Mushtaq H. Khan, SOAS, UNIVERSITY OF London

1. The Challenge of Anti-Corruption Conference on Corruption and Anti-Corruption: Threats, Challenges and Opportunities Sussex Centre for the Study of Corruption, Transparency International Clifford Chance, London 9th September 2014. Mushtaq H. Khan, SOAS, UNIVERSITY OF London

2. Corruption in Developing Countries • Corruption appears to be endemic across developing countries • Anti-corruption efforts do not appear to have lasting effects • The relationship between corruption and economic performance at the aggregate level appears to be relatively weak • One interpretation is that corruption is very difficult to fight and the gains are uncertain. • An alternative interpretation is that we have ignored differences in types of corruption and our instruments do not identify or target the most damaging types of corruption • This is true for much of the ‘good governance’ reform policies that target property right stability, the rule of law, political accountability, AND anti-corruption

3. Cross-Country Evidence

4. Cross-Country Evidence

5. Cross-Country Evidence

6. Cross-Country Evidence

7. Corruption and Growth

8. Growth-Enhancing Governance versus Good Governance

9. Four types of Corruption Corruption is always associated with state functions where a public official is engaged in illegal activities: But the state functions themselves may be legal and/or necessary functions, or not Anti-corruption strategy that does not distinguish between different types of corruption to target the most important and feasible types is likely to fail

10. Feasibility versus Impact of Anti-Corruption Strategies State-constraining corruption is likely to be an important focus for effective and feasible anti-corruption activities in developing countries

11. An Example of the Policy Design Problem from Bangladesh: Regulatory Failure in the Bangladeshi Garments Industry (Drawn from a cross-country study on The Impact of Corruption on Private Sector Growth conducted for DFID 2014)

12. Another Example of State-Constraining Corruption: Customs Corruption in the Bangladeshi Garments Industry (Drawn from a cross-country study on The Impact of Corruption on Private Sector Growth conducted for DFID 2014)

13. A Process-Analysis Approach to Anti-Corruption • The targeting of state-constraining corruption is critically important in developing countries • Corruption is in general ‘over-determined’: multiple processes are involved with firms engaging in corruption for different reasons • In the worst cases, almost all firms are engaged in corruption, and in these cases, everyone pays lip service to anti-corruption but standard anti-corruption strategies have no chance • Effective strategies require careful ‘process analysis’ to separate the determinants of corruption for potentially compliant and potentially non-compliant firms • Necessary state functions have to be redesigned to remain developmental and ensure that it becomes feasible for the potentially compliant to become compliant and even to benefit from compliance • Regulatory and enforcement capacities are likely to need strengthening but since resources are limited, policy has to incrementally target critical agencies to achieve specific objectives