post-conflict countries   81 4

2007a). The failure to examine how aid ensures stability has meant that post-­conflict aid has received insufficient critical attention and has instead been almost universally acclaimed as beneficial, though there has been an increasing recognition of the problem of post-­conflict countries’ ability to absorb aid, and debates about the phasing-­in of assistance (see for example Collier and Hoeffler 2004b). Though it undeniably entails benefits, including the financing of social projects in health and education and the rehabilitation of critical infrastructure, there is a paucity of analysis of the potential unintended consequences of economic aid in the special circumstances of a post-­conflict country. While these may be many – aggravated income inequality, overexploitation of natural resources, overly rapid market liberalisation – corruption is of particular concern as its inherently political nature means that it can derail not only economic reconstruction but also the tenuous political processes unfolding in post-­ conflict countries. Moreover, the potential of aid to trigger corruption is a topic that has received growing attention, not only in scholarly circles but also in the popular media. A 2010 opinion piece in the International Herald Tribune about corruption in Afghanistan asserted that ‘the way in which aid is given is at the heart of the problem’ (Sud 2010), while an article in the New York Times the previous year noted that the deeply corrupt Afghan government, which is ‘kept afloat by billions of dollars in American and other aid’, is rapidly losing legitimacy and respect in the eyes of its population (Filkins 2009). In a report on the relationship between aid and security in Afghanistan, Fishstein (2010) observes that interviewees’ most common complaint was about corruption associated with aid projects. Writing on Sub-­Saharan Africa, Moyo (2009: 48) argues that ‘aid is one of [corruption’s] greatest aides’, not only because it enables rent-­seeking, but also because donors do not withhold aid where corruption is rampant, points to which I return. Ugandan journalist Andrew Mwenda even goes so far as to advocate a complete stop of aid flows to Africa, claiming that international money does not reach those in need but ends up instead in the pockets of corrupt officials (Mortishead 2006). This chapter examines the relationship between aid and corruption in countries that have recently emerged from civil war. It does not explore these issues in countries experiencing interstate conflict, nor does it look at corruption within donor organisations, but instead focuses on how international aid affects domestic corruption after internal conflict in order to determine whether aid can be inimical to peacebuilding. I take as my definition of corruption the version offered by Philp in this volume (p.  34), in which corruption entails not only the abuse of office for personal gain, but also for sectoral or partisan gain. The remainder of this chapter is divided into three parts. First, I discuss the circumstances in post-­conflict states that make them susceptible to corruption, before outlining the debate about whether corruption is

82   S. von Billerbeck worsened in post-­conflict societies and describing the data problems that complicate quantitative analysis of these questions. Second, I turn to how the goals of peacebuilding and the methods of aid collide to produce a situation in which corruption may be an unintended by-­product of building state capacity to maintain peace. More specifically, I examine the manner in which aid is disbursed, arguing that aid that is given directly to the government, for example in the form of budgetary support, can strengthen the state but increase corruption; while aid that is disbursed around the state, in particular through project implementing partners, can contain corruption but weaken the state, and work against a fundamental goal of peacebuilding. Finally, I discuss some of the barriers to building anti-­corruption initiatives into peacebuilding.

Does aid after conflict corrupt? The conditions present after civil war, the initiation of particular programmes of economic reform, and large-­scale disbursements of aid all generate increased opportunities for corruption, and may combine to create a highly permissive environment for corruption in post-­conflict states. Contextual factors that are known to engender corruption under ‘normal’ circumstances are magnified in post-­conflict settings. These include weak state institutions; absent or opaque rules and regulations; a lack of monitoring, enforcement, and punitive capabilities; low, irregular, or unpaid wages; the presence of organised crime networks; and low absorptive capacity (Cooksey 2002: 48; Boyce and O’Donnell 2007b: 10; Rose-­ Ackerman 2009: 67). These conditions are compounded by the initiation of particular activities after conflict, including large one-­off infrastructure projects, decentralisation, privatisation, and natural resource contract reviews – tasks that are also highly susceptible to corruption (Rose-­ Ackerman 2009: 67; Donais 2005: 3; Sundaram 2009). At the same time, while aid can finance critical activities in the post-­ conflict period, help to signal the end of conflict, and deliver a peace dividend to the population, aid windfalls have been associated with heightened corruption (Cooksey 2003: 1, 2002: 48; Rose-­Ackerman 2009: 67; Svensson 2000; Bolongaita 2005). In situations where resource mobilisation is low, as it usually is in post-­conflict countries, large influxes of aid represent a potential source of rents in a resource-­scarce environment, making available resources for competing factions to fight over (Knack 2001: 313; Heller 2005: 22; Bevan 2005: 4; Alesina and Weder 2002; Tornell and Lane 1999; Isopi and Mattesini 2008). This sudden availability of rents, combined with the distorted economic conditions described above, makes post-­conflict settings rife with opportunities for corruption. Post-­war Bosnia provides a vivid illustration of the scale of the problem, where Bosnian leaders stole as much as US$1 billion in public funds and international aid between the signing of the Dayton Peace Accords in 1995 and 1999 (Hedges 1999).

Aid and corruption in post-conflict countries   83 Nevertheless, whether this volatile combination of factors will always lead to corruption in post-­conflict situations is disputed. Orr alleges that, ‘corruption is endemic in virtually all post conflict societies’ (Orr 2002: 148). Some attribute this to the legacy of war, arguing that violent competition, collapsing institutions, and a culture of impunity engender corruption during civil conflict that persists into the post-­conflict phase. Some allege that corruption predates wars and may be a cause of conflict in the first place, subsequently becoming entrenched during fighting (Le Billon 2008b: 346; Duffield 2001: 115). In Sierra Leone, for example, the Revolutionary United Front (RUF ) claimed it was fighting against the corrupt government of Joseph Momoh, but quickly became more interested in controlling a portion of the country’s vast diamond mines (Jackson 2005: 51). Others counter that characterising all post-­conflict countries as corrupt is unfair; arguing that doing so neglects important variations from one conflict setting to another. Del Castillo (2008: 233) asserts that, ‘the belief that corruption is endemic to war-­to-peace transitions is widespread but false’. She points to Sierra Leone and Liberia, which she claims have made significant progress in combating corruption since the end of conflict – the former with the establishment of its Anti-­Corruption Commission, and the latter with the Liberia Governance and Economic Management Assistance Program (GEMAP).5 An objective determination is difficult to make, as data on corruption in post-­conflict countries are problematic in several ways. First, corruption is notoriously difficult to measure (Svensson 2005; Johnston and Kpundeh 2002; Soares 2005; Adwan 2005; Heller 2009). Indices rely on definitions of corruption that are often imprecise and vary with regards to which acts constitute corruption. Because these acts are illegal and therefore rarely reported, obtaining reliable information on them is tricky. Moreover, different indices employ different proxies for corruption, including governance indicators, economic rankings, and perceptions, and it is unclear which of these best capture corruption, if different proxies capture different types of corruption, and how aid inflows affect these proxies.6 Second, corruption data are missing for many post-­conflict states, and where it is available, there are rarely data for the pre-­conflict and conflict phases, rendering observations that take into account post-­conflict aid windfalls impossible.7 Third, corruption data do not differentiate between economic sectors, and thus fail to reflect whether particular sectors are more prone to corruption than others. This is especially important in post-­ conflict countries where aid funds different sectors at different levels. Finally, data on corruption do not provide any information on the relative importance of corruption in an economy, particularly where aid windfalls alter the percentage of the total economy that bribes constitute. In addition, while data on aid is widely available, it too suffers from limitations when examining corruption. Like corruption data, many aid

84   S. von Billerbeck figures do not reflect sectoral spending on, for example, infrastructure or natural resource management, rendering it difficult to determine how different types of aid spending are correlated with increased or decreased corruption. On a broader level, numerous data on post-­conflict assistance do not distinguish between aid money that is actually spent on aid and peacebuilding money that is used to finance, for example, UN mission infrastructure and peacekeeping staff. Furthermore, activities such as security sector reform often have political and economic elements to them, and it is not clear if they fall under peacebuilding or aid. Peacebuilding and aid monies flowing into post-­conflict countries are simply lumped together without information on what is being spent on what. Those statistical studies that have been conducted on the impact of aid on corruption offer conflicting results, finding both that aid increases corruption (Knack 2001), and that it helps to reduce it (Tavares 2003). Dalgaard and Olsson (2008) find that high levels of aid increase corruption, while Svensson (2000) finds that corruption is increased by aid windfalls in countries that are fractionalised. While these studies examine developing countries more generally, rather than focusing on post-­conflict cases, the latter tend to be characterised both by high levels of aid and social competition, reinforcing concerns about the impact of aid on corruption in these countries. Moreover, there are a number of reasons to expect corruption to flourish in post-­conflict settings with large influxes of aid. Under the conditions of lax regulatory frameworks, unpaid salaries and weak institutions described above, bribery may facilitate minor bureaucratic matters, such as securing a permit, opening a business, or moving freely through the country. Carden and Verdon (2010: 41–42) find that corruption can reduce transaction costs imposed by institutional barriers, suggesting that the optimal level of corruption may not, under certain conditions, be zero. While this situation is clearly not ideal, as money is being spent on non-­ productive activities, it is probable that such institutional barriers will exist after conflict and thus the appropriation of aid for this purpose may be accepted if it assists in jumpstarting economic activity. More broadly, economic and political actors in the post-­conflict space will likely be operating in a context of sectarianism, competition and shifting power relations, and it is not surprising that they will try to maximise their access to aid monies in order to recover losses or consolidate gains. Keen (1994: 159–160) notes that the appropriation of international assistance during the 1980s famine in southern Sudan was actually the only way in which provincial officials could survive given the conditions of economic downturn, high inflation, and falling earnings. He observes that such corruption cannot be viewed as a breakdown in the functioning of the state but rather a way for the state to continue functioning. Similarly, Hanlon (1991: 233) notes that in Mozambique, corruption was sometimes institutionalised as a way of enabling normal state business to continue.

Aid and corruption in post-conflict countries   85 Troops accompanying food convoys were given food where they would have stolen it anyway and technicians working in government offices were allowed to use the state’s facilities for outside work. Officials determined that they would do so regardless, and enabling them to continue would ensure that they continue working for the government.

Aid disbursement, corruption, and state capacity If post-­conflict countries receiving large amounts of aid are at high risk of corruption, then it is worth asking whether the way in which aid is given can increase or decrease these risks or whether a certain measure of corruption must be accepted as an unavoidable by-­product of aid in post-­ conflict situations. How aid is disbursed can be sorted into two broad categories: aid that flows directly to the state, and aid that flows around the state to project implementers. However, while different aid modalities may affect the incidence of corruption, they may also imperil the basic logic of peacebuilding, which is to build state capacity to prevent a relapse into conflict. International interventions to consolidate peace aim, ultimately, to become redundant: they endeavour to build indigenous capacity for the peaceful management of conflicts, the equitable conduct of politics, and the independent functioning of the economy, thus making their role unnecessary. This approach to peacebuilding captures not only conflict resolution, but also conflict prevention, as the capacity for political and economic governance is intended to bring past conflicts to an end and prevent future ones from turning violent. The need to build capacity has come to focus increasingly on the state. The logic is that if the state is perceived as a reliable, equitable, and transparent actor, able to deliver security, political access, and basic services, there will no longer be a need for individuals and groups to turn to arms to advance or protect their interests. The realisation that the state is key to stabilisation is evidenced by the growing attention paid to post-­conflict statebuilding, rather than just peacekeeping or even peacebuilding (Donais 2005: 23; Boyce and O’Donnell 2007b: 1; del Castillo 2008: 274–275; Ghani and Lockhart 2008. See also World Bank 1997a). However, for many years, minimising the state was a mainstay of international development practice. The liberal macroeconomic policies that the World Bank and other donors advocate, such as the privatisation of state-­owned industries, the pursuit of foreign investment, deregulation and liberalisation of trade and taxation policies, and decentralisation, favour a limited state (Del Castillo 2008: 274–278; Donais 2005: 17–18). While these may be appropriate goals in some contexts, post-­conflict states do not represent ‘development as usual’.8 Indeed, in a post-­conflict setting marked by state weakness, such policies can undercut efforts to establish legitimate state institutions, as economic control is devolved away from the

86   S. von Billerbeck state. This is particularly problematic as it is the central government that will set overall macroeconomic policy and legislate economic regulations and laws. Worse, if such reforms are poorly conceived and executed they may worsen corruption. Privatisation, for example, gives governments an opportunity to distribute economic assets to allies or family members with the guise of legality. In post-­war Bosnia, authorities have been accused of driving down the value of enterprises by stealing assets from them prior to privatisation in order to create ‘good deals’ and ensure that the privatised companies were sold to the ‘right’ buyers (Donais 2005: 75). Likewise, revision of economic laws, such as mining codes, can result in the redistribution of contracts and extraction rights based on nepotism, behind-­thescenes deals, or bribe payments. For example, the government of DR Congo initiated a comprehensive review of mining contracts in 2007, recommending the renegotiation or outright revocation of many contracts. However, the renegotiation process has been shrouded in secrecy and confusion, leading many to speculate that the government was trying to contrive ways to award contracts based on bribes or personal economic interests. Moreover, large influxes of aid can ‘crowd out’ efforts to boost state capacity for revenue mobilisation and macroeconomic management (Boyce and O’Donnell 2007b: 10–11; Knack 2001: 312). By providing an alternative source of resources, aid takes the pressure off governments to establish tax collection systems and other forms of revenue generation for themselves. Hanlon (1991: 2, 180–181), for example, argues that the international community consciously circumvented the Mozambican government in its aid disbursements, consequently weakening the state. Aid not only diminishes incentives to improve a government’s revenue-­raising capabilities, but by reducing its reliance on tax revenue, it also reduces its reliance on its population and thus makes it less accountable to the latter (Knack 2001: 312–313; Moore 1998), further undermining the legitimacy of the state. In 2005, a Kenyan draft aid policy document stated that the government’s goal was to attract as much aid as possible, rather than to increase its own earnings, signalling a shift in the government’s account­ ability from its population to donors (Ghani and Lockhart 2008: 101). Ultimately, as weak resource mobilisation and low accountability fuelled by corruption become entrenched, aid dependence can develop, which can further undermine governance, institutions and legitimacy; this in turn can further encourage corruption, thus launching a vicious cycle. However, donors find it difficult to simply ‘walk away’ from post-­conflict states where corruption is burgeoning. In the aftermath of violent conflict, powerful nations want to be seen to be doing something, or might see it in their interest to address post-­war instability, and the provision of aid can provide a convenient and politically less controversial alternative to, for example, sending troops. Not providing aid can also carry domestic costs

Aid and corruption in post-conflict countries   87 for donor countries and organisations, as political actors and interest groups at home demand engagement. Donor governments also worry about potential ‘spill over’ effects from wars and therefore want, at a minimum, to contribute to continued stability in the short term. Donors are thus unlikely to completely stop aid flows even where it inhibits reform and reduces accountability (O’Donnell 2008: 242). Accordingly, donors face dilemmas in how they interact with the states to which they provide assistance, and they need to balance between the imperatives of strengthening the state and minimising corruption. On the one hand, corruption is a symptom of state weakness and may be one of the initial sources of conflict or a factor that prolonged it. Large-­scale aid disbursements to a dysfunctional state may make matters worse by displacing the state and reducing incentives to reform. On the other hand, not providing aid to post-­conflict countries may incur humanitarian costs in the recipient country and political costs among donors’ own constituents. The next two sections explore in greater detail the trade-­off that donors face between peacebuilding and corruption by examining the two broad aid modalities mentioned above. Aid that flows through the government entails a greater risk of corruption, but aid that circumvents the government will weaken it, and thus imperil the end-­goal of strengthening the state, improving governance, and ensuring that the national capacity exists to peacefully manage state affairs and future conflicts. Aid through the state As mentioned, international interventions after civil wars have come to focus increasingly on strengthening the state. The main method for achieving this overarching goal has been to build state capacity through participation. It is thought that if national actors participate in and manage their reconstruction process, they will ‘learn by doing’ and gain the capacity to sustain efforts beyond the departure of international actors.9 In particular, as equitable economic policies are a key part of avoiding inter-­societal disputes, the building of state fiscal management capacity is believed to help prevent future conflicts and the recurrence of previous ones. In development practice, the emphasis on building economic capacity has usually meant providing general budget support, rather than project aid, and placing government officials directly in charge of or at least in very prominent roles within development programmes. A number of analysts assert that providing funding directly to governments will give them the opportunity to learn how to manage the distribution of resources throughout society (Knack 2001: 326). However, direct budget support, as opposed to project aid, has also been shown to offer fewer oversight opportunities for donors and thus to  widen the scope for corruption. When aid money flows directly into

88   S. von Billerbeck government accounts, donors’ leverage decreases because they are less able to stipulate how it should be spent and to monitor how it actually is spent, leaving it open to misappropriation and distribution based on nepotism, favouritism, or ethnic, political, or religious considerations. A number of studies have supported this, suggesting that general budget support may assist ongoing economic reforms, but does not trigger them where there is no previous domestic commitment to them. For example, in a review of general budget support to Tanzania, Lawson et al. (2006: 132) note that though they observed some improved technical capacities, no systemic public sector reforms took hold because of a lack of internal political will. They conclude that where the impulse for reform does not exist domestically, general budget support cannot create it (see also Williamson 2006). In order to address this difficulty, attaching conditions to aid disbursements has become common practice. Doing so represents an attempt to achieve not only economic reforms, but also political reforms to ensure that government spending is done transparently and in line with donor priorities. While the extent of conditions varies, rarely is aid given without some conditionality. However, the effectiveness of aid conditionality has proven to be limited (Knack 2001: 312; Killick 1997; Stiglitz 1999; White and Morrissey 1997; Svensson 2003; Cooksey 2002: 49.). Because of the fungibility of aid, donors’ ability to direct the spending of recipient governments is limited, and donors are rarely able to put in place a system of conditionalities where compliance with donor objectives is perceived to be less costly or more beneficial than non-­compliance. Moreover, studies have shown that poor governance and widespread corruption on the part of recipient governments have not led to decreased disbursements of aid, suggesting that aid conditionality is not only ineffective but also rarely enforced (Alesina and Weder 2002). Moreover, aid conditionality, where effective, may have the adverse side effect of reducing government accountability to its population. Conditions reflect donor interests and priorities, and while these may at times overlap with recipient ones, they will require governments to report to donors rather than to their populations. Eventually, in the interests of securing further aid funding, governments may shape their stated objectives, at least nominally, to what they think donors want, rather than to what their citizens need or desire (Boyce and O’Donnell 2007c: 284; Knack 2001: 313; Suhrke 2006: 26). While these studies of aid conditionality examine developing countries and may not necessarily apply to post-­conflict ones, there is reason to believe that the same dynamics will indeed hold in post-­conflict settings. The winner-­takes-all mentality and short time horizons of conflict actors are likely to persist into the post-­conflict phase, and immediate enrichment through the appropriation of aid monies may be seen as more advantageous than participating in a long-­term process of development,

Aid and corruption in post-conflict countries   89 where rewards are uncertain and will not come until later. Additionally, the low risk of detection in post-­conflict countries makes corruption an attractive option and further weakens political will for reform. Conditionality, then, seems unlikely to increase donor leverage, or to induce behavioural changes in post-­conflict settings. Aid around the state As donors have come to recognise that aid through the state may increase corruption and that conditionality is not particularly effective at countering this, some have begun circumventing governments in their disbursements and opting either for direct execution or for heavily monitored national execution of projects. Boyce and O’Donnell (2007b: 10–11) call this an ‘avoidance strategy’, in which donors bypass the government in order to avoid the risks of corruption (see also O’Donnell 2008: 250; François and Sud 2006). In practice, this has meant relying increasingly on project aid funnelled to UN agencies, NGOs, community leaders and civil society actors rather than on budget support to governments. Project aid gives donors greater control over how money is spent and enables closer oversight and auditing during implementation. They are able to stipulate exactly what particular monies are to be used for and can approve decisions along the way about how and to whom implementation contracts are awarded, how staff are recruited and remunerated, and how disbursements are made. However, the failure to include the government in spending decisions will almost certainly undercut the goals of peacebuilding in two ways: donors will be unable to build national capacity for autonomous fiscal management and economic development, and the legitimacy and accountability of the government will diminish. First, if international actors bypass local ones, then local actors will either fail to build the capacity for sound economic management or become dependent on international actors for it, or both. As discussed above, large influxes of aid already reduce the incentives to build up local revenue collection; failing to include national actors in the design and implementation of programmes funded by aid is likely to reduce those incentives even further. States will thus become dependent on aid and irreverent about transparency. For example, Keen argues that in Sierra Leone, the international community’s failure to support the state made it unable to control smuggling, which in turn prevented it from taxing its own resources and building up a revenue base (Keen 2005: 81). In the worst case, the management of aid with little government participation will result in a parallel public sector, with different budgets, spending priorities and accountability mechanisms. Ghani et al. (2007: 157) note that the ‘external budget’ in Afghanistan from 2002–2004 was almost double the ‘internal budget’ because donors used UN agencies, NGOs and private

90   S. von Billerbeck contractors as executors, leaving the Afghans out of the process. However, the international community’s bid to avoid corruption had exactly the opposite effect: it not only made operating outside official economic channels the only option for many, it also entrenched weak capacities and undercut Afghans who were trying to promote greater transparency. Second, if macroeconomic policy is set by international actors and a large percentage of national income comes from them, the post-­conflict government is likely to lose legitimacy in the eyes of the population. Where the government is perceived to have relinquished economic control, people are unlikely to view it as an agent capable of furthering their interests. At the same time, if they are not in charge of economic matters, government authorities will have little reason to be accountable towards their citizens (Heller 2005: 22; Ghani and Lockhart 2008: 83). In Afghanistan, for example, the government of Hamid Karzai is widely perceived as a pawn of Western donors, who give it money and tell it how and when to spend it. This has led many to withdraw their support – and in some cases, to shift it to the Taliban or local warlords. In this way, aid has not only weakened state actors, but has also strengthened those who threaten the state (Suhrke 2006). Additionally, though funding implementing partners directly may avoid state corruption, the former are just as able to appropriate aid money as state agents. Indeed, donor reliance on community leaders or other informal channels for aid delivery has been shown to fuel corruption and entrench exploitative or imbalanced relationships. In Sierra Leone, post-­ war decentralisation, strongly promoted by donors, was perceived as a threat by local chiefs, who thought they would lose power to district councils. Under the new system, however, chiefs were not able to set taxes, but were charged with collecting them. Underreporting the population size and pocketing the excess money in a bid to preserve their positions, they alienated constituents, dividing, rather than uniting, the post-­war society (Jackson 2005: 53–54). Evidence from Tajikistan similarly shows that aid delivered through traditional groups not only contributed to corruption by reinforcing unequal power hierarchies and increasing the marginalisation of particular groups, but also further weakened the state by fuelling divisive nationalist tendencies (Nakaya 2008: 6; Freizer 2005: 228).

Barriers to combating corruption How can the international donor community balance between the need to strengthen states and the need to prevent corruption? Ideally, anti-­ corruption measures built into donor strategies could alleviate the risk of corruption that accompanies aid disbursements after conflict. However, tackling corruption also carries risks, imperilling fragile political processes in recipient states, and conflicting with strategic and institutional imperatives for donors.

Aid and corruption in post-conflict countries   91 While the deleterious effects of corruption are well documented, there may initially be political ‘benefits’, relatively speaking, from low levels of corruption in post-­conflict states. Patronage networks can be used to build and sustain political alliances, and the ability to placate and ‘buy off ’ political actors may help to prevent spoiler behaviour, enhance predictability, and boost political cohesion in the short-­term. This is critical in a context of high fragmentation and one where that fragmentation is expressed through violence rather than peaceful political contest. In eastern DR Congo, for example, there are tacit agreements between members of the armed forces, rebel groups, and the government, in which control of gold, coltan, and cassiterite mines is exchanged for abstaining from attack. Members of the Forces Démocratiques de Libération du Rwanda (FDLR), Rwandan Hutu rebels who originally fled into DR Congo in 1994, give Congolese army commanders and politicians a share of mineral profits in exchange for not being chased out of mining areas. In many instances, the relationship goes beyond a mere arrangement of convenience and reaches the level of friendly cooperation. In Mozambique, aid appropriated by troops is thought to have improved their ability to protect the population and thus reduce popular discontent (Keen and Wilson 1994: 216). This is of course a sub-­optimal way of conducting politics, but it may be one of the few options open to actors operating in a highly competitive setting. Indeed, when corruption is viewed as a political phenomenon rather than a purely economic one, it becomes clear that ‘not all corruption is equally corrupt or equally corrosive’ (Boyce and O’Donnell 2007c: 289). While post-­conflict aid may enable individuals motivated purely by greed to enrich themselves or may entrench dominant parties and reduce the effectiveness of measures such as power-­sharing, it also provides resources for the creation or perpetuation of political alliances through means other than violence. For example, there is evidence of cooperation between former members of the Congrès National pour la Defense du Peuple (CNDP), a Rwandan-­backed Tutsi militia that has now been nominally integrated into the Congolese military, and members of the Hutu FDLR over cassiterite mines in eastern DR Congo. While these groups have a long history of vitriolic animosity and violence in the region, the latter, who control the mines, have an ‘arrangement’ with the former where minerals are exchanged for not being attacked (UN 2010). In the face of potential mineral profits, then, two opposed groups have found a way to co-­exist and even to collaborate. While this relationship is not particularly productive or transparent, and fails to benefit the population at large, violent confrontation between them would certainly not provide a better alternative. This kind of corruption, then, may be a ‘least bad’ option, as it not only assists in jumpstarting economic activity as described above, but also helps to initiate non-­violent political interaction.

92   S. von Billerbeck Most importantly, these examples illustrate the fact that aid disbursements in post-­conflict settings affect power relations between local actors, and attaching conditions to the use of aid means that donors will be dictating how those relations can and cannot shift. While in theory this could assist donors to strengthen moderate actors and weaken divisive or extremist ones, it can also result in the creation of artificial and unsustainable political networks that will compromise long-­term efforts to consolidate peace because they are based on what donors want, rather than what is desired or feasible in the country in question. In post-­war Bosnia, donors were willing to tolerate corruption among their favoured moderate politicians, and in Mozambique, donors preferred to work with corrupt politicians who espoused donor-­promoted economic policies, rather than with clean ones who had different economic priorities (Donais 2005: 80; Hanlon 2004). This phenomenon is echoed in the ‘securitisation’ of aid, in which donors use aid to advance their national security interests, viewing it as a ‘weapon’ with which they can combat insecurity by buying off potential spoilers (Petrík 2008). In these cases, aid goes to those who have the ability to make the most trouble, or to areas that are the most unstable. However, this directs aid to people and places where absorptive capacity is low and risks of abuse are high, rather than to those who are most efficient or capable. Aid can thus not only upset efforts to buttress the state, it can directly help to strengthen extremist or unrepresentative elements and weaken moderate ones. It can also alienate the latter by demonstrating that extremist behaviour is ‘rewarded’ while peaceful behaviour is not (Wilder and Gordon 2009). The Commander’s Emergency Response Program (CERP), a US programme in Iraq and Afghanistan enabling commanders in the field to authorise reconstruction contracts in their areas of responsibility, has been criticised for essentially funding insurgents and warlords, rather than financing projects that will benefit the population. Moreover, CERP-­ funded projects (in Afghanistan in particular) have been audited only selectively. This is ostensibly because there is not the capacity for comprehensive oversight, but it also conveniently allows commanders to build alliances with unsavoury, corrupt, or extremist characters if they perceive them to be key to security (Bauer 2009; Falconer 2009; Londoño 2009). While this may buy access for international forces or short-­term stability, it does little to promote statehood, democratic governance, or transparent economic practices in the longer-­term. However, despite these overtly political aspects of aid, international financial institutions (IFIs) view themselves and the aid they disburse as apolitical, and both the World Bank and the IMF are prevented by their charters from becoming directly involved in political processes in recipient countries (IBRD 1989, Article IV, Section 10; International Monetary Fund 2009, Article IV, Section 3, (b)). Consequently, they tend to view

Aid and corruption in post-conflict countries   93 corruption as a technical economic problem, and have attempted to address it largely through technical means, downplaying the deeply political nature of corruption, undercutting the political manoeuvrability of national actors, and denying their own role in influencing the political situation. This situation is worsened by the bureaucratic pressure on donors to disburse aid in post-­conflict situations quickly. Donors are evaluated on the quantity of aid disbursed, rather than the quality of results on the ground. While state strength and economic development are admittedly difficult to measure, in the ‘disbursement culture’ of IFIs, what matters is how much aid is given, not what it achieves. Moreover, staff will usually lose funds the following fiscal year that they fail to spend in the current one. Accordingly, they are often willing to look the other way when their funds fuel corrupt practices, as ‘moving the money’ becomes their predominant goal (Easterly 2002; Boyce 2002a: 1040; Woods 2006: 180, 201; Cooksey 2002: 49). These strategic and institutional constraints, together with the role of corruption in ‘enabling’ domestic politics in recipient countries, mean that combating corruption in post-­conflict aid is rarely a priority. Poorly executed and ill-­informed anti-­corruption efforts can have serious consequences for political developments in post-­conflict countries, and it is not necessarily in donor or recipient interests to combat corruption in the short term. What can be done? While donors must be sensitive to the political realities of the countries in which they are disbursing aid, corruption cannot be allowed to fester in post-­conflict countries. Low levels of corruption may be unavoidable, but consciously tolerating corruption will lead to it becoming the usual way of conducting politics, rather than a ‘stopgap’ measure in the uncertainty of  the immediate conflict aftermath. Corruption may be a by-­product of efforts to strengthen the state, but if it is allowed to go too far, it will increase the power of elites within the state relative to others to the point that opposition groups are left unviable and the government is no longer accountable to the population (Fritz and Kolstad 2008: 13; Cooksey 2002: 47). Indeed, even those who engage in corruption for ‘political’ purposes may not always have political cohesion and stabilisation as objectives and may instead be motivated by a desire to regroup before a return to conflict (see for example Giustozzi and Ibrahimi forthcoming). After a certain point, the alliances that corruption supports may become entrenched so that they are divisive rather than productive in political terms. Clearly then, even if there may be a short-­term ‘benefit’ to low levels of corruption, it is not a solid foundation upon which to build lasting peace, let alone economic development.

94   S. von Billerbeck Donors thus need to think creatively about ways to disburse post-­conflict aid that both enable politics to be conducted and discourage corruption. They should phase in aid disbursements to minimise the opportunities for corruption created by aid windfalls, and pay less attention to overall disbursement levels, and more to quality of results. Donors should also work closely with security actors like UN peacekeepers, who often have greater knowledge of power relations on the ground and the relative strength of different actors, and can help donors to be sensitive to the political stakes of aid. Additionally, if donors are aware of how and why corrupt practices are being used, they will be able to distinguish between those whose goal is self-­enrichment and those who have political objectives. They can then devise different strategies that root out and prosecute the former and help find alternatives for the latter. Finally, anti-­corruption programmes should be tailored to each individual situation, rather than prescribed as a one-­ size-fits-­all remedy to post-­conflict corruption.

Conclusion Post-­conflict aid has a number of undisputable benefits. It can fund infrastructure projects that support large-­scale economic programmes and enable freedom of movement; it can support social projects that provide education and health services to the population; it can reinvigorate neglected industries or start up new sectors of economic activity; it can tap into underexploited natural resource reserves, and it can back up humanitarian efforts to provide life-­saving assistance. These elements of economic recovery are essential to long-­term stability after civil war. Most importantly, aid can help to strengthen the state’s managerial capacities, introducing predictability and equality into its activities, and thus contributing to the consolidation of peace and the avoidance of renewed conflict. Unfortunately, aid can also render corruption both possible and logical, a problem that has led some donors to avoid the state and instead fund projects directly. However, aid that avoids corrupt state actors can displace the state and discourage economic responsibility, which will reduce state strength and legitimacy. At the same time, corruption may have some utility in facilitating short-­term political manoeuvrability for national actors and may, in the uncertain and distorted political dynamic of a post-­ conflict state, at least present a non-­violent – though perhaps no less detrimental – means of consolidating power and alliances. Yet, tolerance of corruption can undercut economic growth and long-­term fiscal stabilisation, which are, as mentioned, key to long-­term recovery and conflict prevention. Accordingly, donors need to devise new ways to combat corruption that minimise incentives to corruption without interfering with important political evolutions. This does not mean tolerating corruption but it does mean accepting that their work is necessarily political. Donors need

Aid and corruption in post-conflict countries   95 to learn how to distinguish between the motivations of different actors and tailor their responses accordingly. Only by doing so will they be able to convince national actors to prioritise national interests above particularist ones and help the state move toward responsible governance and stability. For anti-­corruption efforts to be effective, there is a need for additional research about corruption in post-­conflict settings. This includes not only better data differentiating between sectors and taking into account aid windfalls, but also exploring the link between corruption and violence, to determine whether corruption – as well as efforts to fight it – increases the risk of conflict recidivism. If low levels of corruption are unavoidable in certain contexts and can jumpstart economic and non-­violent political activity, then it is critical to know how and when it reaches a level where it triggers violent conflict. Indeed, while corruption may have a short-­term stabilising effect after war, in the long-­term its effects will always be negative. Widespread corruption reduces trust in public institutions, stunts economic growth, increases income inequality and entrenches political partisanship. This combination of factors may ultimately incite a return to conflict, meaning that both aid and peacebuilding efforts will have been for nothing. As the UNCAC notes, corruption and instability are closely linked; efforts to combat them must accordingly also go hand-­in-hand.

Notes 1 I use international aid to refer to assistance disbursed through bilateral or multilateral aid agencies, such as the World Bank and the International Monetary Fund (IMF ), with the overarching goal of long-­term development. 2 Data from the World Bank’s World Development Indicators, online, available at: http://databank.worldbank.org/ddp/home.do?Step=2&id=4#. 3 The large literature on the economic causes of war (see for example Ballentine and Sherman 2003; Collier and Hoeffler 2004c; Fearon and Laitin 2003; Keen 1998) has led to an increasing recognition of the potential economic causes of peace (see for example Del Castillo 2008; Collier et al. 2006; Orr 2002). In his 1992 Agenda for Peace, Boutros Boutros-­Ghali calls ‘economic despair’ one of the main causes of conflict. 4 There is also a growing body of work on the concept of peace conditionality, which explores whether foreign aid can be used to elicit compliance with peace agreements. See Boyce 2002b; Boyce and Pastor 1998; Frerks 2006. 5 Some argue that the Anti-­Corruption Commission in Sierra Leone, while a step in the right direction, has not proved effective, noting that few of the cases brought to it have been prosecuted. See Boucher et al. 2007: 19. 6 Measurements based on perceptions are particularly problematic, as they are susceptible to response bias based on differing understandings of what corruption is. 7 For example, data are missing for all of the countries that have had UN peacekeeping operations for some or all years in Transparency International’s Corruption Perceptions Index, which runs from 1995–2010. Online, available at: www.transparency.org/policy_research/surveys_indices/cpi.

96   S. von Billerbeck 8 Despite an increased acknowledgment of the particular conditions present in post-­conflict states by the World Bank and others, many analysts note that they nevertheless pursue the same macroeconomic goals in these countries as in ‘normal’ developing countries. See del Castillo 2008: 275–276; Donais 2005: 17–18, 45. 9 Nearly all multilateral and bilateral donors emphasise national ownership, partnership with beneficiaries and the building of local capacities to ensure sustainability. See, for example, the UN’s Millennium Development Goals and the OECD’s Paris Declaration on Aid Effectiveness of 2005.

Part II

Case studies

6 The political economy of corruption in Bosnia and Herzegovina Michael Pugh and Boris Divjak

Since 1999–2000, when aid flows to Bosnia and Herzegovina (BiH) began to slow down with a concomitant reduction in economic growth rates, much attention has been devoted to the fiscal, legal and administrative impediments to successful economic transition in that country. Additionally, because developmental economic activity has been narrowly defined to only include formal activity, informal economies (often labelled ‘grey’ or ‘shadow’) were increasingly seen to be holding back the transition process. Because it is considered to be important to the informal economy, the ‘culture of corruption’ has attracted interest both domestically and internationally as the bête noir of political integrity, economic justice and progress, including in a comprehensive analysis by Transparency International (2007). This chapter brings together two elements, the structural and the cultural, to focus attention on the relationship between corruption and the constitutional arrangements based on the Dayton Accords. In order to limit the terrain to be covered, a narrow, political definition of corruption is followed: the abuse of public position for personal or factional gain. A broader definition would encompass business corruption, at which accumulators and investors of capital in the core locations of global capitalism have been observed to excel.1 The following analysis uncovers anomalies, not least in the economic performance of BiH itself since 1995. But the main obstacle to reducing corruption has been the absence of a liberal social contract. The governance of BiH through so-­called shared domestic/international sovereignty has led critics to denounce the ‘liberal peace’ in BiH as a travesty of statebuilding because the process has not been anchored to any political roots, and in fact has been de-­politicised. This has led to a supposedly neutral international administration evading its responsibilities and the weakening ability of communities to govern themselves (Chandler 2006). At the same time, however, economic reforms and a high degree of decentralisation have given elites and local communities the ability to resist externally-­ induced structural adjustment. The contention here is that the complex administrative mechanics prescribed by Dayton presented opportunities for the abuse of public office, limited attempts to establish a social contract

100   M. Pugh and B. Divjak between individual and state, and made it difficult to eliminate corruption. A degree of social cohesion still lies in local clientelistic loyalties and informal economic activity. The chapter is divided into four parts. The first part outlines the impact of the Dayton Accords on the territorial and administrative distribution of power. Second, the analysis provides empirical material to illustrate the politics of corruption through the BiH administrative levels in light of the economic power exercised by external agencies. The third part examines the economic/developmental approach to recovery from war and its modulation into a hybrid paradigm. The chapter concludes that the conjuncture of administrative decentralisation and economic liberalisation has facilitated corruption and bounded the individual’s contract with the ‘liberal’ state.

The Dayton legacy In recognition of the politics of self-­determination and previous military outcomes in the Bosnian Republic, the Dayton Accord was an adaptation of the 1993 Vance–Owen plan for semi-­autonomous cantons. It established two entities: the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS), with Brcˇko District eventually carved out by arbitration in 1999 as a separate territory of BiH with its own international administrator, police and judiciary. FBiH was divided into ten cantons, each with its own parliament and ministries (with some 160 ministers altogether), and the country as a whole was further divided into 142 opstinas or municipalities (some scarcely economically viable). The number of public officials in senior and middle administrative management in the country is estimated at around 50,000, according to the BiH Law on Conflict of Interest, and there are 14 police forces. The impact of the Dayton Accord on the territorial and sovereign distribution of power has been long-­lasting, but there has been a debate over its precise impact on economic development. Many commentaries have highlighted the bureaucratic impediments to economic performance arising from multiple layers of government, including the difficulties of conducting trade within the country (World Bank 2003a). However, this does not mean that decentralisation is inherently inefficient. The net burden of direct costs in employment, for example, may be less than assumed. For example, cantons in FBiH employ people in public services (except health care) who would otherwise need to be paid for centrally. In the Tuzla canton budget plan for 2006, only about 600 people were employed in administering and governing a population of 455,000 (Hadzic´). Inefficient spending (and, one should add, corruption) rather than administrative costs per se, has been more significant, according to a World Bank study (2006b).2 Nevertheless, it is not possible to speak of a single economic space; economic power is fragmented. The entities and cantons set their own

The political economy of corruption in BiH   101 budgets and have a degree of autonomy in revenue raising and development policies. Although the Indirect Taxation Authority, established to collect VAT from 2006, is a state-­level body, the revenue is shared with the entities. The state now has a common customs service, but cannot pursue fiscal policies or an economic development strategy independently of entities and cantons (Stojanov 2007). The fragmentation of authority thus presented opportunities for rent seeking and abuse. The attitudes of individuals and groups towards such opportunities evolved from the pre-­war economic system and the wartime entrepreneurship incentives that served political interests. Alarm bells began ringing in 1999 when an anti-­fraud unit established by the Office of the High Representative (OHR) reported that some US$1 billion had gone missing from funds provided through international reconstruction aid, including millions from the Tuzla city budget for 1999 and millions from the Bosnia and Herzegovina Bank (which collapsed) (Hedges 1999).3 Nationalist political leaders, and the Bosnian president’s son, Bakir Izetbegovic´, were implicated in extortion rackets but dismissed the allegations. Concerned with maintaining US relations with the Bosniak majority, American Ambassador Robert Frowick, who led a team sent by Congress to investigate the report, played it cool and noted that corruption was not unknown in his own country (Smith 1999: 5). In July 2002 a new government brought a seasoned investigator, Munir Alibabic´, out of retirement as head of intelligence to deal with corruption and links to terrorism. His report allegedly detailed ties between leaders of the Bosniak nationalist Party of Democratic Action (Stranka Demokratske Akcije, SDA), organised crime and the Third World Relief Agency (TWRA), a front for radical Islam.4 The US General Accounting Office has since labelled the country a ‘lawless political economy’ in which wartime networks turned into peacetime mafia businesses.5 In particular, ethno-­nationalist parties penetrated and controlled industries and enterprises, whether state-­owned or recently privatised. According to public perception, political parties were regarded as the most corrupt sector in BiH by far and confidence in politics, institutions and the administration, including international offices, remained very low (Transparency International 2007: 295). By most accounts, economic development and foreign investment have been the major casualties of the political distribution of economic rewards, concessions, licenses and the privatisation scams that facilitated fraud, money-­laundering, tax evasion and trafficking.6 In particular, corruption was to become endemic at all levels, from ministries to local offices, in the granting of licences, concessions and permissions, notably building permits, usually on a clientelistic and highly discriminatory basis (Pugh et al. 2004: ch. 5). However, the post-­war ethnic division of the spoils did not conform rigidly to administrative boundaries or preclude inter-­ethnic shadow economic activity. War-­ time deals between the militaries continued between crime syndicates

102   M. Pugh and B. Divjak afterwards. For example, a customs duty evasion scam by Bosniaks in Tuzla in the late 1990s and early 2000s required the paying off of RS customs officials.7 Another example is that of Srpske Sume, an RS timber conglomerate, which is partially owned by the Serbian Democratic Party (founded by Radovan Karadžic´) and also has links to firms in the federation.8

Governance and corruption A number of newly adopted laws on corruption in BiH reflect good global practice, but inconsistent and weak implementation and a consequent lack of positive results have led to a continuous decrease in public trust in the country’s institutions. The analysis of the scale of corruption on the basis of corruption surveys shows that it is most pervasive at the local (municipal and particularly cantonal) level (Transparency International 2004). This is unsurprising, given that contact between citizens and the public administration mostly takes place at the sub-­national levels, while the price of corruption is certain to rise at higher levels of power. In most cases, the incriminating trail of activities such as the misappropriation of public funds, the mismanagement of public companies and irregularities in the privatisation process, does lead to the top levels of power. This leads to the conclusion that most of the criminal activities could not happen without the direct engagement or patronage of high-­ranking officials. From the perspective of those concerned with transparency and accountability, it is disturbing that the key positions in the privatisation and regulatory agencies, and on the managing boards of public enterprises are held by persons whose most important qualification is their membership in the right political party. The public thus perceives the political parties as the most corrupt segment of society, introducing fraud, theft, cronyism and other corrupt behaviour into executive and legislative institutions, as well as indirectly undermining the law enforcement institutions of the judiciary, prosecution services and police. Noteworthy, also, is the lack of a multi-­stakeholder approach to fighting corruption. Most efforts have concentrated on the strengthening of individual institutions and have very rarely taken a holistic, countrywide approach that would begin by bringing the key parties together to discuss agendas and priorities. A good example of this type of failure is judicial reform. Strengthening the judiciary without implementing simultaneous and integrated measures in the police, prosecution services, public attorney’s office and the legal professions will not bring about any sustainable improvement. While progress has been made in professionalising the judiciary, the police and other institutions of the legal system, the lack of communication and cooperation between these institutions has prevented substantive systemic change. More than a decade has passed since the end of hostilities, yet there have been few serious prosecutions of corruption

The political economy of corruption in BiH   103 and organised crime by the judiciary, or of economic crimes committed either during the war or after.9 This highlights how the current decentralised and uncoordinated system is unsustainable in the long-­term and vulnerable to political influence. Three anti-­corruption strategies (including two prepared by the international community) have failed thus far because of the lack of commitment from local institutions, the lack of cooperation between the principal agencies, and the lack of political will to combat corruption. As long as national politicians benefit from maintaining non-­transparent, semi-­ autonomous, feudal domains, and rely on unaccountable networks supported by financial and economic resources at their disposal, the public sector will remain unable to effectively address Bosnia’s governance and corruption problems. The apparatus of orderly government is too often hijacked by political elites who siphon off proceeds from the national treasury and transform government bureaucracies into bribe-­collection agencies which impede business. For instance, BiH remains a regional leader in the length of time it takes to register a new business, with corruption slowing down the process and the slowness of the process encouraging more corruption. The customs procedures for both importing and exporting take several times longer than in neighbouring countries. A slow process of using the proceeds of property transformation to drive capacity building has left state-­owned capital languishing, still ruled by an economic policy characterised by conflicts of interest, nepotism and cronyism. A large share of public expenditures remains outside the budget (including the road directorates and power companies). Neoliberal observers are inclined to cavil at the lack of progress in the privatisation strategy, in the federation particularly, as undermining the country’s health.10 Given how time-­consuming it is to address key transition challenges and that much valuable time has already been lost, any further delay in systemic anti-­corruption efforts may threaten the coming reform processes and thus have far-­reaching consequences. Especially worrying has been the privatisation of large, strategically important companies, such as Mostar Aluminium, which has been characterised by its lack of transparency and failure to follow legally prescribed procedures. In 2007, Transparency International BiH raised the issue of the illegal privatisation of the Brod oil refinery and the Gacko thermo-­electric power plant, both operations that more closely resemble a money laundering operation than respectable foreign direct investment (FDI). No less worrying has been the lack of privatisation of companies run by political elites for their own benefit rather than for the benefit of the state. Such an environment deters much-­needed foreign investment and makes domestic investment less appealing and profitable. Corruption has created an atmosphere of ambiguity that stymies businesses from investing and initiating new operations. Certainty

104   M. Pugh and B. Divjak premised on the rule of law is a prerequisite for investment, and pervasive corruption has long-­term consequences for the country’s economic development. Corruption has also played a pivotal role in driving foreign investment away; most foreign companies have refused to set up operations after demands by officials to pay bribes and do business exclusively with local party officials. BiH thus remains one of very few countries where even McDonald’s was discouraged from entering the country; no significant multinational manufacturing or trade business has invested any capital. Until 2005, BiH maintained the lowest regional FDI figures, with a slight improvement since. Administrative barriers are numerous – in the region, the country has the highest costs for setting up a business and among the highest social and fiscal contributions. These barriers are discouraging for investors and they encourage the development of the grey economy, providing the context and incentive for corruption. BiH remains aid dependent at a time with few international sources willing to continuously fund its development, no growth strategy of its own, and no sustainable structures that will lead to EU accession. International governance and corruption The international agencies led by the OHR have failed to ensure the rule of law and transparency prior to disbursing both grants and development loans. To the contrary, in order to reduce popular support for the nationalist parties, corrupt ‘moderates’ were often encouraged through a more intensive delivery of aid, at the further expense of the country’s institutions and sustainable development. The most notable example is that of RS prime minister, Milorad Dodik, whose two terms in office in 1998 and 2006 led to a number of embezzlement and corruption scandals surrounding his cabinet ministers, but no investigations or prosecutions were pursued. Dodik was first installed in 1998 with the significant support of the international community who kept him in power as interim prime minister; his government was the largest recipient of donor funds in post-­ war RS (Divjak 2005: 5). Even recent findings of highly non-­transparent public contracts issued by the Dodik government involving hundreds of millions of euros worth of undisclosed deals have provoked little reaction by any law enforcement agency. Yet in reporting this news, pressure was exercised against the media, NGOs and other watchdogs to the point where many democratic advances may have been reversed. While some individuals within the OHR raised concerns, the bulk of the international community in BiH remained silent, possibly fearing that a strong response would make it more difficult to manage the fall-­out of a declaration of independence by Kosovo. In the FBiH, the Party for BiH, of wartime Prime Minister Haris Silajdzic´, had many cronies running activities with clear conflicts of interest, but managed to maintain its political clout; it was respected by the

The political economy of corruption in BiH   105 international community as non-­nationalist and ‘pro-­democracy’. Reports by the media and civil society on their corrupt activities have mostly remained unaddressed by the prosecutors and the state-­level judiciary, in spite of significant international condemnation. The economic interests of this ‘moderate’ political elite is disguised as calls for the centralisation of the country’s institutions and the abolition of its sub-­national levels – a populist manifesto aimed at its dominantly Bosniak constituency (Transparency International 2007: 166). Political pressure exercised against the wartime Serb Democratic Party, coupled with the attraction of Serb voters to Dodik’s increasingly nationalist political rhetoric, led to internal power struggles and its decline from being the dominant Serb party to becoming the weak opposition. Similarly, the wartime Croatian Democratic Union (Hrvatska demokratska zajednica, HDZ) suffered a split in 2006, which can be ascribed to the domination of individual interests just as the international community was attempting to lessen its influence on the Croat political body. Yet the HDZ’s strategy of alleging Croat marginalisation only shifted support from one wing of the party to the other, without actually expelling the war profiteers and indicted criminals, such as Dragan Covic, from leadership positions. It is this environment in which the international community and the OHR have chosen their temporary partners and politicians, through whom they promote laws, principles, mechanisms and institution-building, much to the discontent of the citizens who are cognizant of the corrupt wartime and post-­war background of the country’s political leaders. The comparatively successful regulation of the banking, financial and taxation sectors, and the establishment of some of the integrity pillars, such as supreme audit institutions, has mainly been ascribed to donors’ technical assistance. The quality of certain laws has often been a product of pressure on public officials by the OHR or other international institutions, and when necessary, their imposition. Should the OHR with its ‘Bonn Powers’ eventually be closed (as has been mooted since 2008), donor agencies and governments, together with the EU Special Representative (EUSR), will need to continue to support the integrity of these laws and institutions.. Ultimately though, local institutions have to take full ownership of and responsibility for the system of integrity. This, however, can only be achieved when relations with the international community achieve the status of a partnership based on mutual support, rather than the full-­scale involvement of the OHR and other international agencies in running the day-­to-day business of the country. This is easier said than done, as national authorities and certain pillars of the integrity system may not be sufficiently ready for such a transfer of responsibilities. Both state- and entity-­level authorities have sometimes opposed the imposition of laws, feeling too weak and vulnerable to social pressure and its associated risks. This unique symbiosis of international and local power in BiH has

106   M. Pugh and B. Divjak weakened the public administration; nonetheless, it remained in place though the OHR was supposed to close down in 2008. A gradual phasing-­ out had begun in 2006 with the arrival of Paddy Ashdown’s successor, Christian Schwarz-­Schilling, but due to regional instabilities caused by regional and international disputes over the status of Kosovo, his successor Miroslav Lajcak has reverted to heavy-­handed political intervention, raising questions about the phasing out of the OHR. Arguably, this sharing of governmental responsibility between the OHR and the national governments at all levels has constituted a comfortable position for both sides, as failures can easily be assigned to the other party, while everyone claims the rare success stories. However, this diminishes the credibility of the national institutions, particularly the justice and law enforcement agencies that are in dire need of reform. Their profile is strongly undermined by every isolated activity of the OHR, when decisions are taken in international circles, without empowering national institutions with professional and fair trials, prosecutions and penal mechanisms. As Jeremy Pope (2000: 162) has argued with regard to the role of international actors in anti-­corruption efforts: No society is free from corruption, and each has to fine-­tune its integrity system continuously to keep the menace in check. Now it is coming to be recognised that only those who live in a particular society can truly appreciate its nuances, and only they are in a position to judge both what is possible, and what may or may not be workable. The donors’ role should therefore be limited to facilitating internal discussions and assisting in building internal ownership of well-­ informed reform programmes. Donors should not attempt to dictate these from outside, or to impose conditionalities that are unrealistic or which are not supported by significant internal actors.

Hybrid economy The description of the BiH economy as utterly criminalised would be inaccurate and would mischaracterise the role of the informal sector. Nor, paradoxically, can ‘corruption’ and informal economic activity be entirely dismissed as anti-­developmental. As Christopher Cramer points out, the tendency to see civil war as wholly devastating ignores the historical experience of primitive capital accumulation, which is so pervasive in war that it plays a significant role in the development of political economies and of political community (2006: 124–137). Capital gains in war have been essential in statebuilding and in BiH the mechanics of externally imposed post-­war reforms and capital accumulation by domestic elites were much less antagonistic and more convergent than the dominant discourse of ‘modernist international probity versus outmoded domestic corruption’ suggests. As indicated above, there have been linkages between the

The political economy of corruption in BiH   107 reformist impulse and local clientelist patronage. The international presence and reform policies created opportunity structures that benefited war entrepreneurs and local elites, who (often simultaneously) have resisted and captured various processes of change (Pugh 2002). Both the international community and war entrepreneurs had a pliant, impoverished population in the economic sphere that could be exploited for nationalist loyalty (by the war entrepreneurs) and moulded for modernisation (by the international community). Above all, international administrators and local elites have privileged business and private wealth as the motor for economic change. To some extent, the international community may inadvertently depend on corruption, particularly in the labour market, to cushion citizens against the harmful effects of abdicating responsibility for fostering direct income generation. Economic prescription has long been a touchstone of liberal peacebuilding, and the principal international agents have had significant powers of direction over economic agendas, with the International Monetary Fund (IMF ) controlling the national budget until 2002, and no local control over monetary or exchange rate policy. For the international community, BiH has been an ideal test case for the ‘liberal peace’ and its utopian vision of harmony based on democratisation, rule of law and market liberalisation, not simply because of the developmental impact but also because of its attenuated connection between development and a social contract between individuals and the state. At the same time, BiH has succumbed to the pressure of ‘accumulation by dispossession’. Endless over-­accumulation by conglomerations of political and economic power requires outlets in acquisition, conversion of property, population displacement and the suppression of alternative means of production – invari­ably resulting in the dispossession of the most vulnerable sections of society (Harvey 2002: 134–135). A neoliberal economic paradigm for BiH was laid down at the first two donor conferences in 1995 and 1996 by the World Bank, the European Commission and the European Bank for Reconstruction and Development. These external agencies and aid donors declared that the economic and development strategy would be governed by the private sector with employment to be generated through small and medium-­sized enterprises (SMEs) and policies of economic liberalisation. A third of EU pre-­accession agreement funds would go to support SMEs, though this was a relatively costly model for BiH compared to development programmes in Africa for example. The state would be reduced to providing the conditions necessary for the ‘uninterrupted functioning of a free market’ as well as the ‘provision of basic public goods and social services’ (World Bank 1997b: 39ff.; 1995a; 1996a). Liberalisation and deregulation made it harder for the state to police corruption, because of their weak regulatory capacities. Yet for all the rhetoric about privatisation, it can be argued that the institutions and agencies of global capital were not dogmatically wedded

108   M. Pugh and B. Divjak to a privatisation programme that would enable local companies to compete successfully in wider markets. Botched privatisation programmes were tolerated except in the banking sector, which was quickly devalued; the banking sector is now 85 per cent foreign-­owned. For the Medium Term Development Strategy (and Poverty Reduction Strategy) of 2004, the government of BiH had a more formative role in strategic economic planning. But the strategy could not go beyond the budget constraints of the international financial institutions (IFIs) and the BiH Economic Policy and Planning Unit under Prime Minister Sulejman Tihic´ was closely attuned to IFI requirements. Institutional and regulatory frameworks and the highly prized ‘rule of law’ were essential for protecting FDI from risk. But in general, the reduction of the state sector, portrayed by donors and global finance institutions as an economic imperative, has only further weakened the central state. In 2005, the Independent Commission on the Balkans noted alarming levels of public distrust in politics and the economic future, and described the whole region as becoming a marginalised ghetto (2005: 10–11, 40). By the beginning of 2007 the economy had officially recovered to about 70 per cent of pre-­war GDP levels. However, this promising figure is misleading. Since pre-­war GDP levels did not include the service sector, pre-­ war GDP levels are understated by about 25 per cent, making the recovery slightly less than 60 per cent of pre-­war GDP. Moreover, GDP was also boosted from 2006 by simply including rents (and will be further increased with the inclusion of cooperative farm production). Such general indi­ cators for BiH, albeit unreliable, display remarkable paradoxes. On the one hand, real growth rates (excluding informal activity but accounting for inflation) have been respectable, though much lower at 6 per cent to 7 per cent in 2006 than during the 1990s when aid disbursement and transfers by peacekeepers and foreign personnel (still an estimated 9 per cent of GDP in 2006) fostered growth rates in the double digits. However, the real rate of GDP growth continued to slow down and in recession collapsed to −2.9 per cent in 2009. GDP per capita had increased steadily by 50 per cent between 1998 and 2006, and by a further 25 per cent between 2006 and 2008 but then fell (by 3 per cent) in 2009, remaining at about one-­third of the EU average. Personal savings had also increased until a mini-­run on savings in October 2008. State revenues followed a similar growth pattern, but in 2009 decreased at the same time as spending commitments increased, obliging BiH to resort to an IMF loan of $1.15 billion over three years. Inflation has been kept low with the consumer price index growing at about 1 per cent a year from 2002 to 2004. It began to increase and reached 7.4 per cent in 2008 but by the end of 2009 deflation had taken hold. State revenue has increased and the public debt has fallen. The trade balance has improved from its dire condition in the 1990s as exports declined less rapidly than imports. Although agriculture remained firmly in the doldrums, industrial production, which had fallen

The political economy of corruption in BiH   109 catastrophically during the war and suffered from destroyed assets, obsolete equipment and antiquated business practices, managed to record real increases of about 10 per cent annually from 2003, notably in RS, but fell by 3.3 per cent in 2009.11 But the main economic driver has been the service sector where traders and financiers have the greatest interest in maintaining poor regulatory standards and weak agricultural and industrial production. On the other hand, the more transition benchmarks laid down by neoliberal reformers have been met – including labour market liberalisation – the higher the rate of unemployment, the more resilient the informal economies, and the more that young people want to leave the country. In November 2009, 66.5 per cent of 18–35 year olds said they would leave BiH if given the chance (UNDP 2010b: 13). As the Rijeka University economist Dragoljub Stojanov argues, with a weak export base and underwhelming inter-­entity trade, trade liberalisation hit producers and resulted in trade diversion rather than trade creation (2007). When the BiH Trade Protection Treaty ended in 2004–2005 the country hardly had any industries to protect. For an undeveloped or transition country, a trade liberalisation strategy between states with unequal levels of development would not work; simple reliance on comparative advantage is of no great help – as the EU long-­recognised in its policies of protection, sector subsidies and inter-­state welfare transfers. In 2009, BiH was ranked at 109 out of 131 in a ranking of global competitiveness, below Mongolia and Tanzania (World Economic Forum 2010). In addition, the heavy emphasis on the development of SMEs in the structural adjustment reforms can be seen as limiting BiH competitiveness in global markets and ensuring eventual vulnerability to foreign capture. The function of asset stripping, privatisation and investment was partly to make enterprises attractive to FDI. And although by regional standards BiH has done well with respect to FDI inflows, disaggregating these investments shows that FDI was not attracted to ‘greenfield’ projects and that state enterprises did not benefit. Most of this money went into a few companies and just under half went to the service sector (mainly banking). Industrial production is less vulnerable to corruption, has employment potential and could be greatly strengthened by investment, flexible employment practices, import substitution and temporary protection. It has been largely unsupported and its infrastructure neglected.12 In the near total absence of anything resembling a national development strategy, the bulk of the expansion of credit since 2002 has not gone into employment-creating sectors, but largely to consumer credit, a sector which contributes more to foreign investment institutions than to domestic industry (Stojanov 2007). The paradox is evident from the inability of exports to generate employment: ten companies account for 45 per cent of FBiH exports and another ten account for 37 per cent in the RS, but these companies account for a

110   M. Pugh and B. Divjak mere 4–5 per cent of total employment (Stojanov 2007; Cˇauševic´ 2006: 31). Above all, job creation in the formal sector has been very poor. SMEs may be the main source of new jobs, for that is where international assistance has been directed, but job losses have outweighed gains in the SME sector. Using strict International Labour Office criteria the unemployment rate had fallen to 23.4 per cent in 2008 but rose again to 27.4 per cent in 2010, though the official rates remained a stubborn 40 per cent and higher for the whole decade. The recession added to further job losses, particularly in the private service sector, in which foreign economic advisers had placed so much faith. The IMF ’s vicious neoliberal conditionalities for bailing out the government deficit included a 10 per cent cut in wages and social transfers (Investment Development Bank; Hurtic´ 2006; Tomaš 2006).13 Unsurprisingly, perhaps, about 35 per cent of the population in 2004 was living below the poverty line (at under e2 a day), and the gap between rich and poor appeared to grow (BiH Agency for Statistics 2005: 50).14 In November 2009, 5.7 per cent of respondents in Bosniak majority areas and nearly 4 per cent in Serb majority areas to a UNDP survey claimed that they had no form of income at all, and over 35 per cent in the whole country claimed to exist on KM500 (e250) or less a month (UNDP 2010a: 82, table 3). Yet the priorities of the citizens for work and income, as reflected in UNDP surveys have come second to making the business environment more attractive to international and domestic investors.15 This was also indicative of the priorities of the OHR and other agencies which relied on the indirect effects of market forces rather than on a more direct employment policy. The net effect seems to be a significant disconnect between social stability and the ‘benefits’ of transition. The neo-­liberal economic paradigm has been unable to forge a new social contract to replace Yugoslav and republic welfare, end war-­time and post-­war aid dependency, eliminate ethno-­nationalist clientelism and reduce reliance on informal economies. Informal economies promote access to goods, services, income and welfare, and provide a form of social and economic inclusion for the uninsured population.16 In the last quarter of 2006, about 20 per cent of those currently employed throughout the country expected to lose their job within three months. Grossly illiberal they might be, but informal economies help to sustain resistance to the socially alienating neoliberal economic paradigm. The informal sector is not to be confused with the organised crime and corruption discussed above. It includes legal, non-­observable or partly observable activities, such as bartering. Remittances and transfers by expatriate visitors are particularly important in servicing the current account deficit (about half the value of remittances is assumed to arrive undetected). In 2003 BiH had the highest remittances per capita of European transition countries, estimated at almost 17 per cent of GDP, though by

The political economy of corruption in BiH   111 2010 it was probably closer to 10 per cent as other GDP factors increased and remittance figures declined, not least because of recession in countries to which Bosnians fled during the war (Schrooten 2005).17 It may not be entirely flippant to contend that BiH’s comparative advantage in the global economy lies in migrant workers and informal economic activity (Stojanov 2007). The diaspora includes thousands of Bosnian contract workers (no one knows quite how many) employed by the likes of Kellogg, Brown and Root, and other American contractors in Afghanistan and Iraq. People have found other means of survival. Entitlements (veterans’ and widows’ benefits, pensions and welfare for victims of war) have been providing a safety net. While it is easy to criticise these for being a drain on the budget, the largesse is not all it seems. Entitlements are not always paid on time or in full, have to be fought for and provide a meagre source of income.18 Child benefits have already ended in most BiH federation cantons, even though the number of children in a household is a key factor in poverty. Health provisions are basic and often need supplementing with a bribe to get reasonable service (the bribe for an appendix operation in a central Bosnian city is KM250).19 Informal employment keeps people above the poverty line, particularly in rural areas (agriculture being the biggest informal employer) and among households headed by women (who are more likely to take part-­ time, temporary and low-­income jobs (Cˇauševic´ 2006)). Indeed, the size of the informal economy makes reform seem unlikely, but without it the situation for citizens would likely be worse. Survival and coping economies depend on petty trading, smuggling, bribery and tax evasion. Interviews suggest that this is particularly widespread and, of course, cash-­based (Jašarević 2006). As in Africa, the reinvention of economies on the basis of liberalisation, a limited state and self-­reliance provides new opportunities for graft and a strong incentive for people to cushion themselves against uncertainty (Szeftel 1998: 233).

Conclusion This chapter has argued that the governance structures instituted for BiH by the Dayton Peace Accord and the OHR have facilitated political corruption. The opportunities that arose out of the legacy of war swiftly became ingrained in the fabric of the government bureaucracy because opportunities arose that cemented the local political roots of clientelism and ethno-­ nationalist loyalties instead of establishing a new social contract between the individual and the state. Levels of mistrust in politicians and government remain very high in UNDP opinion surveys The decentralisation of power enabled entity and cantonal elites to exercise strong conditionality over the nature of survival and development. In particular, incentives to pursue personal and group gain through public office were underpinned

112   M. Pugh and B. Divjak by the self-­help instrumentalism of neoliberal economics. Constitutional fragmentation and development through accumulation by dispossession gave corruption a comparative advantage. Can existing links be weakened and social cohesion built around a less corrupt culture? Many factors could have an influence on shifting loyalties, including granting the region an ‘exception’ to EU accession standards or any conflict-­provoking attempt to undo Dayton. However, an examination of these possibilities is beyond the scope of this chapter. Certainly, it is essential to deal with political corruption through policing, regulation and the creation of a well-­regulated business environment. However, these efforts alone do not wean people off a culture of corruption. It requires not only institutional capacity to exert controls, but also requires revisiting the political roots of transition, and reviewing the adverse impacts of macroeconomic stability, economic liberalisation and treatment of the uninsured as an irrelevant surplus. The aim should be to provide incentives, through social protection and income generation, to replace social contracts forged by political elites, thereby increasing the security of those in a position to ‘blow the whistle’ on corruption.

Notes   1 See Baker (2005). Britain, the United States and Switzerland are among the world’s most corrupt countries. See Christensen (2006).   2 General government expenditure was reduced from 60 per cent of GDP in the late 1990s to below 50 per cent of GDP in 2006: EBRD (2007: 66).   3 Some of it exposed in the Sarajevo weekly magazine, Dani (1999a: 16; 1999b: 16–21).   4 Elfatih Hassanein, Hasan Cˇ engic´, Irfan Ljevakovic´, Bakir Alispahic´ and Alija Delimustafic´ were reportedly named. Ababic´ was subsequently dismissed by Paddy Ashdown, the OHR, possibly for compromising intelligence. Online, available at: www.cooperativeresearch.org/entity.jsp?entity=irfan_ljevakovic_1.   5 The US General Accounting Office (2000: 13) cited by Toal (2004).   6 See for example, Tomaš (2004); Bojicic´-Dželilovic´ et al. (2004); Tomaš et al. (2004); Andreas (2004b); Tzifakis and Tsardanidis (2006); Cˇ auševic´ (2006); Bliesemann de Guevara (2008).   7 Interview with EU Customs and Fiscal Assistance official, Sarajevo, 13 December 2002.   8 Interview with Banja Luka official, 17 June 2005.   9 While there have been no successful judicial prosecutions, the OHR has over the years dismissed a range officials and politicians on corruption-­related charges. However, these do not amount to a systematic response to the problem of corruption. 10 See the neoliberal discourse of the Commission of the European Communities in the Commission Staff Working Document (2009: 26). 11 Basic economic indicators are from a variety of sources, but particularly the Investment Development Bank of Republika Srpska and the Commission of the European Communities (2009). 12 Interview with Fikret Cˇ auševic´, Faculty of Economics, University of Sarajevo, 7 September 2009.

The political economy of corruption in BiH   113 13 Interview with Professor Rajko Tomaš, Banja Luka, 8 September 2006.See also Agency for Statistics of Bosnia and Herzegovina, September 2007. A World Bank estimate for 2001 claimed that about 36 per cent of the employed were working informally (World Bank 2002b). Particularly shocking is the estimated 57 per cent of the active labour force that has simply given up and withdrawn from the market (UNDP 2007: 75). 14 The Gini coefficient in 2004 was 0.43 according to the Living Standards Measurement Survey. Using a household budget survey for 2004, the UNDP report (2007: 189) calculated the Gini coefficient as 0.40 (indicator 14). For further discussion of the Gini estimate see Lierl (2007: 39). 15 The ETU website can be found online, available at: www.ohr.int/ohr-­dept/ econ accessed 14 February 2011. 16 In the last quarter of 2006, about 20 per cent of those currently employed throughout the country expected to lose their job within three months. See UNDP (2007: 76, table XI). Unpalatable they might be, but informal economies help to sustain resistance to the socially alienating neoliberal economic paradigm. 17 Interview with Amir Hadziomeragic´ , Head of Economic Research and Statistics Unit, BiH Central Bank, Sarajevo, 11 September 2009. 18 Information on benefits to women rape victims from Michaelina Jakala, Grabavica, 18 February 2007. 19 Based on interviews in Zenica in June and September 2006.

7 From ownership to imposition The process of creating a legally accountable Bosnian judiciary Per Bergling

This chapter is devoted to one important aspect of international anti-­ corruption efforts in post-­crisis environments: the promotion of judicial integrity. The reason why peacebuilders are concerned with this issue is that without an independent and impartial judiciary, citizens cannot benefit from the protection and opportunities the law provides. Also of fundamental importance is the fact that without judicial integrity there can be no effective supervision and sanctioning of corrupt practices in other branches of the state. This chapter explores the conflicting imperatives of peacebuilding and institution-­building.1 On the one hand, the international community consistently stressed in internal and external fora the importance of local ownership and leadership, but it also had to contend with the fact that corrupt and criminal elements were the most likely to adopt leadership positions in Bosnian government and business. Indeed, approaches based on local ownership and trust failed repeatedly, solidifying popular distrust and cynicism. Eventually, the international community felt it had no option but to move in the opposite direction, towards internationalisation and imposition, with a view to creating conditions for national ownership in the future. The other argument that this chapter puts forth is that the contextual framing of a problem can serve to obscure or to highlight corruption. In the case of BiH, the salient frames, through which all problems of state and society were viewed, had been based on ethnicity and nationalism. But after 1999 an important shift occurred, and there was a greater focus on the rule of law and reforming the judiciary; problems that were previously considered ‘ethnic’ were treated like common corruption. After this paradigm shift occurred, all of the international community’s policy tools and policy perspectives dramatically changed too, and they did so in an abrupt manner. The problems in the BiH judiciary illustrate the importance of framing effects, especially in revealing how corruption can sometimes be obscured (or overemphasised) depending on the frames that an actor chooses to adopt. In exploring the shift from the ethnic frame to the corruption frame, this chapter illustrates that the steps that were eventually

From ownership to imposition   115 taken to address judicial problems were rarely analytical or strategic in nature, but were instead reactive, and thus characterised by a process of trial and error. After the entire Bosnian judiciary was fired, the process of converting the international mechanism for judicial appointments and judicial discipline into a locally owned structure was completed quickly and at the time, it also appeared to be successful. The oversight body and the judiciary enjoyed an unprecedented degree of popular confidence in the period directly after this process occurred. However, this feeling of trust and confidence has since dissipated. Amongst the general population of BiH there now seems to exist a growing lack of trust in the judiciary (UNDP 2010a: 34). Further, the political class’s confidence in the judiciary has waned, as evidenced by the number of legal challenges mounted by a number of political actors in BiH. This, in turn, further undermines confidence in the independence of the judiciary (OSCE 2010).

Corruption and statebuilding There are many reasons why the international community should be concerned by corruption in the wake of war and crisis.2 A basic worry is that corruption affects prospects for investment and economic growth, which determines the economic viability of the entire peace and statebuilding project (Brietzke 2002: 115; Brunetti et al. 1997a, 1997b, 1997c; de Soto 1989: 13; Goodpaster 2002: 23; World Bank 1997a: 102–103). Another reason is that corruption distorts constitutional and democratic norms, consequently eroding public trust in the legitimate institutions of the state, sometimes to the extent that the public prefers non-­democratic alternatives (Rose et al. 1998: 17). Further, human rights abuses, violence, general crime and other infringements on the rights of the individual tend to be particularly serious and frequent in corrupt societies, and weak and vulnerable groups are often the most seriously affected (Sajo 2003; Shelley 2001). In addition, peacekeepers, bilateral donor agencies, international organisations and other anti-­corruption promoters have to worry about money from international loans and grants being siphoned off. These organisations are also aware that corruption affects taxpayers’ perceptions of how their money is being spent; they worry that if taxpayers think that they tolerate corruption then they will find it difficult to raise funds. At the centre of the strategies developed to address the problem is often a vision of an independent, impartial and effective judiciary – one which is able to safeguard individual rights and entitlements, oversee other branches of the state, and sanction corrupt behaviour. Clean justice is not only a means to various political, economic and social ends, but also an end in itself. Obviously, peacebuilders, international organisations and donor agencies promoting judicial reform and the rule of law are operating in a

116   P. Bergling changing environment. There is continuous interplay and interdependence between international and national policy and other conditions. In this interaction, peacebuilders and local policy makers are usually governed by very different incentives and norms. For example, while human rights and political stability are strong international imperatives, national powers often consider it more important to solidify local support and to maximise individual or group gains. Steven Levitsky and Lucan Way (2005), who have analysed the interaction between international and local powers in a number of transitional countries, suggest that the relationship may be understood in terms of ‘leverage’ (the national governments’ vulnerability to ‘Western’ or ‘outside’ pressure) and ‘linkage’ (the density of the respective countries’ ties to powerful states and institutions such as the EU and Western-­led multilateral institutions). Leverage, with the purpose of deterring corruption and other government abuses, may be exerted in a variety of ways, including the imposition of rules and institutions, conditionality in aid, diplomatic pressure and various forms of sanctions. Linkage is a more subtle form of socialisation and may take at least five different forms: economic (credit, investment and assistance); geopolitical (ties to Western governments, membership of alliances and organisations); social (tourism, migration, diaspora communities and elite education in the West); communication (cross-­border telecommunications, internet connections and Western media penetration); and transnational civil society (ties to international nongovernmental organisations, churches, party organisations and other transnational networks). Levitsky and Way argue that although linkage is rooted in a variety of factors, including geostrategic alliances and economic development, its primary source is geography. For example, countries located near the United States or the EU are characterised by more economic interactions, a larger number of intergovernmental connections and higher cross-­border flows of people and information, than more geographically distant ones (Levitsky and Way 2005). The linkage and leverage dynamics are clearly relevant to BiH, but the political complexity of BiH necessitates a broadening of the frame of analysis. The political constituents in BiH comprise a number of seemingly disparate ethnic groupings, Bosniaks (Muslims), Serbs and Croats, each of which has its own objectives. While some political elements have shown a willingness to enforce the reforms contained in the Dayton Agreement and embrace European norms and standards, others have continued to defy ‘rational choice’ logic and chosen to pursue goals of a strongly ethnic and nationalistic nature. As long as this deep rift in ideology and political logic remains, BiH will be unable to act on international incentives as one, and the country will fail to achieve the necessary conditions that would allow entry into the EU.3 In difficult peacekeeping environments, Chapter VII powers allow the UN Security Council to authorise members to take ‘any measures necessary’ to

From ownership to imposition   117 implement the council’s resolutions, including exposing local powers to an extreme form of leverage, imposing unwanted laws, dismissing officials and substituting international organs for local ones. The Bonn Powers and Annex 10 of the General Framework Agreement for Peace (GFAP) give the High Representative (HR) in BiH a similar authority to that of Chapter VII powers. At the same time, there has been confusion and conflict within the international community as to how these mandates should be interpreted and implemented. Furthermore, there have been parallel and uncontrolled channels of communication between actors in addition to the formally recognised parties to the peacebuilding process (such as NGOs and professional groups), as well as fluctuating alliances between local and international stakeholders that allow for a dynamic yet unpredictable form of linkage. In some cases, local stakeholders successfully built alliances among national and international actors in order to resist certain peacebuilding initiatives. For example, international human rights-­oriented NGOs have on several occasions supported national groups and individuals arguing that initiatives by the HR are ultra vires or in violation of international human rights law. While the lack of national structures willing and capable of exerting ‘sound’ leadership and ownership in BiH legitimises a forceful approach to state- and peacebuilding, it is also one of the most influential factors conditioning the success of the long-­term international effort at creating something new and better (Chesterman 2003; International Peace Academy 2004; Wilde 2001). For example, there is a risk that the international policy of ‘compensating’ for local failure may lead peacebuilders to gradually assume an increasing list of responsibilities which it has neither the mandate nor the resources to fulfil. As a consequence, local capacity to perform these functions is ‘sucked out’ (Fukuyama 2004: 55–56). For example, after failing to create the necessary local constituency for passing certain new laws and institutions, the international community’s HR in Bosnia has fallen into the habit of imposing these laws and institutions. Because they knew that critical institutional reforms would be implemented no matter what, nationalist political parties could reject the reforms to please their ethnic constituencies – they did not have to participate in the difficult work of hammering out a compromise between the parties. The alternative ‘idealistic’ approach would have been to make local ownership a key procedural element of the peacebuilding process. This would have included adapting the international support strategy to accommodate local socio-­cultural conditions and impressing the principles of good governance, justice, etc.4 For example, there may have been informal structures for constitution-­making, power-­sharing and resolution of conflicts that worked reasonably well and that only needed slight modification and a little support. There are also effectiveness and efficiency advantages to consider: it is sometimes cheaper, easier and potentially more sustainable to build on something that already exists than to tear it down and construct something new. The obvious problem with building on and

118   P. Bergling adapting pre-­existing paradigms of law and justice in BiH is that often such paradigms resonate badly with the very imperatives of international engagement; i.e. protecting international human rights standards, promoting good governance, establishing the rule of law and maintaining BiH as a unified state.

Recognising the problem The fact that justice sector reform needed to be prioritised in BiH was not understood at the time of Dayton. It only became clear to the international community in the late 1990s as an increasing number of internationally promoted reconstruction and reconciliation projects failed because of problems of bias and obstruction in the justice system. Critical internal and external reports during 1995–1999 also pointed out that the support given by the international community for reforming these structures had so far produced little or no results (International Crisis Group 1999a, 2000, 1999b; European Stability Initiative 1999). The problem was that the major international agencies (including the Office of the High Representative (OHR) and the Judicial System Assessment Programme for the UN Mission in BiH) had persistently framed the problems in the judiciary and those of the society more broadly as being caused by ethnic differences (Sahovic 2007: 176). Corruption as a standalone problem did not have salience for international actors at that time. It was only after the publication in 1999 of an alarming newspaper article in the New York Times which focused on the systematic stealing of reconstruction money (Hedges 1999) that corruption was identified as a key factor for why the judiciary was not working. Only at this point did anti-­corruption become a distinct peacebuilding concern. It was even feared that if corruption was not taken seriously, the frustrated citizens of BiH would look for a political alternative that felt familiar, such as an authoritarian leader. The centrepiece of the HR’s strategy for combating bias and corruption within the judiciary and prosecution was the introduction of a reformed legal framework for the appointment, discipline and dismissal of judges and prosecutors that would eliminate political influence over these processes and promote general judicial integrity. In essence, the new judicial service laws were enacted to ensure that all judges and prosecutors henceforth had the professional and ethical qualities their positions required, and that the political and material environment in which they worked was conducive to fair, impartial and effective decision-­making and enforcement. Local ownership and judicial independence In order to show that there was national ownership of the reform process, the formal responsibility for drafting and promoting the new legal instruments used to regulate appointments, dismissals, etc. was given to ad hoc

From ownership to imposition   119 committees of local judges and prosecutors in the Federation and in Republika Srpska (RS). The OHR and the other international actors contributed expert advice to the committees and scrutinised the resulting drafts from a rule of law and human rights perspective. This effort eventually resulted in the RS Parliament passing the Law on Courts and Courts Service and the Law on the Public Prosecutor’s Office. Meanwhile, in the Federation, the HR eventually had to impose the corresponding Law on Judicial and Prosecutorial Service.5 The most significant feature of this new legal framework was to remove the responsibility for reviewing judicial appointments and supervising professional performance away from the entity and cantonal6 executive institutions (dominated by political parties and organised predominantly along ethnic lines) and to give it to trusted peers, i.e. supposedly competent and impartial Bosnian judges and prosecutors. Special commissions (in the Federation) and councils (in RS), consisting of 7–13 ex officio and elected members of the entity judiciaries were formed to this end. These bodies then proceeded to review information about individual judges and prosecutors that had been submitted by the international community and the general public. The commissions and councils were supervised and assisted in this work by the international community through the OHR and the UN Mission in Bosnia and Herzegovina (UNMIBH) Judicial System Assessment Programme. While this nationally owned structure appeared to have the support of the local judiciary and the general public, the real situation was more complex. The political and executive organs of the BiH government were quick to realise that an important source of income and power was at risk of slipping out of their control so they began to resist implementing the new laws and plan. Consequently, it became very difficult for the commissions and councils to secure adequate funding, recruit competent people, and to assert themselves at the proper level in the state machinery – they did not have the required political support. The ensuing conflict between the commissions and the executive significantly slowed down the vetting process and dampened much of the initial enthusiasm that had surrounded the initiative. The number of judges and prosecutors actually removed from office by the commissions turned out to be suspiciously low – three in total in 2001. Frustrated at the slow pace of work, the extremely low number of judges that had been removed, and the general problems of legal and judicial reform in BiH, the HR decided at the beginning of 2001 to establish a new international agency that could more forcefully advance key judicial reforms: the Independent Judicial Commission for Bosnia and Herzegovina (IJC).7 The IJC had its head office near the OHR in Sarajevo, with field staff in Banja Luka and other important regions and cities. It soon emerged that the most important task for the IJC was to ensure the proper implementation of the new judicial appointment, discipline, and dismissal

120   P. Bergling structure. To this end, the internationally appointed Director of the IJC was given the right to recommend to the HR new legislation, as well as the removal of officials that were obstructing the reform process, including judges and prosecutors. After several unsuccessful attempts by the IJC at revising the laws and strengthening the capacity of the commissions entrusted with their implementation, the international community arrived at the conclusion in 2002 that a domestically owned appointment and dismissal process would not lead to the results that the OHR and the major donors wanted. There was also suspicion that the problems of non-­performance and lenience in the commissions were attributable not only to institutional capacity problems, but also to a lack of incentive and a lack of courage among the individual members of the commissions. The HR and the director of the IJC then decided on a more radical course of action, involving the dismissal of almost all sitting judges and prosecutors – with the proviso that they would have an opportunity to reapply for their old position or another position under the new process. The responsibility for reviewing the applications was placed with new judicial councils that included a considerable number of international representatives who had full voting powers. However, these new joint national–international councils did not produce the desired results either. In 2004, the HR took the final step of ‘internationalising’ the structure by formally merging the state- and entity-­ level judicial councils with the IJC, thus creating the High Judicial and Prosecutorial Council (HJPC), consisting of 13 local and three international members, all appointed by the HR.8 Predictably, this decision was criticised by many international and national observers as well as other stakeholders in the reform process. For example, the Council of Europe was concerned that the removal of tenured judges from office without clear evidence of professional misconduct could be a ‘breach of democratic practices’. Remuneration challenges The introduction of new legislation on judicial appointments, dismissals, etc. was necessary, but it was not enough to improve the formal independence of judges and prosecutors in BiH. To create incentives for judges and prosecutors to behave with objectivity and integrity under the law, the OHR and the IJC felt that the new legislation needed to be combined with a new remuneration structure.9 Again, the powers of the HR were used to formulate and impose new policies. While regular federation judges used to be paid 800–1,500 per month in the local ‘kaimark’ (e400–e750) and RS judges and prosecutors were paid as little as KM432 per month, the new salary structure started at KM2,500 per month (e1,250).10 Not surprisingly, the entity and cantonal budgetary organs protested that they could not afford this and procrastinated in making the necessary funds available.

From ownership to imposition   121 Other categories of high-­ranking civil servants, among them ambassadors, heads of administrative agencies, and under-­secretaries of state, argued that they should also be paid at comparable or even higher levels, thus further increasing budget pressures. The OHR, IJC and others supporting judicial reform came to realise that complete implementation of the salary reform package would require considerable international financial support, but fear of having to foot the bill indefinitely and other sustainability considerations made them reluctant to go down that path. The international community’s refusal to back the salary reform with funding created a situation where local judges and prosecutors were not paid what the reforms said they were entitled to, and where international and local actors criticised each other for inconsistency and irresponsibility (European Stability Initiative 2004: 18–20). Scarce, cynical and unmotivated defence counsellors The attempts to improve the capacity and quality of court justice in BiH by means of integrity and independence reforms were also frustrated by a lack of skilled defence counsel, and insufficient international attention was paid to this professional group. There were two major reasons for the scarcity of defence counsel in the aftermath of the war. First, BiH had an inquisitorial legal tradition with active fact-­finding judges and more passive prosecutors and counsellors; second, there was a legacy of restrictive and formalised requirements for law practices (e.g. the right to represent people in court was reserved for members of the ethnically-­divided bar associations). Among the few active defence counsellors, there was a general feeling that their job was essentially futile, or even that they had a corrupting influence because they served as intermediaries in shady dealings between the privileged clients who could afford their services and the corrupt judiciary. Before the war, each of the republics and autonomous provinces of the former Yugoslavia had its own bar association with its own statutes and by-­laws. These bar associations were in turn joined in the Union of Bar Associations of Yugoslavia. The Bar Association of Bosnia and Herzegovina continued to exist after BiH was recognised as an independent state in 1992. During the war however, the existence of one unified bar association became synonymous with the aspirations of influential Bosniak lawyers to keep BiH unified. This pan-­BiH association was consequently denied recognition by authorities in RS, which instead promoted the passing of the Law on Legal Practice in October 1992, requiring RS citizenship for membership in the entity’s corresponding bar association. Similarly, the Croatian Defence Council adopted a law and a decree in 1993 on practising law in the territory of the then-­Croatian Republic of Herzeg–Bosna. The law and decree determined that attorneys from the territory had to be organised in the Bar Association of the Croatian Union of Herzeg–Bosna,

122   P. Bergling and that legal counselling as a professional activity could only be exercised as set out under the conditions of the law and decree. In practice, this meant that at the time of the introduction of the new judicial service laws, there were not enough defence lawyers who were qualified to practice in BiH, which allowed judges to easily revert to their old investigative and inquisitorial habits.

Ideologies of anti-­corruption The international community’s initial attempt at a locally owned anti-­ corruption effort in BiH may have been inspired by previous anti-­ corruption initiatives in other transition environments which focused on the legal framework. In this sense, the black letter judicial service laws were regarded by the promoters of reform as practical a priori measures that needed to be put in place before other reforms could be undertaken. The international community also had great confidence in the autonomous ability of these laws to promote change at the societal and individual levels. This emphasis on domestic ownership may also have been inspired by approaches to judicial reform from other transitional contexts whereby the first step is to build political support for proposed reforms among key stakeholders, in particular among people within the targeted institution. However, the HR and others promoting judicial reform soon realised that this line of thinking did not apply to the Bosnian context. Not only did it seem to be constructed for an archetypal post-­communist transition context, but it failed to constructively engage the local political leadership, and it did not account for many other unique conditions created by the GFAP. The focus thus shifted away from changing the law and empowering the supposedly ‘good’ institutions towards viewing the judiciary as part of the problem. The international community’s hope that the judiciary would be able to reform itself, regulate itself, and thus serve as a positive example for others was abandoned.11 Rather, expectations were recalibrated, recognising that it was unrealistic for the BiH judiciary to be significantly less corrupt than the rest of society, and that instead, it was necessary to institutionalise some ‘distrust’ in regard to the councils and commissions so that their various ‘pathologies’ could be regularly and effectively checked (Tyler 1998: 46; Braithwaite 1998: 367). Disappointed, and pressured by an increasingly impatient donor community, the OHR thus changed tactics, from local ownership and trust to supervision and distrust. The policy was soon to be reversed again. After all of the review powers had been collected in the hands of the HR, and the IJC and the new judges and prosecutors had been appointed, a process to institute local ownership over these powers was initiated once again. A key element was to lay the ground for transforming the IJC into a properly mandated and funded national oversight body – the HJPC – with a mandate to appoint,

From ownership to imposition   123 discipline and dismiss a new breed of independent and professional Bosnian judges and prosecutors. The HJPC currently consists of 15 members – comprised of six Bosniaks, five Serbs and three Croats, plus one ‘from the rank of others’ – each of whom is selected from different Bosnian judicial institutions, and serve one term of four years.12 There are strict rules governing the election of HJPC members, with the stated aim that there should be a proportional ethnic mix amongst council members. While hypothetically, the judges and prosecutors of the BiH HJPC could be popularly elected and re-­ elected just like political leaders, such options were never discussed in earnest when the new judicial service laws were drafted in BiH, mainly because they clashed with continental European legal models and idealistic notions of isolating justice from the corrupting influence of politics. There was also an awareness that such mechanisms were likely to be fraught with other serious problems, chief among them that the election of judges would lead to further entrenchment of ethnic divisions within the judiciary.

Conclusion In the first years after Dayton, the dominant framework for understanding the problems in the political sphere of BiH were essentially ethnic or nationalist in nature. Only in 1999 were rule of law and judicial reform given sustained attention, resulting in an international strategy to address these problems. In the same year, after an influential newspaper article on the systematic theft of reconstruction money was published, the issue of corruption in the administration and the judiciary was recognised as a major challenge to the peacebuilding effort. Thus, the international community was late in discovering the importance of the judiciary to the peacebuilding effort in BiH, and even tardier in identifying corruption as one of the key reasons why the Bosnian courts and prosecution agencies were not working as they should have. As the problems of the judiciary shifted in focus from highly-­charged ethnic and nationalist issues to the more straightforward problem of crime, it became easier for the HRs to abandon local ownership-­based and trust-­based modes of institutional reorganisation in favour of supervision, ad hoc intervention, and eventually the wholesale imposition of an internationalised appointment and dismissal structure. At the same time, the collegial spirit that had characterised the relationship between local policy makers and the international community became history and so did the expectation that shared professional values of integrity and independence would prevail over nationalism and other problems in post-­conflict Bosnia. The OHR’s decision to forego the fiction of collegiality and mutual trust, and to treat the domestic judiciary and prosecution service as

124   P. Bergling essentially corrupt and incapable of exercising effective self-­regulation was probably a correct one in terms of achieving efficacy. It also resonated with the mood of the general public at the time: that the entrenched and corrupt judicial powers needed to be forcibly reformed. In this sense, the internationalised review and reappointment process did provide the new judges and prosecutors with a degree of legitimacy and helped them to assert themselves as reasonably trustworthy guardians of the rule of law, honest government, and human rights in BiH. Clearly, the BiH judicial system of 2011 is better than it was prior to the introduction of the judicial service legislation and the imposition of the internationalised appointment and dismissal mechanism.13 However, there is still a long way to go before the judiciary could be called independent, and the rule of law and human rights in BiH can be said to be of a standard commensurate with that desired by the EU and the international community. Notably, the number of political challenges that have been recently mounted against the judiciary now threaten its independence. Unless a way of overcoming this issue is found, any further progress will be limited.

Notes   1 The conflict between peacebuilding and institution-­building, often referred to as the sequencing debate, has been discussed in the literature. See Paris 2004; Carothers 2007; Berman 2007; Mansfield and Snyder 2007.   2 There are many competing and conflicting definitions of corruption, but there is also a core understanding that corruption comprises abuse of public office, roles or resources for private or group benefit. See for example Klitgaard (1988), Johnston (2005a), Karklins (2005). There is also a growing doctrine of how to define and address corruption in the specific context of peace building, often resting on the assumption that peace-­building environments are uniquely prone to corruption because of the existence of multiple and competing sets of rules, norms and agencies. See Philp, this volume.   3 A report by the European Forum for Democracy and Solidarity states that ethnic tensions in the country are hindering progress as far as reforms are concerned – this despite a professed desire by BiH politicians that the country should become a member of the EU. See European Forum (2009).   4 It may be argued that these international administrations, just like trusteeships under Chapters XII and XIII, should be seen as performing their governmental functions ‘in trust’, i.e. in the interest of the country or territory in question and not primarily in the interest of the UN or other outside stakeholders. See Stahn (2001).   5 The RS laws were passed by the RS National Assembly in May 2000, and the HR imposed the federation law in June the same year.   6 BiH comprises the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS). FBiH is divided into cantons, which are then divided again into municipalities. RS is divided into municipalities. See Divjak and Pugh, this volume.   7 The decision to take this course was made in accordance with the directives of the Peace Implementation Steering Board in Lisbon in May 2000 and was endorsed by the UN Mission in Bosnia, the OSCE and the Council of Europe.

From ownership to imposition   125   8 Another reason for the establishment of the HJPC was to provide for consistency and synchronisation in judicial reform throughout the country, which had become a priority after the European Union had decided that BiH would not be allowed to enter into negotiations on a stabilisation and association agreement until a unified judicial structure had been established.   9 The assumption that there is a correlation between judicial remuneration, integrity and performance is sometimes questioned, see for example Rijckeghem and Weder (1997). 10 Average salary in BiH in 2001 was about KM309 in RS and KM420 in FBiH. See European Stability Initiative (2004: 18–20). 11 Many of the theories underpinning this expectation may be traced back to Braithwaite’s idea that societies work better when two kinds of mutually reinforcing trust are maximised: trust as confidence (the expectation that someone will do what we want) and trust as obligation (people accepting that they have obligations and act to honour them, e.g. legal obligations). In essence, Braithwaite argues that the more people are trusted to behave in a trustworthy way, the more they are likely to do so. See Braithwaite (1998: 367). 12 In addition there is currently one international member. 13 International reports underline that although judicial corruption remains a problem in BiH, significant progress has been made since the introduction of the reformed appointment structure and other structural reforms. See for example the World Bank (2006a).

8 Anti-­corruption efforts in Liberia Are they aimed at the right targets? William Reno

Corruption in Liberia has long attracted international attention. Liberia’s history has featured cycles of foreign interventions targeting corruption and mismanagement. Most of these interventions brought in foreigners to manage the government’s revenue collection, and even to directly control government spending (Maugham 1920: 84–106). The Governance and Economic Management Assistance Program (GEMAP) established in 2005 is the most recent in this series. Expiring in 2010, it challenged established rights of sovereign states to run their own affairs while placing foreigners at the centre of Liberian internal administration. International experts from the UN, IMF, World Bank, the European Commission, the United States and African regional organisations had counter-­signing authority in the country’s central bank, state enterprises and the government’s auditing office to prevent or permit spending (World Bank 2005a). GEMAP also provided for external auditors and an anti-­corruption commission, continuing the battle against corruption in Liberia in an intrusive manner that characterised international efforts in the last two centuries. GEMAP’s international members gave this latest intervention a multilateral approach that previous state-­to-state and private interventions lacked, and that has continued with subsequent arrangements; but it continued past practices of wholesale intervention into internal governance, especially in economic and fiscal affairs, recognising that corruption in Liberia is integral to the operation of its government administration and the interests of the country’s political elite. A UN Security Council document recognises that ‘many Liberian elites profit from the system of corruption and undue influence and have resisted its reform’ and that many citizens and ex-­combatants in particular, still rely on these networks for survival (UN Security Council 2006a: 8). GEMAP took place against the backdrop of the United Nations Mission in Liberia peacekeeping force (UNMIL), with 15,000 soldiers in 2006, declining to about 8,000 in mid-­2010; taking up the old challenge of changing how Liberia is run rather than simply providing short-­term remedies to treat the effects of corruption. For some, the continuity was explicit: ‘USAID, in particular, was motivated by a sense of déjà vu. In 1988, it sponsored a Liberian Economic Stabilization

Anti-corruption efforts in Liberia   127 Support Project’ that also put foreigners with counter-­signing authority into government agencies, wrote two experts (Dwan and Bailey 2006: 8). Given GEMAP’s focus on corruption in Liberia’s government administration, it makes sense to explore the context and organisation of corruption in Liberia and to explain why it is so tenaciously integral to how the country is run. Does putting foreigners in key positions alongside Liberian officials eradicate corruption, boost official attention to social services and strengthen state institutions after the foreigners return home? The organisation and the context of Liberia’s corruption networks are the subjects of this analysis and will determine whether this externally-­sponsored remaking of Liberian state agencies will eliminate or marginalise the key actors responsible for corruption. This is an especially difficult task in Liberia because authority figures, including many without official positions in the state, see their personal and community interests as aligned with the illicit economy and the subversion of government officials. However, these structures of authority and the interests of actors change. The rule of President Samuel K. Doe (1980–1989) and the 1989–2003 war resulted in the expansion and decentralisation of these parallel structures of authority. Contemporary relationships of corruption and authority have become much more intertwined, resembling a network much more than a hierarchy as compared to the pre-­1980 period. This evolution of corruption changes the way that local elites struggle for supremacy through markets, often in ways that sudden political and economic reforms fail to anticipate.1 The next two sections explore the context and the organisation of corruption in Liberia. The latter pays particular attention to the interests of international actors involved in GEMAP. These actors focus on building state capacity and often portray official corruption as a technical obstacle to be overcome. Even so, many international actors are acutely aware of the non-­bureaucratic and non-­state elements of authority in Liberia, which force them to balance the pursuit of political stability in Liberia with their official goal to end corruption. International actors may have to find compromises that favour stability. This may require relaxing pressures of reform on strongmen whose co-­ operation is essential for maintaining order. I contrast Liberia’s organisation of corruption with corruption in other countries, especially in East Asia. The role of corruption in state construction elsewhere focuses this argument on how the organisation of corruption in Liberia impacts on the autonomy and strength of the state. Sometimes, as in parts of East Asia, corruption is compatible with economic growth, managing local elites and dealing with the societal pressures associated with rapid change. This comparison provides the basis of a critique of GEMAP’s model of anti-­ corruption and state construction. It shows how some types of corruption may entice strongmen to tolerate a political settlement as they go about their business. It recognises that rule over the networks of strongmen often precedes the rule of law and that the two are integrated in ways that

128   W. Reno are particular to each society. Figuring out how to do so requires first understanding the dynamics of the societal relationships that produce corruption.

Corruption and the importance of context Former Liberian president Charles Taylor was extremely corrupt. While in office (1997–2003), he melded his official and personal interests almost perfectly. In 2001 and 2002, Taylor controlled about US$200 million in annual proceeds from business operations, or between two and three times the entire budget for government operations (UN Security Council 2002: 11). Taylor used his official position aggressively to advance these private interests, reserving for himself ‘sole power to execute, negotiate and conclude all commercial contracts or agreements with any foreign or domestic investor for the exploitation of the strategic commodities of the Republic of Liberia’ (House of Representatives 2000). Taylor allegedly did business with agents of Al-­Qaeda, probably out of commercial rather than any ideological motivation (Farah 2004). This type of corruption, which blurred distinctions between officeholders and participants in far-­flung networks of illicit commerce, defined Taylor’s tenure and was central to his personal influence over his associates and rivals in business and government. Many of Taylor’s associates survived in office or found new positions in government after Taylor went into exile in Nigeria in August 2003, following his indictment for crimes against humanity before the Special Court for Sierra Leone. These associates included commanders in militias, both pro- and anti-­Taylor, who appeared after the war started in 1989. This National Transitional Government of Liberia (NTGL) included George Dweh, the Speaker of the National Assembly and former leader of the armed group, Liberians United for Reconciliation and Democracy (LURD). Dweh was accused of embezzling US$92,000. Unwilling to resign, he returned to the floor of the legislature with his bodyguards and held members hostage until soldiers from UNMIL intervened (UNMIL 2005a: 1). NTGL officials also recognised numerous concession agreements, including several for timber and diamond mining that violated Security Council sanctions. Timber concession awards by the NTGL and its predecessors covered 2.5 times more timbered territory than that country possesses (UN Security Council 2006a: 15). Outgoing NTGL officials voted to keep their official Jeep Cherokee vehicles, an act that caused the US ambassador Donald Booth to threaten to declare these officials persona non grata if they tried to travel to the United States, even though some were already targets of a UN travel ban (International Crisis Group 2006: 5). The advent of electoral politics in Liberia provided new opportunities for corruption through ties of clientage, even while international organisations and foreign diplomats pursued Taylor and others for their crimes

Anti-corruption efforts in Liberia   129 during the 1989–2003 war. For some in the international community, this corruption was too much. Jacques Klein, the Secretary-­General’s Special Representative in Liberia wished for more intensive international intervention: ‘It would have been more expedient for the Security Council to have granted the Mission executive mandate’ at the NTGL’s inception in October, 2003, he said near the end of his tenure, rather than to tolerate this degree of corruption in the provisional government (Ellis 2006: 109). Even so, international actors collected extensive documentation of corruption among the officials of Liberia’s government. The UN Panel of Experts monitoring enforcement of economic sanctions, IMF and World Bank officials negotiating debt relief and loans, and the Economic Community of West African States (ECOWAS) and European Commission auditors all found abundant evidence of official corruption. The 2009 Truth and Reconciliation Commission report provided further detail of the links between some government officials and businessmen in illicit enterprises (Republic of Liberia, Truth and Reconciliation Commission 2009). Liberia’s corruption problem is so intractable and so damaging to broader public interests because so many who are responsible for these problems also hold high positions in the state. Liberia’s situation illustrates the ‘criminalisation of the state’, where officials divert public resources for private benefit, using Existing moral and political codes of behavior, especially those of ethnicity, kinship and even religion, and of cultural representations, notably of the invisible, of trickery as a social value, or prestigious styles of life, an aesthetic, whose capacity to legitimise certain types of behavior is considerable. (Bayart et al. 1997: 15) There seems to be a critical mass of Liberians who see corruption as appropriate, or at least tolerable, and not simply an exigency of poverty or disorder. This attitude is certainly prevalent among those in positions of authority, but for many observers goes beyond the country’s elites. Some speak privately about the futility of their missions; of having impacts as lasting as ‘training goldfish’, usually interspersed with praise for the exemplary employee who really is ‘more American’ or ‘more European’ than Liberian in attitude.2 If corruption really is an immutable part of the Liberian social structure, this holds two major implications for GEMAP and other foreign interventions. First, Liberia shares with other parts of Africa a need for what Cameroonian scholar Axelle Kabou called a ‘cultural readjustment’ against the entrenched parochialism of social networks, the claustrophobic world of local solidarities, the grasping claims of family against any member who begins to become prosperous, and the mistrust of people outside their own narrow networks (1991). If corruption really is so deeply

130   W. Reno rooted in social relations that are outside of the regulatory reach of a reformed state administration, then addressing this problem would require a type of sustained and highly disruptive intervention into the most intimate affairs of people’s everyday lives. Ultimately, this may mean Liberian resignation to perpetual outsider administrative ‘guidance’ and reliance on large foreign investors to generate revenues, provided no nationalist or populist urge arises to kick the foreigners out. Second, it assumes that the social connections that bind together groups in Liberian society are a big part of the problem of corruption and are root causes of the recent war – too much patron–client politics, too much devotion to family or clan interests at the expense of others, a suspiciousness of strangers. It would seem that the war made this situation even worse with the massive displacement and the sudden rapid urbanisation of the country’s population. This fits the fears of Francis Fukuyama, who worries that the breakdown of existing social structures in some African settings strips these societies of strong voluntary associations outside of kinship that are needed to ensure stable government and provide a basis for trust in wider economic interactions (1995: 94). Is corruption always so damaging to state capacity or to the accumulation of capital? At the very least, limiting anti-­corruption efforts may be an important ingredient in mollifying local elites who are in a position to disrupt critical policies. David Harris argues that toleration of some corruption prior to the 2005 elections in Liberia enabled relative newcomers to enter politics as wartime leaders busied themselves with the business of making money. This avoided the consolidation of wartime incumbents in politics; yet their stakes in the economy, corrupt though these were, brought them into politics in a more pluralist fashion (Harris 2006). Corruption in African societies was once thought to be compatible with economic growth and political stability. In the early 1970s, a Belgian scholar saw in the Congo the rise of what he called ‘Bureaucratic Caesarism’. He thought that Mobutu used centralised patronage networks to co-­ordinate and control disparate local elites to subject them to the dictates of rational economic policies as he tried to integrate these informal business–state relations into existing systems of loyalty based in ethnic patron–client ties. This was a fairly desperate gambit, given Congo’s troubled transition to independence and the status of Africa’s first failed state in 1960 (Willame 1972: 131–134). A decade later, an American scholar labelled this an absolutist regime that recalled seventeenth- and eighteenth-­century French kings, with networks ‘organized around a presidential monarch who had adapted a colonial state structure to recentralize power . . . to control a complex and fragmented society and extend the state’s limited domain’ (Callaghy 1984: 5).3 By the 1980s, however, patronage and official corruption were uniformly seen as obstacles to state-­ building in Liberia and everywhere else in Africa.

Anti-corruption efforts in Liberia   131 Rather than suggesting that these different views of Mobutu’s behaviour are mutually exclusive, my argument is that corruption and the social relations that underlie it reflect specific contexts. Mobutu may have been a state-­builder in the 1960s, a crisis manager in the 1970s, and a desperate survivor in the 1980s. Moreover, he built his patronage networks in the 1960s on the basis of US backing for his regime and World Bank advice during a period that promoted big state projects and economic planning. By the 1980s, he was operating in an international environment that demanded greater attention to market forces. Liberian social networks, including patronage, adjust in similar fashion. For example, overseas Liberians who sent money to family members to arm a pro-­Taylor militia in their hometown of Ganta (near the Ivorian border) had to work out what to do with their armed kinsmen after Taylor’s departure in 2003. Local religious leaders encouraged these overseas family members to continue their aid, but now to help young kinsmen to set up businesses. Membership in the old militia then became a valuable business asset, as Ganta became a centre for the development of a regional construction industry. The war removed many of the town’s small ethnic Lebanese population, which left a void in other commercial sectors. Old solidarities from the militia and ties to local strongmen who were now elected to the new democratic legislature facilitated the entry of former fighters into other commercial pursuits, such as Monrovia’s retail trade and commercial chicken and pork production for the urban market.4 These networks restricted competition and strengthened patronage ties to the capital; but the recent unexpected prosperity of the provincial town and the business entry of a hitherto commercially marginal group to business at least poses the possibility that this refashioned wartime network – corrupt by most external standards – actually promotes accumulation and efficiency in an important part of Liberia’s economy. Businessmen in the capital also played key roles during the war. One businessman who was formerly in charge of maritime affairs under Taylor, then accused of embezzlement and added to the UN travel ban list, invested in commercial agriculture and fuel distribution. Both activities kept him in political life. He vies with others to assert his business interests as well as exercising influence as a patron of wartime fighters. Although it is hardly fair to reward what many people consider to be corrupt and violent wartime figures, this compromise maintains important commercial activity and diverts the energies of those who could disrupt post-­war agreements through their private pursuits. Kate Meagher examines how social networks evolve in her study of informal sector manufacturers in Nigeria. Among shoe and garment manufacturers in the eastern part of the country, she shows how economic policies that enhance competition can undermine relationships of trust between existing enterprise owners, as employees break away and form new firms, leaving the rest to try to manage their affairs in increasingly

132   W. Reno closed and defensive solidarities. Nigeria’s return to civilian government and elections in 1999, coupled with weak state institutions, gave vulnerable entrepreneurs incentives to seek out political patrons for protection, turning these firms into defensive enterprises with limited prospects of co-­ operation with fellow manufacturers, in turn making them unsuitable to serve as sub-­contractors for larger firms or to grow on their own (Meagher 2006). Drawing from Meagher’s insights, it is reasonable to expect that the 1989–2003 war and the subsequent return of large-­scale international intervention in Liberia have had significant impacts on the organisation and outcomes of networks of corruption. It is to this broader evolution of the context of patronage relations and state corruption that I turn next.

The changing organisation of corruption in Liberia The war brought broad changes to the social relationships underlying patronage and corruption in Liberia. Prior to 1989, Liberia’s presidents shared a common approach to patronage where rural strongmen maintained high degrees of personal control over local politics. This worked well for William Tubman (president from 1944 to 1971). At that time, the country’s entire political establishment was extremely small. Their sons and daughters intermarried, and most went to the same schools and churches. The hinterland was ruled through local proxies in a fashion copied from British colonial administration, and was not fully integrated into the institutions of the rest of the country until 1963. Those from the interior who became government officials adopted the cultural style of the coastal elite to integrate as best they could into this small group (Akpan 1973). So long as this patronage network was based on close personal connections, the president had numerous means of sanctioning the disobedient beyond the coercive use of state power. Tubman even personally managed the marital affairs of his associates, socialising with them at church services, Masonic Temple rites and in other shared settings. It was said that Tubman personally scrutinised expenditures for their impact on this network, and took great care to see that all beneficiaries connected their good fortunes to the president’s personal concern. Corruption as patronage knit together a constellation of local strongmen to the dictates of the leader. Rule over local strongmen rather than the rule of law became the basis of the capital-­based elite’s integration of hinterland politicians into Liberia’s system of national politics (Brown 1982). This arrangement looked like an inefficient sort of machine politics that, in a more open and competitive political system, resembled many American cities through the first half of the twentieth century. The Firestone Tire and Rubber Corporation arrived in Liberia in 1926, and provided over 60 per cent of state revenues from 1950 to 1970. This reinforced the hierarchical organisation of patronage-­based corruption

Anti-corruption efforts in Liberia   133 centred on the person of the president. Although starting from a very low base, Liberia became the world’s second fastest growing economy after Japan from 1950 to 1959, with annual growth exceeding 8 per cent and a ten-­fold expansion of government revenues (Clower et al. 1966: 23). This new income gave the president money to distribute at his personal discretion with less need to worry about building strong revenue collection agencies or to tax wealthy people, many of whom were his political clients and family relations. This gave him autonomy from the country’s legislature, since Tubman did not need official appropriations or require contributions from strongmen from the hinterland for spending. In so far as Tubman and his successor, William Tolbert (1971–1980) maintained personal control over their clients, this patronage system was among the world’s most stable. Up to its overthrow in 1980, Liberia’s regime (founded in 1847) was one of the oldest in the world, and Liberia’s True Whig Party ruled continuously from 1878 to 1980, surviving for a longer period than the Communist Party of the Soviet Union. Sergeant Samuel K. Doe’s 1980 overthrow of Tolbert’s government brought abrupt change to this system of patronage. Doe had neither insider status nor the personal capacity to exercise the tight enforcement of the centralised patronage network that was based upon True Whig presidents’ dense social connections and personal knowledge of their political clients. Doe was politically vulnerable, and had to rely upon people with whom he did not share the kinds of personal ties and insider knowledge that had benefited previous presidents. He also lost the confidence of his American backers and their annual US$200 million in aid when he stole the 1985 election and fell into arrears on loan repayments (Gifford 1993: 18–28). This left him less able to control his partners’ personal interests and strategies within his patronage network. Some of Doe’s associates took advantage of their own political networks to exploit their positions without effective oversight. It was much harder for Doe to maintain surveillance and levy sanctions upon people who had their own power bases and whose daily activities were less visible to him. Doe consequently faced many more coup attempts than his predecessors ever did. In that context, it made sense for Doe to intensify his efforts to co-­opt these people into his own corrupt business dealings, even if this further undermined his country’s economy. Had GEMAP’s measures, or perhaps more intense versions of the various loan regimes in earlier decades been applied to Tubman’s or Tolbert’s centralised, hierarchical organisations of patronage, perhaps some subordinate members of this network could have been removed from their official positions. While this would have raised risks of political instability if they resisted, the centrality of the state bureaucracy as a vehicle for patronage for a fairly narrow oligarchy would have offered an institutional basis for building an effective state administration. The rapid extension of public services in an environment in which the state already provided a

134   W. Reno fairly high degree of security might have mitigated the capacity of disgruntled former clients to organise opposition. In any event, a centralised patronage system parallel to the state administration was vital to providing and ultimately to shutting off resources to political clients; but once Doe arrived and his clients integrated themselves into a network of corruption in which they had more control over their immediate environment than that which state institutions could regulate, removing corrupt officials from their administrative positions became riskier. This provides a lesson for contemporary intervention: reform must extend beyond reforming state institutions and replacing officials. It must be concerned with the connection between local authority and a highly decentralised system of illicit commerce. Yet, in doing so, it risks upsetting what post-­conflict stability exists in Liberia and tests the political will of outsiders who support intervention. Doe built his authority in a networked and decentralised system, relying on some of the Monrovia-­based elite who already had their own deep roots in the politics of patronage in the country. Others rose by virtue of their positions in the military. Thomas Quiwonkpa was appointed to head the army and he used this position to carve out his own powerbase and promote his supporters. These included his aide-­de-campe, Prince Yormi Johnson, who later became a commander in the National Patriotic Front of Liberia (NPFL) and future wartime commander, and Charles Taylor. Quiwonkpa fled in 1983, returning in 1985 to try to overthrow Doe, but was killed. Taylor returned in 1989 to invade Liberia as head of the NPFL. Johnson was personally responsible for killing Doe in 1990 after forming his own faction. Other key players in the 1989–2003 war emerged out of Doe’s patronage network. George Boley led the Liberia Peace Council (LPC) militia after he served as Doe’s Minister of State and business manager. Alhaji G.V. Kromah helped form ULIMO (United Liberation Movement of Liberia for Democracy) in 1991 after serving as Doe’s Information Minister, and Charles Julue, the former head of the Armed Forces of Liberia, staged a coup attempt in 1994. Unlike previous presidents, Doe had more difficulty keeping this diverse group of strongmen under his personal control. They managed their own connections to illicit commerce in areas where they had supporters, while Doe’s sudden rise to power left him without the personal connections or insider knowledge to reliably determine how they used their resources. Initially Doe hired intimates of the regime that he overthrew to help him find a strategy for reining in and harnessing the incumbent elite network. George Boley was one of these people, an ‘educated advisor’ who had served as an assistant minister for education in the Tolbert administration, fresh from graduate studies in the United States. Boley was from Doe’s ethnic group, which may have made Doe think that he could trust him. On close terms with powerful people in the capital, Boley used his association with Doe to build his own network

Anti-corruption efforts in Liberia   135 of influence that he later used to field his own militia. As a former political actor from Doe’s era wrote, ‘With Doe unable to converse in standard English, Boley was de facto head of government in 1980. As the gatekeeper to Doe, he consciously exploited Doe’s distrust of educated people’ (Tarr 1990: 25). As Doe could not be certain who would challenge him, he responded with personal paranoia and a proliferation of joint business ventures in which many from this wider array of people were included. Doe also sought a solution to this problem in deals with politically vulnerable Mandingos. These ethnic outsiders needed the protection of the president, and thus were less prone to political machinations against him. Partnerships with Mandingo commercial networks also tied their activities more closely to Doe’s political interests, giving Doe connections to newer businesses in fuel imports and transport that aided his other partnerships in illicit commerce (Konneh 1996). Doe also looked to partnerships with people involved in illicit businesses or those who were looking for states like Liberia where they could conceal illicit activities.5 These arrangements undermined the institutional capacity of the state since they relied on the president’s authority to grant his partners exemptions from prosecution while pursuing their business rivals for violations of the law. Deals with foreign firms beyond the reach of local-­level political networks have long been the refuge of corrupt leaders and reformers alike. For those who are frustrated by local politics, whether for hard-­pressed patrons or reformers, deals with foreigners who pay taxes and fees in full and on time are attractive indeed. Doe’s corrupt gains, about US$300 million during his ten-­year rule (Berkeley 2001: 33), was less important than the organisation of his patronage network and the degree of control that this gave him over his associates. His clients had no reason to trust Doe, so they removed as much of their ill-­gotten gains from the country as soon as possible. Their autonomy made them more dangerous to their patron than their predecessors had been. Their ability to enter into ‘private’ business created a special problem for international actors as several of them were seen as ‘civil society’ actors in the eyes of some. Others, such as Boley, who could keep their patron at arm’s length, emerged as protectors of their ethnic communities and clans. Thus, people who became businessmen, protectors of minority rights and local patrons also were corrupt insiders and prolific abusers of human rights. Parts of this wartime structure of patronage re-­emerged in the national legislature elected in 2005. Winners included Senator Jewel Howard-­ Taylor, Charles Taylor’s former ‘First Lady’, and Senator Prince Johnson, Taylor’s former associate and the man responsible for Doe’s murder. Representative Edwin Snowe, Speaker of the House of Representatives until he resigned in early 2007, was listed in the UN travel ban report as an ‘Associate of former President Charles Taylor with ongoing ties to him’

136   W. Reno (UN Security Council 2006a: 4). Snowe also allegedly diverted revenues from the state-­owned Liberia Petroleum Refining Company for his and his followers’ personal use (Monbo and Company 2006). Representative Saah Gbollie was ex-­deputy police chief in Taylor’s government. Senator Adolphus Saye Dolo (‘General Peanut Butter’) also has been subject to the UN travel ban. This decentralised and networked patronage network earlier appeared within Taylor’s, and then the transitional government’s state institutions. Joe Gbalah, the former Secretary of LURD (Liberians United for Reconstruction and Democracy – a name affirming only a ceremonial commitment to the liberal democratic model of governance) was appointed the NTGL’s head of the National Port Authority. His chief of security, Ofore Dian, served as Gbalah’s chief of staff while with LURD. Samuel Wlue, a senior MODEL leader (Movement for Democracy in Liberia – also an armed group) became the Minister of Finance. Militia leaders appear among other victors in the 2005 election, including Kia (‘White Flower’) Farley, former MODEL commander elected to the House of Representatives. While in office, his fighters occupied a rubber plantation and maintained contact with fighters in neighbouring Côte d’Ivoire in defiance of UN directives (UN Security Council 2006a: 41). Several years later an American diplomat showed concern about the continued influence of wartime networks: Lines of communications within Taylor’s faction . . . remain intact . . . the reintegration of the ex-­combatants is far from complete. Former NPFL commanders Roland Duo . . . Christopher ‘General Mosquito’ Vambo and Melvin Sogbandi (none of whom are on the sanctions lists) remain in contact with the ex-­combatants, and would have the capability to organize an uprising or even criminal activity. (Department of State, Monrovia Embassy 2009) The story of insider influence, personal gain at state expense, and wartime social networks based in militias gets more complicated if one looks at the different interests and activities of members. The prosperous provincial town of Ganta, referred to earlier, also was a major site of NPFL organising before Taylor was forced into exile. Many fighters from that region fought with the blessings of their communities. Their commanders, portrayed accurately as human rights abusers, also were considered legitimate protectors of communities by many people there. The proliferation of evangelical Christian churches in Ganta and elsewhere in Liberia may interject more autonomy and change patterns of solidarity (and commerce) in these networks. Local commanders, some of whom are preachers, have played important roles in mediating between groups that were associated with Taylor’s NPFL and his rival, Prince Johnson. Shared business networks help to lessen these divisions too.

Anti-corruption efforts in Liberia   137 The decentralisation of patronage networks under Doe, followed by the wartime experience of NPFL, leaves many former fighters with a desire to avoid subordination to a hierarchical state model of patronage. Yet, they may think that internationally imposed reforms that strengthen state institutions are heading towards such a model. At least among new business entrepreneurs, few want to return to what they see as the straightjacket of old reciprocities and obligations to privileged regional administrations wielding the power of Monrovia over them (which is how many interpret the revival of county administration).6 What GEMAP viewed as remnant networks of wartime combatants may enjoy a measure of local legitimacy and might also be the basis for a more efficient local economy: a suggestion at odds with most agendas or frameworks of outside planners or investigators.7 These former wartime commanders use their businesses and influence over parts of the state bureaucracy to provide for their former fighters and manage their illicit economic networks within Liberia and to other states in West Africa and further afield as the real basis of their power. This collapse of a centralised network of control also provides lessons for international actors as they devise ways to address corruption in Liberia. Strategies favouring the decentralisation of power, often borne of the association of decentralisation with democracy, might have unanticipated consequences in Liberia. The decentralisation of the informal structures of Liberian politics in the 1980s and 1990s gave freer rein to warlords vis-­à-vis Monrovia, but it did not release them from the need to cultivate their own supporters. This creates a real conundrum for international agencies and for Liberian reformers. Hutchcroft attributes high growth and managed corruption in China to the ‘centralisation of politics’ and warns that formal decentralisation can lead to disastrous political instability if it means losing substantial control over patronage politics (Hutchcroft 2001); but he assumes that local nodes in these patronage networks are inevitably prone to violence as they free themselves from central constraints. He does not consider that they are bound to their own reciprocities and obligations to followers. In peacebuilding contexts, formal institutional decentralisation and efforts to promote transparency of administration and local governance can play out in different ways. Reform might revive pre-­war relationships that local people cite as causes of conflict. It might dismantle new arrangements to which local people have become accustomed and that they prefer. Moreover, the involvement of wartime leaders and fighters means that challenging some of these arrangements will undermine the political legitimacy of the overall reform effort and provoke conflict. This in turn contains significant risks of escalating political and financial costs to external actors. Intransigent local actors, informal networks and vested interests posed a dilemma for the international backers of GEMAP in having to decide the extent of their financial and political commitment to a uniform model of state reform.

138   W. Reno

The stakes for interveners Will international actors invest the financial and political capital required to fully remake Liberia in the image of an autonomous, well functioning bureaucratic state? GEMAP was estimated to cost about US$500 million over three years. The provision of security through UNMIL cost around US$2.9 billion from 2003 to mid-­2007, and was still running at about US$500 million annually by 2010.8 During those first four years, US bilateral aid to Liberia was about US$600 million (Cook 2006), and the combined US allocation for bilateral aid and UNMIL each year over 2003–2007 was roughly equivalent to Liberia’s annual GDP. The amounts involved are also large enough to make US politicians question whether taxpayers are receiving good value for this expenditure. Fortunately, GEMAP appeared to produce positive results. Liberian government revenues rose sharply from about US$80 million in 2004/2005 to US$317 million in 2009/2010 (International Monetary Fund 2010: 8). Liberians with ties in the illicit economy might conclude that GEMAP was effective only because it forced Liberian officials to share their authority with foreign experts, and they can simply wait out the foreigners’ resolve to remain in Liberia. The durability of reforms after GEMAP experts leave remains in doubt. UNMIL plans to continue its drawdown, particularly if 2011 elections are peaceful, and will be replaced with a US-­ trained security force of Liberians. Those who use positions in the state as platforms for personal influence and wealth accumulation appear to have little to fear from Liberia’s judicial system, despite extensive international attention to its reform. A 2010 UN report found that ‘serious incidents of public disorder in Lofa and Maryland counties are illustrative of the frustration with the justice system, and the violence that erupts as a result’, as evidence of the poor performance of the country’s judiciary (UN Security Council 2010: 8). UNMIL investigators in 2007 found a justice system that demonstrated a ‘lack of the necessary will to institute reforms’ (UN Security Council 2007: 9). Local and international actors engage in a strategic interaction. Local actors try to safeguard their fundamental interests, and some retain a capacity to disrupt reform efforts. Given the intensity of the intervention, even very minor disputes draw in external actors. Complaints among workers at Monrovia’s port about the GEMAP administrator of the Ports Authority, for example, involved ex-­combatants who supported Joe Gbala, the former LURD general secretary, and who came to work at the port once he became manager of operations. This dispute eventually required the intervention of the US ambassador once the workers began to press for the removal of the GEMAP specialist (New Democrat 2007: 1, 14). UNMIL intervention was required in several instances in 2006 and 2007 to remove ex-­combatants occupying rubber plantations who contested the right of new government-­appointed managers to take over these

Anti-corruption efforts in Liberia   139 operations, a problem that persisted at least through 2009 (Cheng 2011). Some of those who were removed complained that local officials were tricking foreigners into enforcing rules that actually established, or in some cases restored, the personal power of these officials to control local resources and deny them to ex-­combatants. Faced with overwhelming demands of micromanaging a difficult bureaucracy and concerns about the sustainability of the overall reform effort, international actors may choose to act expeditiously. Transplanting their model of reform to Liberia ultimately may provide leverage to local actors who the international actors do not want to include; but when faced with the repeated choice between political reforms that generate political instability, international actors may tolerate the incorporation of elements of patrimonial politics with only partial reform. These choices become more pressing as UNMIL prepares to leave the country. Otherwise, to resist local demands on every occasion risks descending into a programme of counterinsurgency if widespread opposition were to develop. This trade-­off between local security and reform is well understood among former commanders. Contemporary telecommunications and personal links to overseas Liberians help these political actors analyse international developments and co-­ordinate strategies.9 More realistically, as resources and the political will for intervention decline as the deadline for withdrawal draws near, both international and domestic actors face substantial incentives to engage in mutual co-­optation. This domestic politics of intervention points to a basic shortcoming in the conceptualisation of this latest internationalisation of Liberia’s anti-­ corruption effort. Often, outsiders characterise all of the actors involved in the political economy inherited from the war as working against state-­ building; but reform programmes such as GEMAP often just give bureaucrats new opportunities to abuse power, as frequently occurs with judicial and security sector reform. In reality, interveners have to engage in the much more complex politics of weighing which elites are true obstacles to reform and which ones can be bargained with to preserve at least some elements of reform while ensuring that the war does not resume. One alternative is to recognise and deal directly with networks of the wartime political economy and try to reincorporate them under the control of the state. This recognises that people often take refuge in their wartime associations to seek protection from the uncertainties of poverty and official abuses of power. Interveners and their local partners often see these associations as violent gangs and impediments to the demobilisation of ex-­combatants. The actions of some of these people, however, indicate a capacity to take on at least some of the tasks of local governance in a durable fashion that eludes current bureaucratic reform efforts. One example can be found in the Wedjeh Youth Association of Sinoe County, which includes ex-­combatants among its members. Its members were targets of UNMIL operations to remove them from rubber plantations.

140   W. Reno The Wedjeh Youth Association’s complaints are instructive. They assert that reform programmes give license to corrupt outsiders from the capital to take up local appointments, using these positions to exploit local resources, receive foreign aid and eventually attract foreign investors on their own terms. Local ex-­combatants complain that as ‘sons of the soil’ they are entitled to exploit local rubber – an argument that does not fit well at all into contemporary liberal notions of property or of the legal rights of citizenship in Liberia’s hastily constructed democratic institutions (Analyst 2007a: 10; 2007b: 1, 10). Guaranteeing these people some control over local resources and integrating their local organisations into official channels would give them a stake in using their influence to see that the state performs well, for example by monitoring the police and judicial officials. It also would incorporate some elements of wartime organisation into the apparatus of governance. This strategy has been used in neighbouring Sierra Leone. There, the Movement of Concerned Kono Youths (MOCKY) was initially seen as a security threat, and depicted as a renegade militia contesting for control of Sierra Leone’s diamond mining region at the end of the war. MOCKY’s main concern, however, was to ensure that Kono youth, including some ex-­combatants, were not summarily excluded from Freetown-­ based reform plans. MOCKY became the beneficiary of a USAID project that built on its own institutional structure to monitor local police and government officials. This required jettisoning uniform plans for nation-­ wide local government reform for that region, as this organisation integrated elements of local customary authorities and devised new ways of regulating the local economy and politics; but such deviation from initial plans bothered some UN and foreign government officials who remained committed to uniform bureaucratic blueprints for reformed local government and who rejected the inclusion of ‘perpetrators’ in the post-­war settlement.10

Is there an alternative? As the organisation of corruption in Liberia shows, the relationship of the networks of patronage, personal trust and insider commercial collusion with the state and the world economy can shape actual policy outcomes. Is it possible to integrate some of these networks into a state-­administered economy that serves the interests of citizens? David Woodruff explores the role of trust for managing capital and coercion in the state ­building process. In the absence of easily exploitable resources or a foreign aid windfall, taxing productive people is a necessary element of state ­building. ‘Pay taxes right! Build nation’s might!’ goes the motto of Liberia’s Ministry of Finance; but historically, builders of states mix formal and informal networks of authority. If they are to acquire even a minimal capacity to tax them, state builders have to take account of the interests of at least some

Anti-corruption efforts in Liberia   141 local bosses, as even the strongest states lack the capacity to monitor every transaction that citizens make. Successful authorities manage pre-­existing networks to official institutions so that bureaucrats can benefit from the detailed market knowledge and social connections of commercial operators and can integrate those networks of trust and loyalty into the realm of bureaucratic authority (Woodruff 1999). This is not to say that reformers have to accede to the interests of Liberia’s most corrupt and violent strongmen; but some of these people enjoy willing support from followers, have standing in their communities, and possess connections and business savvy as they link these constituencies to the world economy. Corruption from the perspective of laws and reformers may be social capital that can be integrated into the authority structures of successful states. In the Philippines, Hutchcroft found oligarchs who colluded with corrupt government officials in decentralised networks to siphon state money into their own pockets as the cause of slow economic growth and political instability (Hutchcroft 1998). But Kang found that ‘crony capitalists’ in South Korea who used informal political connections to officials to exchange bribes for favours actually benefited South Korea’s economy by reducing transaction costs (Kang 2002: 3). Even extensive corruption need not produce economic failure. According to Transparency International, China is the seventy-­eighth least corrupt country in the world, which puts it well behind South Africa’s fifty-­fourth place (Transparency International 2010), yet its per capita incomes grew at an annual rate of 9.8 per cent from 2000 to 2008, while South Africa’s grew at only 3.0 per cent during the same period (World Bank 2009: 384–385). The point, however, is not just the extent of Liberia’s corruption, so much as the organisation of corruption in Liberia (and elsewhere) that shapes institutional and economic development. East Asia’s international politics and domestic administration context is very different from Liberia’s. East Asian countries were considered central to the US Cold War strategy of the containment of communism at a critical time in their development. American officials tolerated domestic insider networks in front line states like South Korea and Taiwan, as long as they maintained high rates of economic growth and were able to share the military burden. This tolerance extended to opening up the US market to East Asian manufactured goods, regardless of the degree of subsidy or officials’ collusion with industrialists (Haggard 1990). China’s particular configuration of corruption captures local networks and knowledge in ways that benefit state interests. Collusion between Chinese Communist Party cadres and entrepreneurs work alongside formal politics that are designed to promote rapid economic growth (Wank 2002: 97–116). Local cadres distribute patronage to their subordinates and expand their circles of clients. Corruption may offer officials side payments that give them a stake in reform. This works so long as local officials who extract bribes pay their superiors who protect them.

142   W. Reno Protection from arbitrary enforcement of anti-­corruption measures is tied to the local cadre’s performance in promoting economic growth and thus increasing the circle of productive supplicants so as to provide payoffs for officials to kick back to their superiors. Business owners tap into these personal connections among government officials to get preferential access to utilities and lax enforcement of labour and environmental regulations (Li 2000). As they can see who has the higher officials’ confidence, these businessmen know who to bribe and how much to bribe. Ironically, this leads to a situation in which the most efficient local cadres are the most corrupt, and enjoy the greatest prospects for promotion. This also creates runaway economic growth, along with attendant social disruption and contempt for official regulations.11 Thus high-­level Chinese bureaucrats maintain access to information about their subordinates, even though this form of corruption presents a huge political problem to China’s rulers and ultimately undermines the regime’s legitimacy; but in the more immediate politics of holding together a large state during a period of extreme rapid social change, it permits continued economic growth and the creation of a large indigenous commercial class that is not at odds with the state. This kind of control privileges close connections to social networks, a difficult element to build into foreign-­designed programmes, but which Tubman and Tolbert used to manage their political circles when they presided over Africa’s fastest growing state. Although the original Liberian system of patronage targeted a very small elite, it ultimately helped lay the seeds for Liberia’s 1989–2003 war. Its maintenance through the middle of the twentieth century highlights the importance of social networks and knowledge as an alternative to a wholesale confrontation of state builders against significant power-­holders in society. This is not to suggest that insider networks are optimal for organising business–state relations. Instead, the argument is that rulers in other places have managed to control and co-­opt the types of social relationships and exchanges that are repressed in the state building designs of foreigners in Liberia. Some did so because they lacked resources to wage a war against powerful clan, community and other personal networks. This ‘institutionalised patrimonialism’ was a major factor in the formation of successful business groups in South Korea (Biggart 1990). Businesses often know better than states about how to organise efficient connections to the global economy. Moreover, they are much better at ad hoc arrangements that use family ties and local political networks to manage crises and allocate capital (Grenovetter 1995). Even if networks that are defined as corrupt are not ideal paths of development, they can help solve some problems of state building. Liberia’s political networks have incorporated violent people responsible for war crimes and other abuses into the inner workings of government but this interpretation of the facts obscures other important

Anti-corruption efforts in Liberia   143 dynamics. This analysis points to some of the tradeoffs of state building that blueprints for a modern ideal liberal democratic state do not consider. Corruption and patronage networks play important roles in the construction of some states and their economies. In all of the successful cases, this takes place in contexts where the bureaucratic apparatus of the state was permitted to intervene into a wide array of activities, especially into the economy. This gives the state the instruments that it can use to begin to co-­opt local authority structures, including religious organisations, bandit groups and local warlords that organise economic exchanges. All operated as ‘states within states’ as their leaders sought to control commerce to survive and take care of their followers. These networks and relationships have to be grafted onto the central authority of states if their states are to exercise real authority. Successful grafting can bring these commercial networks and acumen into the arena where the state can support and promote it in the international economy. Two core lessons emerge. First, as GEMAP designers and many others understand well, the key to political stability and economic expansion lies in building the capacity of state agencies. The second lesson is more controversial. Some powerful individuals and networks that featured in Liberia’s wartime political economy may have material and social assets that they can contribute in a restructured Liberian political economy. A more nuanced application of reforms may be in order to capture some of the societal commercial and political networks that Liberia’s new rulers need so that they can govern effectively and thus, in the long run, legitimately. Such flexibility might require wartime actors to be exempted from exclusion and prosecution if they help to integrate community members into state-­regulated channels, for local strongmen must be ruled before one can implement the rule of law.

Notes   1 A subject explored in Paris (2004).   2 Conversations with the author in the course of field research in Liberia and Sierra Leone since 2000.   3 See also Roth (1968).   4 Author’s observations and conversations with former militia members, 2005.   5 From personal correspondence between a businessman and his partner, President Doe, in the author’s possession.   6 Interviews with Boley associates.   7 A notable exception is Richards et al. (2005).   8 Calculated from Security Council quarterly reports on UNMIL operations.   9 Interview with a former associate of George Boley (LPC chairman), 22 April 2007. 10 Author’s observations and discussions in Sierra Leone, June–July 2005 and in December 2008. 11 This analysis I owe to Zhu Jiangnan, Department of Political Science, Northwestern University, Evanston, IL.

9 Corrupting or consolidating the peace? The drug economy and post-­conflict peacebuilding in Afghanistan Jonathan Goodhand In 2011, Afghanistan was responsible for 90 per cent of the world’s opiates. No other country has ever had such a dominant position in their global supply. However, in 2002 the opium economy was not seen as a priority of the newly-­installed Karzai regime or its international supporters. The US-­led intervention that overthrew the Taliban was primarily concerned with counter-­terrorism and political consolidation. Coalition forces initially turned a blind eye to poppy cultivation and trafficking, fearing that counter-­narcotics (CN) efforts would upset the fragile political coalition that had been forged to pursue the ‘war on terror’. But between the Bonn Agreement of December 2001 and the Afghan Compact signed in London in 2006, CN rapidly rose up the policy agenda, based on the growing perception that the opium economy was a significant driver (as well as a symptom) of insecurity and bad governance. Although there is a large body of research on the upstream dimensions of the drug economy – particularly the micro-­level dynamics of cultivation (Mansfield 2004; Mansfield and Pain 2006) – the downstream side remains relatively opaque and there has been very little work on the political effects of the drug industry (for an exception, see Shaw 2006). This chapter examines the interconnections between drugs, corruption and peacebuilding.1 Based upon the assumption that behind peacebuilding stands statebuilding – the construction of legitimate political authority – it focuses on the various pathways through which drug-­related corruption has influenced processes of political consolidation (and crisis) since the fall of the Taliban regime. It argues that there is no universal uni-­directional relationship between drugs, corruption and conflict. In some parts of the country drugs and corruption have contributed to a level of political order, whereas in other areas they have fuelled disorder. Following Snyder (2004), it is argued that political order is more likely where rulers and private actors have developed joint institutions of extraction around valuable resources such as drugs. One policy implication of this finding is that peacebuilding in Afghanistan is likely to be the result of complex bargaining processes between rulers and

Drug economy and peacebuilding in Afghanistan   145 peripheral elites, which may ultimately lead to stable interdependencies. Current CN policies have had the opposite effect and in fact played a role in fuelling conflict.

Corruption and war to peace transitions Corruption is commonly defined as the misuse of public office or public responsibility for private, group or sectional gain. Typically, corruption is seen as an impediment to a successful war to peace transition. In Kosovo, post-­conflict peacebuilding has been accompanied by the growing penetration of the state by criminal structures, particularly in the judiciary, whilst post-­settlement Liberia is in danger of heading back to the highly unstable spoils politics that led to the outbreak of war in the first place (see Reno’s chapter in this volume). However, it has also been argued that corruption may facilitate the creation of a new political order (or the consolidation of an old one) and the dividends of peace obtained through corruption may outweigh the costs of inefficiencies (Le Billon 2003: 420). Put in another way, donors may have to accept that priming the patronage pump is one of the costs of peace (Smoke and Taliercio 2007: 55). Historical experience, as opposed to current liberal orthodoxies provides some support for this position (Paris 2004). Thomas Gallant (1999), in a study of brigandage and piracy from a world historical perspective, makes a convincing case for the role played by illegal networks of armed predators in facilitating the spread and global triumph of capitalism. Bandits were deeply insinuated in the process of state formation and state consolidation. They acted as brokers between centre and periphery, facilitating capitalist penetration of the countryside by increasing monetisation, encouraging marketisation and by providing a venue for upward economic mobility. Through a process of either co-­opting or crushing rural outlaws in frontier regions, states experienced a ‘border effect’ that strengthened their capacities. Put simply, ‘bandits helped make states and states made bandits’ (ibid.: 25). Contemporary statebuilders may adopt similar tactics: the Burmese drug lord Khun Sa for example has played a catalytic role in state formation by forcing Rangoon to impose control over its frontiers (McCoy 1999: 558).2 Similarly Snyder convincingly argues that although opium initially fuelled chaos by providing a key source of income to rebel armies, after 1990 it contributed to the consolidation of a stable military regime that ended the civil war and forcibly imposed political order (Snyder 2004: 12). The key, according to Snyder, is how institutions of extraction involving rulers and private actors develop around these resources. Four possible extraction regimes are posited – private, public, joint or no extraction – each leading to different outcomes in terms of political (dis)order. If rulers are able to build institutions of joint extraction, lootable resources can produce political order by providing the revenues to govern. Rulers may deploy sticks (coercion or legal instruments) to deny

146   J. Goodhand private actors independent access to resources, or carrots (amnesties, tax breaks) to encourage them to share and invest their revenues. Patronage and corruption may be part of the bargaining process. The links between corruption and peacebuilding therefore depend upon the particular types and settings of corruption. ‘Successful’ corruption according to Reno (this volume) has occurred when informal networks have been grafted onto the central authority of states. In cases where the bureaucratic apparatus of the state was permitted to intervene into a wide array of activities, especially into the economy, it was able to co-­opt local authority structures – a practice that is highly at odds with contemporary economic ideology. Therefore the effects of post-­conflict corruption on peacebuilding processes depend on a range of context specific factors. These include the structure of power relations (pre- and post-­conflict); the nature of resources (licit and illicit) available to different groups; the social capital upon which leaders can build constituencies; the intensity, duration and legacies of the conflict period; the nature of the ‘grand bargain’ or peace settlement; and the role played by international and regional actors. As examined below, all these factors have played a part in shaping the complex and dynamic pattern of relationships between drugs, corruption and peacebuilding in Afghanistan. Whilst this chapter focuses on the post-­Taliban period, some background on the wartime period is required so as to better understand the contemporary dynamics of drugs and corruption.

The Afghan war economy The political economy of the Afghan wars can broadly be divided into three phases: first, the Cold War period, spanning the Soviet invasion of 1979 to the fall of the Najibullah regime in 1992; second, the intra-­ mujahedin civil war, which lasted until the emergence of the Taliban and their takeover of Kabul in 1996; and third, the period of Taliban rule until their removal by the US-­led coalition at the end of 2001. Between each phase there were significant shifts in the war economy. Key factors included the changing role of international and regional (state and non-­ state) patrons; the types, sources and magnitude of external and internal resource flows; new patterns of capital accumulation and investment; the emergence and evolution of politico-­military structures; and the mobilisation of social networks (ethnic, religious, tribal and regional) by military entrepreneurs. During the Cold War period of the conflict, massive inflows of military and financial assistance to the regime and the mujahedin (from the Soviet Union and the United States respectively) fuelled the expansion of a war economy; producing both rentier rebels and a rentier state (Rubin 1996). In the struggle for pre-­eminence amongst the Peshawar-­based resistance groups, the cultivation of foreign patrons was the key to building constituencies within Afghanistan. The influx of external funds contributed to the

Drug economy and peacebuilding in Afghanistan   147 rapid monetisation of the economy, and provided the start-­up capital for commanders to begin investing in the production, processing and trafficking of opium. The collapse of the Soviet Union and the decline in superpower patronage ultimately led to the fall of the Najibullah regime. Military entrepreneurs had to develop new strategies to generate revenue. They did this primarily through taxing the expanding drugs trade and cross border smuggling, by securing support from neighbouring countries and from trans-­national religious networks. The emergence of the drugs industry denoted a major transformation of the Afghan economy from largely subsistence agriculture to commercial, export-­oriented farming (Rubin 2007). The decentralisation of the war economy led to a regime of private extraction whereby private economic actors enjoyed exclusive, unregulated and untaxed control over the income generated by resources (Snyder 2004). The lawlessness, criminality and corruption of this period contributed to the groundswell of support for the Taliban, particularly in the south of the country when they first emerged in 1994. It also led to a new political coalition between the Taliban and the merchant class of the Afghan–Pakistan borderland, whose trucking and smuggling businesses were undermined by the chaos of warlord rule. The Taliban takeover led to the emergence of a joint extraction regime. In this third phase of the Afghan war economy, the Taliban consolidated their hold over 90 per cent of the country and in so doing centralised the means of coercion and predation. This period saw the consolidation and expansion of the drug economy. Opium was a de facto legal commodity, as indicated by its cultivation on prime agricultural land. Although there are competing explanations as to why the Taliban introduced and successfully enforced an opium ban in 2000, it seems probable that it was a bargaining ploy to gain international recognition.3 Therefore, during these three phases of the conflict, Afghanistan emerged as the global leader in opium production, based upon a ‘triple comparative advantage’ of favourable physical, political and economic conditions: a cultivation environment producing opium poppies with a high morphine content; chronic insecurity and institutional weakness resulting in inadequate or non-­existent forms of regulation; and poor infrastructure and rural poverty preventing the development of alternative licit livelihoods. Over the years, Afghans have developed the know-­how, expertise and market connections to build upon these comparative advantages in order to survive, accumulate, or wage war (Goodhand 2004).

Post-­Taliban Afghanistan and the re-­emergence of the opium economy Whilst the removal of the Taliban and the signing of the Bonn Agreement transformed the political landscape, many of the structural factors underpinning the opium economy remained unchanged. A range of factors

148   J. Goodhand contributed to the re-­emergence of the drug economy. First, the Taliban’s opium ban had the twin effects of creating a ten-­fold increase in prices and a growth in opium-­related debt in rural areas. Poor farmers had little choice but to plant poppy in November 2001 in order to repay their debts. For more wealthy farmers, high prices created strong incentives to allocate land to poppy. These factors were reinforced by the end of the drought which meant an increased availability of wheat (a competing crop) and an improvement in security which freed up internal and external markets (Mansfield 2007a). Second, the CIA’s policy of providing several hundred million US dollars to commanders to buy their support in the ‘war on terror’ essentially flooded the money market. The exchange rate of the dollar with the Afghan currency was halved, and this rapid deflation created incentives to unload US dollars into other currencies or other profitable investments. Since the US offensive occurred during poppy planting season, dollars were quickly recycled into loans to farmers to finance next spring’s poppy crop. Third, coalition forces initially adopted a laissez-­faire policy towards drugs, born out of the strong tension between counter-­insurgency and CN objectives. Counter insurgency efforts require good local allies and intelligence. However, local warlords are unlikely to provide either support or intelligence to those who are destroying their businesses (Felbab-­Brown 2005). Fourth, the criminalisation of opium had the effect of keeping prices high because of the associated ‘risk premium’ (in contrast to previous phases of the conflict when it was essentially a licit commodity) which forced those involved in the opium industry to look for protection beyond the state. Consequently the Taliban in the south and military entrepreneurs elsewhere have been able to generate political capital (and revenue) by providing protection to the peasantry and to traffickers from state-­led CN efforts. The decentralisation of violence and insecurity in the countryside was compounded by the failure to extend the International Security Assistance Force (ISAF ) beyond Kabul.

Contemporary features of the opium industry According to UNODC figures (2007), opium cultivation rose from 165,000 ha in 2006 to 193,000 ha in 2007 – following a 59 per cent increase between 2005 and 2006. National production grew from 6,500 tons to 8,200 tons. While the area under cultivation decreased by 19 per cent in 2008, good yields meant that total production only decreased by a modest 6 per cent to an estimated 7,700 tons. The 2009 UNODC report shows a 22 per cent decrease in cultivation and a 10 per cent decrease in production, and while cultivation remained stable in 2010, production further declined to 3,900 tons, largely due to the effects of a disease. However,

Drug economy and peacebuilding in Afghanistan   149 opium prices surged to US$169 per kilo, an increase of 36 per cent on the previous year, creating strong incentives to increase production again (UNODC 2010a). National figures mask considerable fluctuations in cultivation over time, and diversity amongst provinces (Mansfield 2006). Cultivation has become increasingly concentrated, and in 2010, 96 per cent of production occurred in nine provinces in the south and west. Helmand was responsible for 50 per cent of the entire opium crop in Afghanistan in 2007/2008, producing more narcotics than any other country, but in 2008/2009 cultivation declined by one-­third. In the north and centre poppy cultivation has diminished, and the number of poppy-­free provinces more than doubled from six to 13 in 2006, and by 2009 had further increased to 20.4 At both the upstream and downstream ends of the value chain – Afghan farmers and drug consumers in the developed world – markets are characterised by numerous actors who are ‘price takers’. But the number of actors at the intermediate stages is much smaller, enabling them to set and manipulate prices (Byrd and Jonglez 2006: 136). This practice corresponds with other (licit and illicit) commodity markets in Afghanistan, in which there are low barriers to entry at the bottom, but few actors and stronger forms of regulation further up the chain (Patterson 2006; Lister and Pain 2004). The vast bulk of the value-­added is generated outside Afghanistan (Byrd and Jonglez 2006: 130).5 In 2005–2006 the total export value of opiates produced in Afghanistan equalled about 38 per cent of non-­drug GDP, down from 47 per cent of the previous year due to growth of the non-­drug economy. In 2006 the export value of drugs was US$3.1 billion, compared to US$2.7 billion in 2005. UNODC estimates that 76 per cent of the income from narcotics goes to traffickers and heroin refiners (most of which is accrued to a limited number of bulk buyers and large scale specialist traders) and 24 per cent went to farmers (UNODC 2007). In order to reduce risks, a significant part of revenue is spent on payments to ‘security providers’ and government officials. Since 2002, criminalisation and law enforcement efforts have increased the ‘risk premium’ charged by opium traders, which is reflected in higher prices. Although frequently described as a vertically integrated value chain, in practice the opium economy might better be conceptualised as a number of inter-­connected but constantly mutating networks. There is no evidence to indicate the emergence of a hierarchically-­controlled, cartelised drug economy, though a recent UNODC/World Bank study reports growing market integration, with Helmand and Kandahar becoming centres of gravity which influence prices in other markets (Byrd and Jonglez 2006). A further sign of the maturity of the industry is the increased amount of opium refined into morphine and heroin within Afghanistan,6 and the shift in quality and purity of heroin.

150   J. Goodhand

Post-­Bonn peacebuilding and the criminalised peace economy In the post-­Bonn period, the war economy has mutated into a criminalised peace economy. Three factors have contributed to this problematic transition: the role of international actors; the post-­conflict ‘grand bargain’ forged in Bonn; and the character of the emergent Afghan state. First, in the international sphere there have been extreme tensions and inconsistencies over the means and ends of intervention. A ‘light footprint’ approach was adopted by Lakhdar Brahimi, the then Special Advisor to the United Nations Secretary-­General. This involved working through domestic power holders (many of dubious legitimacy), and maintaining a limited peacekeeping presence in Kabul, whilst an alliance of US-­led coalition forces and regional strongmen pursued the ‘war on terror’. Counter-­ terrorism was prioritised over statebuilding, and the strategy for pursing the former undermined the latter as regional strongmen re-­established their spheres of influence in the provinces. The problem of the ‘light footprint’ was compounded by the invasion of Iraq, which had the effect of redirecting diplomatic, financial and military resources away from Afghanistan. Between Bonn and the Afghan Compact the US position shifted away from its original minimalist agenda, and the Afghan Compact reflects a more maximalist approach to statebuilding. However, it also reflects the confusion around competing and perhaps incompatible priorities. Liberal peacebuilding skirts around these tensions by assuming that all good things come together. But the failure to prioritise between the ‘war on terror’, defeating the Taliban, statebuilding, CN and re-­inventing the NATO alliance has often led to second-­best, hybrid solutions – one example being the provincial reconstruction teams (PRTs) that were, in effect, the poor man’s solution to the problem of failing to extend ISAF forces into the provinces (Rubin and Hamidzada 2007: 12). Second, the Bonn Agreement did not constitute a sustainable peace settlement, but signified a victor’s peace involving a coalition of actors falling on the ‘right side’ of the ‘war on terror’.7 Unfortunately, however, the losers retained their capacity to challenge the new political dispensation. The Bonn Agreement left the largest ethnic group, the Pashtuns, feeling disenfranchised, and by excluding groups sympathetic to the interests of the Taliban and Pakistan, it invited spoiler behaviour and continued conflict. Third, in parallel with the ‘official’ political transition with its benchmarks of the emergency loya jirga, the constitutional loya jirga and elections, there has been an ‘unofficial’ transition in which power has coalesced around factions and groups that established a strategic edge in the war years. These groups continue to have access to means of protection and predation. Presidential elections (2004 and 2009) and parliamentary elections (2005 and 2010) had the effect of entrenching

Drug economy and peacebuilding in Afghanistan   151 politico-­military structures, and real power in Afghanistan became closely linked to the capacity to generate money and patronage through the drug economy.8 Because central government is so weak and dependent on unreliable external patrons, power holders in the periphery have a level of autonomy and leverage. In the bargaining processes between central and peripheral elites, the latter calculate that it may not be safe to throw in their lot with the former, leading to the continuation of fluid political arrangements which take the form of ‘spot contracts’ or constant ‘hedging’ (Suhrke 2009). The nature of these brokering relationships varies from region to region, depending on the area’s constellation of political and military actors and its potential for profitable extraction. Therefore, there is a deep interpenetration of formal politics with informal structures of networks and factions and as Mustaq Khan (2005) has shown in other contexts, internal political stability is not maintained through fiscal policy, but largely through off-­budget and selective accommodation of factions organised along patron–client lines.

Drugs, corruption and state crisis According to the World Bank (2005b), the drugs economy has induced a ‘vicious circle’ of bad governance endangering the re-­establishment of security, the rule of law and a legitimate economy. Opium, it is argued, constitutes a ‘grave danger to the entire statebuilding and reconstruction agenda’. The poppy economy has several direct and indirect impacts upon both the degree of the state and the kind of state. It is widely believed to underwrite a parallel set of power structures, lubricate clientelist relations and feed endemic corruption.9 Current-­day corruption appears to be built upon earlier practices of patronage, but one of the principal differences between the pre-­war and post-­war economy is the level of monetisation of everyday relationships (Harrison 2006: 21). The state has become the major avenue for accumulation and inter-­factional competition, and drugs have had the effect of increasing the stakes and therefore the costs of appointments. The Ministry of Interior, according to one report, is afflicted by ‘multi-­ tiered graft’ and ‘concentric circles of corruption’ (Kent 2007). According to one general in the Ministry of Interior, up to 30 per cent of the department’s foreign-­donated finances go astray (ibid.: 11). In an investigative report on the drugs trade it was reported that a police chief in a poppy growing area can pay up to US$100,000 in bribes every six months to retain a position with a salary of US$60 per month.10 Highway police, until they were disbanded, were also believed to be heavily involved in facilitating and taxing smuggling, and drugs were reportedly smuggled through government law enforcement vehicles. In the same article, Afghan officials

152   J. Goodhand privately admitted that perhaps 80 per cent of the personnel at the Ministry of Interior may be benefiting from the drug trade. In a report by the Afghan Research and Evaluation Unit (AREU) on police reform, an interviewee described the Ministry of Interior as a ‘shop for selling jobs’, confirming its reputation as one of the most corrupt ministries (Wilder 2007). But this problem is not restricted to the Ministry of Interior; of the 250,000 to 400,000 civil servants who are working within the Afghan government, Afghan officials estimate that perhaps 100,000 of these are directly benefiting (through transportation fees, profits, or bribes) from the drug trade. Confidential diplomatic cables obtained by WikiLeaks revealed the level of US concerns about drug related corruption within the Afghan government.11 The drug economy has become a vehicle for accumulating power. Political entrepreneurs, who want to be seen as ‘legitimate’, have a ‘remote control’ engagement with the drugs trade which involves working through connections lower down the chain.12 A complex pyramid of protection and patronage has emerged, providing state protection to criminal trafficking (Shaw 2006).13 This assemblage of actors, networks and institutions, like the opium economy itself, is extremely footloose and flexible, and patterns of capture and corruption can shift across ministries and other institutions in order to evade regulatory mechanisms (Byrd and Buddenberg 2006: 6). The drugs economy provides a mode of accumulation which enabled military and political entrepreneurs to ‘capture’ parts of the state. The wholesale absorption of factional networks into the government administration at the national and local levels negatively affects the ‘degree’ or capacity of the state. Those who rose to prominence during the war years and have used their strategic edge to enter the new Afghan state, lack the administrative skills and know-­how (unlike the technocrats) to work effectively with donors, manage projects and deliver services to the population. The drug economy also constitutes a huge quantity of untaxed income. Government revenue amounts to some 7 per cent of GDP, one of the lowest ratios in the world, limiting the state’s ability to deliver services and increasing its dependence on external resources. Drugs influence not only the capacity, but also the perceived legitimacy of the state. If the key challenge of post-­conflict peacebuilding is the construction of legitimate political authority, the widespread perception of corruption undermines the emergence of this authority. Corrupt officials are the face of government in the districts. But corruption is so far out of hand that the discourse on corruption has been skilfully mobilised by the Taliban and anti-­government elements.14 Corruption became a powerful public issue at the time of the 2005 parliamentary elections when it was popularised by Ramazan Bashar Dost, an MP from Kabul.15 A study by Integrity Watch Afghanistan found that 60 per cent of respondents believed that this administration was more corrupt than any other in the

Drug economy and peacebuilding in Afghanistan   153 past two decades (cited in Abrashi 2007), highlighting the courts and the Ministry of Interior as particularly corrupt. A report by UNODC in 2010 found that in the previous 12 months, half of the respondents in urban and rural areas had been forced to pay a bribe to a public official (UNODC 2010b). This damaging perception of corruption has also spread into the international sphere, undermining the support for further aid amongst voters in western countries. President Bush stated that he did not want to ‘waste another American life on a “narco-­state” ’ (cited in Risen 2007), and this perception of bad governance has perhaps been heightened as a result of the Obama administration’s military and civilian surge in Afghanistan.

Drugs, corruption and statebuilding? The mainstream discourse on drugs, however, exaggerates its political and financial influence – so far there is little evidence to suggest that the state is wholly subordinate to drugs interests. Though there are some indications of growing integration in the drug industry, it is far from being a hierarchical, cartelised entity that is able to exert influence on the state in a coherent manner. Drug networks tend to be decentralised and constantly mutating. Whilst drug money represents a significant source of rent for military and political entrepreneurs, other (licit and illicit) income streams, including large inflows of foreign aid, play a role in buying votes, positions, and favours. Furthermore, with the growth of the licit economy since 2002, the relative size of the drug economy has declined. Finally, political decision-­making involves a complex mix of factors in which financial, political and social resources are brought into play. Tribal, ethnic, political and religious allegiances can – and frequently do – trump economic self-­interest. Thus, whilst drugs are a factor in political decision making, the ‘narco-­state’ discourse exaggerates their role by raising them to a position of primacy. The drug economy is conventionally viewed as an index of state power, so that low capacity regimes are more likely to have a ‘drug problem’ than high capacity regimes. During the war years, Afghanistan developed a strong global comparative advantage in illegality as a result of state collapse and the emergence of military entrepreneurs and trans-­national networks able to facilitate the trade. Whilst this created an enabling environment for the emergence of the drug economy, different structural factors encouraged its consolidation and expansion. The most rapid expansion of the drugs trade has coincided with two periods of statebuilding – first, during the Taliban regime when the number of opium-­growing provinces grew from ten to 23 and, second, during the Karzai regime when it grew for a time to 32 provinces. However, many other factors contributed to the spread of opium cultivation and one should be careful not to confuse correlation with causation: the common assumption that state

154   J. Goodhand collapse and warlordism always provide favourable conditions for the drug trade is empirically inaccurate. In Burma, for example, a major expansion of the narcotics industry in the 1990s occurred during a period that also saw the end of the civil war, the demobilisation of ethnic and communist insurgents, and the successful restoration of a military regime’s grip on power (Snyder 2004: 2). As Gambetta and others argue, mafias need states to provide a level of stability and predictability in economic and political relations (Gambetta 1993). The drugs mafia supported the Taliban when they first emerged precisely because they could provide state-­like functions in terms of security and law and order. The pathways through which drugs and corruption affect peacebuilding processes are far more ambivalent and context specific than the mainstream discourse allows. The effects of lootable resources like drugs appear to vary according to the political structures in place and the associated institutions of extraction (Snyder 2004). Illicit drugs lend themselves to regimes of joint extraction because they present difficulties either for private agents or rulers to establish monopoly control. Since there are low barriers to entry, drugs are a diffuse resource and their illegality poses a barrier to entry for the public sector – as Snyder notes, it is not feasible to have a Ministry of Opium (though some would argue that the Afghan Ministry of Interior is performing that function). Moreover, joint extraction is easier to sustain in the face of lootable resources with a renewable and elastic supply – as in the case of illicit drugs. Whether drug-­related corruption is stabilising or destabilising depends on the level of centralisation, the nature of the bargains struck between rulers and private actors, and the role of international policies. Rulers can deploy a range of sticks and carrots in order to get private actors to cooperate in joint extraction. They can use coercion, the threat of no extraction (drug eradication policies), or legal inducements. A number of factors may lead to changes in the equilibrium of joint extraction including shifts in the power balance, changes in the value of lootable resources, or changes in leadership and grievances over the division of spoils (ibid.: 9). In Afghanistan, the institutions of extraction which link rulers at the centre with private agents on the periphery vary from area to area, but the crucial dividing line at present is between governance in the south and the north. In the south, the extraction regime somewhat resembles the situation that existed during the Soviet invasion, when rebels commanded a near monopoly over drug-­related rents. Large swathes of the south have now become ‘non state spaces’ (Scott 1998), where the government has neither the capacity nor legitimacy to mobilise capital or coercion in order to enforce institutions of joint control (or no extraction).16 This contrasts with the Taliban period, when revenues from the drugs trade were used to concentrate the means of coercion and consolidate political control. The change in leadership, the shift in the balance of power17 and the increase in the value of opium have occurred at a time of growing grievances in the south, as Pashtuns felt excluded from the new political dispensation.

Drug economy and peacebuilding in Afghanistan   155 These dynamics were accentuated by the 2010 parliamentary elections as voting could not occur in many of the insurgency affected areas of the south, leading to lower Pashtun representation in Parliament. However, the political dynamics in the north are very different. Arguably a new equilibrium has emerged leading to institutions of joint extraction. The power balance between centre and periphery changed as a result of unevenly implemented disarmament, demobilisation and reintegration programmes18 and the stabilising presence of international forces, since warlords had less to fear from an attack by rivals. The political equilibrium had the state essentially maintaining a protection racket, with private actors paying for protection from harassment by the government or from other competitors. The state’s carrots and sticks (non enforcement of the law or the threat of eradication) are deployed in such a way as to force private actors to cooperate by sharing their income. Conversely regional strongmen have not altogether dispensed with their militias and have reached an accommodation with the state, in return for a policy of limited interference. The stability of this equilibrium varies from area to area but there is no automatic and straightforward relationship between the drug trade and violence (Mansfield 2007b). Violence is likely to be instrumental and limited and is most frequently a consequence of market dysfunction and disorganisation. Because it is bad for business, the default setting may be violence avoidance. When wielders of force become owners of capital they are subject to the logic and rules of economic activity, and markets may increasingly control and transform such groups (Volkov 2002: 122). Whereas in the pre-­war period the border regions suffered from a political economy of neglect – their sparse populations and limited resources made them unpromising sites for state formation – during the war years they became important strategic resources and sites of accumulation. The post-­Bonn construction boom has largely been funded by drug money, so to a great extent, economic activities in the hinterland are actually responsible for the peace dividend experienced by the centre. Whilst much of the proceeds from the drug economy have been invested outside the country, there are visible signs of inward investment in drug-­producing areas and there has been a recycling of money into licit businesses. The opium economy has produced significant increases in rural wages and is an important source of credit for poor rural households. Opium profits fuel consumption of domestic products and support the importation of high value goods. Whereas other markets in Afghanistan are extremely fragmented, the drug economy represents the closest thing there is to a national market, involving multi-­ethnic networks and strong north–south integration. According to the World Bank (2005c), the opium economy has had a stabilising effect on the currency by having a significant net positive impact on Afghanistan’s balance of payments. The IMF has warned that successful CN efforts could adversely affect GDP growth, the balance of payments and government revenue (International Monetary Fund 2005).

156   J. Goodhand Afghanistan has undergone major transformations during the war years including a shift from subsistence agriculture to an export-­based cash crop economy resulting in growing inequality between the peasantry on one hand and political and military entrepreneurs on the other. Perhaps the specialists in violence, the drug traffickers and businessmen, who prospered during this period, represent an emergent capitalist class. As Giustozzi (2007) notes, many of these actors have now invested too much in the ‘peace’ for them to seek a return to war. To some extent in the north of the country, buying out the spoilers has worked. In Burma, peace proved more profitable than war because the returns on opium increased dramatically after ceasefire agreements were reached between the military and insurgents. However, in Afghanistan, the war in the south and the international narcotics regime are likely to prevent such a transition from occurring. The connection between drugs, corruption and legitimacy is far more complex than the international discourse allows. External actors have tended to focus on the illegitimacy and harmful effects of corruption. The negative impact on the lives of ordinary Afghans cannot be denied, and transactions of bribery and corruption always take place in power relationships that stratify, marginalise and exclude (Haller and Shore 2005: 17). But not all forms of corruption are equally harmful or equally wrong in the eyes of most Afghans. Impartiality in public service, for example, may not always be seen as virtue: people might tolerate corruption if the state can deliver some tangible benefits to them and their families. These benefits may constitute public goods such as security, law and order, and justice; or private goods including jobs, ‘gifts’, or favours. Interestingly, the local discourse on corruption appears to be far less focused on drugs than the international discourse. Instead anger is directed more towards perceived misuse of foreign funding and corruption amongst ‘NGOs’ – these are the issues, rather than drugs, that Bashar Dhost mobilised around during the 2005 parliamentary elections. Afghans also see corruption in other areas of international engagement, including the links between US security contractors, Afghan militias, and corrupt officials. Involvement in the drugs economy is not seen as a deviant activity, and to a great extent, the drug industry is far more ‘pro poor’ than the aid industry as it has permeated the rural economy and provided a safety net for poor households. The connection between state building and drugs is therefore more complex than commonly assumed. One could hypothesise that rather than being a linear relationship which progresses from ‘low capacity regime/high drug production’ to ‘high capacity regime/low drug production’, the historical trajectory has been closer to an inverted U. When state capacity is low, drug production is minimal and illegality grows as state capacity improves during the early phases of statebuilding; this is followed by a decreasing reliance on shadow economy activity as the state matures into a high capacity regime.

Drug economy and peacebuilding in Afghanistan   157

Corruption and counter-­narcotics policies As highlighted above, there is a big gap between the (possibly unrealistic) aspirations outlined in Bonn of a liberal democratic state and the reality almost a decade later of a shadow state deeply penetrated by political factions and drugs interests. Karzai’s ‘big tent’ approach, which prioritised stability over reforms, has enabled ‘reform resistant’ elements to consolidate their position and consequently act as spoilers within government. A whole raft of initiatives to build accountability, transparency, and greater effectiveness have been blocked or diluted, in large measure because they challenge the interests of key actors in the central and provincial administrations. These include reforms to the police and judiciary, public administration reforms and, anti-­corruption measures.19 The failure to confront drug interests through substantive reforms to the most powerful ministries also reflects the competing objectives of international players and leads to inconsistent policies as highlighted earlier.20 Karzai, particularly in relation to the drugs issue, is caught in the dual legitimacy trap. Paradoxically, drug eradication may build Karzai’s external legitimacy whilst simultaneously undermining his domestic standing. He has declared a jihad on drugs and he has deployed notions of religious sin and collective shame to persuade farmers to desist from poppy cultivation. But illegality does not mean that such activities are regarded as illegitimate. Many Afghans view CN policies as an externally-­driven Western agenda. Criminalisation and eradication may end up undermining government legitimacy – particularly when the government cannot deliver on its part of the bargain by providing alternative sources of livelihood. Laws which lack legitimacy consequently require a greater reliance on coercion. International forces are also de-­legitimised by association in the eyes of many Afghans, who were initially supportive of coalition forces. CN policies may accentuate inter-­ethnic/north–south tensions since eradication efforts in the south highlighted the perception that the government was ‘anti-­Pashtun’. In addition to their effects on the legitimacy of the state, CN policies have important opportunity costs and may indirectly undermine state capacities. As Koehler (2005) argues, the ‘narco state’ may be less of a threat to Afghan statehood than a ‘foreign steered counter-­narcotics proxy state’. The legitimacy of Afghan statebuilding runs the risk of being sacrificed for a ‘quick result counter-­narcotics enforcement machinery’ (ibid.: 70). Therefore even if CN efforts were successful on their own terms (which they are not), ultimately they run the danger of undermining the more fundamental goal of statebuilding. Control regimes tend to reflect de facto power relations, and the state’s involvement in CN has generated perverse incentives for misgovernment. The threat or application of eradication or interdiction has been used to undermine political enemies or extract resources, and has enabled producers to eliminate

158   J. Goodhand competitors, leading to the de facto consolidation of the drug industry. In 2007 around 10 per cent of the poppy crop was eradicated according to UNODC, but these were mainly marginal fields, the result of ‘corrupt deals between landowners, village elders and eradication teams’ (UNODC 2010a: v). The eradication figures themselves have become a source of corruption – local officials are reported to inflate the figures since governors are compensated at US$120 for each eradicated hectare (TNI 2007). One province that was initially considered a success for poppy eradication was Nangahar. In 2005, there was a 94 per cent decrease in poppy cultivation and only a limited rebound in 2006. But by 2007, there was a major rebound in production. The Nangahar ‘experiment’ provides some insights into the perverse political and economic effects of ‘shock therapy’ elimination. Following a similar approach to the Taliban in 2000, the Karzai government delegated responsibility for reducing cultivation to local power holders. The chief bargaining tools available to the state were to offer a level of autonomy to warlords (a regime of joint extraction) or to threaten eradication (a regime of ‘no extraction’). Local strongmen who made the transition into the administration realised that being a warlord or jihadi commander may be less secure and less lucrative than a position in the state bureaucracy (Koehler 2005). But warlords have not necessarily thrown in their lot with the government and continue to hedge their bets. In Nangahar their part of the bargain was to ‘turn off ’ production, but when the quid pro quo of substantial development assistance did not materialise, the economic effects of the ban rapidly undermined support for the government. Although the opium ban continued into the 2009/2010 growing season, increased political instability and economic distress call into question its sustainability in the long term (Goodhand and Mansfield 2010). It has been argued that by focusing on poppy production and acreage, CN efforts are using the wrong metric of success. It makes little sense to concentrate on the part of the chain which involves 80 per cent of the stakeholders but only 20 per cent of the value. Eradication leads to price increases which transfers profits from farmers to traffickers. Therefore the focus should be on trafficking where 80 per cent of the profits are located. However, interdiction efforts have provided leverage to corrupt officials to extract enormous bribes from traffickers. Such corruption has attracted former militia commanders who joined the Ministry of Interior after being demobilised (Rubin 2007). Not surprisingly, very few high-­ranking government officials have been prosecuted for drug-­related corruption, although under the Obama administration a stronger emphasis has been placed on targeting ‘drugs kingpins’ and trafficking networks. There is a complex and ambiguous relationship between CN and statebuilding, and heavy-­handed eradication may have perverse effects and undermine the legitimacy and capacity of the central state vis-­à-vis local strongmen. Returning to Snyder’s analysis, CN policies are likely to create

Drug economy and peacebuilding in Afghanistan   159 political disorder, because they render joint extraction infeasible by imposing high costs on government participation. As experience from Colombia and elsewhere shows, ‘externally induced prohibition against joint extraction is the cause of violence and disorder because it forces governments into a lethal confrontation with drug cartels’ (Snyder 2004: 9).

Conclusions This chapter has outlined how the drug economy emerged, evolved and adapted to transformations in Afghanistan’s political economy. Central to this analysis has been an examination of the power relationships and institutions of extraction which developed around the drug economy. It is argued, following Snyder, that joint extraction regimes involving rulers and private actors have tended to bring political order whilst private extraction regimes have led to decentralised violence and political breakdown. In the post-­Bonn environment, both regimes can be detected, with a fairly clear dividing line, following the mountains of the Hindu Kush, between the north and south of the country. This political divide is a legacy of the war years and the division of spoils following the Bonn Agreement. In the north, drugs, to some degree, have played a role in cementing political relationships between centre and periphery and in so doing helped create a level of political order. In the south however, they have fuelled the combat economy and enabled the Taliban to generate political capital by protecting the peasantry and traffickers. But drugs are the symptom, rather than the driver of this insecurity in the south. Drugs and drug-­related corruption are not inherently conflictual, and depending on underlying power relations they may produce order or disorder. Corruption may be the most efficient means for individuals or groups to cope with a political economy of high uncertainty, scarcity and disorder (Le Billon 2003: 424). It is as well to remember, that corruption is not the worst thing that can happen, compared to the real possibility of state collapse and a return to civil war. From a historical perspective, processes of early state formation were never linear and smooth, and states, bandits and criminality have frequently been close companions. A drug-­free Afghanistan cannot be achieved in the short-­term, particularly whilst pursuing a war. Efforts to eliminate narcotics in an ungoverned or badly governed state have become increasingly militarised. And law enforcement approaches which operate either through patronage-­based networks or parallel institutions created by foreigners have limited purchase. A zero tolerance approach to drugs and corruption is therefore unworkable and has perverse effects. Peacebuilding and CN are two distinct and not even complementary objectives, and the CN polices are determined by the interests of Western countries and their problems with drug consumption, rather than the

160   J. Goodhand long-­term interests of Afghan citizens. Clearly, states cannot be made to work from the outside (Chestermann et al. 2004), and legitimate institutions are the product of long-­term domestic political processes (Ottoway 2002). The bargaining between rulers and private actors and the institutions of extraction referred to in this chapter are central to the process of statebuilding. Perhaps there is a limit as to how far the argument can be pushed that revenues from the drug economy can pay for peace as well as war. Does this mean that peacebuilding is concerned exclusively with constructing political order in the absence of violence rather than adhering to a higher standard of positive peace? It is clear that corruption cannot simply be dismissed as a Western crusade, given its negative impacts on the lives of most Afghans and the fact that there is a constituency within Afghan society pushing for more stringent measures against corruption and drugs – these policies have their importers as well as their exporters. Yet surely there is a fruitful middle ground to explore between consolidating an illiberal, warlord-­dominated peace and pursuing the so-­called ‘post-­conflict make over fantasy’ (Cramer 2006), which sets out an idealised end state but provides no road map for how to get there. The most productive approaches to CN, anti-­corruption and post-­conflict statebuilding in Afghanistan and elsewhere are likely to involve transitional arrangements that enable the country to gradually move towards being less drug dependent and less corrupt. Paradoxically, standalone CN efforts are likely to impede such a transition.

Notes   1 The chapter is based on field work conducted in 2005–2006, funded by the ESRC and CMI.   2 Arguably if one views the Taliban as proto-­statebuilders, their control and taxation of the poppy economy was a factor which enabled them to extend their control over the country and concentrate the means of coercion.   3 Other interpretations are that it was a strategy to push up prices – which rose by a factor of ten following the ban – or that it was driven by religious concerns.   4 The sustainability of these decreases can be questioned and opium trafficking also continues in the north, and the increase in marijuana production has been substantial.   5 Zetland (2003: 4) for instance calculates that opium which costs US$90 per kilo at the Afghan farmgate becomes US$2870 per kilo (refined heroin) in Pakistan, which in turn increases to US$80,000 per kilo in the US wholesale market and finally US$725,000 at retail prices. The cross border mark-­up from Pakistan to the United States is 2,400 per cent compared to the norm of 12 per cent for most agricultural products.   6 In 1995, 41 per cent of opiate-­based exports were in the form of heroin, but by 2002 this had risen to 72 per cent.   7 The four main groups at the Bonn talks were the Northern Alliance, the Pakistan-­based Peshawar Front, the Iran-­backed Cyprus group and the Rome group representing former King Zahir Shah.

Drug economy and peacebuilding in Afghanistan   161   8 For example, the Afghan Independent Human Rights Commission reported that after the parliamentary elections an estimated 80 per cent of the candidates in the provinces and 60 per cent in Kabul maintained contacts with armed groups and drug traffickers (IRIN 2005).   9 Afghanistan ranked 172 out of 180 countries in Transparency International’s 2007 Corruption Perception Index. 10 Baldauf 2006. Pay grades have subsequently changed and a provincial police chief is now paid US$500–US$600 per month. 11 American Ambassador Eikenberry for example wrote after his meeting with Ahmad Wali Karzai, half brother of the president and long suspected to be involved in drug trafficking: ‘The meeting with AWK highlights one of the major challenges in Afghanistan: how to fight corruption and connect the people to their government, when the key government officials are themselves corrupt’ (Shane et al. 2010). 12 For example in Jurm district of Badakshan a local commander has reached an agreement with a parliamentarian who has close links to the president’s office. In return for delivering votes and the ongoing support of the population, the commander receives the parliamentarian’s patronage. In return, the parliamentarian turns a blind eye to poppy cultivation. 13 Thus, one former mujahedin commander, Din Muhammed Jurat, became a general in the Ministry of Interior and is widely believed to be a major figure in organised crime (Rubin 2007). 14 For example the Taliban introduced their own ‘code of conduct’ aiming to set standards of professionalism and behaviour in contrast to the perceived corruption of government (Schuster 2006). 15 ‘It [corruption] is a disaster for the Afghan people . . . Mr Karzai doesn’t really want to fight corruption, and the international community too, doesn’t want to fight corruption in Afghanistan’, Bashar Dost, cited in Kent 2007: 12. 16 It should be noted that the drug trade in the south still depends upon the tacit collaboration of state officials; it would not be able to function without the collaboration of provincial governors, police officers, border guards, customs officials and so forth. 17 The presence of a virtually open border, the Taliban’s establishment of safe havens within Pakistan’s tribal territories, and the introduction of tactics of asymmetrical warfare including suicide bombing have shifted the balance of power in favour of the insurgents. 18 Disarmament, demobilisation and reintegration programmes are aimed at ex-­ combatants. 19 The Afghan government published its ‘Anti-­Corruption Roadmap’ in 2007, and established a US-­backed Criminal Information Unit within the Ministry of Interior to reduce corruption by strengthening internal affairs and accountability mechanisms. However, Afghanistan’s first anti-­corruption chief, Izzatullah Wasifi, had a troubling past, having been convicted in the 1980s of selling heroin in the United States. 20 In 2005 DEA agents and Afghan counterparts found nine tons of opium in the office of Sher Muhammad Akhundzada, governor of Helmand, but the CN team was blocked from taking any action against the governor who had close ties to American and British military intelligence and diplomatic officials (Risen 2007).

10 Reconstruction and peacebuilding under extreme adversity The problem of pervasive corruption in Iraq Robert Looney Uncontrolled levels of corruption in Iraq are fuelling the country’s sectarian conflict and creating a political economy of violence. The political economy of this conflict is very much rooted in the alarming levels of corruption that we are dealing with. A lot of the money from many sectors of the economy is diverted to sustain the violence. (Barham Salih, Iraqi Deputy Prime Minister)1

There are two major obstacles to Iraq’s economic recovery: the lingering violence and ongoing sectarian strife. Combating these problems has been further complicated by the large numbers of unemployed, easily available weaponry, a quickly widening gap between the rich and poor, and a largely impotent government. Pervasive violence and a deteriorating economy have created a vicious circle that has further undermined the government’s ability to tackle the economy’s four basic problems: the security of the oil supply; high levels of unemployment; deficiencies in infrastructure; and the government’s failure to introduce much-­needed economic reforms. In turn, these four problems have contributed to the development of a large underground economy reinforced by pervasive corruption at all levels of government. The reduction in violence in recent years has led to changes in the underground economy is evolving. However, because the shadow economy’s size is largely controlled by the level of corruption, it is the composition rather than the absolute size that has changed. In conflict countries, similar types of vicious circles are often set in motion through a process whereby negative developments are reinforced over time. These cycles will often continue in the same direction until an exogenous factor intervenes and stops or reverses the cycle. Research suggests that this is what is happening to the Iraqi economy in the post-­ Saddam period (Looney 2004, 2006a, 2006b). Any efforts to reconstruct and restore a functioning Iraqi economy will be constrained by the government’s ability to set in motion a virtuous circle of economic expansion and improved security. In turn, this means constructing a strategy that positively addresses a number of interrelated factors including: (a) the growth and dynamics of the shadow or informal economy; (b) the

Reconstruction and corruption in Iraq   163 deterioration in social capital, and in particular the near absence of trust between the different regions, religious groups, tribes and even local neighbourhoods; and (c) the evolving relationship between tribes, gangs and the insurgency. As Deputy Prime Minister Barham Salih suggests (in the above epigraph), corruption is the common element that ties these diverse forces together, and the dynamic that drives the vicious circle of violence and economic stagnation that Iraq has experienced. Unfortunately, international media attention on corruption in Iraq has tended to focus exclusively on high-­profile cases of fraud, waste and abuse by US contracting authorities and private foreign firms (GAO 2007), or the fallout from the Oil-­for-Food programme of the 1990s. Without denying the importance of these forms of corruption, the analysis that follows is more focused on the future, in particular on the rampant and growing domestic Iraqi corruption that is draining the country’s public finances, choking reconstruction efforts and undermining the fragile support for the new Iraqi state (Oxford Analytica 2007: 1). As the following sections illustrate, the ongoing violence, lack of trust, and conflict, together with unique factors such as oil revenues and the presence of a serious criminal element, have combined to create an environment in which the extent and effects of corruption are even more pronounced than that observed by Mark Philp in his chapter (p. 33) in ‘normal’ post-­conflict settings: In post-­conflict societies [corruption’s] impact is potentially still more serious, since it can undercut the emergence of stable expectations and the processes by which they are legitimated; it can maintain or further exacerbate situations in which outcomes lack legitimacy, making it difficult for any serious form of authority to emerge; it can lead to the squandering of aid and external political will; and it can make the weak weaker, the poor poorer, and the vulnerable still less secure. All of this has occurred in Iraq, perhaps even to an unprecedented degree – certainly to an extent not envisaged by even the most vocal critics of the invasion of Iraq and subsequent reconstruction efforts.

Comparative measures of corruption Unfortunately there are no definitive measures of corruption.2 Instead several indices of the relative ranking of countries are available (Tables 10.1 and 10.2). In each case, Iraq ranks as one of the world’s most corrupt countries. Even worse, there is little evidence that the already pervasive corruption that has gripped the country is declining. The World Bank’s Governance Indicators (Table 10.1) document Iraq’s lack of effective governance not just in the area of corruption control, but

164   R. Looney Table 10.1  Iraq: measures of relative governance, 1996–2009 (in percentiles) Measures of governance

2009

2008

2007

2006

2005

2004

2003

2002

Voice and accountability Political stability Government effectiveness Regulatory quality Rule of law Control of corruption

13.7 1.9 8.1 15.2 1.4 4.8

10.6 1.4 4.8 12.6 1.0 2.4

9.6 0.5 1.9 8.3 0.5 2.4

11.1 0.0 0.5 6.3 1.0 1.5

9.3 0.0 1.0 5.9 0.5 3.9

4.8 0.0 1.0 2.9 0.5 1.9

5.3 0.0 2.4 6.8 1.4 12.1

0.5 2.9 1.0 0.0 2.4 1.0

Source: World Bank, Worldwide Governance Indicators, 2009 (Washington: World Bank, 2010). Online, available at: http://info.worldbank.org/governance/wgi/resources.htm.

in other key areas of governance: voice and accountability, political stability/no violence, government effectiveness and the rule of law. The country consistently ranks in the bottom 5–10 per cent in each category. Since the country’s governance standards are so poor, making connections between corruption and the slow progress of reconstruction is difficult. Do reconstruction cost overruns stem from corruption or from government incompetence? Does the diversion of reconstruction funds stem from corruption or the absence of the rule of law? Do infrastructure projects fail to attract follow-­on private investment due to corruption or the level of violence? Most likely, all these factors are interrelated, thus necessitating a comprehensive approach to combating the country’s growing levels of corruption. Transparency International’s Corruption Perceptions Index (CPI) is a composite index that draws on multiple expert opinion surveys that poll perceptions of public sector corruption. It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption. Again, Iraq (Table 10.2) has one of the lowest scores. Unfortunately, rather than improving, the Table 10.2  Iraq: Corruption Perception Index 2003–2010 Year

Score

Rank

Total countries

2003 2004 2005 2006 2007 2008 2009 2010

2.2 2.1 2.2 1.9 1.5 1.3 1.5 1.5

113–117 129–132 137–143 160 178 178 176 175

133 145 158 163 179 180 180 178

Source: Compiled from Transparency International CPI, various issues. Online, available at: www.transparency.org/policy_research.

Reconstruction and corruption in Iraq   165 situation, as depicted in the World Bank data, appears to have stabilised at very low levels in recent years. As of 2010, Iraq ranked 175 out of 178 countries.

The pervasive nature of Iraqi corruption Underlying the figures and indices are numerous accounts of corruption cutting across all segments of Iraqi public and private life (Oxford Analytica 2007: 1). Following the establishment of the new Iraqi government in late 2010, many of the key public ministries expected to play a lead role in the country’s reconstruction were staffed largely through political patronage (The Economist 2011: 38). Despite efforts over the years, even rudimentary systems of accountability, internal controls and the rule of law have been lacking. For several years after the invasion, the Interior Ministry epitomised this sad state of affairs: with different parts controlled by political factions, it housed a myriad of competing police and intelligence agencies that pursued various political or sectarian agendas. In the Oil Ministry, corruption at all levels has led to massive losses of revenue. The Oil Ministry is aware of the situation and has endorsed the Extractive Industries Transparency Initiative (EITI) and is seeking to become a full member. In the Health Ministry, the dire shortage of medicines and drugs in Iraqi hospitals is largely due to the organised theft that takes place at every point in the supply chain. In the Defence Ministry, senior officials are under investigation following allegations that over US$1 billion worth of military equipment was paid for, but not delivered to army units. In the justice system, the police and judges in many areas have reverted to a system where families can only secure the release of their detained relatives on payment of a bribe. It is now routine to hear reports of new officers who have just graduated from the police academy selling their handguns on the black market. Even worse, many in the police are linked to, or are members of, assorted militias and criminal gangs – thus the distinction between the police, the political militias and criminal groups is often marginal in the minds of Iraqis (Oxford Analytica 2010: 1). In the southern provinces, insurgent gangs that attacked coalition forces more often than not are indistinguishable from gangs of criminals or smugglers, loosely affiliated with a Shia militia, mainly concerned with preventing the closing down of lucrative smuggling routes.3 With oil products still being massively subsidised in Iraq, the smuggling trade is still booming (Looney 2005e). Additional examples of widespread corruption, shoddy work and poor management have been documented at length in a series of reports from the US Government’s Special Inspector-­General for Iraq Reconstruction (SIGIR), the Government Accountability Office (GAO), which is the investigative arm of Congress, and CorpWatch, a non-­partisan, not-­for-profit monitoring organisation.

166   R. Looney In his April 2007 report, Stuart Bowen, the head of SIGIR, noted that his agency sampled eight projects and found that seven of them had significant operational problems either because the expensive equipment that was purchased was never used or there were other problems such as plumbing and electrical failures, lack of proper maintenance and looting (SIGIR 2007).4 What was particularly troubling was that this report was focused only on projects that the administration had touted as successes, In actuality, these successes, should have been described as failures. • •

•

•

•

At Baghdad International Airport, where US$11.8 million was spent on new electrical generators, US$8.6 million worth equipment stopped functioning shortly after completion of the project. In a maternity hospital in the northern city of Erbil, a newly built water purification system did not function; an expensive incinerator for medical waste was found padlocked; and medical waste – including syringes, used bandages and empty drug vials – was clogging the sewage system and probably contaminating the water system. At the same hospital, a newly installed system for distributing oxygen was ignored by the medical staff, who told inspectors they distrusted the sophisticated new equipment and had gone back to using tried-­ and-true oxygen tanks – which were stored unsafely throughout the building. Expensive generators went missing from the Iraqi Camp Ur military base, having been hauled off to another post. At the same camp, three modular buildings constructed at a cost of US$1.8 million had been dismantled and removed with no explanation given. Barracks renovated for enlisted soldiers were already in disrepair, just a year after being handed over to the Iraqi Army.

These events contributed to the widespread concern over the ability of the various ministries to manage the reconstruction effort. How much of the difficulty can be attributed exclusively to corruption, however, is difficult to assess. Because the ministries suffer from shortages of skilled personnel and have budgets inadequate to cover maintenance, they have refused to assume responsibility for many projects. SIGIR concluded that the Iraqi civil service is hampered by inadequately trained or unskilled staff. ‘Iraqi government institutions are undeveloped and confront significant challenges in staffing a competent, non-­partisan civil service; effectively fighting corruption; using modern technology; and managing resources effectively’ (GAO 2007). Furthermore, political and sectarian loyalties have jeopardised the ministries’ abilities to provide basic services and build credibility among Iraqi citizens. In short, government ministries are being staffed with party cronies and their budgets are being used as sources of power for political parties.

Reconstruction and corruption in Iraq   167 SIGIR in particular noted that patronage in the ministries has led to staff instability, as key personnel are replaced when the government changes or a new minister is named. An ongoing fear in Iraq is that some Iraqi ministries, including the Ministries of Interior, Agriculture, Health, Transportation and Tourism, will revert to being led by ministers who are aligned with political parties such as the Sadrists who remain hostile to the international presence (The Economist 2011: 38). These ministers have used their positions to pursue partisan agendas that conflict with the goal of building a government that represents all ethnic groups. In this environment SIGIR notes that: ‘Corruption jeopardises future flows of needed international assistance and reportedly undermines the government’s ability to make effective use of current reconstruction assistance.’ Other factors contribute to the corruption problem: an ineffective banking system that leaves the government dependent on cash transactions, opaque and obsolete ministry procurement systems, and inadequately resourced accountability institutions such as the ministries’ Inspector-­Generals. Aside from the lack of security, corruption is the biggest threat to progress in stabilising Iraq. SIGIR reports that Iraq has been losing US$4 billion to corruption every year since the overthrow of Saddam Hussein. Paying bribes for services is now standard practice. As noted, corruption is particularly endemic in the oil sector, with the Ministry of Oil hit by smuggling rackets that have reduced state oil earnings. At least 10 per cent of refined fuels are sold on the black market and about 30 per cent of imported fuels are smuggled out of Iraq (Glanz and Worth 2006). Hundreds of criminal corruption cases remain open, involving billions of dollars. However the situation may improve after Iraq has signed and ratified the United Nations Convention against Corruption (UNCAC) and begins the process of making the changes that are required to come into compliance. In addition, Iraq, at least on paper, has a strong set of institutions designed to address corruption issues: • • •

The Board of Supreme Audit dates back to the 1920s. The CPA installed Inspector-­Generals in all Iraqi ministries and also created a Commission on Public Integrity to investigate the most serious cases of corruption (Coalition Provisional Authority 2004). Since April 2003, a large amount of international assistance has gone into providing these institutions (and the Iraqi courts and police) with training, equipment and technical advice.

Nonetheless, these anti-­corruption institutions remain very weak and susceptible to political pressures, and it is common in today’s Iraq to use charges of corruption to discredit officials who stand in the way of political objectives. The breadth and depth of corruption has infuriated Iraqi

168   R. Looney citizens, who see politicians and officials growing rich while services decline. This also fed disillusionment with the United States, United Kingdom and the coalition presence, and may have contributed to support for militias and insurgents. Corruption also alienates international donors, who see much of their investment in Iraq going to waste. In order to address this issue, Iraq’s key international partners have suggested a range of schemes that include training investigators, protecting judges and witnesses, and reforming procurement and financial processes to remove opportunities for fraud. However, without the political will of those at the top of the Iraqi government, such technical assistance will be of little use. The government’s ability to crack down on corruption let alone its determination, to do so remains very much in doubt.

Corruption as an integral part of the economic dynamics of post-­war Iraq While commendable, the attempts at combating corruption in Iraq are unlikely to be successful as long as many of the underlying factors remain unchanged. As noted above this means addressing three interrelated factors: (a) the growth and dynamics of the shadow or informal economy; (b) the deterioration in social capital; and (c) the evolving relationship between tribes, gangs and the insurgency. The shadow economy The only part of the economy to have thrived under Saddam Hussein and in the post-­2003 period of instability and insurgency is the country’s informal economy. In fact, there is ample evidence that the country’s informal economy has expanded considerably since Saddam’s overthrow. In this regard, Iraq has followed a pattern seen in other parts of the world, where informal economies have tended to grow during periods of political, economic and social crisis. Preliminary analysis also suggests that a clear pattern exists whereby the relative size of a country’s informal economy (as a share of gross national product) is inversely correlated with openness to the world economy (Looney 2005d, 2007). Countries that are relatively closed tend to have large informal economies, while those countries open to the pressures of globalisation have much smaller informal economies. Furthermore, the informal sector becomes significantly smaller as countries increase their control over corruption (Looney 2005d, 2005e). As might have been expected, Iraq under Saddam was in a group of countries with the highest probability of possessing a large informal economy. With limited exposure to the world economy under the sanctions regime, Iraq’s shadow or informal economy probably accounted for around 35 per cent of gross domestic product (GDP) in 2000 (Looney 2005b), with nearly 70 per cent of the labour force employed in informal

Reconstruction and corruption in Iraq   169 activities. Since the fall of Saddam, Iraq’s informal economy has been fuelled by the ongoing crisis. Clearly, conflict and the insurgency have taken a heavy toll on the formal economy. As private firms or public enterprises are downsized or closed, newly unemployed workers often find that their only choice is to seek work in the informal sector. Also, in response to conflict-­driven inflation or cutbacks in public services, households have often needed to supplement formal sector incomes with informal earnings. In some parts of the country, the continuing failure to strengthen law and order has made it difficult to contain the expansion of criminal activity, some of which continues to plague parts of the shadow economy. For example, street vendors are now selling stolen merchandise. In sum, corruption has been one of the key factors affecting the size of Iraq’s informal or shadow economy (Looney 2005a).5 Given increased levels of corruption, the insurgency and the uncertainty surrounding political developments, we can expect large segments of the population to continue to rely on survival relationships that were characteristic of the 1990s sanctions period. This is confirmed daily with the news coming out of Iraq describing economic mismanagement (Al-­Saadi 2004), vast black markets in gasoline (Noozz 2005), increased crime, and shortages of critical inputs (Murphy 2005). These developments do not bode well and suggest that the current size of the informal economy is considerably larger than the 35 per cent of GDP during the late 1990s. Based on the ongoing pervasiveness of corruption (statistically the main link to the size of the shadow economy), a safe estimate, in light of the decline in the insurgency, would put the informal economy at around 50 per cent of gross national product (Looney 2005b, 2005d). It is difficult to assess the impact of disbanding of the army and the anti-­ Baathist campaign following Saddam’s overthrow – this estimate may err on the conservative side. In addition to the factors noted above, the informal economy may be growing simply because of the constraints limiting the expansion of formal economic activity. Just as private capital formation is often critical to the development of a thriving modern economy, social capital creation may be just as essential in creating the shift to more formal activities. Iraq’s informal or shadow economy presents a number of obstacles to peacebuilding. Most notably it facilitates an opaque environment that accommodates official corruption. There are solutions, but in the Iraqi context they are difficult to implement. Specifically, recent research (Dreher et al. 2005) suggests that improvements in institutional quality reduces the shadow economy directly and corruption both directly and indirectly (through its effect on the shadow market). Unfortunately in Iraq’s case, the political accommodation of crime-­based activities and their associated financial gains significantly lessen the incentives for public officials to initiate the institutional reforms needed to create a modern transparent state (Looney 2005e: 6).

170   R. Looney The deterioration in social capital Perhaps the most detrimental effect of corruption on the peacebuilding process is its effect on the country’s social capital. Social capital refers to networks of relationships that bind people together.6 Social capitalists distinguish such relationships from physical capital and human capital (Scanlon 2003). In the context of Iraqi reconstruction and the establishment of a market economy, a key element of social capital centres on a particular component of social capital: the notion of trust. Corruption reduces trust at all levels thus making it nearly impossible for a formal economy to grow and displace the shadow economy. Trust is such a critical factor in the development of modern economies because it enables contact with others and facilitates the exchange of goods and services. It fosters cooperation, and cooperation then breeds trust in a two-­way interaction necessary for the creation of long-­term generalised norms for cooperation. Social capital thus represents a set of resources rooted in networks of relationships possessing the power to facilitate economic progress. There are three types of relationships among parties to an economic transaction, giving rise to three different types of trust (Raiser 1999): Ascribed trust: This first type of relationship is found among kinship groups and family members. These relationships dominate economic transactions in subsistence economies and still characterise reproduction and the household economy (but also many small-­scale crafts and trades). Process-­based trust: This type of relationship exists between individuals that have known each other for a long time, but do not share loyalty to a specific group. Most business networks are characterised by this type of repeated interaction and which develops into a process-­based form of trust. Extended trust: This relationship exists between individuals who enter into a transaction with only limited information about the counterpart’s specific attributes. For economic exchange to take place between these types of individuals, generalised or extended trust is needed. The importance of this third type of relationship and the corresponding economic transactions between largely anonymous individuals is a key element of a modern economic system. This typology suggests that the building of extended trust is a key challenge for Iraq’s development into a modern economy. It is also important to bear in mind the relationships between the various forms of trust. In particular, extended trust could not exist without the experience of reciprocity that is created through repeated interactions among family and other members of a societal or business community. Where process-­based trust is absent, extended trust is unlikely to develop. Corruption’s role is to weaken trust at each stage, especially at the extended stage and to a somewhat lesser extent at the process stage. The

Reconstruction and corruption in Iraq   171 net result is to retard the development of national and even regional markets, thus making the attainment of any sort of normal efficiency nearly impossible. In Iraq’s case it is unlikely that extended trust in economic exchanges could be sustained without third-­party enforcement by the state. Clearly, trust in government institutions will be a necessary prerequisite before Iraq can expect any type of significant expansion of the formal economy. This is where the country’s problems lie. It is not just the current lack of incentives for policy makers to reform the country’s institutions; the situation inherited from the past would have made reforms extremely difficult even under more favourable circumstances. The Ba’athist government had a profound effect on the nature of formal and informal institutions in Iraq. Not only did Ba’athism hamper the emergence of a market economy, but it corrupted the judicial and legal institutions needed to create and nurture trust. The result was to nearly eliminate extended trust, weaken process-­based trust, and force most transactions into networks that rely almost exclusively on ascribed trust. Furthermore, the manner in which Ba’athist Iraq dealt with UN sanctions was to abdicate authority over large swathes of public services to local groups and militias which undermined many of the state institutions that normally help create and maintain trust.7 In short, Iraqi values today are no longer those that were reported in earlier accounts of the pre-­Ba’athist period, which stressed the country’s vibrant entrepreneurial spirit. People’s values have been affected by years of repression under authoritarian top-­down decision making. Several decades of political and economic insecurity have caused doubt and distrust to be deeply entrenched in the individual mind. They represent a major constraint against drawing entrepreneurs and individuals out of the safe, kinship-­based informal economy. One of the main criticisms of US policy in post-­war Iraq has been a rejection of the very state-­centred approaches that were critical to the successful reconstruction of post-­war Japan and Germany. At the same time, fundamental social reforms were also ruled out (Selden 2004). As might be expected, with the post-­invasion trauma, violence and the slow recovery of the state as a social safety net, the process of restoring trust has been slow. The economy remains largely divided into segments of mutually exclusive networks divided along sectarian/ethnic lines. Ascribed trust networks The individual and business networks built on ascribed trust are by far the largest in number in Iraq. These are usually confined to the local, informal economy. Most ascribed trust networks involve groups bound together by family, tribal, or ethnic ties, which facilitates business based on verbal contracts. Many of these networks have the potential to expand through selective interaction with outsiders. However, such expansion will take

172   R. Looney time in Iraq, especially under the current conditions of public corruption and great uncertainty over the enforceability of contracts. In today’s Iraq, many ascribed trust activities fall under what is commonly referred to as the coping economy – numerous economic interactions during armed conflict that provide benefits to the civilian population, particularly the poorest and most vulnerable (Goodhand 2004). These functions are even more important to civilian livelihoods where the formal economy and traditional livelihoods have been destroyed or rendered difficult to sustain. The coping economy includes a wide range of activities including subsistence agriculture, petty trade and various household businesses such as catering and food processing. Of the country’s three main economic sectors – the public sector, the oil sector and the coping economy – it is reasonable to assume that a disproportionate share of the country’s poor participate primarily in the coping economy. Data released by the Ministry of Labour and Social Affairs in 2004 indicates that in the aftermath of the war, about five million Iraqis were living below the poverty line, compared with 143,000 in 1993 (Xinhua News Agency 2004). While the data on poverty is crude and politically sensitive, a recent estimate from the Ministry of Planning suggests that 23 per cent of the population continues to live in poverty. The government’s goal is to reduce this to 16 per cent by 2014 (Ministry of Planning and Development Cooperation 2009). Significantly, the ministry noted that more than one million Iraqi women aged 25 to 40 were unmarried, while divorce cases were increasing, as was child labour. It is reason­ able to assume that this group of women is firmly entrenched in the coping economy. The plight of women in Iraq remains grim (UNB Connect 2010). Process-­based trust networks Process-­based trust networks rely on existing ties between the previous members of the Ba’ath government and criminal groups that thrived during the sanctions period of the 1990s. Today, these activities have largely shifted into the criminal area. The emergence of pervasive criminality was readily apparent soon after the overthrow of Saddam Hussein. If anything, these problems have become increasingly severe. According to a UN report: The emerging crime problem is subtler and scarier: theft, extortion, and drug- and arms-­smuggling operations that have become more sophisticated, more clandestine, and more organised. In Baghdad, one team of thieves recently burned down a warehouse filled with the hot booty of another group. It was one mob sending a message to another. (Fritz 2003)8

Reconstruction and corruption in Iraq   173 As in the case of the ascribed trust groups, the activities of these networks have been affected by the insurgency. Process-­based networks’ activities have often directly contributed to prolonging the insurgency in five ways. First, they have contributed to the destruction or circumvention of the formal economy and the growth of informal and black markets, thereby effectively blurring the lines between the formal, informal and criminal sectors. Second, such networks have engaged in pillage, predation and extortion; they have used deliberate violence against civilians to extort ransoms and capture trade networks and diaspora remittances. Third, these networks have led to greater decentralisation, both in the means of coercion and in the means of production and exchange, again blurring the lines between formal and informal activities. Fourth, such networks have contributed to the licit or illicit exploitation of lucrative natural resources. Finally, process-­based trust networks often rely on cross-­border trading networks, regional kin and ethnic groups, arms traffickers and mercenaries, as well as legally operating commercial entities, each of which may have a vested interest in the continuation of conflict and instability. Many of the cross-­border relationships cultivated by the various smuggler/criminal groups in the 1990s are still in place and operational at the present time. Jonathan Goodhand observes that in many conflicts the shadow economy was already widespread before the outbreak of conflict and is a facilitating factor for conflict, as it often contributes to violent state collapse, or serves as a source of income to would-­be rebels. Once conflict erupts, shadow economies are easily captured by combatants and thus often become the basis for the combat economy (2004). This has happened in Iraq, with kidnappings and smuggling providing significant financial assistance to the insurgency (Salih 2004). Western intelligence agencies are becoming increasingly worried about this systematic strengthening of ties between terrorists and organised crime. Stefan Maier of the German Institute for International and Security Affairs confirmed that cooperation between the two camps was on the rise, despite their different political and economic motives (Deutsche Welle 2004). As he observes: Common ground between terrorists and organized criminal groups can be found primarily in two areas. First, the two come together in money-­ laundering activities: Terrorists often need to park their money temporarily with somebody else to cover up their tracks. Secondly, they need weapons, and they usually get them straight from organized crime. (Struck 2005: A18) ‘With the lack of security measures, disorganized crime became organized crime’, said Hania Mufti, Baghdad director of Human Rights Watch, ‘then, at some point, there was a merging between organized crime and political crime’ (Struck 2005: A18). In today’s Iraq, terrorist groups use many of the same channels for their activities that the Iraqi government

174   R. Looney and associated criminal groups used in the 1980s and 1990s. In this regard, Iraq is an ideal environment for this type of activity. Decades of socialist and statist experiments of the Ba’ath Party regime, together with subsequent wars and the consequences of UN sanctions have left the Iraqi economy heavily damaged, distorted and exposed to administrative and political interference (Looney 2004). Within this context, terrorists, insurgents and organised crime elements have been able to thrive by exploiting various economic and institutional weaknesses. Extended trust networks While extended trust networks may involve some reliance on kinship and family relationships, they are largely characterised by transactions between anonymous individuals. As noted, they are a key element in a modern economic system. Since the focus of the present analysis is on the informal economy, these networks will not be treated in detail other than to note that they are largely undeveloped outside the public sector and the national oil industry. Some banking arrangements are moving in this direction, albeit extremely slowly (Looney 2005c). Clearly, for Iraq, the key challenge facing the economy is developing the conditions conducive to the creation and growth of extended trust networks. Conversely, the lack of supporting institutions has constrained most economic agents to informal activities characterised by family- and kinship-­based ascribed trust. Because the informal economy is largely the result of a convergence of powerful long-­run demographic and economic forces, it will be a fixture for some time to come. At best, informal activities may evolve over the next several years progressing from ascribed trust-­based networks to process trust-­based networks. If this transition is viewed as successful by Iraqi entrepreneurs and the government makes significant strides in the governance area, then the progression to extended trust-­based networks becomes a distinct possibility, particularly if the security situation stabilises enough to support foreign direct investment. However, a good case can be made that under current conditions, the development and evolution of organised networks may perpetuate and even expand the shadow economy through corruption and intimidation. Many of the organised networks today have evolved out of Ba’ath party efforts to limit traditional centres of tribal authority. In effect the Ba’ath party encouraged the growth and proliferation of informal local associational links, as described below.

The evolution of local networks9 Local-­level kinship affiliation was increasingly encouraged as the effects of the 1980s war with Iran and the sanctions of the 1990s drained the power

Reconstruction and corruption in Iraq   175 of the central government. Particularly after the 1991 Gulf War, the central government was weakened to the point that it was unable to perform many of its traditional military, economic and security functions.10 The Ba’athist survival strategy during this period was for the party to serve as an umbrella for local tribal associations that would assist in providing state capacity. By 1996, officially sanctioned ‘tribes’ were responsible not only for the maintenance of local law and order, but also collected taxes on behalf of the government, were appointed judicial powers, and applied customary tribal law within their territory. They received arms and ammunition, vehicles and logistical support as payment for services rendered to the party. Local dominance of revived tribal networks was evident in 1998, following the eviction of the UN weapons inspectors, which resulted in US/UK air strikes against Iraq. At that time, heavily armed and equipped Sunni tribal units were positioned in and around Baghdad to control the restive urban population, a role formerly belonging to the Ba’ath Party militia. With time, the interests of the central government and local networks began to diverge. Clan-­based groups controlled the highways around Baghdad. They increasingly turned to criminal activities, such as looting, smuggling and hijacking throughout most of al Anbar province. Conditions deteriorated to the extent that convoys were necessary even for basic travel in daylight to avoid raids by tribal guerrillas. By 2000, policemen, judges and party officials were subject to violent tribal recriminations. Encounters between Iraqi soldiers and tribal irregulars, especially those based in al Anbar province, escalated in frequency and scale. In this ever more lawless environment, tribal elements began to take over many of the local informal street markets. These markets comprised a sub-­stratum of the informal Iraqi economy that, as discussed earlier, began to grow from the early 1980s as a result of chronic resource scarcities brought on by war, and were aggravated by unrest and a decade of sanctions. In addition, Saddam Hussein’s selective distribution of scarce resources created some of the underlying group rivalries that exist today. By directing funds, rations, government positions, electricity, clean water, fuel and industrial investment toward specific villages in the western Sunni regions in exchange for service to the regime, and withholding resources to other villages as a punitive mechanism, a local-­level competitive calculus developed that was perpetuated by Hussein as an instrument for rule. Because the state-­level formal economy was dramatically curtailed by sanctions, this competition for resources further encouraged the growth of informal activities and employment. The tendency of corrupt party and state institutions to favour key supporters in the distribution of goods and services encouraged those operating in the informal (and formal) economy to rely on local level mediation by tribal groups. Because informal activity is based in large part on social

176   R. Looney capital – the trusted familial and kinship ties noted above – local tribal groups played a central role in the expansion of the informal economy. By assessing fees for the settlement of disputes and collecting taxes on local production, local tribal groups also began to establish financial support systems free of state control. Tribal groups were also increasingly involved in criminal-­type activities, especially in the western border regions. Illicit criminal networks were initially based on the cross-­border smuggling of animals, tea, alcohol and electronics. Later, these activities began to encompass the drug trade. Tribal-­based organised criminal activities increased toward the end of Ba’athist rule with many party members becoming involved due to declining opportunities to acquire official resources. By early 2002, the entire route along the Euphrates River in al Anbar had essentially developed into a sanctuary for illicit traffickers and criminal entrepreneurs. Resource scarcity and the stature of sub-­tribal groups were both greatly enhanced at the local level following the removal of Saddam Hussein. The process began with the Coalition Provisional Authority’s early adoption of a neo-­liberal economic programme which had the unintended effect of impeding the growth of regulatory and legal institutions. This institutional vacuum forced businesses and those entering the labour market to rely on the trusted kinship or extended family networks of the informal economy. Shortages of critical inputs such as electricity and fuel, and the dangers of transportation further encouraged informal entrepreneurs to rely on tribal and extended family associations for protection and support. Endemic corruption and uncertainty further contributed to a dramatic increase in the informal sector following the 2003 invasion. As a result, approximately 80 per cent of the labour force is now working informally, accounting for nearly two-­thirds of Iraq’s gross domestic product. In this regard, growth of the informal economy is particularly evident in certain areas west of the capital, where the destruction of the Sunni-­oriented military establishment and related industries has contributed to a substantial contraction of formal employment. Reinforcing these trends has been a dramatic rise in criminal activity dominated by local-­level tribal elements, including emerging economic sectors based on the distribution of scarce resources, kidnapping, trafficking in petrol, narcotics, looted weaponry and the targeting of coalition forces. Where the Iraqi government lacks control or where there is not a substantial coalition presence, the shadow economy is rapidly displacing any legal or semi-­legal structures that have managed to survive.

Conclusion: a possible way out of the vicious circle The integrated model sketched above suggests that any attempts to reduce corruption in Iraq needs to place the problem in a broader historical, social and economic context. Rather than focusing on trust-­building and

Reconstruction and corruption in Iraq   177 institutional reform, the current reconstruction strategy has emphasised market reforms, infrastructure development and private foreign investment. It is not producing tangible economic gains and in fact has created an environment in which corruption flourishes. As a result, the massive expenditures in infrastructure have not produced the significant follow-­on investment that Hirschman’s unbalanced growth strategy might have anticipated (1958). Instead, infrastructure projects have been an easy target for the insurgents and a financial drain for the United States and the Iraqi government. The top-­down nature of the post-­war strategy is another reason for its limited impact. Rather than focusing on grassroots community development and trust building, there has only been limited Iraqi input and participation. Consequently many of the investments undertaken have not been nearly as productive in the Iraqi context as they would have been if they had been indigenously designed to respond to a tangible domestic demand within Iraqi markets. Further, bureaucratic fear of the anti-­corruption measures that are in effect has brought needed capital programmes to a halt. The critical question is what can be done to break out of the current vicious circle of corruption, government inefficiency and pervasive unemployment which is trapping the Iraqi economy in a low growth path? Thomas Palley for instance has argued that the country’s current needs are so pressing that a significant share of oil revenues should be disbursed to the population immediately (2003). His tentative figure was that 25 per cent of revenues be distributed. The logical argument against disbursing a large share of oil revenues directly to the public is whether the country can afford such a programme. A counter argument is that these projects have been a major source of corruption. Taking the money out of the hands of a corrupt political elite and giving it to the population is probably the most powerful anti-­ corruption policy available today (Gillies 2010b) – the policy of simply going after the ‘bad guys’ has clearly failed. In contrast, a distribution scheme would help undermine two key elements contributing to the country’s massive corruption problem – the shadow economy and deficient social capital. With regard to the latter, currently one of the main stumbling blocks in uniting Iraq is the ongoing controversy over the distribution of oil revenues with each region not trusting the others to agree to a ‘fair’ allocation. The direct distribution of oil revenues would assist in overcoming this impediment while eliminating one of the major impediments to improved trust. The process is summarised in Figure 10.1. Such a policy would provide an incentive to ordinary Iraqis to protect the country’s oil facilities by providing intelligence on insurgent groups attempting to disrupt the production and flow of oil ( Johnson 2004). It might further help to quell the insurgency by allaying the fears of the Sunnis that they will suffer financially from the fact that most oil reserves

178   R. Looney Expanded number of small-medium sized enterprises

Expanded supply – growth of the economy

Increased entrepreneurship

Pressures for further market reforms, supporting institutions

Oil fund for public distribution

Expanded demand – domestic market

Reduced corruption

Development extended trust networks

Reduced market-based corruption

Phase out subsidies, food, oil, electricity

Figure 10.1  Iraq virtuous circle of demand-led private sector activity.

are in Shiite and Kurdish territories. Without an equitable distribution of oil revenues, the competition among various groups for oil money could turn ugly and even erupt into violent conflict in Iraq. Rifts over oil revenues already run deep, as Iraqi Kurds, Arabs and Turkmen struggle for control of oil-­rich Kirkuk (Revenue Watch 2005). Distributing oil revenues directly to the public could also contribute to the formalisation of a range of economic activities by creating an irrevocable personal identity under the law, and thus establishing the conditions for, inter alia, property rights and the registration for taxation; and could expand banking and credit access for small businesses. While not a panacea, the impact of such a policy is likely to contribute to reducing the impact of corruption and stabilising the economic environment in post-­ conflict Iraq. Unfortunately as of early 2011, the Iraqi government has shown no interest in such a programme – the country’s new oil law that

Reconstruction and corruption in Iraq   179 will govern most aspects of the oil industry and is progressive in many key aspects surrounding the treatment of oil royalties, is completely silent on this issue (Lidstone 2009).

Notes   1 Quoted by Negus (2006).   2 See Philp, this volume for the conceptual difficulties in defining corruption in post-­conflict settings. See also Jain (2001).   3 As the storming of a police station in Basra by British forces in December 2006 showed, parts of Basra’s police have been at the centre of the city’s criminal activity.   4 This source is the basis of the summary of SIGIR findings reported in the paragraphs that follow.   5 In an analysis of the size of informal economies across 146 countries, corruption was found to be statistically significant at the 95 per cent level.   6 An overview of the literature on social capital can be found in Paldam (2000). The concept of social capital owes its origins to Robert Putnam (1993, 2000).   7 See Braude (2003: ch. 4) for a detailed account of this process.   8 For a full assessment of early post-­Saddam crime in Iraq see UNODC (2003).   9 This section draws heavily on Haussler (2005: 33–41). 10 For this period see Braude (2003) and Glain (2004: ch. 5).

11 The nexus of militarisation and corruption in post-­conflict Sri Lanka Zachariah Mampilly

Sri Lanka confounds much of the common wisdom about civil wars. A functional democracy with well-­established government institutions, the country boasts a literate population, low birth rates and economic growth for much of the past four decades. There is a written constitution, a  functional court system, regular elections, and a competitive party system; most other post-­conflict countries can only aspire to these formal institutional arrangements. Indeed, creating a bureaucracy that functions as well as Sri Lanka’s is often the end goal of many international peacebuilding efforts. Beneath the surface, however, the country’s institutional framework exhibits several severe pathologies that threaten to unleash a  third round of domestic bloodletting. A closer look sheds light on how  corruption can remain endemic and detrimental to peacebuilding efforts, even in contexts where the formal institutional setting is relatively robust. Some 26 years after its official beginning, the brutal Sri Lankan war ended in early 2009 with the total victory of government forces over the Liberation Tigers of Tamil Eelam (LTTE). The optimistic view on civil war termination is that it will precipitate a broader transformation of society. It can be an opportunity to take stock and implement new institutional frameworks to prevent political disputes from turning violent. Immediately after the war many hoped that the country had left its violent past behind. However, knowledgeable observers were already raising alarms barely one year later (International Crisis Group 2010a). Sri Lanka’s war did not end with an internationally mediated peace process, but rather through a brutal two-­year siege over insurgent-­ controlled territory by government forces. Consequently, it did not trigger a broad transformation of the overarching political infrastructure. Rather than initiating a new political order, the end of the war represents an evolution of prior militaristic tendencies. This chapter makes the case that corruption in post-­conflict Sri Lanka must be understood as part of broader political and economic historical trends. I argue that the antecedents for the post-­conflict dispensation – epitomised by the increasingly autocratic position occupied by President

Militarisation and corruption in Sri Lanka   181 Mahinda Rajapaksa – are traceable to changes in Sri Lankan state and society resulting from two decades of conflict.1 While Rajapaksa’s emergence as the most powerful political leader in the country’s history is frequently blamed for the spike in corruption, treating his rise as a distinct moment ignores the precedents established by his predecessors. Rather than personalising the country’s predicament, I situate the contemporary period within the broader political context from which it emerged. Using such an approach is the best way to understand the evolution of the majority Sinhalese position in the aftermath of the LTTE’s demise. When considering the role that corruption plays in the post-­conflict period, it is essential to assess the larger relationship between the state and society in Sri Lanka. I trace several political tendencies that emerged during the war and show how they contributed to the explosion in corruption. Specifically, I look at how the militarisation of the state during the conflict led to the centralisation of power in the presidency and to the closure of the democratic space, fostering distinct forms of corruption at every level of government. Contrary to other analyses that view corruption as a disease that can undermine legitimate authority in post-­conflict settings (see Philp, this volume), I argue that corruption in this case is not the cause of dysfunction, but rather the most overt symptom of these broader pathologies. I also examine the legacies of the war on the reconstruction process, arguing that the impact of the above transformations undermined the potential for building a durable peace. Sri Lanka demonstrates the limits of peacebuilding approaches that emphasise formal institutional structures in a post-­conflict regime, without resolving the underlying political cleavages (Carothers 2007). I show how the territorial division that characterised Sri Lanka during the war continues to shape post-­conflict realities, leaving the entire reconstruction process vulnerable to endemic corruption. Finally, I assess the transformation of the geopolitical context and its role in furthering corruption at the highest levels of Sri Lanka’s government in the post-­conflict period. While the emergence of corruption in the 1970s was tied to pro-­Western free market reforms, currently, it is the rise of Chinese influence that poses the greatest challenge to curtailing corruption.

Background to the war The war officially began in 1983, following several decades of non-­violent protest by the country’s minority communities in response to the gradual Sinhalisation of the state. Among various militant groups, the LTTE emerged as the dominant face of the armed resistance, frequently resorting to brutal violence to subdue competitors. Over time, the organisation arguably became the most sophisticated non-­state fighting force ever with a military that included a navy, an air force and approximately 20,000

182   Z. Mampilly cadre. At its most powerful, the organisation controlled approximately one-­third of Sri Lankan territory, establishing a complex governance system to administer its territory (Stokke 2006; Mampilly 2009). The war against the Tamil insurgency was characterised by prolonged periods of intense fighting interspersed with negotiations that often came close to a settlement, but fell short due to the intransigence of one or both parties. The conflict shifted in 2005 with the defection of a top rebel commander and the election of Rajapaksa, who campaigned on a platform to end the war. Eventually, Rajapaksa was able to defeat the LTTE using overwhelming force sanctioned by a wide variety of international actors (Uyangoda 2008).2 Victory by the government was complete, killing up to 20,000 non-­combatants during the final siege as well as the upper echelons of the rebel leadership, including many who died after attempting to surrender (International Crisis Group 2010a). Over the course of 26 years, 100,000 people lost their lives in the fighting. Many more were displaced, including 300,000 Tamils put into detention camps with tens of thousands remaining interned more than a year later.3 The central question of the war has always been whether Sri Lanka is populated by a single nation or whether it encompasses two distinct nationalities, each worthy of its own state. For most of the war, the latter was the basis for negotiation. Debate centred around two possibilities: dividing the country into two states or creating a bi-­national state with appropriate political arrangements (Edrisinha and Welikala 2008). The end of the war has undermined support for Tamil-­controlled structures, and increasingly, the political leadership has sought to position the country as a single Sinhala nation with a few dissatisfied minority voices, akin to Malaysia. Peacebuilding in this context faces severe hurdles, not least of which is the problem of corruption. A failure to make improvements in the performance of political institutions, especially with respect to corruption, could easily lead to another round of ethnic warfare.

The institutional setting: a history of corruption and anti-­ corruption efforts While Sri Lanka’s anti-­corruption efforts began before the war, they were shaped in the crucible of three decades of fighting. Corruption became endemic after Junius Jayawardene was elected the head of the United National Party (UNP) in 1977.4 Jayawardene’s election marked the end of 17 years of unbroken rule by the Sri Lanka Freedom Party (SLFP), a left-­ leaning party aligned with the Soviet bloc.5 His policies initiated three long-­term shifts to the Sri Lankan polity – the consequences of which are still being felt today. First, Jayawardene became more nationalistic to undercut the UNP’s primary competitor, the SLFP, by depriving it of key supporters. This coalescing around an ethno-­nationalist position resulted in Sinhala

Militarisation and corruption in Sri Lanka   183 chauvinism becoming the de facto official position of the country’s two primary political parties. Second, Jayawardene amended the Constitution, creating (and immediately claiming) the position of executive president. The mixed political system that resulted elevated the presidency to a position equal to that of Parliament – which historically had held constitutional power – setting the stage for recurring disputes over the extent of presidential power. In Sri Lanka, the president serves as head of government and commander-­inchief of the armed forces and controls all government procurements. Formally responsible to Parliament, there have been no instances of a president being called to account by the legislative body, underscoring how a strong presidency decreases accountability and promotes corruption (Gerring and Thacker 2004). In addition, Article 35 of the Constitution makes the president immune from prosecution (Wirithamulla 2008: 37). The president also appoints a cabinet of ministers, which is formally responsible to Parliament, though their loyalties remain with the more powerful executive. Finally, Jayawardene came into office as a result of an economic crisis that undermined the UNP’s ability to continue its generous welfare programmes. In response, he pivoted the country’s geopolitical alignment away from the Non-­Aligned Movement and the Soviet bloc towards the NATO alliance.6 Strategically located off the coast of India, Sri Lanka was a prize for the Western powers, most of whom had previously remained cool towards the country. By offering generous terms for international financing through the International Monetary Fund (IMF ), the World Bank and the Asian Development Bank (ADB), Sri Lanka ambitiously replaced its state-­centric economic policy with a more market-­oriented approach (Bastian 2007). Credited with salvaging the country’s economy, Jayawardene’s decision to voluntarily implement structural reforms precipitated a period of rapid economic growth that contributed to his 1982 re-­ election victory (Richardson 2004: 45). However, the economic reforms also triggered negative consequences, including corruption. The new regime lifted controls on the economy, purposely abrogating the state’s capacity to regulate the flow of foreign investment. In addition, the government borrowed heavily and foreign debt tripled between 1976 and 1982 (Richardson 2004: 52). Massive development schemes funded by international aid money and implemented by private corporations presented new opportunities for bribery and tax evasion. Capital transfers were deregulated in line with IMF prescriptions, unleashing a torrent of foreign money into the growing black market (Samarasinghe 2002: 270).7 As early as 1979, complaints about government kickbacks in the awarding of contracts led to the creation of the Committee on Public Enterprises (COPE). COPE was comprised of MPs and reported to Parliament. It was designed to ensure fiscal discipline in public

184   Z. Mampilly corporations and other quasi-­governmental bodies. But without the political impetus to hold government officials accountable, COPE did relatively little during its first three decades. Still, it represented the beginning of Sri Lanka’s anti-­corruption system. During three unbroken terms of UNP rule (1977–1994), a growing chorus of opposition figures and members of the media echoed the perception that the political leadership had improperly profited from economic liberalisation. Chandrika Kumaratunga, the head of a resurgent SLFP, made corruption a centrepiece of her parliamentary campaign, sweeping to victory in 1994 at the head of a centre-­left coalition known as the People’s Alliance (Ponnamperuma 2002: 277–279). Having promised to cut war expenditures and divert resources to development, Kumaratunga created a permanent anti-­corruption body. Act 19 was passed, creating the independent Permanent Commission to Investigate Allegations of Bribery or Corruption (CIABOC) with wide-­ranging powers to prosecute instances of corruption (K.M. de Silva 2002: 250). Accountable to Parliament, CIABOC was designed to look into corrupt government acts, gather information and initiate prosecutions of offenders.8 But the commission was only allowed to instigate investigations following formal complaints, denying it the ability to initiate investigations or follow up on press reports (de Mel 2007: 46; Wirithamulla 2008: 40). Furthermore, investigators were controlled by the police, dissuading many from coming forward since it was often police officers who were being accused (de Mel 2007: 46). By mid-­1995, the commission began to run into more serious trouble with members claiming it was underfunded and understaffed (Ponnamperuma 2002: 285). More damningly, infighting and accusations of interference by high-­ranking officials undermined CIABOC’s autonomy and effectiveness. Meanwhile, an intense period of fighting resumed in 1995, derailing Kumaratunga’s plans for fiscal reform. Defence expenditures grew from 1.3 per cent of GDP at the start of the war to average between 5 per cent and 6 per cent of GDP (Shastri 2004: 77–83). In 2005, Kumaratunga’s former prime minister, Mahinda Rajapaksa, took over the presidency, winning broad support among rural Sinhalese voters for his hardline views on the Tamil insurgency. Rajapaksa immediately stepped up the war effort, cutting off negotiations and funnelling even more resources towards the military. Rajapaksa displayed little concern for anti-­corruption institutions, despite signs that the anaemic system was finally beginning to stir.9 COPE, which was largely thought to be an irrelevant relic, released its first report in early 2007. It documented corruption affecting 26 state institutions that cost the country Rs.150 billion (~US$140 million) (COPE 2007a). A second report issued later in 2007 also documented billion-­rupee losses at a number of state institutions (COPE 2007b). Both reports produced by COPE were referred to CIABOC, which had the mandate to open

Militarisation and corruption in Sri Lanka   185 investigations into cases of public malfeasance.10 Formally accountable only to Parliament, CIABOC was ordered to update legislators every two weeks on its investigations (Wirithamulla 2008: 4–12). Even though he was not personally implicated in the COPE reports, Rajapaksa undermined the autonomy of the commission. He transferred the director of CIABOC, Piyasena Ranasinghe, after he refused to resign. At the time, Ranasinghe was following up on the damaging reports produced by COPE as well as investigating a number of other illegal weapons deals (Wirithamulla 2008: 12). After Ranasinghe’s departure, Rajapaksa appointed his brother Basil to the commission, further undermining its independence (Wirithamulla 2008: 5). Though not meant to be conclusive, several indicators demonstrate the minimal capacity of the anti-­corruption system and the impact of the war on fostering corruption. An influential Sri Lankan economist estimated that the country’s growth rate lost 2 per cent annually as a result of corruption during the war (Indraratna 2007). And according to Transparency International’s 2009 Corruption Perception Index, Sri Lanka scored 3.1 out of 10 at war’s end, tying it with Liberia. Since 2002, the country has experienced a steady decline in its CPI rating when it scored 3.7 (Wirithamulla 2009: 37).

Post-­conflict legacies and their impact on corruption Post-­conflict politics in Sri Lanka now looks much like politics did during the war years. The country’s political and social realms remain intrinsically intermeshed with the militarisation of the state. Corruption has been magnified as a result of these conflict-­induced transformations. It exists across the spectrum of governmental authority, from low-­level kickbacks for local administrators to ‘grand’ corruption in which entire branches of government have been complicit in illegal revenue-­generating schemes. As such, corruption is merely a symptom of a broader disease that affects the Sri Lankan body politic: the militarisation of the state. To understand how corruption has become endemic, we must consider how the war transformed both state and society. Three features of this transformation – two internal and one external – gave rise to the conditions conducive to corruption. Centralisation of power and the militarisation of the state Formally, the president shares a co-­equal position to Parliament, however, the war created an unwavering trend towards a greater centralisation of power in the executive.11 As commander in chief of the armed forces, the president is responsible for determining all military allocations, and hence, from an institutional perspective, had the most to gain politically and materially in perpetuating the war. This dynamic has resulted in new opportunities for corruption by reducing the accountability of the political leadership.

186   Z. Mampilly The conflict also massively increased military expenditures. In 1982, before the war began, defence expenditures were 1.4 per cent of GDP. According to a 2006 study, military expenditures had risen to 4.1 per cent of GDP. Proportionately, the military budget in Sri Lanka was the highest in South Asia, – higher than India (2.5 per cent), Nepal (2.5 per cent), Bangladesh (1.5 per cent), and even Pakistan (3.5 per cent) (cited in Reddy 2010). Notably, these figures do not include the military build­up that occurred during the final phase of the war. In fact, Rajapaksa increased defence expenditures dramatically in order to crush the LTTE. In 2008, the defence budget rose by 20 per cent (BBC News 2007). In 2009, it reached US$1.7 billion, about 17 per cent of overall government spending. And despite the end of the war, the government has made clear that it has no intention of reducing the defence budget (AsiaNews 2009). By another metric, in 2006, Sri Lanka had 8,000 military personnel per one million people – this was the highest rate in South Asia.12 Again, during the final phase of the war, the numbers surged. Both the police and armed forces witnessed substantial increases in personnel. Even after the war ended, General Sarath Fonseka, the former Commander of the Army, launched a recruitment drive for 50,000 new soldiers (Agence France-­ Presse 2009b). The effect has been to double the number of citizens in uniform since 2006, from approximately one in 125 to an astonishing one in 66 in 2009 (AsiaNews 2009). The impact of centralising defence decision-­making has allowed corruption to flourish at the highest level of government. Indeed, corrupt regimes frequently utilise large weapons purchases to mask kickbacks from shady deals (Rose-­Ackerman 2008: 329). For example, in 2008, Sri Lanka signed an agreement to procure four MiG-­27 attack crafts from the Ukrainian government – the largest military contract in the country’s history. Touted as a government-­to-government arrangement, it was revealed that the contract was actually signed with a private company registered in the United Kingdom. A select committee was appointed by Parliament to examine the details of the sale, but in 2008, the president suddenly and without any stated reason prorogued Parliament leading to the dissolution of the committee (Wirithamulla 2008: 6; Beling 2008: 46). While many pin the upsurge in militarisation and corruption to the rise of Rajapaksa (for example, in appointing military men to high-­level diplomatic and administrative positions (Abeywickrema 2011)), it is more useful to understand the current situation as a culmination of historical trends. Indeed, scholars and civil society leaders have long bemoaned the militarisation of state and society in Sri Lanka (de Mel 2007). Parliament has passed two constitutional amendments to weaken the executive with little effect. The Thirteenth Amendment was drafted with the intent of decentralising power to the provinces, but none of the specific provisions have been implemented.

Militarisation and corruption in Sri Lanka   187 Meanwhile, the Seventeenth Amendment created a constitutional commission to depoliticise appointments to key posts. The goal was to mitigate nepotism and cronyism in high-­level appointments, thereby reducing the power of the executive. In September of 2001, Parliament certified the amendment and a Constitutional Council was established comprising of the prime minister, the Speaker of the Parliament, the Leader of the Opposition and a number of appointed members including one selected by the president. However, in 2005, the council’s term expired and no new appointees were made. Instead, Rajapaksa took on the powers of the commission for himself (Wirithamulla 2008: 38). Since then, high-­level positions including the Auditor General, the Attorney General, the Chief Justice, the Inspector-­General of Police and the Secretary General of Parliament have been appointed by the president in direct contravention of the Seventeenth Amendment (Beling 2009: 14). Closure of democratic space Corruption thrives in closed environments. Governments seeking to cover corrupt practices have frequently restricted information flows in the name of national security (Arunatilake et al. 2002: 1487). In Sri Lanka, the government has gone to extreme lengths to limit coverage of its activities. In government-­controlled areas and in LTTE-­controlled areas, citizens have had minimal opportunity to challenge political authority. In the words of a leading anti-­corruption advocate, ‘for 30 years, there has been no environment to ask questions’.13 Save for a few brief periods during peace negotiations, Sri Lanka has been under a state of emergency since the late 1970s. Emergency regulations were promulgated under the Public Security Ordinance which combined with the Prevention of Terrorism Act (PTA)14 to give greater powers to the police, the military and the executive to closely monitor internal criticism. In August 2005, additional emergency regulations came into force, permitting the Minister of Defence to unilaterally order the detention of persons for up to one year without charge. Taken together with the country’s perpetual state of emergency, these new measures allowed key constitutional safeguards to be bypassed on the basis of alleged national security concerns, undermining government transparency and accountability and restricting freedom of expression (Beling 2009: 7–8). Indeed, the government has always exerted significant control over the media through direct ownership of English and vernacular newspapers and control over television and radio broadcasts.15 A censor board remains vigilant and the government has consistently refused to pass a Right to Information Act, despite the efforts of pro-­democracy activists. Many ordinary Sri Lankans understand that such efforts have little to do with national security and are more a cover for government malfeasance. As one scholar put it, there was a widespread perception among civilians that

188   Z. Mampilly ‘censorship relieved the government of its responsibility to account for its use of public funds, and intimidation suppressed critical voices in the press’ (Gambard 2004: 155). As a result, evidence of government corruption is difficult to produce and distribute openly.16 Still, independent media such as the Sunday Leader among others have bravely sought to document multiple instances of corruption, despite the censorship they face. In 2008, during the final assault on the LTTE, the government made clear the costs of dissent. Stating that ‘criticism in a time of war is dissent’, Secretary of Defence Gotabaya Rajapaksa, another brother of the president, issued a warning to critics of his regime, branding them traitors to the country (Beling 2008: 51). This was not simply bluster. Journalists who have documented bribery in the purchasing of military equipment have been threatened by state agents or been put in detention without trial. In addition, beyond the institutional regime that restricts effective investigation of government corruption, the state has orchestrated extrajudicial attacks on government critics. After Rajapaksa’s election, extrajudicial killings of journalists became disturbingly common. During the last five years of the war, 34 journalists were killed. None of these cases have been solved and no arrests made (Beling 2009: 13). Initially, such killings targeted Tamil opponents to the regime, including the prominent Tamil journalist Dharmaratna Sivaram. But, gradually, these attacks expanded to target internal Sinhala critics, such as the noted government critic, Lasantha Wickramatunga, whose spine-­tingling self-­ authored obituary is a must read for anyone interested in the chilling effect of militarisation on a society’s democratic space (2009). Many of the journalist killings, including the assassination of Wickramatunga, occurred in broad daylight in close proximity to police and military checkpoints. Despite the creation of a Presidential Commission of Inquiry in 2006 to investigate the killings, the president dissolved the commission in 2009 before the investigation was completed.17 Geopolitical manoeuvring The regime has been especially astute in navigating broader geopolitical rivalries. By playing off India, China and the United States against each other, Rajapaksa has managed to avoid unwanted international scrutiny (Raman 2010). Since 1977, Sri Lanka has been heavily subsidised by development aid. International financing has often been a lifeline for the government, and historically, previous regimes had gone out of their way to assuage their foreign patrons, particularly around the conduct of the armed forces (Bastian 2006; Mampilly 2009). But in recent years, the regime has become less responsive to outside actors. The strategic manipulation of the US–China–India rivalry to control the Indian Ocean shipping lanes has allowed top government officials to fully engage in corruption without needing to worry about penalties (Uyangoda 2008:

Militarisation and corruption in Sri Lanka   189 18

23–25). The geostrategic importance of the shipping lanes has also allowed the government to ignore other demands made by India and the United States, including concerns over recent conduct during the war as well as broader issues of governance. For example, during the final phase of the conflict, which coincided with the global financial crisis that began in 2008, the regime turned to the IMF for an emergency loan after depleting its foreign reserves due to massive military spending. Initially, the foreign secretaries of the United Kingdom, France and the United States sought to have conditions placed on the loans with respect to the treatment of Tamil civilians caught in the warzone (Agence France-­Presse 2009a). However, Sri Lanka rebuffed these attempts, negotiating a US$2.5 billion loan with zero conditions, demonstrating that the country no longer feels obligated to its Western patrons (Lanka Business Online 2009). Indeed, the leadership frequently criticised Western efforts to link international aid to good governance as ‘neo-­colonial’. Through such geopolitical manoeuvring, the country has been able to avoid many of the costs that can befall corrupt regimes.19 Corruption is often thought to reduce capital inflows and foreign direct investment resulting from the weariness of investors to enter such markets (Rose-­ Ackerman 2008: 332). However, competition between the Asian giants has allowed the regime to nimbly position itself to enjoy the benefits of foreign investment while openly accepting kickbacks.20 The president’s efforts to develop ties to China have paid off handsomely – doubling investment to over US$1 billion in government-­to-government contracts in just the past five years (Gunawardena 2009; Raman 2010). China has been aggressively moving into the region, forming partnerships and directing investments towards countries that India historically has claimed as part of its sphere of influence – a strategy of encirclement evocatively referred to as the ‘string of pearls’ in a 2004 CIA report. The United States has sought to support India in this Asian tug of war by providing military advice and selling arms. Chinese efforts include a billion-­ dollar port project in Hambantota that will nearly quadruple Sri Lanka’s total cargo handling capacity from six million containers annually to close to 23 million (Rabinowitz 2008). Deals between Sri Lanka and China are not tendered through a competitive bidding process, but instead result from direct government negotiations. Using state-­to-state contracts allows the regime to limit Chinese exposure to demands for kickbacks from low-­level government officials though payoffs to higher levels of power are considered standard.21 In contrast, Indian investment in Sri Lanka tends to be directed through private enterprise. As a result, Indian businessmen are more exposed to demands for bribes from all levels of the Sri Lankan bureaucracy and have limited their investments as a result.22 There are a number of effects on corruption resulting from the recent shift in geopolitics. Notably, China has a demonstrated record of tolerating

190   Z. Mampilly high levels of corruption with its trading partners. China also has a policy of non-­intervention in domestic affairs, and has proven willing to use its veto to prevent a Security Council investigation of Sri Lanka’s conduct during the final phase of the war (Lee 2009). In response to Chinese competition, India and the United States have toned down their criticism of the Sri Lankan government despite facing pressure from domestic constituencies regarding the treatment of Tamils. Both countries also avoided making the issue of corruption a central determinant of their respective bilateral relations with Sri Lanka out of a fear of pushing the country further into the Chinese camp.23

Corruption and post-­conflict reconstruction To understand how the nexus of corruption and militarisation has shaped the reconstruction process, it is essential to grasp the tripartite territorial division of the country during the war (Figure 11.1). These divisions produced three distinct politico-­economic formations that governed daily life on the island. In the southwest, including the capital Colombo, the government exerted complete control. Within the northern province, the LTTE controlled a vast territorial enclave. In the eastern province, control was divided between the government, which controlled most of the main towns such as Batticaloa and Trincomalee, and the insurgency, which operated mostly in the rural areas just beyond the city boundaries. Over time, the institutional framework came to reflect these divisions, with areas in the north and east interacting with the government in vastly different ways than the southwest – with important consequences for the reconstruction process. The goal of this territorial and institutional division was to isolate the nefarious effects of the war economy and to prevent these effects from spreading to the rest of the economy (Bastian 2006). Driven by a need to retain foreign aid flows into the country, the SLFP administrations created a tripartite economic system tethered to the political actor in control of a particular territorial space. In areas under uncontested government control, economic life centred on Colombo. This area remained the preferred face of the pro-­Western political leadership, despite the occasional bombings and suicide attacks that periodically disrupted economic activity. By tying Sri Lanka’s economic health to the global economy – the result of two decades of liberal economic policies pursued by both parties – the government was able to ensure steady growth. Led by the southwest, the country achieved remarkable rates of real growth, averaging over 5 per cent during the 1990s (Shastri 2004: 88–89). The northern province, governed by the LTTE rebels, had a vast territorial enclave under its control, where political and economic life revolved around the insurgent civil administration. Economic activity in Tamil Tiger areas was largely delinked from the broader economic system of the country. Mirroring the transnational funding strategy of the Colombo

Militarisation and corruption in Sri Lanka   191

Figure 11.1  Map of Sri Lanka during the war.

government (which relied on labour remittances as a source of foreign exchange and domestic investment) (Shastri 2004: 88), the Tamil insurgency also created an ‘open economy’ in areas under its control. By exploiting the country’s liberal financial rules, the insurgency was able to launder money from international NGOs, affiliated businesses and most importantly, from diasporic contributions (International Crisis Group 2010a).

192   Z. Mampilly Meanwhile, the eastern province languished between government-­ controlled urban zones and rebel-­controlled rural zones. Unlike the southwest and the north where control was not contested, residents of the east experienced life within a war economy, bereft of effective government administration and unable to move freely or participate fully in the local economy (Mampilly 2007). The rules and norms that existed in each of these three zones during the war were quite distinct. Understanding the war-­induced territorial division is essential for understanding the variation in corruption in the post-­conflict period. In the northern and eastern provinces, where the bulk of fighting actually took place, corruption was a normal by-­product of the war economy.24 Commissions and kickbacks were standard practice in awarding defence contracts and arms purchases. Illicit profiteering by officials and private businessmen was also common as residents of the two regions sought to acquire goods banned by extensive sanctions that drove up prices to exorbitant levels (Shastri 2004: 89). Corruption also trickled down to lower levels. Soldiers were often accused of pilfering small arms and weaponry and selling them to Tamil militants (Gambard 2004: 155), reflecting the relatively dire conditions that characterised their service in the national army. Corruption often bedevils reconstruction efforts. When the fighting ended in May 2009, new political alignments came to the fore accompanied by new opportunities for predation in the post-­conflict social order. Resources resulting from a peace dividend – whether from savings in military spending or an increase in international aid – can flood into these new political arrangements, enticing government officials (see Cheng and Zaum, and von Billerbeck, this volume). In Sri Lanka, the government has had to deal with three interlinked challenges, each prone to corruption in varying forms: resettling Tamil IDPs, allocating lands appropriated by the insurgency and ensuring community participation in the reconstruction process. Resettlement camps During the final siege, 300,000 Tamils were pushed out of rebel territory and placed in vast internment camps (Human Rights Watch 2010). The government claimed that keeping Tamils in ‘welfare camps’ was necessary since many had connections to the insurgency and needed to be separated out from the broader population. But these efforts were not systematic and tended towards collective punishment of non-­combatants rather than targeting those most likely to be involved in future militancy. This dynamic became evident as reports leaked out regarding the steady flow of Tamils leaving the camps without permission (International Crisis Group 2010a). Those with sufficient resources, including many mid-­ level members of the insurgency, were able to bribe their way out, paying

Militarisation and corruption in Sri Lanka   193 approximately US$3,000 to camp guards to secure their release. This was a continuation of similar practices embraced by soldiers during the war.25 Money for bribes sometimes came from the diasporic networks that the LTTE had developed (International Crisis Group 2010a). Ironically, this meant that those with the closest ties to the organisation were best able to pay, leaving those with the least resources to languish behind barbed wire. Close to 100,000 Tamils remained in the camps for a year, though the government did resettle many after considerable international pressure (Gowrinathan 2009).26 The resettlement process of Sri Lanka’s Muslims, many of whom were forcibly expelled from areas under insurgent control in 1990, has also been plagued by corruption (International Crisis Group 2010a: 6). As a result, tensions between the two minority communities have been exacerbated, especially since neither community has felt that the resettlement process has properly addressed their needs.27 Land allocation During more than two decades of fighting, large tracts of land in the two provinces were taken over by the military or were under insurgent control. When the war ended, the government was forced to decide how to allocate these lands. This question has become particularly contentious as powerful interests jockey for position.28 The eastern province, which encompasses 15 per cent of Sri Lankan territory, came under government control following the defection of the LTTE’s top eastern commander in 2005. The province is home to the world’s largest natural harbour in Trincomalee, a particularly strategic and profitable concern (Bulathsinghala and Parakrama 2009: 74). The northern province, which constitutes 13.6 per cent of the land area, only came under government control after the war. Both areas are also being touted as tourist destinations.29 Formally, two ministries – the Ministry of Nation Building and Estate Infrastructure Development, and the Ministry of Social Services and Social Welfare – are responsible for reconstruction and development of conflict-­ afflicted areas. Both are controlled by the Rajapaksa family, with the president himself serving as the minister of the former and his brother Basil controlling the latter (despite a Tamil politician, Douglas Devananda, nominally occupying the minister position).30 Reports of high-­level graft in both ministries are common.31 Rumours abound of the president’s family purchasing land near the coast in order to take advantage of the hoped for surge in tourism.32 Even beyond individual culpability for accepting kickbacks, the broader reconstruction process has also been rife with accusations of corruption. This is a direct result of the top-­down and opaque nature of the reconstruction process. Pakiasothy Saravanamuttu, a leading critic of the

194   Z. Mampilly government, stated that reconstruction has been highly ‘Colombo-­ centric’ with ‘very little or no consultation with people on the ground’.33 As Transparency International researchers note, the reconstruction process lacks Both downward accountability and transparency, and invariably culminates in various forms of wastage, inappropriateness, or corruption. The risk of corruption is exponentially greater in this context because of the large sums involved, the lack of local accountability or even participation of beneficiaries, and the excessive centralization of decision-­ making. (Bulathsinghala and Parakrama 2009: 81) Concerns about local administration Reflecting the militarisation of civilian administration during the war, retired military officers have been put in charge of local governments in the former war zone. Payoffs to government officials are a frequent requirement for those hoping to take advantage of the extensive development plans for the war-­affected regions. According to a Transparency International report, ‘lack of accountability in tender processes and award of contracts to friends and family have become more the rule than the exception’ (Bulathsinghala and Parakrama 2009: 79–80). Anti-­corruption researchers who have tried to gather concrete information on the allocation of land in the former rebel-­controlled areas have run into intransigent government officials.34 Government reports and work plans for the two provinces, including updated costs and contract details, are treated as classified information. To give just one pertinent example, resettlement plans for the 300,000 Tamil IDPs remained a state secret for six months after the war (Bulathsinghala and Parakrama 2009: 74).35 The international community has remained powerless to change the dynamics on the ground, despite substantial contributions to the reconstruction process. Drawing on strategies honed to control the massive influx of aid after the 2004 Asian Tsunami (Uyangoda 2005), the regime has politicised reconstruction by restricting access to the former conflict zones, allowing in only those foreign NGOs willing to comply with the government agenda. This was a practice used to devastating effect during the war itself (Gowrinathan and Mampilly 2009). As a leading civil society figure explained: ‘The use of the visa as a weapon was very effective and so they [INGOs] were willing to play by the script.’36 Geopolitical rivalries have also contributed to the weakness of good governance norms. China has stepped in to replace reluctant Western powers, most obviously in the eastern province which has witnessed a spate of infrastructure projects by Chinese firms.37

Militarisation and corruption in Sri Lanka   195

Corruption, legitimacy and the 2010 elections It is a central axiom of corruption studies that corrupt governments will eventually face a crisis of legitimacy (see Philp, this volume). The argument is that trust in government declines when citizens no longer feel that their political representatives have their interests at heart. However, in an immediate post-­ conflict setting, this logic may not hold. Traumatised by war, many Sinhalese were willing to overlook government corruption, instead rewarding the Rajapaksa regime for subduing the LTTE. There is a sense, both within the regime and among its supporters, that certain payoffs were the rightful reward for the Rajapaksas. The post-­conflict presidential elections illustrated this dynamic, despite the opposition’s best efforts to document the excesses of the regime (Fonseka 2010; International Crisis Group 2010a: 2). Interestingly, during the election run-­up, the country experienced a rare moment of political openness, unique during the entire Rajapaksa presidency. A robust debate about corruption emerged in the local press, with government-­owned media devoting space to rebut charges against the president (Ivan 2010). Civil society leaders and academics openly called for a change of regime, falling short of endorsing General Sarath Fonseka, but embracing the relative openness that his candidacy produced. Yet rather than opening up the political space, elections allowed Rajapaksa to settle old scores with opponents, provide benefits to his rural southern Sinhalese constituents, and pay off politicians both within his own party as well as those from other Sinhala and Tamil parties. In January of 2010, Rajapaksa easily won re-­election over Fonseka, his one-­time top military commander, who was backed by a coalition of ten opposition parties from across the political spectrum. Fonseka’s overwhelming defeat and subsequent arrest shattered the weak opposition coalition, leading to the shutdown of whatever political space had briefly opened.38 The question now is what does Rajapaksa’s victory mean for corruption and the exercise of political power in Sri Lanka? Having rebuffed critics and increased his base of popular support, Rajapaksa openly acknowledges his desire to form a political dynasty in the country. He has systematically sought to put family members or close allies into every important state institution, including those designed to promote autonomy from the state and the de-­politicisation of government appointments. These appointments have allowed the president to violate the Constitution with impunity, effectively institutionalising unethical practices (though not technically corrupt by the letter of the law).39 The president’s kin have frequently ratcheted up tensions within numerous ministries since they have often wielded more power than the nominal minister. This mechanism of indirect control has allowed the Rajapaksa brothers to control, directly or indirectly, two-­thirds of the budget.40 Though public resentment often lingers below the surface, the family views itself as being no different than other South Asian family dynasties (Velloor 2010).41

196   Z. Mampilly Parliamentary elections held in 2010 produced a two-­thirds majority for the SLFP. While most corrupt practices in Sri Lanka are illegal according to the country’s penal code, the SLFP’s parliamentary power allows it to amend the Constitution in ways favourable to the executive. The first step the party took was to allow Rajapaksa to run for a third term.

Conclusion This chapter has argued that to understand the current political crisis in post-­conflict Sri Lanka – a crisis that has allowed corruption to flourish throughout all levels of government – it is necessary to examine the broader evolution of the political and economic system through two decades of war. Conflict economies do not simply dissipate after the fighting stops. Rather, they continue to affect the post-­conflict political and social order in often nefarious ways. This chapter examined the ways in which multiple institutional pathologies have determined the scale and scope of post-­conflict corruption. In this chapter, I focused on three separate conditions. First, Sri Lanka’s centralisation of power has proceeded in lockstep with the increasing militarisation of state and society, thereby undermining parliamentary controls over budgetary expenditures and fuelling a culture of corruption. Second, the state of emergency and the closure of the democratic space provided ideal conditions for corrupt officials to avoid the scrutiny of the media and civil society. And third, the Rajapaksa regime has taken advantage of geopolitical rivalries between India, China, and the United States, allowing it to avoid international scrutiny regarding its corrupt practices. So whither Sri Lanka in the post-­conflict period? The country serves as an example of an extensive and durable bureaucracy that is unable to curtail metastasising corruption. Rajapaksa has successfully manipulated the genuine security concerns of average Sinhalese to ensconce his own family in power while ignoring basic democratic norms. Without a violent challenger, it is unlikely that the regime will back down in the face of non-­ violent challenges by civil society or the international community. The country has become a paradigmatic example of ‘state capture’ in which a regime is able to subvert the political process and restructure the legal framework to render corrupt gains legitimate.42

Notes   1 Research for this chapter was conducted primarily during a visit to Sri Lanka in January of 2010. Previous field visits to the country between 2004 and 2007, encompassing both the conflict period as well as the aftermath of the war, also figure into the analysis.   2 India, Pakistan, Iran, Israel, China and the United States all contributed arms and other direct support.

Militarisation and corruption in Sri Lanka   197   3 Though the government claims that the Tamils were put in camps for their own safety, the camps have widely been condemned by international observers. Inmates’ daily activities are monitored by the military and mobility is restricted (HRW 2010b).   4 Sri Lanka has a long history of institutional efforts in curtailing corruption, starting as early as 1883 with the colonial penal code. In 1954, a Bribery Act was passed. Along with related amendments, it forms the backbone of Sri Lanka’s modern corruption law (H.L. de Silva 2002: 245–249).   5 Political parties in Sri Lanka tend to be highly leader-­centric with little internal democracy, so it is appropriate to speak of Jayawardene’s policies as UNP policies (interview with R. Edrisinha, head of the Legal and Constitutional Unit, Centre for Policy Alternatives, 5 January 2010).   6 He earned himself the nickname ‘Yankee Dickie’ as a result.   7 Several factors linked to Jayawardene’s package of economic reforms exacerbated ethnic cleavages on the island (Shastri 2004: 74). Furthermore, structural adjustment resulted in a rapidly declining defence budget, falling from an already low 2.5 per cent of government expenditure in 1977 to 1.4 per cent by 1982 (Richardson 2004: 53). These conditions proved ideal for the Tamil insurgency to take root.   8 By law, the commission consists of three members, two of whom are drawn from retired judges of the Supreme Court and a third person selected for his/ her wide experience in law enforcement.   9 Rajapaksa hails from a different social class than Kumaratunga, who was part of the long-­dominant Colombo elites. His origins in the rural south and associ_ ation with the Janath​a​  Vimukthi Peramun. a militants rendered him anathema to the traditional political elite, who attempted to prevent his rise through their positions in anti-­corruption institutions. 10 COPE is a parliamentary commission that may refer cases to CIABOC, which is an independent commission accountable to Parliament. 11 Due to concerns about the negative impacts of a powerful presidency, both the UNP and the SLFP have promised to abolish the presidency, only to abandon such attempts once in power (interview with R. Edrisinha 2010). 12 The corresponding figure for Pakistan is 4,000; Nepal 2,700; India 1,300; and Bangladesh 1,000 (Reddy 2010). 13 Personal interview with J.C. Weliamuna. Executive Director, Transparency International, Sri Lanka, 8 January 2010. 14 No. 48 of 1979. 15 Personal interview with P.K. Balachandra, Indian Express, 3 January 2010. 16 Interview with J.C. Weliamuna. 17 Such overt threats have continued. In early 2010, a watch list produced by state intelligence units included prominent pro-­democracy voices such as Pakiasothy Saravanamuttu and J.C. Weliamuna of the Centre for Policy Alternatives and Transparency International respectively. 18 Sri Lanka serves as a strategic shipping hub between Europe and Asia. 19 Even the withdrawal of a preferential trade agreement with the EU had little influence on the government’s behaviour, something many analysts attributed to China’s increased economic power. 20 Interview with J.C. Weliamuna. 21 Interview with P.K. Balachandra. 22 Sinhala nationalism has always had two related strands. The anti-­Tamil version is well-­known to international observers, but there is also a virulent anti-­Indian undercurrent that shapes the nationalist project (interview with Ponnambalam 2010).

198   Z. Mampilly 23 Realistically, it is unlikely that Sri Lanka can simply push away the Indians and the Americans. Sri Lanka is too reliant on India and the United States to turns its back despite the bluster of the Rajapaksa regime. 24 According to Gambard (2004: 154), villagers compared the relationship between the war and corruption to a ‘beggar’s wound’. They recognised that for those who profited, allowing the open sore of the conflict to fester was more profitable than allowing it to heal. 25 Personal interview with Jeevan Thiagarajah. Executive Director, Consortium of Humanitarian Agencies, 4 January 2010. 26 An additional 10,000 former cadre remain in a special camp for former LTTE members, but these tend to be mostly younger recruits that were coerced into the organisation during its final days. Interview with P.K. Balachandra. 27 Muralidhar Reddy, Hindu, 3 January 2010. 28 Interview with P.K. Balachandra. 29 Recently, both the New York Times and National Geographic ranked the country among the top international destinations for tourism, providing a massive endorsement quickly embraced by the government. 30 Interview with P.K. Balachandra. 31 Informants familiar with reconstruction efforts claim that Basil Rajapaksa pockets between 10–15 per cent of the total for any given project. Interview with R. Edrisinha. 32 Ibid. 33 Interview with Pakiasothy Saravanamuttu. Executive Director, Centre for Policy Alternatives, 5 January 2010. 34 Interview with J.C.Weliuma. 35 Tamils in both the eastern and the northern province remain suspicious that the government will try to ‘Sinhalise’ these areas. See interview with Rajaram Mohan, the Tamil Chair of the Trincomalee Chamber of Commerce (Polgreen 2009) . 36 Interview with Pakiasothy Saravanamuttu. Executive Director, Centre for Policy Alternatives 5 January 2010. 37 Interview with P.K. Balachandra. 38 Elections were generally considered free and fair. Turnout was above 70 per cent across the country. However, in Tamil areas, where multiple violent incidents occurred, turnout was under 20 per cent, and almost all for Fonseka. Following his defeat, Fonseka was dragged kicking and screaming into military custody, and was convicted in September 2010 for corruption (Haviland 2010). 39 Interview with R. Edrishina. A family tree circulating in Colombo provides evidence of the depth of the Rajapaksa family’s political and economic involvement in Sri Lanka. It identifies over 25 family members and their occupation of leading positions in government and industry. I have no independent verification of its accuracy. I am grateful to Arthur Rhodes for sharing it with me. 40 Interview with P.K. Balachandra. 41 Interview with R. Edrisinha. Widespread accusations proliferate that the family has used its political power to expand its financial position on the island (interview with M. Reddy). Rumours abound about state lands and lands once controlled by the LTTE being parcelled out by the president and his brothers, often to members of the extended Rajapaksa family. These accusations of nepotism and corruption by the first family were well documented in the run-­up to the election, but did not undermine Rajapaksa’s support (interview with J.C. Weliamuna). 42 On state capture, see Hellman et al. (2003).

Part III

Anti-­corruption measures in peacebuilding contexts

12 Post-­conflict reconstruction, legitimacy and anti-­corruption commissions John Heilbrunn

This chapter traces the international development of anti-­corruption commissions (ACCs) with a focus on post-­conflict and fragile states. It explores the extent to which ACCs have become integral actors in post-­conflict reconstruction settings. The chapter argues that ACCs have the potential to be effective in the fight against corruption. It notes that international donors and the diplomatic community have identified the reduction of corruption as a priority for rebuilding legitimacy in post-­conflict and fragile states. Among the factors motivating leaders of fragile states to establish ACCs is the signing of the United Nations Convention against Corruption (UNCAC). With signatories from 140 countries, the UNCAC asks policymakers to comply with Article 6, Section 1 of the Convention which states: ‘Each State Party shall, in accordance with the fundamental principles of its legal system, ensure the existence of a body or bodies, as appropriate, that prevent corruption.’1 In many countries, the establishment of ACCs, some with mandates to investigate malfeasance and others with a focus on corruption prevention, followed the ratification of UNCAC. However, ACCs have a mixed record of achievements, even though they have come to be seen as one of the key instruments for reducing corruption in developing countries. The sheer number of ACCs around the world might suffice to mute critics who have suggested that ACCs are ineffective and costly diversions of scarce reconstruction funds (Heilbrunn 2006). Critical assessments of ACCs cite their failure to reduce corruption in a meaningful manner (De Maria 2008). Critics note that ACCs are often understaffed and they lack an adequate budget to ensure success. This problem of understaffing and inadequate training is especially a challenge for ACCs in post-­conflict states that can only handle a small number of cases. This lack of capacity is a particular disadvantage when they negotiate with individuals who have vested interests in corrupt arrangements. It follows that for many observers, in such an environment, cleaning up corruption is akin to clearing the Augean stables. However, as this chapter argues, for governments in many post-­conflict countries the function of establishing ACCs is not necessarily to address corruption directly, but to signal seriousness (whether genuine

202   J. Heilbrunn or not) about addressing the problem, and to maintain the support of international actors. Since 1995, shifts in international norms have resulted in declining tolerance for corruption. This intolerance has found expression in pressures that international donors have put on governments to establish ACCs, in some of the most unlikely places. Most of these are modelled, to some extent, on the organisational structures and operational imperatives of Hong Kong’s Independent Commission against Corruption (ICAC) or Singapore’s Corrupt Practices Investigation Bureau (CPIB). Whereas in 1980, few ACCs existed worldwide, by 2010, ACCs had become commonplace, operating under a variety of titles. Some ACCs have the authority both to investigate and prosecute. Others engage in prevention by passing laws, establishing bureaucratic rules and closing loopholes that venal individuals exploit for their private gain. Investigation and prevention often enhance the public awareness work that forms the third arena of ACC activities. ACCs are state agencies that receive complaints about malfeasance; investigate alleged bribery, graft and fraud; develop prevention strategies and help citizens understand the costs that corruption imposes upon public life. In post-­conflict states, ACCs can demonstrate to international donors that the government is intolerant of corrupt practices. In most instances, the government first nominates the ACC’s director, associate director and senior staff, and parliamentary select committees vet and approve the appointments. In principle, once the parliamentary committees confirm the appointments, the commission begins operations and within a specified time, generates periodic reports. In addition, many ACCs have oversight boards to advise on investigations and prevent abuses of powers, but which also help to protect ACCs against political influence, especially from the executive branch. Only an independent ACC can initiate investigations, recommend prosecution and register abuses of position by influential members of society without threat of reprisal or dismissal. In practice, however, executive interference is common; it undermines investigations of politically sensitive cases, and more importantly creates a sense that an ACC is a token agency or, worse, a tool to redress political debts. Thus, ACCs that lack independence are unlikely to reduce corruption. Independence is therefore a crucial element of an ACC’s effectiveness and contribution in the fight against corruption. This chapter examines the role of ACCs in fighting corruption in post-­ conflict environments. It contests well-­known arguments that ACCs are unsuccessful in their individual battles against corruption (Doig et al. 2007; Heilbrunn 2004), and proposes instead that they are better seen as part of a lengthy process of institutional and normative change in post-­conflict societies, in which the rules of the game adjust to new norms that are intolerant of corruption and impunity. One of the unique aspects of the role of ACCs in post-­conflict countries is the involvement of international

Anrti-corruption commissions   203 actors in post-­conflict reconstruction and peacebuilding, and their interest in and push for credible governance reforms, including anti-­corruption reforms. In cases where international involvement is deep, and might even involve the sharing of sovereign functions, local political elites must demonstrate to international actors – whether they are regional organisations, multilateral agencies, or bilateral donors – their credible commitment to reforms. While the establishment of ACCs is one way to signal the intention to take the issue of corruption seriously, actual change in the rules of the game takes time. Hence, this chapter suggests that ultimately, assessing the impact of ACCs in post-­conflict states can only be made in the long term. ACCs are no quick fix for the problem of corruption. Norm changes, especially in areas such as anti-­corruption, require lengthy interventions and are often accompanied by challenges that deny any linearity to the process. The remainder of this chapter is divided into four parts. The next section briefly discusses the relationship between corruption and state fragility, focusing on the impact of corruption on state legitimacy and ways in which ACCs can address these problems. In the second section, the chapter examines the history of ACCs in Hong Kong and Singapore, which have served as best practices for many countries that have established ACCs. The third section considers the cases of two ACCs established in post-­conflict or weak states: Sierra Leone and Timor-­Leste. Finally, the conclusion returns to the issue of post-­conflict state fragility and legitimacy, assessing the extent of the contribution that ACCs can make to the (re)legitimation of the state after conflict.

Corruption, state fragility and anti-­corruption commissions Corruption has been defined in multiple ways in the literature. Modifiers such as political corruption, bureaucratic corruption, public corruption and private corruption are often supplied. John Joseph Wallis has contributed the concept of ‘systematic corruption’ to describe behaviour in which actors Deliberately create rents by limiting entry into valuable economic activities through grants of monopoly, restrictive corporate charters, tariffs, quotas, regulations, and the like. These rents bind the interests of the recipients to the politicians who create them. The purpose is to build a coalition that can dominate the government. (Wallis 2006: 25) Wallis’ concept recalls Andrei Shleifer and Robert Vishny’s depiction of corruption as behaviour in which officials market government property for profit (Shleifer and Vishny 1993: 599). Daniel Kaufmann calls corruption ‘ “the privatization of public policy”, in which public policy is seen as

204   J. Heilbrunn including access to public services’ (Kaufmann 2006: 82). Susan Rose-­ Ackerman considers corruption as dishonest acts at the juncture of the state and the private sector (Rose-­Ackerman 1999: 113). Her description recalls Yves Mény’s comment that corruption involves a ‘clandestine exchange between two “markets”, the “political and/or administrative market” on the one hand, and the economic or social market on the other’ (Mény 1996: 112). Michael Johnston proposes four syndromes of behaviour; influence market corruption, elite cartel corruption, oligarch and clan corruption, and official mogul corruption (Johnston 2005a: 42–48). All of these definitions contribute to the conceptual pluralism that has characterised the analysis of corruption. For this chapter, corruption is defined as behaviour that constitutes an abuse of position for personal gain, including unfair advantages for groups and individuals. In some countries, corruption is petty and involves low-­ level civil servants and security officers; in others, it is grand and includes high-­level officials; or it is systemic throughout all levels of state (Rose-­ Ackerman 1999: 27). Corruption in fragile and post-­conflict states is typically systemic. Politically, systemic corruption distorts political processes and the rule of law, and fosters the perception of a class of people that can act with impunity. Economically, it imposes an added cost to conducting business in the country that discourages foreign investments, distorts public spending and deprives the state of resources, impeding reconstruction. Systemic corruption sustains networks whose leaders try to capture the state thereby contributing to its inherent fragility and weakness. Corruption also undermines the legitimacy of weak states. We can distinguish between three different sources of state legitimacy – normative, procedural and output legitimacy – all of which are negatively affected by corruption. A state’s normative legitimacy arises from the degree to which its institutions reflect the values of the society it governs. Corruption violates norms of public office, and the expectations that society has vis-­à-vis the state (see Philp’s chapter in this volume), thereby undermining its normative legitimacy. Procedural legitimacy derives from the processes of establishing state agencies, and the processes of decision-­making (Franck 1990). Corruption compromises these decision-­making processes, with private financial or other incentives that shape decisions, rather than transparent and well-­established rules. A state’s output legitimacy derives from its ability to satisfy citizen’s expectations of government performance (Scharpf 1999). As corruption tends to divert revenues from public services, it leads to unequal service delivery and reduces available resources. The state’s output legitimacy suffers when services provided to the public are unequal. To reduce corruption and build legitimacy, many post-­conflict governments have chosen to establish ACCs. The establishment of an ACC is one reform that directly impacts former elites who profited from corrupt practices. As a reform agency, the ACC is redistributive; it shifts access to

Anrti-corruption commissions   205 corrupt benefits from one set of actors to another. This conceptualisation of reform corresponds to the definition by Albert O. Hirschman that reform involves a process in which ‘the power of hitherto privileged groups is curbed and the economic and social status of underprivileged groups is correspondingly improved’ (Hirschman 1963: 267). Hirschman’s definition emphasises the important point that reforms redistribute benefits. An ACC is therefore a critical actor in this shift of benefits and can be decisive in stabilising fragile states.

A brief history of anti-­corruption commissions Before examining the role of ACCs in post-­conflict countries, it is worth briefly reviewing the first efforts of establishing such commissions in Hong Kong and Singapore, which have served as ‘best practice’ models for many contemporary ACCs. Hong Kong’s Independent Commission against Corruption British colonial authorities passed legislation to establish Hong Kong’s ICAC after pervasive police corruption in the early 1970s caused a wide-­ ranging scandal (De Speville 1997). By the end of the Vietnam War, drug trafficking had become big business in Southeast Asia; and Hong Kong, Singapore and Australia were important transhipment points. In the early 1970s, it was revealed that senior police officials in the British colonial administration had been accepting sizeable bribes from drug smugglers. The Crown Colony asked Alastair Blair-­Kerr, a man with impeccable integrity, to empanel a commission that would propose some solutions to the increasing problem of corruption. The Blair-­Kerr Commission recommended that colonial authorities establish an anti-­corruption agency to investigate alleged incidents of corruption and forward evidence to prosecutors. British authorities revised the Prevention of Bribery Ordinance to criminalise the act of paying any civil servant a bribe. Then, in October 1973, they passed a series of laws including the Independent Commission against Corruption Act; the Independent Commission against Corruption Ordinance, and the Corrupt and Illegal Practices Ordinance (ibid.: 24). These laws criminalised numerous forms of corruption and created a new organisation with considerable autonomy to fight corruption in Hong Kong. Hong Kong’s ICAC has been extraordinarily successful in fighting corruption largely due to its sweeping powers. The ICAC may seize passports, property, and even incarcerate individuals that it fears might be at risk of absconding. Such police powers are not cheap; the ICAC’s operational costs in 2001 were approximately US$90 million, covering the salaries of 1,200 officers and hundreds of investigations.2 In 2007, this number increased to 1,354 employees who work in operations (approximately

206   J. Heilbrunn two-­thirds of the total staff work on corruption investigations), prevention and public relations. Most of the ICAC’s budget funds its investigation division. The next most important division, in terms of funding and personnel, is the Corruption Prevention Department that prepares studies for civil servants and business actors in Hong Kong (De Speville 1997: 49). Finally, the smallest division is the Community Relations Department; this public awareness unit conceptualises advertising campaigns, billboards displayed in the city, television commercials, media relations and outreach programmes. The directors of these three departments report directly to the ICAC director. The ICAC director is a political appointee, and since the handover of Hong Kong to China, he reports to the Special Regional Administrator for Hong Kong, as well as three oversight committees: the Operations Review Committee, the Corruption Prevention Advisory Committee and the Citizen Advisory Committee on Community Relations. Committee members are distinguished representatives of Hong Kong’s civil society who meet regularly and report to the Hong Kong Special Regional Administrator. This system therefore has considerable accountability mechanisms that require that the ICAC follow clear procedures to launch an investigation, seize property and make periodic reports to account for ongoing investigations. For example, the Operations Review Committee requires that the Operations Division submit a report on any individuals on bail for more than six months and investigations that have lasted over 12 months. It authorises all new investigations and searches authorised under Section 17 of the Prevention of Bribery Act. Finally, the ICAC cannot dismiss or drop an investigation without first receiving approval from the committee. These controls help to shield the ICAC from political pressure and prevent it from abusing its police powers, and have contributed to its continuing success. Successful anti-­corruption reforms endowed ICAC with an impressive degree of credibility that it has managed to protect even after the handover to China in 1997. When the Chinese assumed sovereignty over Hong Kong, the Beijing government designated the former British Crown Colony a Special Administrative Region (SAR). China, at this time, was in the early years of a major economic expansion that was notable for its high rates of corruption. This problem of malfeasance may have been a consequence of a larger transition from state socialism to a market-­based economy (Lü 2000: 190). However, instead of a spillover effect from the mainland, the ICAC’s performance remained outstanding under the administration of Beijing’s appointed governor. As Melanie Manion has observed, ‘the governor publicly staked his reputation on the ICAC, but he did not “tie his hands” with agency design. Rather, the constraints to respond effectively with publicly acceptable solutions of “good government” inhered in other contextual features’ (Manion 2004: 203). These constraints included a respect for the laws that had been foundational in the ICAC’s establishment and later development.

Anrti-corruption commissions   207 Singapore’s Corrupt Practices Investigation Bureau As a city built on commerce and the promise of profit, Singapore experienced relatively frequent corruption scandals. Narcotics smuggling from the Golden Triangle added a sinister element to the voluminous trade that transited through Singapore. In contrast to its current image of propriety and integrity, organised crime syndicates used Singapore as a base of operations, openly bribing police and public officials to ignore their commerce. In 1951, a series of scandals implicated colonial police in the theft of 1,800 pounds of heroin from evidence lockers (Leak 1999: 59). These scandals prompted British colonial administrators to pass the Prevention of Corruption Ordinance that created the CPIB in 1952. In its initial form, the CPIB was a police agency with a mandate to rein in the corruption that had become commonplace in Singapore. However, corruption was systemic; it was present in the police, judiciary and civil service. At first, the CPIB was largely ineffective due to a lack of attention from political authorities; scandals continued to occur with regularity until the 1970s when the Lee Kuan Yew government split the agency from the police and authorised a revitalised unit to investigate allegations of corruption and strictly enforce laws. Within a remarkably short period, Singapore acquired a reputation for rigid enforcement of its anti-­corruption laws and as a place to avoid any attempts to bribe the police. The success that Singapore’s ACC enjoys is evidenced by the city’s ability to become one of the top 20 recipients of foreign investment in the world in absolute terms (Kim et al. 1993: 127). Indeed, according to Transparency International’s Corruption Perception Index (CPI), Singapore has achieved low levels of corruption only rivalled by the Scandinavian countries and New Zealand, coming joint first in the 2010 CPI (Transparency International 2010). The CPIB only investigates allegations of corrupt acts and prepares evidence for prosecutors. Compared to the Hong Kong ICAC, it is a tiny agency of less than 100 law enforcement professionals who have considerable discretion in their decisions to investigate allegations of corruption (Quah 2001: 139). The original 1960 Prevention of Corruption Ordinance gave the CPIB a mandate to investigate alleged corruption and then forward evidence to the judiciary for prosecution. Since 1960, Singapore’s government has revised the now renamed Prevention of Corruption Act (Chapter 241 of the Statutes of Singapore) seven times. In 1989, the Singapore government enacted the Confiscation of Benefits Act; this bill gave the government powers to seize assets of individuals convicted of taking bribes. It explicitly bars civil servants from soliciting or accepting bribes and punishes the payers of illegal payments. Later, the Corruption, Drug Trafficking and Other Serious Crimes Act of 1999 replaced the Confiscation of Benefits Act.3 These acts and their subsequent revisions strengthened the CPIB and its powers to seize assets and set forth evidence needed to convict wrongdoers of corruption. In the late 1990s, prevention

208   J. Heilbrunn assumed an increasingly important role in the CPIB’s anti-­corruption strategy in an effort to reinforce and entrench anti-­corruption norms (Leak 1999: 64). Key among the CPIB’s unique characteristics is that in its early years under the Yew government, it operated solely as an investigative unit that deterred corruption through the threat of aggressive and vigorous investigation and prosecution. The CPIB was a narrow police agency that served a semi-­authoritarian regime, and was placed for much of its time under the authority of the Prime Minister’s Office. As a police organisation, the CPIB is hierarchical; at the top is the president who receives all reports and orders any investigation into allegations of corruption. Reporting to the president is the CPIB director, who the president appoints and may relieve of duties at will. Below the director, there is a deputy director, assistant directors and special investigators who send reports up the hierarchy. These narrow operations employ mostly former police investigators, accountants and attorneys. Although the numbers of employees in the CPIB is relatively small, it enjoys a high conviction rate. Prison terms for those people convicted of corruption offenses are lengthy and the fines are substantial. For example, a conviction for corruption may carry a US$100,000 fine and up to five years in prison.4 Finally, in a regime that made economic growth one of its primary policy objectives, and derived much of its legitimacy from achieving that, the CPIB served an important political function and benefitted from substantial political will to make Singapore’s anti-­corruption stance credible. One of the interesting differences between the two bodies is their oversight and accountability structures. In contrast to Hong Kong’s ICAC, which submits regular reports to oversight committees, Singapore’s oversight mechanisms are rather ambiguous. The CPIB sends reports on its investigations to the Anti-­Corruption Advisory Committee that in turn reports directly to the president. Nonetheless, since the passage of the 1999 Corruption, Drug Trafficking and Other Serious Crimes Act, corruption has declined each year (according to Transparency International’s CPI). As one observer has noted, legislation may not have eliminated corruption, it ‘is a fact of life rather than a way of life. Put differently, corruption exists in Singapore, but not a corrupt society’ (Quah 1988: 841). The city enjoys a reputation as one of the most law-­abiding societies in the world with low levels of corruption and a credible zero-­tolerance policy. Hong Kong and Singapore compared The operation of Hong Kong’s ICAC is successful largely because the oversight committees ensure the ACC’s independence. This control by oversight committee is indicative of Hong Kong’s decentralised political system. Put differently, anti-­corruption enforcement in Hong Kong operates through horizontal accountability in which official agencies oversee

Anrti-corruption commissions   209 their counterparts in other areas of state activity. Meanwhile, civil society organisations participate in overseeing the ICAC’s activities. This oversight and reporting structure protects the ICAC’s independence and legitimacy. By contrast, Singapore’s CPIB is a critical block in the centralised polity that governs the city-­state. Efforts by the Singapore government to install an oversight committee suggest that the semi-­authoritarian regime is bringing new expressions into the vertical accountability that has traditionally existed in the city-­state. The success of both of these ACCs, despite the evident differences in their structures, rests on their reputations for forceful investigations and strict punishments for wrongdoers. First, Hong Kong’s laws leave little room for individuals who might wish to flee the territory. By the same token, the semi-­authoritarian rule of Singapore’s government enables it to impose constraints on citizens who might wish to engage in corrupt behaviour. Second, oversight committees and measures taken to prevent political abuses of the ACC have in turn enhanced the legitimacy of both the Hong Kong and Singapore governments. In this important regard, ACCs present opportunities for statebuilding among fragile, post-­conflict states that seek to enhance their legitimacy to stabilise their rule. In post-­conflict states, ACCs signal to international donors (rightly or wrongly) that a government has the political will to reduce malfeasance in official transactions. In addition, ACCs signal to domestic constituents a political leadership’s resolve to fight corruption. Hence, the establishment of an ACC informs citizens of a reconstructing state that their political authorities are serious, at least to some extent, about transparency and accountability in the public sector.

Anti-­corruption commissions in post-­conflict states Since corruption emerged as a major concern of post-­conflict peacebuilders, promoting the establishment of ACCs has become an important part of peace- and statebuilding activities. Often, these efforts accompanied bilateral assistance and multilateral trust funds for governance, mostly administered by the World Bank.5 Consequently, ACCs became integral actors in post-­conflict reconstruction. This is surprising, given that ACCs have been established in a range of countries where the public administration is otherwise weak, and the government’s capacity to deliver public services very limited. In such situations, it is unlikely that ACCs can deliver on expected reductions in corruption. However, post-­conflict leaders establish ACCs arguably to signal to donors (whether genuine or not) that they take tackling graft seriously. Efforts to reduce corruption levels after war confront two converging sets of pressures. First, malfeasance denies the post-­conflict state desperately needed fiscal revenues. It is a behaviour in which individuals divert government funds towards private consumption; the effects on the

210   J. Heilbrunn economy are similar to a tax, except the money goes to the official instead of the treasury (Shleifer and Vishney 1993: 603). Second, international donor agencies that grant reconstruction credits put demands for due diligence on post-­conflict governments. In an interesting reformulation of the aid absorptive capacity dilemma, Fredrik Galtung and Martin Tisne discuss ‘the potlatch effect’ in which international donors transfer reconstruction credits to post-­conflict states when they are least able to use those credits (Galtung and Tisne 2009: 95; see also Dobrska 1968). Large transfers encourage corruption since control mechanisms in post-­conflict states are often ineffective or absent. Donors require that post-­conflict states have offices essential for due diligence and good governance that would include an ACC. By the time post-­conflict states have developed the capa­ city to use reconstruction credits efficiently, donors have reduced transfers. At least three constituencies influence outcomes for anti-­corruption reforms in post-­conflict states. First, many former elites continue to hold positions they occupied before or during a conflict; they might feel that they have the most to lose from governance reforms and, consequently, they obstruct such efforts. Second, previous opponents to the regime who take up government positions often have mixed motives. Some hope to achieve serious reforms; others hope for revenge while others still hope for personal enrichment. A third constituency includes international donors who demand anti-­corruption reforms before they will release reconstruction credits. An ACC may be a popular choice for political leaders who for a variety of reasons, have no political will to fight corruption. They can subtly curtail an ACC’s independence and effectiveness, and in this fashion, limit the ACC’s ability to credibly challenge existing power structures. In post-­conflict states, ACCs are a technical solution to a political problem for local elites – signalling to the international community that one is serious about corruption without undermining the power and patronage structures that sustain their rule.6 The politics of corruption are evident when leaders give jobs to unqualified relatives or offer opportunities for bribe-­taking to appease opponents (Cheng and Zaum 2008: 303). In fragile states, peacebuilders and local elites create ACCs which then lack the resources to conduct investigations, prevention campaigns, or public relations. Yemen provides a good case in point. In 2006, Yemen’s government passed the National Anti-­Corruption Act that created an ACC called the Supreme National Authority for Combating Corruption (SNACC). The SNACC enforces provisions of the Anti-­Corruption Act, the 2007 Financial Disclosure Act and the 2007 National Procurement Act. Operationally, the SNACC receives reports of corruption, investigates, and refers cases to the judiciary for prosecution. Yet, the SNACC is a small agency of only 11 people in a country of almost 23 million inhabitants. Each year, the SNACC receives as many as 16,000 asset declarations; to review all of these

Anrti-corruption commissions   211 disclosures would require a Herculean effort (Wray 2009). Meanwhile, Yemen remains a fragile state with a lingering low intensity conflict between the north and south and a growing threat of radical Islam in its countryside. Yemen’s ACC is hardly atypical of a country where fiscal realities deny effective reform, and where political power depends on fragile coalitions built on patronage. The problems that ACCs face in peace-­ building environments and fragile states are highlighted by the two case studies discussed below. Anti-­corruption commissions in Sierra Leone Sierra Leone has the unfortunate distinction of being emblematic of a ‘failed state’. For a decade, a bloody civil war, caused and fuelled by corruption, gained impetus from illegal diamond mining (Hirsch 2001). Rooted in the local colonial governance structures (especially the role of the paramount chiefs), post-­colonial rulers systematically destroyed the state’s capacity to provide its citizens with public goods (Reno 2003: 71), while the chiefdoms increasingly engaged in informal activity and became instruments of oppression (Fanthorpe 2006: 32–34). Sierra Leone’s central government disengaged from local politics and put traditional chiefs increasingly into positions from which they oppressed their people. As a consequence, diverse networks emerged to satisfy unmet needs by whatever means available. In the years before the civil war, corrupt networks were so widespread in Sierra Leone that they enfeebled the state and left enduring legacies. Most notably, the networks formed parallel structures that fed directly into the civil war. Foday Sankoh, leader of the Revolutionary United Front (RUF ), successfully tapped into the intergenerational resentment of Sierra Leone’s youth against a corrupt government and opportunistic local chiefs who presided over a system that exploited the youths’ vulnerability (Jackson 2005: 55). These internal conflicts were compounded by the involvement of outside actors (in particular Liberia’s President Charles Taylor), and the opportunities that the war economy offered for personal enrichment and the enhancement of status. At different times, international actors negotiated several ceasefires and peace agreements. These ceasefires brought short periods of peace followed by economic upheaval, continued injustices and official neglect, which inflamed renewed hostilities (Duffy Toft 2010: 39). In 2000, two years before the war’s end, the Tejan-­Kabbah government passed the Anti-­Corruption Act and created an ACC. Entrenched interests on all sides of the conflict actively resisted the efforts of anti-­corruption reformers. It is hardly surprising that given this configuration of opponents, the ACC failed to make much progress. Almost from the beginning, Sierra Leone’s ACC encountered bottlenecks; political interference in the justice system prevented investigations from being followed up in the

212   J. Heilbrunn courts (Thomson 2007: 17). In response, donors increased their pressure on Tejan-­Kabbah to prepare a national strategy to fight corruption. From 2002 to 2007, the Tejan-­Kabbah government stumbled as it tried to balance demands from the three post-­war constituencies. First, under strong donor pressure, the administration emphasised decentralisation as its primary policy reform. Second, it informed the local chiefs that from 2004 the costs of the chieftaincies, including salaries, would have to be paid from local taxes. As this led to irregular payments of salaries, corruption in the chieftaincies increased thereby undermining the state’s legitimacy (Jackson 2007: 99–100). In short, the Tejan-­Kabbah government de-­emphasised anti-­corruption reforms and worked to reconstruct local governments without a consideration of the root causes of Sierra Leone’s civil war. In the October 2007 elections, Tejan-­Kabbah lost to Ernest Bai Koroma, who ran on a clean government campaign. Among his government’s first acts was to pass the 2008 Anti-­Corruption Act. The new anti-­corruption law defined 29 violations as corruption; it required asset declarations, criminalised bribe taking and graft, and established an ACC with a commissioner, a deputy commissioner and divisions organised along similar lines as the Hong Kong ICAC. The commissioner and deputy commissioner receive their appointments from the president who consults with an advisory board on corruption. The advisory board is made up of seven members appointed by the president and approved by Parliament, and drawn from wider civil society.7 The advisory board advises and approves the president’s decision about whom he appoints as commissioner and deputy commissioner. This Board is the ACC’s sole oversight body; it advises the commissioner and provides an annual assessment of the ACC’s operations. One sign of the new ACC’s potential is that the reforms have met with strong resistance from individuals who had profited from the illicit sales of diamonds during the war, especially in Kenema and Kailahun from where the diamonds are marketed. For example, the Standard Times described how in 2007 the director of the National Revenue Authority, John Karimu, appointed his clansmen from Kailahun to strategic positions in the agency (Standard Times 2007). These people had clear incentives to oppose the 2008 anti-­corruption reforms. While President Koroma has publicly expressed his complete support for the ACC’s first commissioner, Abdul Tejan-­Cole, the ACC has faced strong opposition from high-­level officials and has been accused of investigating low-­level civil servants while the corrupt ‘big men’ in ministerial positions enjoy impunity (Africa Confidential 2009b). Possibly to get the act through the National Assembly, Koroma agreed to ignore prior offenses (Africa Confidential 2009a). This de facto amnesty has allowed high-­level officials suspected of corruption to remain in government, contrary to his stated goals. Koroma has made the fight against corruption a central issue in establishing the legitimacy of his administration. However, opposition from entrenched

Anrti-corruption commissions   213 politicians who profited from earlier arrangements highlights the problem that ACCs face in post-­conflict peacebuilding contexts. While it is too early to fully assess the impact of these reforms, it is worth noting that perceptions of corruption in Sierra Leone remain high; in 2009, Transparency International ranked Sierra Leone 146 of 180 countries, between Russia and Timor-­Leste. The ombudsman in Timor-­Leste: fighting corruption in a post-­genocide state Timor-­Leste is a small post-­conflict state of 1.3 million inhabitants. It gained independence in 2002 after three years of UN administration, following the large scale violence and destruction after the 1999 referendum declared the people’s desire for independence from Indonesia. Timor-­Leste suffered under Indonesian rule that began in 1975, destroyed 90 per cent of the country’s infrastructure and displaced hundreds of thousands of people (Jardine 2008). An economy with low levels of industrialisation and mostly subsistence agriculture, it is the considerable oil and gas fields in the Timor Sea that provide the government with most of its fiscal revenues. Corruption is a clear challenge to the government; perceptions of corruption in Timor-­ Leste as measured by Transparency International ranked the country 146 out of 180 countries in 2009. Still, Timor-­Leste is remarkable for its novel revenue management law that allows the government only 3 per cent of the oil and gas revenues for fiscal expenditures and invests the remainder in US Treasury bills. Oil and gas revenues are the object of oversight by three entities that include several civil society organisations, the Ministry of Natural Resources and an ACC in the Office of the Ombudsman. Although in recent years political authorities have diverted revenues earmarked for the sovereign wealth fund, it remains mostly viable even if certain withdrawals exceed the estimated sustainable income levels from the fund. Perhaps the greatest challenges facing the ACC are the limited governance capacity and the small size of East Timor’s political and administrative elite. More than two decades of Indonesian occupation drove many Timorese into exile and largely excluded Timorese from the higher echelons of the civil service and the justice system (see Robinson 2010: ch. 4). After 1999 until Timorese independence in 2002, the United Nations Transitional Administration in East Timor was responsible for building the Timorese state and managing the territory’s transition to independence. At the time of Timor-­Leste’s independence in May 2002, its state structures, in particular the justice system, remained weak and heavily reliant on external assistance. The UN continued to provide assistance, first through a new peacekeeping mission, UNMISET (until 2005), and then through the UN Support Office for Timor-­Leste (UNOTIL) for another year. When public order collapsed in 2006, after one-­third of the army deserted, a new UN peacekeeping operation, UNMIT, was deployed in the

214   J. Heilbrunn summer of 2006, to maintain order and assist with the consolidation of both peace and the state’s authority. Timor-­Leste’s Ombudsman Office (of which the ACC is an integral part) is a product of negotiations in 2005 among Timorese politicians, the UN and major donors, and civil society organisations.8 When the Timorese Parliament established the Ombudsman’s Office it received a mandate to work on three areas: human rights, good governance and anti-­corruption. The anti-­corruption office receives complaints about corruption and can investigate them, but has no activities in prevention or public awareness. The lack of human capital, which affects the public administration across the board in Timor-­Leste, is also one of the major factors limiting the effectiveness of the ACC. As a result, corrupt officials have little to fear from the ACC, which has insufficient and insufficiently trained staff. Procedurally, when the Ombudsman’s Office receives a complaint of malfeasance; it forwards the allegations to the ACC to investigate if corruption has occurred. If the ACC decides that bribery or graft did indeed take place, it forwards its evidence to public prosecutors. On the one hand, the limited capacity of the ACC means that few investigations are conducted: in 2009, for example, it forwarded only a single case for investigation to the prosecutors. However, its work is also hampered by bottlenecks within the Timorese justice system, where cases are prone to linger without action once the prosecutors receive the evidence. Timor-­Leste’s judiciary is notoriously weak. In January 2005, all Timorese judges were disqualified after failing professional examinations, and were given further full-­time legal training for up to three years (Judicial System Monitoring Programme 2005: 12). While in the meantime, the courts were staffed exclusively with international judges. Prosecutors are unlikely to act on cases that involve politically connected members of the state. Given the weakness of the public administration and the justice system, the ACC was never likely to be an effective instrument to address corruption in the short run. Its establishment reflects the priorities and normative commitments of donors rather than Timorese peace- and statebuilding priorities. Timor-­Leste’s ACC reports to the Speaker of the Parliament. No oversight committee supervises case selection, time of investigation, or outcomes (for those few outcomes that have occurred). As the case of Hong Kong suggests, such boards are important for safeguarding the independence of the ACC and to shield it from political influence, and the lack of such a board arguably weakens the ACC even further. With regard to the ACC’s reports, it is at the Speaker’s discretion whether to withhold the ACC’s reports or release them to the public. A paltry number of cases meant that the Ombudsman’s Office had not published a report since its establishment. The failure to publish the report may indicate more an absence of capacity than a lack of commitment to reform. However, the limited number of investigations, its lack of public awareness work, and the fact that it is at the discretion of the Speaker of the Parliament whether

Anrti-corruption commissions   215 reports are published or not severely limit its ability to promote anti-­ corruption norms. To partially compensate for its limited capacity, Timor-­Leste’s Office of the Ombudsman (in pursuit of its wider human rights and good governance mandate) collaborates with various civil society organisations, in particular La’o Hamutuk and Luta Hamutuk. These civil society organisations have been instrumental in the norm creation favouring oversight and accountability. Both of these non-­state actors have played a significant role in the reconstruction process. Oversight activities of these civil society organisations have induced Timor-­Leste’s government to operate with greater transparency and accountability, especially in the management of oil revenues and the state oil fund. When the NGOs expose malfeasance in reconstruction projects or the management of oil revenues, condemnation falls to the individual officials and not necessarily on the government. Indeed, the participation of civil society organisations and the Ombudsman’s Office has demonstrated a significant level of political commitment in this fragile post-­conflict state.

Conclusion: legitimacy and corruption This chapter has discussed the importance of ACCs in post-­conflict and fragile states. It described the destructive nature of corruption in fragile post-­conflict states, and highlighted how corruption undermines the state’s legitimacy in the eyes of its citizenry by compromising norms of public office, weakening and distorting the delivery of public services, perverting decision-­making procedures, and impeding reconstruction efforts. The challenge of establishing ACCs to fight corruption and build legitimacy in post-­conflict states is twofold: first, post-­conflict states lack the capacity to sustain an effective ACC; and second, anti-­corruption reforms invariably remove benefits from one faction and distribute those benefits to other factions, fuelling resistance to them. Thus, while anti-­corruption measures such as ACCs might help to build legitimacy in the eyes of citizens and the international community, they also bear the risk of renewed conflict. Herein the dangers that peacebuilders confront in fragile post-­ conflict states like Sierra Leone and Timor-­Leste have discussed. Corruption is a common issue within the ranks of weak states. Strengthening the capacity of weak states to develop and implement public policy, and to contain corruption, requires both internal political will and external assistance. Post-­conflict states have adopted ACCs as institutional means of reducing corruption, even though they base the agencies on external models. Through their direct involvement in post-­conflict reconstruction, through conditionalities, and through political pressure, international donors and peacebuilding operations require local elites to adopt methods of fighting corruption that correspond to supposed ‘best practices’ found in other countries.

216   J. Heilbrunn The prototypes or best practices for ACCs are the Hong Kong ICAC and Singapore’s CPIB. These two agencies place an emphasis on investigation and to varying extents, on prevention. Only Hong Kong has invested substantially in public awareness efforts with a clear impact on public perceptions of corruption and its costs. These organisations have been reproduced to greater or lesser degrees by governments around the world that are signatories of the UNCAC. However, two factors are often absent from post-­ conflict ACCs. Namely, few have external oversight committees and even fewer are independent from executive interference. Both problems are evident in the ACCs in Sierra Leone and Timor-­Leste discussed above. Both cases demonstrate certain pitfalls that bedevil fragile and post-­ conflict states. As Sierra Leone demonstrates, the role of an ACC is particularly threatening to individuals from previous governments who continue to feed at the government trough. Its contribution is therefore incremental at best; the ACC can provide a step towards building legitimacy and towards strengthening anti-­corruption norms. Timor-­Leste is a post-­genocidal state where the degree of political commitment, especially among the population, is remarkably high. Still, corruption remains a serious problem among senior elected and appointed officials. To no small degree, the country’s instability is a consequence of low capacity. Despite apparently high levels of commitment from the political leadership for fighting corruption, the ability to conduct audits and control expenditures is low. Consequently, the opportunities for inefficiencies and corruption are high. Corruption remains a salient problem in many weak post-­conflict states, with important consequences for their ability to consolidate and strengthen the capacity of state institutions. Strengthening the state requires building legitimacy; that is, the citizens’ acceptance of political authority exercised by the individuals who govern. Legitimacy has been widely accepted as a fundamental element of effective rule. If political authority is legitimate, citizens will consent to a state’s right to ensure security, levy taxes, pass laws and deliver basic public sector services. In post-­conflict states, however, corruption is an impediment to reconstructing the offices and agencies that are critical to deliver basic services. In effect, corruption is an obstacle to building widespread coalitions that are fundamental to state reconstruction. It is therefore a domestic policy issue that leaders of post-­conflict states ignore at their peril.

Notes 1 The UN Ad hoc Committee for the Negotiation of the Convention approved the text for the Convention against Corruption by Resolution 58/4 on 31 October 2003. See the article in the UNCAC text, online, available at: www. unodc.org/unodc/en/treaties/CAC/index.html; and a list of signatories, online, available at: www.unodc.org/unodc/en/treaties/CAC/signatories.html accessed 17 March 2010.

Anrti-corruption commissions   217 2 Thomas Chan, former Director Department of Corruption Prevention, Hong Kong ICAC, Presentation at Boyanna Residence, Sofia, Bulgaria (29 October 2002). 3 See Singapore government website, online, available at: www.gov.sg/pmo/cpib/ aboutus.htm. 4 Muhammed Ali, ‘Eradicating corruption – the Singapore experience’, paper prepared for presentation at the Seminar on International Experiences in Good Governance and Fighting Corruption, Bangkok, Thailand, 17 February 2000. 5 Every major donor government has trust fund accounts for specific development priorities. For a number of years during the late 1990s, the government of the Netherlands was a crucial funder of governance trust funds. In the early twenty-­ first century, the Canadians, the Norwegians and the British have had a major influence though their respective agencies, CIDA, Norad and the Department for International Development, as well as trust fund allocations at the World Bank. 6 Thanks to Dominik Zaum for this formulation. 7 Sierra Leone Anti-­Corruption Act 2008, Part III. 8 All information is from a field visit in June 2009.

13 Part of the problem or part of the solution? Civil society and corruption in post-­conflict states Roberto Belloni In recent years the extent of mismanagement and corruption in post-­ conflict countries has been identified as a serious challenge to the efficiency and effectiveness of peacebuilding programmes. Perhaps more worryingly, sometimes the cure has been more damaging than the disease. Judicial prosecution has rarely resulted in visible and lasting results, mostly because of low capacity and corruption in the judiciary – typical of post-­ conflict states. Likewise, the establishment of anti-­corruption agencies, probably the most common executive anti-­corruption approach in peacebuilding contexts, has obtained only meagre results (see John Heilbrunn’s contribution to this volume). In Afghanistan, Kosovo and Sierra Leone, not a single ‘big fish’ has been convicted by an anti-­corruption agency. In some extreme cases, anti-­corruption agencies are nothing more than another layer of corrupt bureaucracy (de Sousa 2009). It is in this context that policy makers and analysts have turned to civil society hoping to deal more effectively with fighting corruption than current executive-­driven strategies (Bolongaita 2005: 13). This chapter acknowledges that civil society can play a positive role in anti-­corruption activities, in particular by monitoring the behaviour of public authorities in the unstable and corruption-­ridden transition from war towards peace and democracy, and also in providing a ‘voice’ to citizens’ demands for accountability and change. However, the relationship between civil society and corruption is not limited to the former fighting the latter. Civil society organisations in post-­conflict states commonly incorporate and reflect the broader political and institutional context in which they operate. Where such a context is dominated by patronage, clientelism and corruption, as is regularly the case in post-­conflict settings, civic associations also tend to replicate those vertical bonds. Thus, as this chapter will argue, civil society plays a dual role. At its best, civil society organisations are at the forefront of anti-­corruption activities. Media reports of both civil society work and intimidation against whistleblowers confirm how the determination of individuals and groups is essential to exposing corrupt activities. At the same time, many civil society organisations are part of a broader network of patron–client relationships.

Civil society and corruption   219 This chapter proceeds as follows. First, it briefly discusses the meaning of corruption and civil society – both of which are highly contested concepts. Second, it describes the context where civil society organisations operate, and in particular, how consociational and power-­sharing institutions, commonly adopted as part of peace agreements, tend to entrench patron–client relationships and corrupt tendencies. In states divided along national, ethnic and religious lines, and dominated by patron–client relationships, civil society organisations themselves frequently participate in elite patronage networks, with negative consequences for their monitoring and advocacy role. Third, the chapter moves on to account for civil society’s anti-­corruption activities in the inhospitable environment typical of post-­conflict states. Domestically, anti-­corruption civil society organisations are often subjected to strong political pressures, legal limitations and even physical threats. For this reason, international organisations, such as Transparency International, habitually take the lead in exposing graft. At the same time, both international and local associations appeal to international standards and norms, such as the United Nations Convention against Corruption (UNCAC), in order to undermine domestic corrupt practices. Fourth, the chapter describes how, drawing on international standards and initiatives, civil society organisations attempt to stimulate and channel citizens’ desire for change. The goal of this chapter is not to account for all the cases where civil society is part of a corrupt patronage system, nor is it to explain civil society’s role as an anti-­corruption actor. Instead, the overall intent is to isolate and discuss the main issues and questions raised by civil society’s role vis-­à-vis corruption in post-­conflict areas.

Corruption and civil society For both ‘corruption’ and especially for ‘civil society’ there exists a Babyloni­an range of definitions and understandings. Corruption is commonly defined as the abuse of public office for private gain. It is further distinguished as involving bureaucratic (or ‘petty’) corruption and political (or ‘grand’) corruption. Petty corruption occurs when citizens face demands for bribes by civil servants, the police, or tax collectors and other authorities; grand corruption refers to elites who use institutions for their own private profiteering. In post-­conflict states there is both grand and petty corruption, demonstrating the Herculean difficulties in identifying and implementing effective anti-­corruption activities (Bolongaita 2005: 8). Yet, as Mark Philp notes in his contribution to this volume, there exist other varieties of corruption involving the use of public roles to benefit one’s party, sectional interest, or an organisation or group that is of personal interest. This kind of corruption frequently involves forms of patronage and clientelism and, as this chapter will show, implicates civil society organisations. Patronage and clientelism may not result in corruption in

220   R. Belloni its narrow sense, particularly if the patron is not a public official, and thus some authors do not include these phenomena. By contrast, following Philp and others, this chapter adopts a broad notion of corruption that includes not only the abuse of public office for private gain but also patronage and clientelism which, because of its regularity within a bureaucracy and the fact that it occurs between citizens and officials, invari­ably translates into corrupt behaviour (Stefes 2006: 19). In post-­ conflict settings patronage and clientelism play an important role in undermining the legitimacy and efficiency of institutions, in strengthening mistrust and undemocratic norms and values, and in damaging generalised trust in society. These harmful impacts also affect peacebuilding, which includes among its goals the restoration of levels of trust to what they were before the conflict began (Cheng and Zaum 2008). Civil society, as a concept, is also difficult to pin down with any degree of precision. A widely adopted definition considers civil society to be ‘the arena of uncoerced collective action around shared interests, purposes and values’ distinct from the state, family and market (LSE 2004). While useful, this definition does not help us identify the exact role civil society plays in public life, and whether civil society is a concept which can be applied to different contexts. Needless to say, the fact that civil society is strongly embedded in European history does not make it unknown to other parts of the world. The substance of civil society is common to various cultures, so that one could speak of a continuum of civil society with local, cultural declinations (Challand 2009: 7). That said, there are widely different understandings of civil society across regions and religions, making it a subject of heated political debate. In addition, the difficulty in identifying a definition is compounded by the fact that most analysts and policy-­makers endorse a normative notion of the concept. According to Robert Putnam, whose study on civic association in Italy brought the concept to the broader public, civil society organisations played an important role in supporting democratic development in Italy and, by extension, in the West (Putnam 1993). Civil society associations provide individuals and groups with opportunities to connect and, in so doing, they enable the development of social capital, that is, of norms of trust and reciprocity which facilitate the functioning of political and economic institutions. Drawing on Putnam’s work, donors, international officials and some scholars have argued that civil society organisations could fulfil important peacebuilding and democratisation tasks (Paffenholz 2010). Many of these organisations fulfil these expectations: they promote a politics of inclusion and civic principles; stress the importance of accepting diversity; promote tolerance; support the rule of law and demand governmental accountability. Yet, civil society organisations, and the social capital they foster, are not exclusively associated with tolerance, transparency, democracy and so on. Rather, social capital is a resource that can be used for a range of

Civil society and corruption   221 goals; it may foster cohesion and trust or produce divisions and corruption. Not only can participation in civil society organisations and social networks provide the opportunity for individuals to enhance their political and social engagement, but it may also lead to clientelism, patronage and corruption (Tonoyan 2004). In conflict areas, ‘the dark side of trust’ is found primarily in two kinds of groups: uncivil organisations, such as mafia-­like groups and paramilitary gangs engaged in illegal and violent activities; and civil society organisations, which include religious and community groups, veterans associations and NGOs, which may not be violent but are explicitly sectarian (Belloni 2008). Setting aside mafia-­like groups and paramilitary gangs, whose negative contribution to building peace after war and fighting corruption is well-­known, the role of other civil society organisations is more controversial. These organisations are typically as divided as the society in which they are embedded. They are often predicated upon exclusionist values and norms that chafe against democratic practices, including transparency and accountability. Their contribution to building generalised trust – that is, the belief that you should treat strangers as if they were trustworthy (Putnam 1993: 163–164) – is spurious. These organisations may strengthen in-­group ties but at the cost of undermining cross-­ community links and generalised trust. Crucially, there is an inverse relationship between generalised trust and corruption. States with low levels of trust have high levels of corruption and vice versa (Uslaner 2004). Thus, the enhanced presence of civil society organisations and networks can actually have negative consequences on both generalised trust and corruption. Many African states, for example, have long been successful in building a history of associational life that is structured along ethnic, national, religious and clan lines, but have nonetheless been highly corrupt. According to Peter Ekeh, ever since colonial times, two publics have coexisted in Africa – the civic one and the primordial one. The civic public was the colonial-­imposed state. Politicians and civil servants always felt little connection and loyalty to it but rather considered the state as a fount of resources. These resources could then be used to gain or maintain the support of the second public – one’s group-­based clients. The dialectical relationships between the two publics accounts for two crucial political problems of postcolonial Africa: first, the centrality of ethnicity in African politics and, second, the widespread view of the state as a resource to plunder in order to benefit one’s own ethnic supporters (Ekeh 1975). The relationship between the two publics also has significant consequences for the role of civil society vis-­à-vis corruption. Strong social networks based on family, clan and ethnic ties not only entrench parochialism, thus undermining generalised trust, but they also encourage a culture of reciprocity. This culture makes the formation of horizontal, functionally determined ties of solidarity, such as issue-­based groups,

222   R. Belloni highly difficult. In this context, corruption is rarely censored, particularly if its fruits are thought to have been suitably redistributed according to the logic of patronage (Chabal and Daloz 1999: 100; Sindzingre 2005). Needless to say, patronage and corruption are not exclusive to African states. In Papua New Guinea, a state considered to be among the most corrupt in the world, public officials share the spoils of office through patronage. They view public office as a tool to accumulate wealth for themselves and their reciprocal social networks – so called wantoks (Dix and Pok 2009). In Nepal, the guthis are extended families, clans and lineage groups which reinforce cronyism and a patrimonial culture (Dahal 2006: 22). In the Balkans, strong family and parochial ties dominate society, encouraging nepotism, clientelism and corruption, as illustrated by the colloquial term štela. Štela includes a range of actions from small favours to more blatant forms of bribery and corruption (UNDP 2009: 74). As we shall see below, all of these practices may also involve the relationship between civil society organisations and the political sphere. Because civil society groups, such as organisations of demobilised soldiers, churches, community groups and even sports leagues, can provide an important electoral basis for sectarian political parties, they may receive funding, support and privileges by state authorities. Rather than acting as a bulwark against corruption, these organisations become part of the clientelistic networks supported by political patrons wishing to preserve and/ or extend their influence into society. An interesting case is that of religious organisations, particularly Islamic ones. The growth of Islamic NGOs and community groups is part of a worldwide trend. Some of these organisations have taken strong stands against corruption. Islamic sharia law provides a normative framework for anti-­corruption initiatives. Islamic values, including the promotion of commercial fairness and ethical conduct in commercial activities, provide a motivation for principled behaviour and may engender a feeling of local ownership and legitimacy towards anti-­corruption initiatives, but these values are not always compatible with democratic ones. In Indonesia, for example, two large and influential Muslim organisations have forcefully campaigned against corruption and in favour of accountable and open democracy (Chêne 2007); however, in the Arab world, civil society organisations such as the Muslim Brotherhood may pursue an anti-­corruption agenda, but is widely seen as not being particularly keen to promote democratic norms and institutions, thus clashing with ideals of liberal peacebuilding. The experience with Afghanistan, where the Taliban were initially welcomed by the population because they put an end to widespread corruption, is frequently cited as an example of how civil society’s fight against venality may be incompatible with the democratic values and norms that are associated with liberal peacebuilding. Worryingly, the flourishing of corruption under the regime of President Karzai is thought to foster support for the Taliban once again.

Civil society and corruption   223 In sum, the positive role of civil society in anti-­corruption activities cannot be taken for granted. The social capital generated by participation in civil society organisations may be translated into support for civic and democratic norms and practices and in particular, the fight against graft. Yet, in most cases, civil society organisations in conflict areas are as divided as the broader societies in which they operate. In order to survive and thrive, they may endorse the agenda of their political patrons and join a network of clientelistic organisations that are organically linked to certain political leaders. Even when civil society organisations have an uncompromising anti-­corruption policy, which is the case for many Muslim organisations such as the Muslim Brotherhood and the Taliban, they may support a broader political agenda that is incompatible with the promotion of democratic norms and practices. Put another way, the promotion of democracy (which remains a foundational tenet of post-­conflict peacebuilding) and the fight against corruption do not always go hand in hand. While values of democracy and corruption rarely go together (Stefes 2006: 126), anti-­corruption groups in conflict areas are not necessarily supporters of democratic institutions. As Daniel Treisman (2007: 229–231) concludes, it may take decades of democratic exposure before corruption levels decline and, one might add, before anti-­corruption groups subscribe fully to democratic norms.

The context: post-­conflict settings and state institutions It is widely believed that the participation of non-­state actors in public policy formulation, monitoring, and implementation can improve the quality of anti-­corruption policies (Johnston 2005c; for a critical assessment, see de Sousa et al. 2009). Despite these high expectations, however, civil society organisations in post-­conflict states struggle to perform the monitoring and watchdog functions, among others, that are necessary for carrying out effective anti-­corruption activities. Organisationally, most civil society groups are small, have minimal access to information and are starved of funding. They strive to get qualified personnel and may be reluctant to engage with state actors. When they do succeed in developing into fully-­fledged organisations – usually because of access to foreign funding – they may detach themselves from their root constituencies, as professionalisation tends to have a negative impact on their membership base. As elite organisations without strong local constituencies, civil society organisations can be easily subjected to accusations of being agents of foreign interference. While these problems have significant negative consequences for the role of civil society in anti-­corruption activities, they are not as important as the context where civil society organisations operate and, in particular, the role played by state institutions in permeating social and economic life. According to Joel Migdal, the state in much of the developing world is

224   R. Belloni embedded in society, that is, it possesses the capacity ‘to penetrate society, regulate social relationships, extract resources and appropriate and use resources in determined ways’ (Migdal 1988: 4–5). This state-­in-society perspective contends that the state is not divorced from society – as in the ideal typical Western state. While this distinction between the developing and Western world about the character of the state may be rather crude, it does capture an important characteristic of state–society relations in regions torn by conflict. When state authority is embedded in society or, to use Chabal and Daloz’s terminology (1999: 4–8), when the state is ‘non-­emancipated’ from localised and personalised political contexts, then favourable conditions for patronage, clientelism and corruption are set in place. Not only do political authorities effectively extract resources from society, but they also use some of those resources to gain political support. Patronage and corruption are frequently used, especially by incumbent elites, as tools to maintain stability and political control in unstable political environments (Khan 1998). State officials bolster key supporters with the distribution of resources while, in turn, formal and informal civil society groups and networks support their ethnic and national patrons. Needless to say, corruption is not an exclusive reality of either post-­ conflict contexts or developing countries in the so-­called Global South, but affects Western democracies and authoritarian and semi-­authoritarian states as well. Michael Johnston (2005a) has put forward a useful typology of four distinctive ‘syndromes’ of corruption – two of which are particularly relevant for conflict areas. ‘Oligarchs and clans’ emerge and consolidate themselves when both the political and economic spheres liberalise and power and wealth are up for grabs in a context of weak institutions and rules. ‘Elite cartels’ are networks of individuals (including politicians, military officers, businesses people and others) who share benefits among themselves and thus have a common interest in maintaining the status quo. Consociational/power-­sharing institutions favour the emergence and/ or consolidation of a mixture of ‘oligarchs and clans’, on the one hand, and ‘elite cartels’, on the other. Consociationalism has increasingly become the preferred institutional choice of many states for ending civil strife. In Africa alone, consociationalism has recently been implemented in Burundi (2000), Guinea-­Conakry (2010), Kenya (2008), Madagascar (2009), Sudan (2005) and Zimbabwe (2009) as a means of resolving political conflict.1 Consociational institutions are led by an ‘elite cartel’ that colludes at the centre. In consociational grand coalitions, elites tacitly agree to divide among themselves state assets and positions while promoting the interests of their respective communities (Le Billon 2003). Moreover, because consociationalism is frequently adopted, at least in part, as a result of international pressures, it is commonly associated with economic and political liberalisation. At the same time, both types of liberalisation

Civil society and corruption   225 also figure high on the agenda of international donors and contribute to supporting the consolidation of ‘oligarchs and clans’ bent on plundering the state’s assets. Economic liberalisation, combined with international aid, provide domestic elites with vast opportunities for enrichment and corruption. Of course, systemic corruption may pre-­date the establishment of consociationalism/power sharing, and even war. In Bosnia, for example, the amnesty for crimes committed during the 1992–1995 war did not simply include the period of the war, but dated back to January 1991, when the three main nationalist parties were first voted into office, and tellingly included economic crimes (Andreas 2004a: 44). Moreover, corruption is not only associated with post-­war consociational institutions. In much of Africa, patron–client and neopatrimonial networks, both of which have been linked to cases of severe corruption, have profound roots in the colonial experience and in the persistence of the ‘two publics’ mentioned above (Ekeh 1975; Chabal and Daloz 1999). In Palestine, no consociational institutions are in place, but corruption is thought to be widespread and to even involve civil society organisations to various degrees. Clearly, patronage and corruption are not exclusive to post-­conflict societies or consociational institutions. That said, because consociational institutions are increasingly adopted as a solution to civil strife, and because there exists no systematic study on the link between consociationalism and corruption, it is important to reflect on the relationship between the two and how consociational institutions favour the development of an environment where civil society is easily co-­opted and corrupted. In the context of weak checks and balances and inadequate rule of law, consociational institutions do little to hinder, and often even favour, the development of internal networks of patronage and corrupt practices, as well as the appropriation of any peace dividend. With consociational quota systems, government ministries are farmed out to members of political parties who represent a particular segment of society (be it ethnic, national or religious). There is usually little oversight over how these ministers conduct their daily business. Under these conditions, rent-­seeking by individuals and groups, including civil society organisations, may be commonplace. In sum, consociationalism favours the consolidation of a neopatrimonial system where the patrons, or community leaders, secure the support of clients by giving them state resources. Yet the question of whether consociational institutions are particularly prone to developing corrupt relations with civil society remains an open one. In a number of post-­conflict contexts, civil society and the state intertwine, regardless of the type of institutions in place. More often than not, governmental authorities and civil society organisations and networks are linked through a clientelistic system. In the Balkans, a clientelistic patronage system involving civil society exists in states with consociational

226   R. Belloni institutions (such as Bosnia-­Herzegovina and Macedonia) and states without them (such as Croatia and Serbia). Elsewhere, as in Palestine, civil society has long been deeply intertwined with political authorities. In states as diverse as the Democratic Republic of Congo, Nigeria, Guatemala, Nepal and Turkey, clientelism deeply implicates civil society and reinforces its segmentation. In all of these cases, patronage politics undermines the autonomy of civil society groups who, rather than holding political authorities accountable, may become a reservoir of political support for the ruling party (or parties). In such cases, many organisations, including sports and youth clubs, veterans groups and associations of displaced persons may quiet criticism of the political establishment in exchange for access to resources (Paffenholz et al. 2010). While consociationalism is not the only political system prone to developing patronage relationships with civil society, it presents two important negative consequences – one which is relevant for peacebuilding and the other for the fight against corruption. First, political elites in consociational institutions govern their respective communities exclusively and have little or no interest in developing cross-­ethnic ties at the communal level. Arguably, reconciliation and inter-­ethnic moderation from the ground up would actually undermine their political power which is premised upon the key consociational principle that ‘high fences make good neighbours’. Rather than creating conditions for successful peacebuilding, consociational institutions may eventually reproduce the very same societal cleavages that led to violence (Paffenholz et al. 2010: 408–409). Second, consociational institutions may have strong negative consequences for the fight against corruption. Rooting out corrupt members of a consociational/power-­sharing coalition is extremely difficult. To begin, colluding elites have a stake in the status quo, which provides them access to the state’s spoils and ensures the perpetuation of their influence in public policy. Because consensus is required, each party can effectively veto a decision, including those that introduce anti-­corruption measures. In Bosnia, civil society organisations have repeatedly pointed out how the draft law for the fight against corruption, among others, has been languishing for years in Parliament. Moreover, because consociational institutions allow each faction to assert control over its own turf, they wind up hindering both transparency and accountability. Voters, civil society organisations and opposition parties all face considerable monitoring difficulties under consociational institutions elected through proportional representation (Kunicová and Rose-­Ackerman 2005). Allegations and/or investigations of corrupt practices can also be rebuffed as politically motivated when they are directed towards those who belong to a different community or group. Again, Bosnia provides a good example. Milorad Dodik, the prime minister of Republika Srpska (RS), has come under investigation for several corruption scandals. In denying the charges, he vehemently condemned it as unacceptable for ‘Muslim

Civil society and corruption   227 judges’ of the state-­level court to probe into RS affairs (Ajder 2009). This kind of argument may be self-­serving, but it strikes a chord among Bosnian Serb citizens who are fearful of external meddling in their semi-­ autonomous entity and whose quasi-­independence is guaranteed by the consociational agreement that ended the Bosnian war in the mid-­1990s. Similarly, in other countries, politicians serving in consociational institutions can dismiss accusations of corruption from other ethnic groups as being politically motivated. The very logic of consociationalism, based on segmental autonomy and group self-­government, makes politicians accountable to their own national group at best, but not to general rule of law principles. Cross-­national data confirm that political decentralisation, one key characteristic of consociational systems, is significantly correlated with higher levels of perceived corruption (Treisman 2007: 235).

State and civil society: two faces of the same coin? What emerges from this analysis of post-­conflict contexts is a situation that is typically dominated by factionalism and divided political institutions. These conditions also favour the development of an equally divided civil society. Civil society organisations in post-­conflict states tend to be organised along ethnic and national lines and are primarily concerned with advancing parochial agendas. Sometimes, as in the case of Palestine discussed below, ethnic and national divisions are not the only important conflict lines. As the struggle between Fatah and Hamas testifies, political divisions within a particular ethnic or national group also have severe consequences for peacemaking and peacebuilding efforts. The social capital generated by organisations in ethnically, nationally, or politically divided contexts can be a source of solidarity and cohesion for their members, but can also feed nepotism and cronyism. To the extent that such associations have connections to governmental authorities through clientelism and patronage, they reinforce a non-­transparent and unaccountable system of governance. Thus, contrary to the expectation that civil society is the key arena that supports democratic development (as posited by Putnam), in fact, civil society tends to strengthen existing political institutions and regimes – which in post-­conflict states are frequently dysfunctional, corrupt and unaccountable (Belloni 2008). As the example of Palestinian civil society organisations confirm, the impact of patronage on generalised trust and civic engagement – both important for supporting anti-­corruption activities – can be momentous. Patronage and neopatrimonialism have long been important features of the Palestinian political experience – at least from the Ottoman times onwards. More recently, roughly from the late 1970s, the yearly transfer of tens of millions of dollars from the Arab states to the Palestinian Liberation Organization (PLO) has only intensified this phenomenon. Fatah was the primary beneficiary of this flow, which was used to support not only much needed

228   R. Belloni infrastructure projects, but also to counter the grassroots organisational challenge posed by the Palestinian left. To this end, handouts in the form of patronage money were given to nationalist institutions and personalities in civil society. The Palestinian associational landscape became polarised along the axis of PLO supporters (later of the Palestinian National Authority – PNA) and its opponents (Schäublin 2009). The PLO developed a network that included both formal and informal patron–client relationships that even extended into small rural villages (Brynen 1995). In the 1990s, the PNA’s corruption and mismanagement was very extensive – involving an estimated 40 per cent of the PNA annual budget (Bolongaita 2005: 7). The consequences of clientelism and patronage on the development of generalised trust, a key indicator of social capital, were significant. Clientelistic organisations linked to the PNA derived benefits from the state and were more likely to support the government’s initiatives and rely less on member participation and engagement. These organisations tended to display higher levels of (internal) trust but lower levels of democratic and civic engagement. By contrast, organisations not clientelistically linked to the political elites, (such as Hamas, which was founded in 1987–1988 as a political and armed branch of the Muslim Brotherhood), showed higher levels of civic engagement and were more horizontally organised, since their members had to rely on each other to achieve their common goals. These organisations were successful in documenting government corruption. Importantly, however, they were unable to promote high levels of generalised trust, since their members were isolated from other groups in society (Jamal 2007). Ultimately patronage, corruption and the select distribution of resources permitted PNA elites to reward friends and allies, but it came at the cost of undermining the legitimacy of their political leadership. The corruption problem allowed Hamas to adopt the language of civil society in order to present itself as the leader of a new Palestinian reform drive. After 1998, large segments of Palestinian civil society switched their support from Fatah to Hamas, especially those who had been sentenced to prison by Israeli military courts (Schäublin 2009: 53). Hamas’ victory in municipal and legislative elections in 2005 and 2006 was built on the popularity of its civil society organisations and its promise to provide better, less corrupt governance. Since Hamas’ victory, Palestinian NGOs have played an even bigger social and economic role. In fact, Western donor countries have boycotted any Hamas-­led government and channelled money into the occupied Palestinian territories through local NGOs. Unsurprisingly, the power struggle between Hamas and Fatah has also led to a battle for control of these NGOs and other associations and mosques. Both Hamas in Gaza and Fatah in the West Bank have been busy in their attempts to tighten their grip over civil society organisations and to access foreign funding (Schäublin 2009: 19, 42). In other war-­torn regions, civil society organisations play a similarly important political role. In West Africa, even human rights organisations

Civil society and corruption   229 display political agendas, despite the fact that human rights are supported by donors precisely because they are supposed to transcend politics. In Liberia and Sierra Leone, human rights organisations often have very different interpretations of political violence, depending on their clan, ethnic and other affiliations (International Crisis Group 2004: 25). In the Balkans, not only are clientelism and nepotism common, as demonstrated by the widespread use of the term štela, but civil society organisations also tend to have clientelistic relationships with state authorities. In Croatia, the government has supported some civil society organisations, making those that receive support stronger and more sustainable than those not under state patronage. The most influential associations are those organised under the Catholic Church and the former soldiers of the homeland war – neither of which is known for exhibiting liberal and tolerant attitudes (Freedom House 2008). In Bosnia-­Herzegovina, the distribution of material perks to new civil society groups created after the war (especially those involving the disabled, veterans and displaced persons) has contributed to the strengthening of ethno-­nationalist parties (Belloni and Hemmer 2010). Similarly in Serbia, some civil society organisations have been accused of corruption and nepotism in their dealings with state authorities and businesses (Edmunds 2009). Throughout the Balkans, patron–client networks and even outright corruption have contributed to maintaining low levels of generalised trust which, in turn, has reinforced fragmentation and fear within society. In some extreme cases, as in Macedonia, civil society itself has been widely regarded as corrupt (Dimitrov 2003) – although recently there has been a gradual improvement in the situation. The Macedonian case raises the controversial and highly sensitive issue of corruption within civil society organisations. For NGOs and community groups, allegations of corruption can be particularly damaging since the credibility of these organisations is linked to their reputation for pursuing the common good. Unsurprisingly, sometimes allegations of corruption are made purely with the intent of discrediting a group. At the same time, however, it is not uncommon to find organisations set up by corrupt government officials to take advantage of donor aid, or organisations run for personal profit or for the profit of the organisation itself.2 Recent stories in the African press increasingly highlight how ‘the ugly monster of corruption’ within African civil society organisations ‘has broken free from its tether’ (Munene 2005). Sometimes, donor decisions have contributed to the problem. For example, when donors refuse to pay overheads, NGOs may be forced to find ‘creative’ ways of covering their real costs while complying with donor requirements (Holloway 2001). Whether it is because they themselves are corrupt, or because they are forced to look for ‘financial shortcuts’ for the sake of the organisation’s survival, some civil society organisations may prefer not to get involved in anti-­corruption activities. This is perplexing to other anti-­corruption actors. The Anti-­Corruption Commission in Sierra Leone, for example, speculates that one important

230   R. Belloni reason for civil society’s reluctance to undertake advocacy against corruption is that ‘civil society actors do not wish to subject their own personal backgrounds to the scrutiny of embarking on such work’ (ACC-­SL 2010: 3). In the south Caucasus, International Alert (a leading anti-­corruption international NGO) argues that NGOs ‘are often seen as corrupt or politicised – whether they are affiliated with the government or the opposition’ (Mirimanova 2006: 38). More specifically, in both Georgia and Armenia, local NGOs have frequently been used to embezzle international assistance (Stefes 2006: 123). The problem is so serious that Transparency International has adopted a certification process to guarantee that its more than 90 national chapters do not misuse Transparency International’s brand. In general, civil society organisations are likely to engage in self-­censorship in post-­conflict contexts because they fear government retaliation or because they want to avoid accusations of political partisanship.

Anti-­corruption standards and the role of civil society The importance of patron–client networks involving civil society organisations as well as instances of corruption within civil society organisations should not obscure the role of civil society in the fight against corruption. Although some organisations and groups may be clients of political authorities and are thus unwilling to engage in anti-­corruption work, others are strongly involved in such activities. Indeed, many of these civil society organisations have an international personality which allows them to avoid becoming entangled in domestic politics. Some, such as Transparency International, maintain local chapters. The affiliation of these chapters to an international network of like-­minded organisations combined with their access to foreign funding helps protect them from domestic threats; this facilitates their participation in anti-­corruption activities. More generally, since civil society organisations can be subjected to strong domestic political pressures and even limitations on their activities, they frequently appeal to international standards and norms. Among the several anti-­corruption conventions signed by states since the early 2000s, UNCAC, adopted in Merida, Mexico, in 2003, is of crucial importance for civil society groups. For the first time, an international treaty has adopted a legally binding instrument with common standards in the fight against corruption. These standards have the potential to support the development of a common front involving the international community, national governments, business actors, as well as civil society organisations, in pursuing the anti-­corruption struggle. More than 140 state signatories have committed themselves to five main areas of activity: prevention, criminalisation, international cooperation, asset recovery, and technical assistance. As for civil society organisations, Article 13 of the UNCAC recognises the important role civil society can play in the fight against corruption and

Civil society and corruption   231 obliges states to ensure civil society’s participation in the implementation of the Convention: Each state party shall take appropriate measures . . . to promote the active participation of individuals and groups outside the public sector, such as civil society organizations, non-­governmental organizations and community-­based organizations, in the prevention of and the fight against corruption and to raise public awareness regarding the existence, causes and gravity of the threats posed by corruption. Civil society groups have reacted positively to the convention, including Article 13, and in 2006, 200 of them established the UNCAC coalition to promote its ratification, implementation, and monitoring. While Article 13 anticipated collaboration between donors and civil society organisations on anti-­corruption issues (Chêne and Dell 2008), it is unclear whether and how these expectations will be met. In general, civil society organisations can perform at least two main functions to support the implementation of international conventions such as UNCAC. To begin, civil society organisations, and in particular NGOs, can engage in advocacy, including lobbying, media campaigns, and so on, in order to promote the signature, ratification and implementation of international conventions. If states sign up to a convention, NGOs can monitor its implementation, participate in its review, and produce ‘shadow reports’ which, in some cases, are more reliable and informative than state reports. Transparency International’s national chapters have published a number of these reports, many of which have been widely circulated and debated in the national and international press. Second, NGOs can perform their well-­known watchdog function in exposing cases of corruption or fraud. The ability to embarrass the government internationally is one of the most powerful actions that civil society groups can take. However, while both national and international NGOs can draw attention to corrupt practices, the former are generally more vulnerable to governmental retaliation than the latter. Thus, international NGOs (such as Global Witness) or local chapters of international NGOs (such as Transparency International) tend to be more outspoken than local associations. In places like Bosnia, Croatia, and Macedonia, Transparency International is the only civil society organisation directly engaged in fighting corruption. The role of international NGOs is particularly important in the extractive industries sector. In early 2000s Global Witness, Transparency International and other NGOs launched Publish What You Pay (PWYP), calling for the mandatory disclosure of all payments made by gas, oil and mining companies to host governments for the extraction of natural resources (see Gillies and Dykstra, this volume). Along with broad international efforts, international NGOs have also targeted specific situations directly.

232   R. Belloni For example, Global Witness published a report in 2007 titled ‘Cambodia’s Family Trees’, which exposed the involvement in illegal logging by Cambodian officials, including the prime minister and his family members. These individuals were also accused of tax evasion, kidnapping and attempted murder (Global Witness 2007). The Cambodian government banned the report on the grounds that it was politically motivated, while the prime minister’s brother, who was also a provincial governor, declared that if any Global Witness staff came to Cambodia he would ‘hit them until their heads are broken’ (Macan-­Markar 2007). Clearly, a damning report such as the one published by Global Witness could not have been drafted by any Cambodian civil society organisation. As a result, international NGOs frequently substitute for local organisations in monitoring state behaviour.

Anti-­corruption activities and the role of civil society While monitoring is an important element in the anti-­corruption fight, it is only one of many possible anti-­corruption activities. Scharbatke-­Church and Reiling (2009) summarise the three main categories of such activities: punishment, prevention and values-­based approaches in the diffusion of anti-­ corruption norms. Civil society groups have a role to play in all of these. The punishment approach, which includes legal prosecution, is the obvious starting point for anti-­corruption work. This approach frequently ends up focusing on low-­ranking officials – the only ones who can be reached via the law. Unfortunately, this leaves warlords or senior government officials (sometimes one and the same, as in Afghanistan) unpunished. The prevention approach, which often goes with the punishment strategy, focuses on deterrence through auditing, accounting controls and the like. Rather than acting after corruption has occurred and holding corrupt actors legally accountable, prevention contains corruption through institutions and practices that create an environment in which corrupt behaviour becomes more difficult, thus preventing such abuses. Both in the punishment and preventive approach, civil society can play a significant role by ‘naming and shaming’ individuals involved in corrupt practices. The third strategy is values-­based and focuses on the diffusion of anti-­ corruption norms through education and information. Public information campaigns help raise awareness about corruption, and possibly stimulate citizens’ participation in anti-­corruption activities. Activists believe that the participation of citizens and civil society actors in anti-­corruption efforts, often referred to as the ‘demand side of reforms’, is one of the most promising approaches against sleaze. Demand side approaches focus on fostering the abilities of civil society so that it can push for greater government accountability and control over corruption. According to Jeremy Pope (2000: 129–136), who authored Transparency International’s textbook on anti-­corruption efforts, civil society adds an indispensable bottom-­up

Civil society and corruption   233 dimension to executive anti-­corruption strategies. Civil society’s expected contribution to anti-­corruption work parallels its contribution to peacebuilding. In both cases, international donors judge that the involvement of local civil society organisations is indispensable for achieving domestic ownership of internationally supported activities, and in developing more accountable state institutions. To illustrate the relationship between citizens and public authorities, as well as the role of civil society actors in mediating that relationship, one could adopt Albert O. Hirschman’s (1970) influential framework on ‘exit, voice and loyalty’. Post-­conflict states score poorly in the provision of public goods. When faced by the request for a bribe in order to access a public service (education, health care, and so on), citizens have three possible courses of action. ‘Exit’ refers to the option of withdrawing from the relationship with the public official and, more broadly, the state. Many citizens in conflict-­ridden states may wish to leave but are prevented from doing so for lack of other options. As a result, they may organise parallel social structures to avoid contact with the state, as the Albanian community did in Kosovo during the Miloševic´ regime. Although a rational choice, exit is unable to counteract the state’s poor performance. ‘Loyalty’ explains inertia and pressure to conform. Particularly when options for exit are either not appealing or available, citizens may pay the bribe – ultimately believing in the stickiness of the system and their inability to change it. ‘Voice’, by contrast, challenges the status quo through complaint and protest and represents a vital strategy to support states (and other complex organisations) to remain, or to become, healthy and responsive. Civil society can play a crucial role in stimulating and channelling the citizenry’s voice for change, while demanding accountability from state authorities. Arguably, without concrete mechanisms to hold the state accountable, a voice may not lead to accountability (Chêne 2008; ODI 2007). At the same time, however, without voice, any improvement in the public sector remains highly unlikely. Accordingly, civil society organisations in post-­conflict areas have engaged in a wide range of actions to make citizens’ voices heard. For example, in Lebanon, they drafted a manual describing the procedures necessary to acquire a construction permit, including the documents, fees and deadlines; in Papua New Guinea, they provided civic training and capacity building to increase the participatory powers of citizens; in Kenya, they created an Urban Bribery Index to highlight the extent to which citizens are subjected to corruption.3 An interesting example of demand side approaches to anti-­corruption work is provided by the use of public expenditure tracking surveys (PETS). First introduced in Uganda in 1996, PETS were intended to provide local communities with information about the flow of resources allocated to particular services (primarily health and education) in their area. The surveys unveiled the leakage of public funds and helped communities to make public services more transparent and accountable. Since 1996 PETS

234   R. Belloni have been undertaken in more than a dozen states, including post-­conflict ones (Cambodia, Macedonia, Rwanda, Mozambique and Sierra Leone among others) and have led to some positive results (Sundet 2008). In most cases, civil society organisations have played an important role in helping to track financial flows – demonstrating how their participation in budgeting and public expenditure management represents a new strategic opportunity to voice demands for change (Pact Tanzania 2009). Despite PETS’ promising beginnings, the overall evidence of the direct impact of anti-­corruption interventions aimed at strengthening state accountability has been mainly anecdotal (Chêne 2008). Three main reasons account for this limited impact. First, most citizens are well aware of the presence and corrosive influence of corruption and consequently do not react when they receive additional information about corrupt activities (Scharbatke-­Church and Reiling 2009). Rather, in a context where the state is unable to provide public services, and perhaps even security, citizens may rely more on patronage networks than on public institutions. In the process, public awareness of corruption may turn into cynicism about anti-­corruption activities. Second, and perhaps more importantly, the cooperation of state authorities is indispensible in making information available. Expenditure tracking systems such as PETS depend on the willingness of government officials to provide access to financial data and to support the follow-­up process when the findings are released. Needless to say, such willingness cannot be taken for granted. Third, even those civil society organisations that have the skills and resources to challenge the status quo in post-­conflict states face severe restrictions. Governments view independent, outspoken advocacy organisations as sympathisers of opposition political parties and thus as adversaries. As a result, they attempt to intimidate them through legal and other restrictions. Civil society activists frequently report being subjected to pressures and even physical threats from authorities. In mid-­2009, the New York Times reported that anti-­corruption initiatives in Africa, including in post-­ conflict states, are failing, as local anti-­corruption agencies have been undermined or disbanded, and their officials dismissed, subjected to death threats, and driven into exile. In some cases, civil society anti-­ corruption campaigners have been killed (Duggar 2009). But even short of these extreme occurrences, civil society organisations and their leaders may come under threat from governments through the enactment of restrictive laws governing the NGO sector. In 2009, the Sierra Leonean government enacted the Revised NGO Policy Regulations, the National Revenue Authority Act and the Anti-­ Corruption Act, all of which subjected civil society organisations to increased interference from state agencies (ICNL 2010). In the south Caucasus (including Armenia, Azerbaijan and Georgia), civil society’s accusations are met by the threat of retaliation and punishment (Mirimanova 2006: 38). In the Middle East, governments have traditionally imposed

Civil society and corruption   235 severe restrictions on freedom of association and expression, access to information, and freedom of the press, though these have eased somewhat after the Tunisian and Egyptian revolutions. In August 2007, the Palestinian prime minister went as far as dissolving 123 civil society organisations because of alleged legal, administrative and financial offences. The decision was criticised for being politically motivated since it targeted the opposition’s charitable organisations, attempting to eliminate Hamas’ influence over local NGOs (Schäublin 2009: 42). In most cases, faced by difficult environmental constraints, local civil society organisations have adopted a non-­confrontational approach towards government. Such an approach de-­politicises the struggle against corruption, signals to political leaders that change of government is no longer a key measure to adopt, and generally has had limited effects on fighting graft. For example in south-­eastern Europe, a region where donors invested heavily in anti-­corruption initiatives, civil society coalitions failed to deliver results. The non-­confrontational approach of these coalitions towards government made them look suspicious to the wider public, which considered them to be too close to government (Tisne and Smilov 2004). In sum, civil society’s work to increase citizens’ voices in a context dominated by a lack of capacity and resources, as well as government opposition, faces considerable obstacles. As Bolongaita (2005: 15) concludes, ‘it should not be surprising that there are fewer successful anti-­ corruption stories than there are unsuccessful ones’.

Conclusion Most advocates of civil society involvement in anti-­corruption activities focus on the role that these organisations can play in keeping the state in check. In conflict areas, however, civil society is better understood as a conglomeration of competing groups with different relationships with state authorities. Only a case-­by-case, detailed analysis of these groups can reveal the potential role of the sector in sustaining or challenging corruption. Put another way, the corruption problem is not one of bad states which have to be disciplined by good civil societies (Khan 1998). Rather, civil society in conflict areas is just as divided as political society, and participates in a system of spoils whereby some groups are supported against others for political, ethnic, religious or other reasons. Consociational/ power-­sharing institutions favour the development of a spoils system which makes local civil society organisations vulnerable to powerful political actors and undermines citizens’ demands for change. In this context, brave civil society organisations rely on international standards and norms in order to challenge misconduct. While civil society organisations may play a positive role in attacking specific instances of corruption, their work is reminiscent of the Lilliputians’ attempts to tie down Gulliver: civil society organisations face enormous capacity and

236   R. Belloni logistical obstacles in challenging the corrupt practices of post-­conflict states. Their effectiveness depends upon freedom from government interference and obstruction. Yet, not only have governments adopted a range of actions to undermine anti-­corruption work (from killing or exiling whistleblowers to co-­opting critics) but they can also rely on a distracted public. While successful anti-­corruption initiatives need a critical mass of supporters, such a critical mass is unlikely to be recruited in post-­conflict societies, which are often divided along national, ethnic and religious lines, and linked through patronage networks to their respective political elites. In sum, in most post-­settlement states civil society is too weak to mount an effective anti-­corruption campaign. Rather, anti-­corruption strategies are now seen as more likely to succeed if all stakeholders in society (government, civil society, media, the private sector, business and so on) are included (Kpundeh 2005). Some civil society organisations, most notably Transparency International, argue that the fight against corruption can be effective only if it is led by all, or most, of the reformist forces within a country. However, there is no hard evidence that such coalitions can be effective. Rather, the most discouraging aspect of anti-­corruption activities lies in their limited impact. Despite the proliferation of conventions, commissions, programmes and projects, corruption (however understood) seems to be as widespread as ever. As confirmed by the experience of post-­ Yugoslav states, those countries with the largest number of good governance anti-­corruption programmes in Europe tend to be the most corrupt (Tisne and Smilov 2004). Although anti-­corruption activities, and civil society’s participation in them, have an undeniable ‘feel-­good’ character, it remains to be seen how, concretely, they can contribute to improving governance in post-­conflict states.

Acknowledgements Many thanks to Darren Kew, Simona Piattoni, Christoph Stefes and especially Christine Cheng and Dominik Zaum for their help in writing this chapter. Needless to say, I am solely responsible for any errors that remain.

Notes 1 Since Arendt Lijphart first introduced the consociational model in the 1970s, significant developments both in the theory and practice of power-­sharing have occurred. For a brief, accessible analysis of the current state of the debate on consociationalism see Wolff, 2010. 2 A leading Palestinian human rights NGO (LAW) was caught in 2002 in a situation where US$4 million out of US$10 million disbursed between 1997 and 2002 remained unaccounted for. See Challand 2009: 66. 3 For other examples, see the U4 Anti-­Corruption Resource Centre, online, avail­ able at: www.U4.no. For an overview of civil society work in the African context see McNeil and Mumvuma, 2006.

14 International campaigns for extractive industry transparency in post-­conflict settings Alexandra Gillies and Page Dykstra

Oil and mining activities and the revenues they produce, have been implicated in the initiation and prolongation of conflict in a number of countries. In response, the international community has begun to advocate for the adoption and implementation of transparency and accountability initiatives in post-­conflict settings so as to alter the behaviours around natural resource governance that prevailed during a conflict. The Publish What You Pay (PWYP) movement and the subsequent Extractive Industries Transparency Initiative (EITI) represent the leading international efforts to rally support and facilitate change in this area. In this chapter, we examine the emergence of these movements and the claims made around their capacity to advance peacebuilding processes. In particular, EITI and PWYP are credited with deterring corruption through improving transparency and increasing dialogue and trust among stakeholders. Both of these effects are thought to diffuse the dynamics through which resource wealth can exacerbate conflict risks. The chapter describes the thinking and assumptions behind these positive linkages, as well as the challenges in proving or measuring their existence on the ground. While lofty expectations helped these initiatives to gain momentum, their more measured records of success speak to the contingent nature of natural resource management practices and their resistance to easy change. The chapter draws on illustrations from four post-­conflict countries in order to demonstrate the range of implementation experiences. Along with obvious factors, such as committed leadership and a conducive governance context, the timing of EITI and PWYP initiation appears to affect their capacity to deliver meaningful results. These timing issues could have important implications for determining how to optimally deploy these transparency initiatives in post-­conflict environments. Specifically, transparency initiatives will face greater challenges in contexts where rival groups are party to ‘buy-­outs’, particularly if these settlements involve the extractive sector. Moreover, if the initiatives precede the establishment of a comprehensive approach to resource management, the transparency objectives may be drowned out by broader concerns.

238   A. Gillies and P. Dykstra The chapter begins by briefly revisiting the resource curse literature which ties oil and mineral wealth with violent conflict. It then traces the process through which PWYP and EITI emerged as the centrepieces of increasing global concern with natural resource management in developing countries. The next section discusses how, in theory, these two initiatives should contribute to the peacebuilding process, by reducing corruption and generating dialogue among stakeholders, and the challenges of measuring these effects. The final section preliminarily examines the implementation of EITI and PWYP in four post-­conflict settings: the Democratic Republic of Congo (DRC), Liberia, Sierra Leone and Timor-­ Leste. These cases suggest that the timing of implementation relative to other significant post-­conflict developments appears to condition the success of the initiatives.

The problem: natural resources and conflict The growing ‘resource curse’ literature suggests that natural resource wealth generates negative outcomes in three broad areas: economic performance, quality of governance and democracy, and conflict (see Rosser 2006). More recent writings add nuance to these hypotheses, arguing that certain types of countries are more likely to experience resource curse effects. Countries with strong institutions (Karl 1997; Bacon and Tordo 2006; Mehlum et al. 2006; Robinson et al. 2006; Collier and Venables 2009), broad political coalitions (Dauderstadt 2006; Smith 2006; Lewis 2007), and robust non-­extractive private sectors (Dunning 2008; Morrison 2009) may be less susceptible to resource curse effects. Many resource-­rich developing countries lack these traits, and are therefore considered vulnerable to suffering negative outcomes. Several studies address how mining and petroleum resources can ex­acerbate conflict risks and prolong conflicts in countries lacking these protective traits (De Soysa 2002; Ross 2004, 2008; Collier and Hoeffler 2005; Lindley 2007; Le Billon 2008a; Le Billon and Levin 2009). Oil-­ producing developing countries are twice as likely to suffer internal rebellion as non-­oil producers, and a growing proportion of the world’s conflicts have taken place in oil-­producing states (Ross 2008). Mineral wealth featured centrally in several conflicts with high international visibility and involvement, namely in Sierra Leone, Liberia, Angola and the DRC. The specific nature of the causal relationship between resource dependence and conflict continues to be debated in the literature. However, it is widely accepted that natural resources, and their exploitation by both government authorities and non-­government combatants, played an integral role in the conflict economies of several countries. This chapter does not seek to enter the debate on whether and how resources increase the chance of conflict or lengthen its duration, or how different resource types generate distinct kinds of effects. However, it is

International campaigns for transparency   239 useful to identify some of the impacts that the existing literature suggests resources might have, as these become the phenomena which post-­conflict strategies seek to address. Some argue that resources increase the desirability of controlling the state, and therefore heighten motives for going to war. This ‘allure of claiming ownership of a natural resource discovery’ (Collier and Hoeffler 2002) also explains secessionist movements in resource-­rich regions (Ross 2008). Resources, especially those organised and controlled by the state such as oil production, can increase the government’s capacity to discourage or deter threats (Snyder and Bhavnani 2005; Basedau and Lacher 2006; Cotet and Tsui 2010) or to make it more belligerent (Colgan 2010). However, the wealth and discretionary power which accompany political office in these contexts does encourage zero-­sum political battles. Resources can also be used by government and non-­government combatants in order to fund their wartime activities. Insurgents can easily access diffuse mineral resources (Snyder and Bhavnani 2005), but can also steal oil, as in Nigeria (Peel 2009), and extort extractive industry companies (Ross 2008). The availability of resource wealth encourages opportunistic rebellions to the point that materially motivated movements often squeeze out those which pursue the redress of popular grievances (Collier and Hoeffler 2005). Others emphasise how the presence of natural resources worsens governance practices, especially corruption, further inflating the reasons for instigating conflict (see Ross 2004; Basedau and Lacher 2006). Practices such as rent-­seeking, bribery, theft of public funds and inequitable patronage can generate dissatisfaction in the population and rival groups, particularly when expectations surrounding the benefits of resource wealth go unmet. This logic links up with broader resource curse findings about how natural resource dependency appears to undermine the accountability and performance of public sector institutions (Beblawi and Luciani 1987; Yates 1996; Karl 1997; Auty and Gelb 2001; Ross 2001; Eifert et al. 2002; Dauderstadt 2006). In conflict settings, the management of natural resources can contribute to all three of these dynamics. Inequitable and discretionary practices, such as the award of production licenses or the allocation of revenues, which are controlled by the executive, increase the zero-sum nature of politics and raise the rewards of capturing office. Weak regulatory regimes and limited oversight of extractive activities will facilitate the capture of resources by insurgents. Inadequate budgetary and expenditure systems allow governments to spend resource revenues on security and defence. Lastly, poor governance compromises the capacity of the state to advance the long-­term interests of society, particularly in the decisions and behaviours around natural resource management – if politicians manipulate, capture, and misappropriate resource rents, grievances grow.

240   A. Gillies and P. Dykstra Given the prominence afforded to natural resources in understandings of conflict, their management became a natural priority when international and domestic actors sought to tackle post-­conflict strategies for peace. As described below, transparency and accountability became leading tools in this effort.

The rise of the extractive industry transparency movement: a brief history Since the late 1990s, the resource curse thesis has gained credence in academic and policy circles. In particular, it is widely believed that poor governance and corruption inhibit the potential benefits of oil and mineral wealth. In response, donors and analysts have developed ideas regarding how countries can avoid these governance outcomes (see, for instance, Katz et al. 2004; Bacon and Tordo 2006; Humphreys et al. 2007; Collier 2007; Natural Resource Charter 2009). The avoidance of resource-­fuelled conflicts is a prominent goal of this movement – by improving natural resource governance and consequently reducing corruption, it is assumed that the drivers of conflict will be reduced. However, as donors and other international agents that promote governance reform have relatively limited leverage in resource-­rich countries, they have sought to generate new kinds of initiatives to engender more desirable natural resource management practices. The Kimberley Process, an international certification process aimed at keeping ‘conflict diamonds’ off the international markets, represents one such response. Transparency is another issue around which international attention has coalesced to counteract the dynamics linking natural resources with conflict. Transparency has grown prominent in international development and other arenas (Florini 2007) in response to growing government and corporate corruption in the 1990s and early 2000s. Current evidence of a growing emphasis on transparency includes the proliferation of freedom of information laws (now in 70 countries), increasing investor demand for corporate account disclosures (spurred on by the Asian financial crisis and US corporate scandals), the prominence of Transparency International, and mounting pressure for multilateral organisations to end their opaque styles of operation. Donor-­initiated good governance programmes latched onto transparency as a tool for reducing principal–agent problems: by increasing disclosures and scrutiny of public sector actors, officials are less able to advance their own narrow interests at the expense of the broader society. As such, transparency should help to combat corruption, advance accountability and improve policy choice. By ‘grafting’ (Price 2003) onto the general transparency movement, extractive industry transparency advocates acquired language, legitimacy and allies. The actors initially engaged in this grafting were several international NGOs, in particular Global Witness, a London-­based group

International campaigns for transparency   241 founded in 1995 to ‘break the links between the exploitation of natural resources, and conflict and corruption’. Global Witness gained notoriety for its work on the conflict economy in Angola and played an important role in starting the Kimberley Process. It also was the first to articulate the idea that transparency should be introduced as a remedy to resource-­ fuelled corruption. Its landmark 1999 report, ‘Crude Awakening: The Role of Oil and Banking Industries in Angola’s Conflict’ (Global Witness 1999: 13) made the following demands: If a company decides to conduct business in a country such as Angola, where there is little or no transparency or accountability of government, then it is vital that the company concerned adopts a level of transparency far in excess of that which it would be required to adopt in western democracies. . . . Full transparency means that companies must clarify their exact relationship with government. This means that all payments must be published and made available in an easily understandable format to the Angola population. While the report provoked a furious response from the Angolan government (Shaxson 2007), it laid the groundwork for alliances which would help the transparency movement to advance. ‘Crude Awakenings’, as well as a Human Rights Watch (2001) report on Angolan oil, aligned itself with the ongoing IMF effort to push fiscal transparency in Angola. All three bodies urged Western businesses to live up to their stated ethical commitments by disclosing financial information. During the same period of 1999–2002, NGOs also invoked revenue transparency in their campaigning around two major oil pipeline construction projects in Chad and Cameroon, and in Turkey, Georgia, and Azerbaijan. Publish What You Pay In 2001, leaders of Global Witness and George Soros, the billionaire financier and head of the Open Society Foundation, decided to create the global PWYP campaign which would ‘insist that oil, gas, and mining companies must publish net taxes, fees, royalties, and other payments as a condition for being listed on international stock exchanges and financial markets’ (PWYP 2002). The 30 original members of the coalition – created with the explicit aim of advancing extractive industry transparency – included well-­established NGOs with areas of focus that ranged from human rights to child wellness to the environment. PWYP and its member organisations prioritised alliance building among international NGOs as well as local civil society groups in resource-­rich developing countries. Since international and domestic civil societies are mutually legitimating, they were able to apply an effective combination of internal and external pressure on non-­compliant governments (Risse and

242   A. Gillies and P. Dykstra Sikkink 1999). PWYP and its European and American members provided capacity building, access to information, cross-­country networking support, and helped to protect local activists from repressive governments. Conversely, local civil society legitimised the campaign as being ‘locally-­ owned’, provided on-­the-ground information, and tested the practicality of the transparency platform. Developing country NGOs now constitute the majority of PWYP’s membership, which rocketed to 305 organisations in 56 countries by 2007. The coalition has continued to expand and includes member organisations in nearly 70 countries with affiliated national coalitions in 26 countries as of 2010. Since its inception, PWYP’s mission has expanded and evolved to include transparency and good governance beyond its initial focus on company payments and government revenues, and its activities now include pursuing government expenditures, contracts, and licensing transparency. The targets of PWYP’s advocacy have also expanded in recognition that ‘all stakeholders that play a role in supporting or investing in the extractive industries have a responsibility to act to increase transparency’ (PWYP 2010). Accordingly, PWYP now advocates for the adoption of EITI, stock market listing regulations, accounting standards regulations, and revenue transparency for extractive companies, host and home governments, investors, international financial institutions (IFI), parliamentarians, export credit agencies, regional economic communities and other international institutions. As the PWYP movement has grown and local civil society groups’ interest in domestic monitoring and activism has expanded, the coalition has also sought to fill the enormous demand for training and capacity building around EITI processes, contracting and taxation regimes, auditing and accounting processes, IFI lending and disclosure policies, and budget monitoring (PWYP 2010). As the extractive industry transparency movement gained traction, two approaches began to emerge. The disagreement arose regarding revenue inflow transparency, the issue prioritised by the early advocacy campaigns. Revenue inflow disclosures reveal how much money is paid by extractive companies to governments. There are two clear parties to this transaction – companies and host governments – and a battle ensued over two fundamental questions: Who carries the onus of disclosure? And, should disclosure be voluntary? Much of the PWYP coalition’s early efforts targeted North American and European companies and their home governments, calling for mandatory full corporate disclosure of payments (personal interview with PWYP representative, 11 September 2007). Oil and mining companies resisted this approach, as did their home governments, particularly as commodity prices began to rise sharply. While several companies had initially supported the transparency movement, largely as a tool to reduce the reputational risks that accompany work in poor governance environments (Gillies 2010a), the increasing global competition over resources led companies to instead prioritise the maintenance of good relations with

International campaigns for transparency   243 host governments. PWYP’s push for mandatory revenue disclosures began to constitute a threat to Western commercial interests, and efforts to obtain legislation making disclosures mandatory faced resistance from home country governments, particularly the United States. In this environment, the UK government, which had been a crucial ally of extractive sector transparency, and which was unusually accessible to NGOs, spearheaded an alternate approach. Discussions on transparency began in 2001 between the NGO community and officials from the Department for International Development (DFID) and the Office of the Prime Minister. The concept of transparency found support both within the political leadership and the civil service, and provided an actionable strategy to address governance issues, especially in Africa where the British sought to lead new development efforts in the run-­up to the 2005 Glen­ eagles G8 summit. While DFID and other parts of the UK government strongly supported extractive industry transparency, they also recognised the difficult terrain facing the ambitious PWYP approach. In 2002, civil servants within DFID worked to devise an alternative approach for advancing transparency that would be acceptable to host countries, NGOs, donors and companies. Prime Minister Blair announced the resulting compromise at the September 2002 Johannesburg World Summit for Sustainable Development: the EITI. Extractive Industries Transparency Initiative EITI would become the leading institutional vehicle for the promotion of petroleum and mining sector transparency. In contrast to the PWYP agenda, EITI placed the onus of disclosure squarely on the host government and favoured voluntary compliance over any kind of international enforcement. Its basic premise was as follows: EITI supports improved governance in resource-­rich countries through the verification and full publication of company payments and government revenues from oil, gas, and mining. . . . EITI is a coalition of governments, companies, civil society groups, investors, and international organizations. . . . Implementation itself, however, is the responsibility of individual countries. (EITI 2004) The EITI grew quickly. As host country governments, rather than companies became the focus of transparency activity, many Western companies quickly signed up as EITI ‘supporters’, a status requiring little action on their part, yet providing an attractive label which they use widely. Western governments and IFIs also leapt aboard, demonstrated by its frequent mention in G8 speeches and IFI publications: 2004 saw the creation of the

244   A. Gillies and P. Dykstra EITI Multi-­Donor Trust Fund to which a number of Western governments donate. The World Bank, responding to growing scrutiny of its own extractive sector operations, became an EITI advocate and agreed to manage the Fund as well as lead the provision of technical assistance to countries implementing the initiative. Since its inception, the Multi-­Donor Trust Fund has managed approximately US$17 million and has received contributions from 13 supporting countries. EITI has modest aims, a fact not unrelated to the large number and enthusiasm of its supporters. Compliance hinges on two components: revenue receipt disclosure and the creation of a multi-­stakeholder body to oversee implementation. Oil and mineral production occurs across a complex series of stages: the allocation of licenses to explore and produce are allocated; contracts to regulate how companies and governments divide revenues; the marketing and sale of resources on international markets; government decisions regarding revenue management; and the eventual expenditure of these revenues. EITI seeks disclosure at a single link in this chain: the transfer of funds from extractive companies to host governments. What’s more, EITI does not specify how these disclosures should be made. Governments can publish data as aggregate figures, or disaggregated by company and/or by payment type. Implementation occurs at the pace dictated by the producing country’s government, and has varied from negligible (i.e. Equatorial Guinea) to exceeding the suggested criteria (i.e. Nigeria). While these uncritical standards draw the ire of NGO activists, they probably helped the norm’s emergence by permitting a higher number of countries to participate, thereby introducing the transparency discourse more widely. Similarly, EITI retained donor and corporate support when, with higher commodity prices, they could have walked away. These two points are related: for image-­conscious actors like the international oil companies (IOCs) and IFIs, the countries with the worst governance environments pose the greatest reputational risks. In these settings, EITI provided a handle of respectability which Western IOCs, governments, and IFIs could hold onto. As the initiative has matured and the rules of implementation have been codified, EITI has begun to face difficult decisions pitting the interests of various stakeholders against the overarching need to maintain the credibility of EITI by upholding those rules. This was most apparent during the April 2010 meeting of the EITI International Board: 22 candidate countries had a March 2010 deadline to complete the EITI quality assurance mechanism known as ‘validation’, but the overwhelming majority had failed to do so. As the board considered the 17 requests for extensions from candidate countries, a Financial Times editorial declared that ‘How the board responds will determine the EITI’s credibility’ (Financial Times 2010). By rejecting the requests of two countries (Equatorial Guinea, and Sao Tome and Principe), the board appears to have navigated this

International campaigns for transparency   245 difficult juncture. By the end of 2010, 23 countries had produced EITI reports which together constitute an unprecedented revelation of extractive sector financial data. With Iraq, Afghanistan, Indonesia, and other new members, the initiative has retained healthy momentum. However, EITI still needs to demonstrate that it can generate the benefits it claims to deliver. As we will see in the next section, those claims have been particularly notable in the context of resource-­rich post-­conflict countries.

Extractive Industries Transparency Initiative and the peacebuilding agenda Supporters of EITI and PWYP argue that transparency initiatives can prevent the kinds of resource-­driven conflict dynamics discussed in the resource curse literature. Two assumed mechanisms appear to dominate the thinking behind these arguments, and both shape the approaches taken by the two programmes. First, transparency is believed to reduce corruption. Secrecy, it is argued, creates a permissive environment for corruption, and corruption leads to the kinds of resource flows and governance practices which generate conflict. In a pitch for natural resource transparency, Collier (2007) explains: ‘The opacity of resource revenues and their theft by rebel groups are not mistakes. Evidently, they are the result of misaligned incentives: opacity and theft benefit those who misappropriate resource revenues.’ PWYP justifies their focus on mandatory disclosures with complementary ideas: ‘In the absence of public awareness or participation in government processes for revenue collection and distribution, corruption and mismanagement of public finances are free to thrive’ (PWYP 2010). Kolstad and Wiig (2009: 522) offer a more sophisticated consideration of these dynamics. They identify and discuss several mechanisms through which transparency could potentially reduce corruption: • • • • • •

A lack of transparency makes corruption less risky and more attractive. A lack of transparency makes it harder to use incentives to make public officials act cleanly. A lack of transparency makes it hard to select the most honest and efficient people for public sector positions or as contract partners. Informational advantages give access to rents, making reform difficult. A lack of transparency makes cooperation more difficult to sustain, and opportunistic rent-­seeking more likely. A lack of transparency may undermine social norms and reduce trust.

For international actors and a number of domestic parties, these effects represent desirable ends. Better governance, a more equitable and honest

246   A. Gillies and P. Dykstra allocation of funds, and ensuing developmental gains would reduce the grievances which generate conflict and broaden the economic benefits of resource wealth across a post-­conflict society. This would lead to a greater buy-­in to the peace. As Cheng and Zaum (2008: 303) note, the post-­ conflict period offers opportunities to establish and enforce new behavioural standards for public office holders which ‘are less likely to create resentment and grounds for future conflict’. However, as the introductory chapter to this volume highlights, corruption can serve a practical purpose in post-­conflict settlements. The illicit receipt of resources, or the opportunity to capture such gains are often used to appease parties to the conflict and potential peace spoilers. However, transparency advocates and the rhetoric surrounding the EITI and PWYP movements afford little priority to these dynamics, focusing instead on creating a ‘quality peace’ where the corrupt misappropriation of mining and petroleum revenues can no longer continue under the cover of opaque systems. EITI and PWYP push for the disclosure of particular types of information which they judge to be strategic to generating anti-­corruption effects. EITI is precise in its disclosure requirements: in implementing countries, the government discloses the amount it receives in revenues from extract­ ive companies, the companies disclose how much they paid, and the two figures are reconciled.1 EITI states that such disclosures will offer benefits to implementing countries including an improved investment climate, strengthened accountability and governance, greater economic and political stability. These benefits, as EITI itself argues, ‘can contribute to the prevention of conflict based around oil, mining and gas sectors’ (EITI 2010c). As described above, PWYP takes a broader tack by emphasising the obligations of different actors and advocating for the disclosure of more types of information. While fully supporting EITI as a voluntary initiative, many of PWYP’s advocacy efforts continue to centre on mandatory disclosure. Thus in the United States it successfully pushed for the 2010 financial reform legislation to require all energy and mining companies listed with the Securities and Exchange Commission to reveal how much they pay to foreign countries and the US government for oil, gas and other minerals (PWYP-­US 2010). The international PWYP coalition is working with the International Accounting Standards Board (IASB) subgroup on extractive activities to recommend that country-­specific disclosure requirements be included in future versions of that group’s influential guidelines. PWYP has pursued mandatory and voluntary disclosure mechanisms in the aim of creating a universal standard of transparency, and sees these varied initiatives as complementary strategies for reducing opportunities for corruption. Second, in addition to reducing corruption, EITI and PWYP seek to broaden who is at the table when natural resource issues are discussed, thereby facilitating interaction among government, civil society and

International campaigns for transparency   247 corporate stakeholders. This emphasis on interaction and participation should reduce principal–agent problems and build trust and strengthen peacebuilding dynamics. These participatory and accountability-­oriented objectives distinguish the two initiatives from strict transparency-­oriented programmes. It is not enough to simply disclose the information. The insufficiency of disclosure, and the necessity of participation, speaks to a commonly held idea that transparency requires a recipient, an actor capable of using the disclosed informationt to enhance accountability. These new interactions should produce trust, greater understanding and informed expectations. Lindley (2007) finds that transparency can encourage countries to enter into security regimes as it ‘reduces unwarranted fears, misperceptions, and miscalculations’, particularly in environments typically characterised by tensions and low levels of information. The need for common expectations underlies Le Billon’s (2008a) call for a ‘resource compact’ in post-­conflict settings which would bring together the various parties through public debate about the role of resources in the country’s future. More information can generate greater trust (Bacon and Tordo 2006), and create a platform on which more mutually beneficial settlements can be constructed. EITI generates these kinds of interactions by requiring participating countries to establish multi-­stakeholder committees that have government, company and civil society members. In several country contexts, these interactions represent pioneering advances, and often prove more challenging to the governments than the disclosures of the financial data. In Azerbaijan, for instance, the kind of multi-­stakeholder dialogue facilitated by EITI had never taken place before. In Congo-­Brazzaville, activists have described how EITI provides a small space in which they can operate and directly confront the government about its natural resource management practices. Demonstrating the importance of this participatory requirement, EITI ejected Equatorial Guinea for failing to meet its March 2010 validation deadline, but also cited ‘difficulties in ensuring meaningful civil society participation in the process’ (EITI 2010b). PWYP is a different breed of organisation, created to empower the voices of citizens and civil society who do not typically hold sway in resource-­rich countries. Through its 600-plus members, the coalition amplifies the demands of these actors. In this way, PWYP often serves as an important corollary to EITI, supporting civil society as it participates in the multi-stakeholder process, lobbies for speedy and thorough implementation, and examines the disclosed data for evidence of misdeeds. In authoritarian contexts, the international movement helps to protect local activists and, as in Gabon and Angola, draws attention to their cause when they have faced intimidation or arrest by the authorities. As such, PWYP helps to facilitate the kinds of interactions which transparency and accountability advocates claim are crucial to constructing a more robust post-­conflict social compact.

248   A. Gillies and P. Dykstra The primary justifications for EITI and PWYP’s utility in post-­conflict settings are their assumed capacities to reduce corruption and to facilitate interaction and trust-­building. More practically perhaps, the initiatives also represent concrete and low-­cost strategies that international actors can promote. Such strategies are often sparse in difficult country contexts, furthering the popularity of these initiatives with donors and other international participants. Moreover, the initiatives offer entry points into the broader political economy environment of the country and into highly strategic sectors which often appear impenetrable to some international and domestic constituencies. Post-­conflict strategies sometimes seek to work through extractive industry sector reforms in order to tackle the broader causes for war, such as underdevelopment (Le Billon and Levin 2009). Through a combination of these potential benefits, and particularly the assumed anti-­corruption and trust-­building effects, the expectations towards EITI and PWYP in post-­conflict settings are quite high. The following section explores the nature and effects of their actual implementation in several resource-­rich country contexts.

Extractive Industries Transparency Initiative and Publish What You Pay experiences in post-­conflict settings The challenges of measuring impact, and the centrality of accountability As of 2010, there are over 30 countries implementing EITI, over a third of which have witnessed some kind of violent conflict in the past decade. Despite this broad overlap, assessing the impact of EITI and PWYP on peacebuilding processes is a difficult task. Both are young initiatives whose long-­term effects have yet to be seen. Moreover, methodologically it is extremely difficult to assess the effects described above. In particular, the deterrence of corruption – essentially a non-­event – is impossible to systematically capture and even anecdotal evidence is scarce. Whether transparency reduces conflict risks relies on a causal story that is difficult to tell. Transparency and successful EITI and PWYP experiences tend to track alongside other governance variables, such as democracy or freedom of expression, and isolating their impact poses great methodological challenges. Despite these caveats, the various experiences in several post-­conflict EITI countries do provide important lessons regarding its potential impact and what may determine its chances at success. In October 2009, Liberia became the second EITI compliant2 country and boasts one of the most swift and comprehensive implementations to date. On the other side of the world, Timor-­Leste was the third country to receive compliant status with its relatively robust implementation process. Other post-­conflict countries have not been as successful, however. Both Sierra Leone and the DRC

International campaigns for transparency   249 missed their validation deadlines in March 2010 and have struggled in their respective implementation processes. These four countries share the post-­conflict challenges of managing settlements and launching reconstruction, and each features widespread international involvement in the peacebuilding process. EITI and PWYP have been advocated and initiated in all four. However, their implementations exhibit apparent differences. In two countries, Liberia and Timor-­ Leste, the initiatives have made progress and are cited by observers as instances of success; in DRC and Sierra Leone, the initiatives appear to have confronted more impassable challenges. By examining aspects of their diverse experiences, these countries reveal some of the initiatives’ limitations and possible factors which condition their success. As described above, the main value of EITI and PWYP in post-­conflict countries is tied to two factors, namely reducing corruption and building trust through multi-­stakeholder dialogue. As mentioned, measuring these effects is difficult. Anecdotal evidence suggests that the impact of EITI on increasing dialogue is quite strong. EITI participants from various stakeholder groups and several different countries have expressed the view that EITI has provided a useful forum for discussing contentious issues and provided a unique space for dialogue. In the words of Liberian President Ellen Johnson Sirleaf, ‘trust is the greatest asset a country can have. LEITI (Liberia Extractive Industries Transparency Initiative) represents an important step in advancing our efforts to engage with stakeholders, to talk about our resources, and to build trust in our communities’ (EITI 2009a). According to discussions with implementers, one reason for delays in implementing EITI in Sierra Leone has been the absence of a culture of dialogue and the time needed to build up an environment of trust where decisions could be made on the basis of a multi-­stakeholder consensus. When it comes to reducing corruption, however, it is more difficult to find even anecdotal evidence. It is particularly hard to show the impact of a single initiative on deterring corruption since it is almost impossible to isolate the impact of EITI versus other variables, or to know what levels of corruption would have been in the absence of EITI. Such problems are only compounded by the fact that these countries have only been implementing EITI for a few years, limiting the amount of data available. While EITI reports have resulted in the unprecedented disclosure of extractive sector financial data, there are few instances of them uncovering corruption. Working backwards from the analysis by Kolstad and Wiig (2009: 522), one would expect if EITI is to act as a deterrent, it should detect corruption where it is happening. Unfortunately, such detection is rare. The first LEITI report did uncover a discrepancy concerning an income tax payment of over US$100,000 by mining company AmLib which the government denied receiving. Upon investigation it was discovered that a company employee and government official allegedly worked together to

250   A. Gillies and P. Dykstra embezzle the payment. Appropriate legal action was taken and the company has since strengthened its accounting procedures (EITI 2009a). Unlike this exceptional example in Liberia, in many EITI implementing countries large discrepancies between payments and receipts are not investigated, or are explained as accounting errors. Some discrepancies are not even disclosed in the EITI report with enough detail so as to allow concerned parties to identify what government agency and/or company should be investigated. The DRC’s first EITI report, for example, identifies several large discrepancies, but these are not explained, and it is unclear whether these will be followed up appropriately or not. Revenue data does not, it appears, produce many smoking guns. Transparency needs to be accompanied by accountability mechanisms that can utilise the information made available by EITI. This is where PWYP’s broader work becomes crucial for EITI to have a lasting impact. In some countries, such as Liberia, the PWYP coalition has worked with government to investigate discrepancies and ensure they are handled appropriately. In other countries, however, capacity as well as political constraints prevent local PWYP coalitions from undertaking such follow-­on activities. While it may be several years before more exact analysis of EITI’s impact on reducing corruption is possible, the Liberian and Timorese cases suggest that this link would be strengthened if civil society and other oversight bodies have the capacity and resources to play an accountability role more effectively. That way, it would be known that the disclosure of financial data would be accompanied by competent analysis by actors who prioritise the public interest, which should increase deterrence effects. The impact of EITI on broader governance reform is even less clear, and many local PWYP coalitions bemoan their governments’ commitment to EITI as nothing more than an effort to pull a smoke screen over the real problems in the extractive sector (see for example PWYP-­Liberia 2009). Even private sector supporters of EITI recognise the limited scope of the initiative to generate broader change in governance. As Cynthia Carroll, CEO of Anglo American PLC suggested, ‘it [the EITI] is not a silver bullet for dealing with all corruption but it is beginning to produce some worthwhile results’ (cited in EITI 2009a). Timing Extractive Industries Transparency Initiative implementation in transitional periods: Liberia and the Democratic Republic of Congo In addition to questions about impact, the experiences of the four countries suggest that the timing of the initiatives has a bearing on their success, shedding some light on how transparency initiatives interact with broader post-­conflict negotiations. As described above, EITI and PWYP do not recognise the potential need for appeasing warring parties with illicit receipt of resources as described by several contributors to this volume. While one would not expect transparency initiatives to endorse such

International campaigns for transparency   251 arrangements, the contrasting experiences of Liberia and the DRC suggest that in deciding when to initiate EITI or PWYP processes, the use of appeasement as a stabilising strategy should be considered by host countries and the international community. Liberia is rich in natural resources including iron ore, diamonds, gold, timber and rubber. While playing a central role in the civil war, these sectors also suffered dramatically during the fighting that ended in 2003. Corruption was an acknowledged problem following the end of the civil war, when several parties to the conflict shared control and resources via the short-­lived transitional government. The Government of Liberia did not commit to EITI until October 2006, when the highly corrupt transitional government was replaced by an elected government headed by President Ellen Johnson Sirleaf. PWYP-­Liberia was launched the same year and was instrumental in moving the EITI process forward. Despite the delay between the end of the conflict and participation in these initiatives, LEITI is explicitly framed by the links between natural resources and past conflict as expressed in the LEITI Act: Exploitation of Liberia’s forest and mineral resources for many decades has not had adequate or meaningful beneficial impact on the national economy or the livelihood of Liberians, but has led to deprivations and conflict due largely to the lack of transparency and accountability in the operations and regulation of logging, mining, oil and related companies and the persistence of opportunism in the award and performance of concessions/licenses for exploitation of these resources. (Government of Liberia 2009) Once Liberia committed to EITI, implementation moved quickly. The initiative enjoyed strong political support and leadership from government, a dynamic and organised technical secretariat to oversee the process, and an engaged and consensual multi-­stakeholder steering group (Oxford Policy Management 2009). By many measures the country has exceeded the minimum EITI requirements by including the forestry sector and enshrining LEITI into law, among other innovations. It is difficult to envision how such implementation would have emerged had Liberia initiated its EITI efforts during the transitional government period during which the extractive sectors were an embedded component of illicit resource sharing. In contrast, the Transitional Government of the DRC initially showed interest in EITI in March 2005 during a time of continued turmoil in the country. The initiative made little progress during the first few years due to several factors, most of which can be linked to the ongoing political transition and instability. Thus, the governance structure of EITI became unwieldy: its multi-­stakeholder group had nearly 70 members in an effort to be inclusive. In addition, there was a dearth of political leadership, with the government failing to participate in the process in a timely manner.

252   A. Gillies and P. Dykstra These challenges are not surprising given the context of transition and turmoil which prevailed in the DRC during these years. Moreover, during this period, the DRC bought out parties to the conflict and potential spoilers. It has been strongly argued that the former warlords and their external partners accepted the Global and All-­Inclusive Agreement that ended the second Congo war in 2003 because it left intact their economic privileges, including access to the illicit trade in natural resources (Nest 2006). This meant that former parties to the conflict who then went on to share power in the transitional government had a strong incentive to continue the underhanded dealings and illicit trade in natural resources in order to secure their own position and gain economic rewards. Given that EITI reports reveal the financial earnings associated with specific resources and activities, robust EITI implementation could have undermined the fragile peace agreement by making it more difficult for some actors to access the illicit receipts from the extractive sector that was their incentive for not spoiling the peace. It is beyond the scope of this chapter to explore these links in greater detail, but the contrasting experiences of Liberia and the DRC suggest that EITI may have limited effectiveness in countries where a transition is ongoing, particularly one that hinges on the tacit buy-­out of parties using natural resources. In the case of the DRC, the factionalism within the transitional government hindered the kind of political leadership needed for the initiative to succeed, and opposition to EITI may have been motivated by parties whose interests lay in the continued illicit exploitation of natural resources. This argument is supported by the fact that progress in the DRC’s implementation schedule finally accelerated in 2009 following renewed political commitment to the initiative and a streamlining of the governance structure. Unlike the DRC, Liberia waited until after the end of its transitional period before implementing EITI. As such, the country enjoyed more political stability and the leader had more space in which to act, rather than during a transitional period when competing demands had to be appeased. The record of EITI in Liberia suggests that timing was an advantage during the implementation process. In addition to this sequencing of EITI after the end of the transitional period, the Liberian Validation Report highlights another way in which timing can affect EITI implementation: The suspension of activities across much of the logging and mining sectors following the war arguably created a more conducive environment for the adoption of initiatives like EITI by removing short-­term commercial pressures, and allowing government, industry and civil society to focus on developing the country’s political, economic and social frameworks. (Oxford Policy Management 2009)

International campaigns for transparency   253 While the ceasing of commercial activity was an unfortunate by-­product of the conflict that led to economic decline in the country, this provided a relatively clean slate for renegotiating the prevailing contracts and concessions. EITI and its multi-­stakeholder discussions enjoyed greater political space and faced less active vested interests, factors which contributed to the comparatively favourable environment for advancing the transparency agenda. Given the priority of stimulating post-­conflict economic activity, the suspension of commercial activities in the extractive sector will not be possible in many country contexts. This is where the need for a ‘resource compact’ (Le Billon 2008a) becomes crucial so that various stakeholders can discuss the role of natural resources in reconstruction and the country’s economic future. As a multi-­stakeholder initiative, EITI would appear to be an ideal forum for such discussions. By its own definition, however, EITI is a narrowly-­focused initiative that is not formally equipped to handle issues beyond the transparency of revenue flows between extractive companies and governments. Timing Extractive Industries Transparency Initiative implementation and broader reforms: Sierra Leone and Timor-­Leste While some countries have successfully expanded EITI to tackle related issues (e.g. sub-­national revenue flows in Ghana and contract transparency in Liberia), such broader discussions have only diluted and distracted the process in other countries. Sierra Leone provides a good example of an EITI process that, among other difficulties, has been delayed considerably by the need for overarching reform in the mineral sector. After announ­ cing its intention to implement EITI in June 2006, the country was officially accepted as a candidate in February 2008. However, progress in Sierra Leone has so far been slow, partially due to wider reforms in the mining sector, including a review of all existing contracts and passage of the Mineral Act in 2009. Despite falling outside the mandate of EITI, these issues were discussed in the EITI multi-­stakeholder group, and it was also suggested that the process should include a mapping of the mining sector and a study on transfer pricing. PWYP also devoted energies to these broader extractive sector governance concerns. Given the role that natural resources played in Sierra Leone’s civil war and the potential of the diamond sector to contribute to the economic recovery of the country, these were important issues which required a multi-­stakeholder discussion. Nonetheless, they distracted from the fulfilment of the core EITI requirements, and contributed to Sierra Leone’s failure to meet the March 2010 deadline for completing validation, and not publishing their first EITI report until the spring of 2010. The experiences of Sierra Leone can be contrasted with Timor-­Leste which, following its independence struggle and related conflicts,

254   A. Gillies and P. Dykstra established a new comprehensive governance structure for their extract­ ives sector, including a Petroleum Fund widely considered to reflect international best practice on matters of production, taxation and revenue management. Although Timor-­Leste’s government expressed interest in implementing EITI as early as June 2003, the multi-­stakeholder working group was formed and implementation officially started in 2008 after the new governance framework was largely decided and in place. Although Timor-­Leste narrowly missed the validation deadline in March 2010, the EITI International Board recognised that this was largely due to unforeseen delays in the international review of the validation report (EITI 2010a). The country has since been deemed compliant. Overall, implementation in Timor-­Leste has been relatively quick compared to that in Sierra Leone, but it is likely that had it launched the EITI process before establishing the new extractive sector governance regime, the process would have been delayed. This effect does not mean that the multi-­stakeholder group of the EITI should not be used as a forum for discussing wider issues in post-­conflict countries. However, the initiative does not have a formal framework for discussing extractive sector issues beyond revenue transparency, and therefore may be less successful in such applications. Achieving the specific EITI transparency objectives will be more difficult in contexts where the broader sectoral governance strategy is still being discussed and constructed. As current EITI rules require that the validation report be completed within two years of obtaining candidate status, this may mean that formal EITI implementation should not begin until the governance foundations are in place.

Conclusions In resource-­rich, post-­conflict countries, extractive sector transparency initiatives have become prominent components of the governance reforms advocated by international and domestic constituents, arguing that transparency can help to prevent against the kinds of resource governance which prompted the conflict or permitted its continuance. Proponents of EITI and PWYP herald their capacity to achieve these kinds of results. In particular, these transparency programmes are lauded with the capacity to reduce corruption and to facilitate the kinds of multi-­stakeholder dialogue which raises levels of trust. These high expectations enabled EITI and PWYP to attract high levels of global support and resources, making their implementation even more attractive for the authorities of post-­conflict states. The early records of EITI implementation in post-­conflict environments suggest that the benefits of the initiative may have been oversold and that the markers of EITI success – reducing corruption and generating dialogue – will likely correlate with the broader governance environment

International campaigns for transparency   255 and presence of favourable political leadership. This should come as no surprise. However, the difficulty of demonstrating direct impact may come to undermine the enthusiasm which enabled their rapid rise to prominence. This would be a shame, as participants in EITI and PWYP programmes across all the countries, even those where implementation has struggled, cite the benefits of their existence. Most commonly, they facilitate new kinds of interaction and information sharing around issues which had previously been the exclusive domain of top officials, companies and their respective cohorts. Instead, greater attention to pairing transparency with accountability – a pairing that PWYP often helps provide to EITI – will help to leverage greater deterrent and trust-­building results from the disclosure process. Along with more realistic expectations and an emphasis on accountability, this brief review of EITI and PWYP implementation in post-­conflict environments uncovers two important observations regarding issues of timing. First, implementation may struggle during transitional periods in which extractive sector activities form part of the bargains made among rival parties. In Liberia, EITI not only began after the end of such a transitional period, but it had time to find its feet during a temporary suspension of mining and logging activities. Without competing parties working to protect their interests, the initiative appeared to enjoy more space, broader support and less controversy. Second, transparency can be drowned out in environments which lack a post-­conflict ‘resource compact’. In post-­conflict countries with resource­dependent economies, extractive sector governance represents a crucial arena in which the state, political factions and society itself will need to agree on how the sector should be governed and how its revenues should be used. These questions extend far beyond the issues targeted by EITI, or even PWYP. If EITI is formally launched prior to reaching some agreement on these issues, it risks being overrun by this broader agenda. To the extent that EITI may provide the only multi-­stakeholder forum for discussing these broader issues there could be positive externalities to the process being taken over by topics that go beyond revenue transparency. Similarly, PWYP may be the only source of coordination and capacity-­building for civil society on extractive industries. However, EITI and PWYP are not adequately equipped to address all these issues, and those concerned with post-­conflict management of the extractive sector should consider whether more suitable mechanisms exist or can be created to that end. Similarly, those concerned strictly with the progress of EITI should take into account whether its narrow goals should be prioritised during periods of broader negotiation and how the initiative fits into the overall development of the extractive sector. Despite the challenges apparent in implementing extractive sector transparency, EITI and PWYP have made considerable progress in many countries and continue to play a valuable role generating new forums for

256   A. Gillies and P. Dykstra dialogue and providing entry points into industries which have previously been opaque in their dealings. As these initiatives mature and evolve, it will be important for them to demonstrate their impact and avoid making claims that cannot be backed up. This is particularly true in post-­conflict countries where early observation suggests the need for measured expectations as well as serious consideration regarding the optimal timing for the introduction of these initiatives.

Notes 1 Some countries have chosen to extend this basic criteria. Nigeria’s EITI reports, for instance, contain a wide range of information including production levels, assessments of the capacities of key fiscal institutions and reviews of licensing procedures. Other countries, such as Azerbaijan and Cameroon, have chosen a narrower approach and produce only the information needed to reach the EITI standards. 2 The EITI Rules establishes the two categories of implementing countries: Candidate countries are those who have signed up to implement the EITI and met all four indicators in the sign up stage of the Validation Grid. This includes: committing to implement the EITI; committing to work with civil society and the private sector; appointing an individual to lead implementation; and producing a Work Plan that has been agreed with stakeholders. Compliant countries have fully implemented the EITI. They have met all the indicators in the Validation Grid, including the publication and distribution of an EITI Report. (EITI 2010a [emphasis in original])

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Index

Page numbers in italics denote tables. Abeywickrema, Mandana Ismail 186 Abrashi, F. 153 accountability: centrality of 248–50; options to improve 58, 59 Acemoglu, D. 53, 56 Ades, A. 53 administrative corruption 37, 54, 56 administrative distribution of power, BiH 100–2 advocacy, role of NGOs 231 Adwan, C. 83 Afghan Compact (2006) 144, 150 Afghan Reconstruction Trust Fund 59 Afghan Research and Evaluation Unit (AREU) 152 Afghanistan 9–10, 15, 17, 49, 53, 55, 59, 64, 66, 81, 89–90, 92, 222; central elites, 150–1, centre-periphery relations 154–5, contemporary features of opium industry 148–9; counter-narcotics policies 157–9; criminalised peace economy 150–1; peripheral elites 150–1; re-emergence of opium trade 147–9; state crisis 151–3; statebuilding 153–6; war economy 146–7; war to peace transitions 145–6 Africa 221, 224–5, 234, 243 aid dependency 86, 89, 104 aid: barriers to building anti-corruption initiatives 90–4; corruption dilemma 70–1; corrupting effects of 82–5; disbursement and state capacity 85–90; early and rapid disbursement of 13–14; negative effects of corruption on 72–4; statistics on 63–4; tolerance of corruption 36–7

Ajder, M. 227 Akhunzada, Sher Muhammad 9 Akpan, M.B. 132 Al-Saadi, S.Z. 169 Alesina, A. 18, 82, 88 Anderson, C.J. 8, 12, 51 Andreas, P. 225 Andvig, J.C. 6, 7 Angola 65, 66, 73, 241, 247 Anti-Corruption Act, Sierra Leone 212 anti-corruption commissions (ACCs) 20; history of 205–9; legitimacy and corruption 215–16; in post-conflict states 209–15; and state fragility 203–5; see also Hong Kong; Sierra Leone; Singapore; Timor-Leste; Yemen. anti-corruption efforts: Afghanistan 157–9; BiH 102–3, 118–24; Iraq 167; Liberia 138–43; obstacles to 18–22, 90–4; role of civil society 232–5; role of international actors 106; Sri Lanka 182–5; value-based approaches 234–6 anti-corruption proposals: aid disbursement 93–5; Iraq 176–9 anti-corruption standards, role of civil society 230–2 armed conflicts: numbers of 68–9; ‘spill over’ effects 87; threat of renewal of 72, 83 Arunatilake, Nisha 187 ascribed trust 170, 171–2 Asian Development Bank (ADB) 183 asymmetrical corruption 38 Auty, R.M. 239 Azerbaijan 234, 241, 247

Index   291 Ba’ath Party 171–5 Bacon, R. 238, 240, 247 Bailey, L. 18, 127 Balkans 222, 225–6 Bar Association of Bosnia and Herzegovina 121 Bar Association of the Croatian Union of Herzeg-Bosna 121–2 Barnett, M. 1, 9 Basedau, M. 239 Bastian, S. 183, 188, 190 Bauer, S. 92 Bayart, Jean-François 11, 129 Belloni, R. 24 Blair-Kerr Commission 205 Bolivia 51 Bolongaita, E. 235 Bonn Agreement (2001) 105, 117, 144, 147, 150 Bonnett, H. 55 book organisation 23–4 Bosnia and Herzegovina (BiH) 21–2, 55, 66, 82, 86, 91, 225, 226–7, 229; Dayton legacy 100–2; defence counsellors 121–2; economy 106–11; governance and corruption 102–6; judicial reform 118–23; statebuilding 115–18 Boyce, J.K. 89 Braithwaite, J. 125 n.11 Burma 154, 156 Business Environment and Enterprise Performance Surveys (BEEPS) 56–7 Cambodia 66, 232 Cameroon 241 Car, O. 55 Carden, A. 84 Caucasus 230, 234–5 Central and Eastern Europe 51, 56 Central Intelligence Agency (CIA) 148, 189 centralised power, Sri Lanka 185–7 Chabal, P. 224 Chad 241 China 55, 137, 141–2, 194, 206; relations with Sri Lanka 188–90 civil society organisations: and anti-corruption activities 232–5; and anti-corruption standards 230–2; context for participation 222–7; and corruption 219–23; corruption within 229–30; and the state 227–30;

Timor-Leste 215; see also nongovernmental organisations Coalition Provisional Authority (CPA), Iraq 17, 70–1, 176 collective action problems 35–6 Collier, P. 16 Commander’s Emergency Response Program (CERP) 92 Committee on Public Enterprises (COPE), Sri Lanka 183–5 community leaders, donor reliance on 90 community-based norms 36 competitiveness, positive effects of 53 conditional aid 88–9 Confiscation of Benefits Act, Singapore 207 Congrès National pour la Defense du Peuple (CNDP) 91 consociationalism 224–6 Constitution, Sri Lanka 183, 186–7, 195–6 contracts, redistribution of 86 corrosive effects of corruption 11–12 Corrupt and Illegal Practices Ordinance, Hong Kong 205 Corrupt Practices Investigation Bureau (CPIB), Singapore 202, 207–9 corruption perception trends 50–2, 65–8 Corruption, Drug Trafficking and Other Serious Crimes Act, Singapore 207–8 corruption: assessing consequences of 72–4; barriers to combating 90–4; benefits of 91–3; conceptualising 3–7; definitional challenges 30–6; differentiating forms of 6–7; dilemma of 70–1; economic effects 50–2; enabling 39–41; hierarchical organisation of 132–3; importance of context 128–32; mitigating 16–18; objective core 31–2; political effects of 74, 75–6, 91–2; problems with data 83–4, toleration of 36–7, 41; varieties of 37–8 Côte d’Ivoire 65, 66, 67–8 Council of Europe 120 counter-narcotics policies 144–5, 157–9 counter-terrorism (CT) 150, 152; prioritisation of 15 Cramer, Christopher 1, 106, 160 criminality, facilitation of 72–3 Croatia 65, 66, 229

292   Index Croatian Democratic Union (HDZ) 105 crony capitalism 37–8, 54–7 Crook, R.C. 54 ‘crowding out’ effects of aid 86 Daloz, J.-P. 224 Dayton Accords 82, 100–2, 117–18; see also Bosnia and Herzegovina Delesgues, L. 51 democracy, impact on corruption 54, 58 Democratic Republic of Congo 60, 66, 74, 86, 91, 130–1; Extractive Industries Transparency Initiative 248–9, 250–3 democratisation 15–16, 69 Department for International Development (DFID), UK 243 direct budget support 87–9 Dodik, Milorad 104, 105, 226–7 Doe, Samuel K. 133–5 donors: corruption dilemma 70–1; trade-off between peacebuilding and corruption 86–90 Dweh, George 128 East Timor 66; see also Timor Leste economic growth: compatibility with corruption 130–2; effects of 57 economic liberalisation 69–70, 73–4, 57–6 economic management capacity 87–9 economic power, links with political power 54–7 economic sanctions, Liberia 128–9 economy: Afghanistan 146–8; BiH 100–2, 106–11; Iraq 162–3, 168–74; Sierra Leone 253–4; Sri Lanka 184 Ekeh, Peter P. 221 El Salvador 51, 65, 66 elections 15–16; see also entries by country employment: BiH 109–11; Iraq 168–9 entrenched corruption 37–8 Equatorial Guinea 247 Esty, D. 51 ethnic groups: Afghanistan 150, 154–5, 157; BiH 116–18, 123; Iraq 165–7; political divisions 227–8; Sri Lanka 181–3 ethno-nationalist parties 101–2 European Bank for Reconstruction and Development (EBRD) 56, 107 European Union (EU) 116, 125 n.8; accession 106, 107, 112, 117

European Union Rule of Law Mission (EULEX) 15, 19 European Union Special Representative (EUSR) 105 executive fiat, anti-corruption by 21–2 extended trust 170–1, 174 Extractive Industries Transparency Initiative (EITI) 21, 165, 242, 243–5; experiences in post-conflict settings 248–54; Multi-Donor Trust Fund 244; and peacebuilding agenda 245–8 Fatah 227–9 Federation Law on Judicial and Prosecutorial Service, BiH 119 Firestone Tire and Rubber Corporation 132–3 Fonseka, S. 186, 195, 198 n.38 Forces Démocratiques de Libération du Rwanda (FDLR) 91 foreign direct investment (FDI) 70, 74, 75, 103–4, 108, 109, 110, 189 formal institutions, focus on 19–20 Fox, G. 19 Fukuyama, Francis 130 Gabon 247 Gallant, Thomas 145 Gambetta, D. 154 Ganta, Liberia 131, 136 General Framework Agreement for Peace (GFAP); see Dayton Accords generalised trust 221, 227–9 Georgia 241 Ghani, A. 86 Global Witness 231–3, 240–1 Governance and Economic Management Assistance Program (GEMAP) 19, 74, 83, 126–8, 129, 137, 138–9, 143 governance functions, internationalisation of 19 Government Accountability Office (GAO), US 165–6 government corruption: causes of 52–4; conceptual underpinnings 48–50; consequences of 50–2; crony capitalism 54–7; reform proposals 57–60 government structure, options to improve 58 government, intimidation of NGOs 234–5 grand corruption 6, 48–9, 204, 219

Index   293 Guatemala 65, 66 Haiti 65, 66 Hamas 227–9, 235 High Judicial and Prosecutorial Council (HJPC), BiH 120, 123 High Representative (HR), BiH 117, 118, 119–21, 122–3 Hirschman, Albert O. 205 historical factors, effects of 53–4, 64 Hong Kong 202, 205–6, 280–9 host-state institutions, focus on 20–1 Human Rights Watch 241 Hurtic´, Zlatko 110 Hussein, Saddam 175 Hutu rebels 91 Independent Commission against Corruption (ICAC), Hong Kong 202, 205–6, 208–9 Independent Commission against Corruption Act, Hong Kong 205 Independent Commission on the Balkans 108 Independent Judicial Commission for Bosnia and Herzegovina (IJC) 21–2, 119–21, 123 India, relations with Sri Lanka 188–90 Indonesia 55, 222 Indraratna, A.D.V. de S. 185 inequality, negative effects of 53 informal economy: BiH 106, 109, 110–11; effects of 57; Iraq 162, 168–9, 173, 174, 175–6; Liberia 131–2 institutional reform proposals 57–60 institutional weakness: and aid disbursement 85–90; causes of 52–4; effects of 64–5 institutionalised corruption 84–5 Integrity Watch Afghanistan 152–3 International Accounting Standards Board (IASB) 246 international actors: anti corruption efforts 21–2; interlinkages with local powers 116–17; role of 20–1 International Alert 230 International Civilian Office (ICO) 15 International Committee of the Red Cross (ICRC) 36–7 International Crime Victims Survey (ICVS) 52 international financial institutions (IFIs): and BiH 108; disbursement

culture 92–3; see also International Monetary Fund; World Bank international governance 19; in BiH 104–6 International Monetary Fund (IMF) 92–3, 107, 180, 110, 155, 183, 189, 241 International Security Assistance Force (ISAF), Afghanistan 148 international technical assistance 59–60 Iraq 15, 17, 64, 65, 66, 70–1, 75, 93; anti-corruption proposals 176–9; comparative measures of corruption 163–5; Defence Ministry 165; economic dynamics 168–74; evolution of local networks 174–6; pervasive nature of corruption 165–9; state of exception in 70–1 Islamic NGOs/community groups 222–3 Italy 220 Ivan, Victor 195 Japan 55 Jayawardene, Junius 183–4 Johnson, Prince Yorni 134, 135, 137 joint extraction regime 145–6, 147, 154–5, 159–60 Jordan-Smith, D. 43 n.5, 44 n.11 judiciary 6–7, 21–2; defence counsellor problems 121–2; ideologies of anticorruption 122–3; Iraq 165; Liberia 138; local ownership and judicial independence 118–20; remuneration 120–1; Timor-Leste 214 Kabou, Axelle 129 Karzai, Hamid 9, 53, 157 Kaufmann, Daniel 56–7, 203–4 Keen, D. 84, 90 Kenya 86, 233 Khan, Mustaq H. 151 Kimberley Process 240, 241 Klitgaard, R. 40, 45 n.19 Koetzle, William 4–5 Korea 55 Koroma, Ernest Bai 212–13 Kosovar Stability Initiative 20 Kosovo Liberation Army (KLA) 7, 19 Kosovo 15, 19, 20, 22, 66 La Porta, R. 53–4 La’o Hamutuk 215 land allocation 193–4

294   Index Law on Courts and Courts Service, BiH 119 Law on Legal Practice, BiH 121 Law on the Public Prosecutor’s Office, BiH 119 Le Billon, P. 44 n.13 Lebanon 55, 64, 73, 233 Lee, Matthew 190 legal definitions of corruption 34 legitimacy 32, 38, 41, 42, 47,89, 94, 139, 150,209; and anti-corruption measures 124, 157–9, 208, 222, 240; and elections 197–8; impact of corruption on 2, 8, 14, 23, 49,51, 57, 59, 62, 76, 81, 86, 144, 204–5, 212, 220, 228; and peacebuilding 14, 16, 63, 152, 156, 215–16 leverage over local institutions 116–17 Levitsky, Steven 116 liberal peacebuilding 23, 63, 65, 68–71, 99, 107, 150; see also peacebuilding Liberation Tigers of Tamil Eelam (LTTE) 180, 181–2, 187, 188, 190–1, 193, 195 Liberia Anti-Corruption Commission (LACC) 83 Liberia Extractive Industries Transparency Initiative (LEITI) 248–9, 250–3 Liberia Peace Council (LPC) 134 Liberia 9, 10–11, 13, 19, 66, 73, 74, 83, 229; anti-corruption proposals 140–3; centralised patronage networks 133, 134, 137, changing organisation of corruption 132–7; context of corruption 128–32; decentralised patronage networks, 133–5, 137; stakes for interveners 138–40; see also Governance and Economic Management Assistance Programme Liberian Economic Stabilization Support Project 126–7 Liberians United for Reconciliation and Democracy (LURD) 128, 136 local administration 194 local elite 7,14,15, 53, 105, 126, 130, 134, 142, 177, 197 n.9, 313, 219; cartels 224 local networks 174–6 local ownership 96, 105, 106, 116–20, 123, 124, 222, 233 local strongmen 131, 132–3, 134–5, 138–40

Luta Hamutuk 215 Meagher, Kate 131–2 Medium Term Development Strategy, BiH 108 Migdal, S. Joel 223–4 militarisation, Sri Lanka 185–7, 194 militias: Afghanistan 155, 156, 158; Liberia 131, 136 Mineral Act, Sierra Leone 253 Ministry of Interior: Afghanistan 151–2, 153, 154, 148; Iraq 165, 167 Ministry of Nation Building and Estate Infrastructure Development, Sri Lanka 193 Ministry of Social Services and Social Welfare, Sri Lanka 193 Mobutu, Sese Seko 130–1 Monitoring of aid 16–17, 18, 82 moral concept, corruption as 5 Morrissey, Oliver 88 Movement for Democracy in Liberia (MODEL) 136 Movement of Concerned Kono Youths (MOCKY) 140 Mozambique 55, 56, 60, 66, 84–5, 91, 92 multi-stakeholder involvement in anticorruption initiatives 246–7, 249, 251, 253, 254 Muslim Brotherhood 222–3 Najibullah regime, Afghanistan 146–7 Namibia 66, 78 n.12 narcotics: Afghanistan and trade in 149–51; and corruption 46, 62, 146, 151–3, 176, 207; counter-narcotics policies 9, 144, 157–9; economic benefits of trade in, 155, 156; poppy cultivation 158 National Patriotic Front of Liberal (NPFL) 134, 136–7 National Transitional Government of Liberia (NTGL) 128–9 natural resources 20–1; and conflict 238–40; role of NGOs in monitoring trade in conflict resources 233–4; see also Extractive Industries Transparency Initiative (EITI); Publish What You Pay (PWYP) Nepal 222 nepotism 63, 86, 88, 103, 187, 198 n.41, 222, 227, 229 Nest, Michael 252

Index   295 Nicaragua 51, 66, 72 Nigeria 44 n.11, 128, 132, 133,226, 239, 244, 256 n.1 Non-Governmental Organisations (NGOs) 42, 50, 89, 104,194,221, 222, 228 ; and anticorruption standards 21, 230–2, 244; fuelling corruption 14, 17, 156, 192, 229, 230; and extractive industry transparency movement 240–3; role in anti-corruption activities 60, 74, 215, 230, 231–5, 243; watchdog function 231–2; see also civil society O’Donnell, M. 59, 89 Office of the High Representative (OHR), Bosnia 21–2, 101, 104, 105–6, 110, 118, 119–21, 123; see also Bosnia and Herzegovina Office of the Ombudsman, Timor-Leste 213–15 Office of the Prime Minister, UK 243 Oil for Food programme, Iraq 75, 163 Oil Ministry, Iraq 165, 167 oil revenues: Iraq 167, 177–9; TimorLeste 213 Olson, Mancur 38, 56 opium trade see narcotics organized crime 15, 49, 82, 101, 103, 110, 161 n.13, 173, 174, 207 Palestine 66, 225, 226, 227–9, 235 Palestine Liberation Organization (PLO) 227–9 Palley, Thomas I. 177 Papua New Guinea 222, 233 Paraguay 51 Parakrama, Arjuna 193, 194 Paris, Roland 68–9 Party for BiH 104–5 Party of Democratic Action (SDA), BiH 102 patronage 6, 8–9, 10–11, 46, 55, 76, 91, 102, 107, 130–6, 147, 140, 142, 145, 146, 147, 151, 152, 159, 161 n.12, 165,167, 210, 219–23, 225–6, 227–30, 239 peace agreements 2,13, 69, 127, 140, 211; and anti-corruption measures 58, 247, 252; and corruption 5, 8–10, 68, 146, 150, 221, 237 peacebuilding: Afghanistan 150–1; conceptualising corruption in context of 32–6; effects of corruption 62–77; enabling corruption 39–41;

and extractive industry transparency 245–8; impact of corruption 7–12; impact of EITI/PWYP 248–50; impact on corruption 12–18; links with corruption 145–6; obstacles to 18–22; prioritising of 36–7; realistic policy priorities 42 peace settlement see peace agreements Permanent Commission to Investigate Allegations of Bribery or Corruption (CIABOC), Sri Lanka 184–5 Petroleum Fund, Timor-Leste 254 petty corruption 6, 48–9, 204, 219 Philippines 141 Police: and anti-corruption efforts 58, 59, 157, 167, 205–6, 207; corruption in 37, 46, 49, 73, 102, 140, 151–2, 165, 184, 205, 219; international control over 19, 100; weakness of in post-conflict countries 6, 102; political stability, compatibility with corruption 8–10, 14,18, 22, 63, 70, 76, 92, 130–4, 155, 224 Political Risk Service/International Country Risk Guide (PRS) 65–8 Pope, Jeremy 106, 232–3 poverty 80, 110, 111, 112, 129, 139, 147, 172 power-sharing agreements 8–10, 69, 91, 117, 219, 224–6 Prevention of Bribery Act, Hong Kong 206 Prevention of Bribery Ordinance, Hong Kong 205 prevention of corruption 201–2, 206, 207–8, 210, 214, 216, 230, 231, 232 Prevention of Corruption Ordinance, Singapore 207 Prevention of Terrorism Act (PTA), Sri Lanka 187 principal-agent problems 14, 48 private extraction regime 145–6, 147 privatisation 56, 82, 85–6; BiH 102, 103, 107–8, 109 procedural safeguards, lack of 21–2 process-based trust 170, 171, 172–4 procurement and corruption 6–7, 19, 20, 22, 54, 167, 168, 210 project aid 87, 89 project failures, Iraq 166, 178–9 Provincial Reconstruction Teams (PRTs) 150 public expenditure tracking surveys (PETS) 233–4

296   Index public office, rules and norms of 30–1, 32–6, 39–41 Public Security Ordinance, Sri Lanka 187 Publish What You Fund (PWYF) 20 Publish What You Pay (PWYP) 20–1, 231–2, 241–3; experiences in postconflict settings 248–54; history of transparency movement 242–7; and peacebuilding agenda 245–8; see also Extractive Industries Transparency Initiative Quiwonkpa, Thomas 134 Rajapaksa, Mahinda 181–2, 184–5, 186, 193, 195 Ranasinghe, Piyasena 185 reconstruction National Integrity System Survey 55 reconstruction 32, 36–7, 63, 71–2, 253; impact of corruption on 7, 17, 50, 55–6, 64–5, 81, 101, 153, 163, 166–7, 190–2, 204, 209–10, 215–16 redistributive effects of corruption 10–11 religious organisations 222–3 remittances 110–11 Reno, W. 9, 23, 146 Republica Srpska (RS) 100, 110–11, 120, 121–2, 226–7; see also BosniaHerzegovina resettlement camps, Sri Lanka 192–3 resource curse 238–40 revenue inflow transparency 242–6 Revolutionary United Front (RUF), Sierra Leone 75, 83, 211 Romania 51 Rose-Ackerman, S. 23, 204 Rwanda 66, 91, 234 Sadrists, Iraq 167 Salih, Barham 162–3 Sambanis, Nicholas 36 Sandholtz, Wayne 4–5 Sankoh, Foday 211 Scott, James 4, 154 sectarianism 165–7, 178, 221–3 ‘securitisation’ of aid 91 security sector: corruption 6–7; restrictions on business activities 59; reform 84, 139 segmented autonomy 226–7 Serbia 229 Serbian Democratic Party (SDS) 102, 105

Shearer, David 14 Sierra Leone 55, 60, 66, 83, 89, 90, 140, 229, 230, 234; anti-corruption commission 211–13, 230; Extractive Industries Transparency Initiative 248–9, 253–4 Singapore 50, 203, 205, 207–9 Sinhalas, Sri Lanka 181–3, 184, 188, 195 Sinoe Rubber Plantation 10–11 small and medium sized enterprises (SMEs) 109–10 social capital 220–3; Iraq 170–6 social divisions 227–9 social effects of corruption 74 social safety nets 111 social networks 4, 20, 30, 36, 55, 103, 130–9, 146, 151, 156, 170–5, 211, 221–2; and patronage 6, 8, 10,12, 41, 91, 140, 144, 159, 219, 224, 225, 229, 230, 234, 236; and smuggling and organised crime 55, 82, 101, 153, 158, 176 Somalia 66 South Africa 141 South America 51 South Korea 141, 142 spoilers 76, 78 n.17, 151, 157; ‘buying out’ of 8, 74–5, 91, 92, 156, 246, 252; co-opting 9 Sri Lanka Freedom Party (SLFP) 182–3, 184, 190, 196 Sri Lanka: background to war in 181–2; democratic deficit 187–8; elections 195–6; emergency regulations 187–9; impact of post-conflict legacies 185–90; institutional division 190–4; institutional setting 182–5; postconflict reconstruction 190–4 stability: primacy of 9–10, 14–15,39–41 state capacity 46, 152–6, 175, 183, 209, 239; and aid disbursement 87–92, 210; impact of corruption on 11, 13, 130–1, 211, 213; strengthening of 18–19, 80–2, 127, 215–16, 233 state fragility 203–5 ‘state of exception’, Iraq 70–1 statebuilding 2, 14, 15, 57, 72, 85–9, 99, 115–18, 150–6, 160, 209, 214 state weakness 85–6 Stiglitz, Joseph E. 88 Sudan 66, 84 Supreme National Authority for Combating Corruption (SNACC), Yemen 210–11

Index   297 symmetrical corruption 37–8 systemic corruption 49–50, 203, 204, 207 Tajikistan 90 Taliban 9, 144, 146, 147, 148, 150, 152, 154, 158, 222, 223; see also Afghanistan Tamils 181–2, 188, 189, 190–1, 192–3, 195; see also Sri Lanka Tanzania 88 Taylor, Charles 128–9, 131, 134, 135–6, 211 territorial distribution of power, BiH 100–2 territorial division, Sri Lanka 190–4 terrorism 15, 62, 101, 173–4 Thailand 55 Third World Relief Agency (TWRA) 101 Timor-Leste: Extractive Industries Transparency Initiative 248–9, 253–5; ombudsman 213–15 transnational networks 116, 147, 154, 193 Transparency International 4, 50, 51, 64, 103, 194, 230–13, 240; Corruption Perception Index (CPI) 52, 65–8, 141, 164–6, 185, 207–8 transparency, 18, 19–21, 42, 209, 237–8; lack of 63–4, 70, 157, 226; options to improve 58, 76, 89–90, 102, 103, 137, 215; see also Extractive Industries Transparency Initiative (EITI); Publish What You Pay (PWYP) Treisman, Daniel 223 trust 170–4, 220–3 trust funds 59 Truth and Reconciliation Commission, Liberia 129 Tubman, William 132, 133 Turkey 241 Tutsi militia 91 Underkuffler, Laura 5 Union of Bar Associations of Yugoslavia 121 United Liberation Movement of Liberia for Democracy (ULIMO) 134 United National Party (UNP), Sri Lanka 182–3, 184 United Nations (UN) 58 United Nations Convention against Corruption (UNCAC) 80, 167, 201, 219, 230–1

United Inter-Regional Crime and Justice Research Institute (UNICRI) 52 United Nations Mission in Bosnia and Herzegovina (UNMIBH) Judicial System Assessment Programme 118–19 United Nations Mission in Liberia (UNMIL) 126, 128–9, 138–9 United Nations Office on Drugs and Crime (UNODC) 148–9, 153, 158 United Nations Support Office for Timor-Leste (UNOTIL) 213 United Nations Transitional Administration in East Timor (UNTAET) 213 US Government’s Special InspectorGeneral for Iraq Reconstruction (SIGIR) 165–7 US Securities and Exchange Commission 246 USAID 71, 73, 126–7, 140 values-based anti-corruption strategies 232–3 violence 155–6; as a consequence of corruption 51, 62, 73, 162–3; corruption and limitation of 6, 8–10, 46; sustaining corruption through 7, 22, 37–8, 40, 47; trade-off between corruption and 14–15, 36, 41, 60 war criminals 72 war economy: Afghanistan 146–7; BiH 106–7; legacies of 63–5; Liberia 132–7, 139; Sierra Leone 211; Sri Lanka 181–2, 190–2 Way, Lucan 116 Wedjeh Youth Association 139–40 West Africa 7, 229 whistleblowers 59 White, Howard 88 Wickramatunga, Lasantha 188 World Bank 34, 54–5, 56, 85, 92–3, 107, 183, 209, 244; Governance Indicators 52, 163–4 World Bank Institute 50 World Values Survey 51 Yemen 210–12