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Corruption and Government Integrity in Mainland China and Hong Kong. Professor Ting Gong Department of Public Policy City University of Hong Kong. What is Corruption? “ Everyone knows what corruption is; but it is difficult to define it in exact terms.” --- M. Halayya.
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Corruption and Government Integrity in Mainland China and Hong Kong Professor Ting Gong Department of Public Policy City University of Hong Kong
What is Corruption? “Everyone knows what corruption is; but it is difficult to define it in exact terms.” --- M. Halayya
Contemporary definitions • Law-centered definitions (Nye, 1067; Ekpo, 1979) • Objective but what if legal systems are not well established? • Public-interest-centered (Friedrich, 1966) • What is “public interest”? • Public-opinion-centered (Heidenheimer, 1970) • “Black corruption”, “grey corruption”, “white corruption” • Is public opinion homogeneous? • Personal-gain-centered ((Brooks, 1974; MacRae, 1982) • Does corruption always involve personal gains?
Defining Corruption in China • A narrow definition → ordinary citizens • “abuse of public power for private interests” • Key elements: 1) abusing public office; 2) relying on legal standards • A broad definition → public officials • behavior that violates not only legal but also moral conventions
Difficulties in Defining Corruption • difficult to draw distinction between "public" and "private“ – “grey areas” • intangible, long-term, widely dispersed gains • loopholes in a legal system • cultural impact
Eight Questions about Corruption(by Jakob Svensson) • What is corruption? • What are the common characteristics of countries with high corruption? • What is the magnitude of corruption? How to measure it? • Does corruption adversely affect growth? • Do higher wages for bureaucrats reduce corruption? • Can market competition reduce corruption? • Why have there been so few (recent) successful attempts to fight corruption? • Is corruption eradicable ?
Corruption by consumption • “Cash corruption” -- embezzling and extravagantly consuming public funds • Often seen in position-related consumption • Examples • Lavish eating and drinking • Misuse and abuse of government vehicles • Sightseeing tours disguised disguised as duty trips
Capital Corruption • Meaning: “unsanctioned transfers of state assets into private hands of government officials • Differs from “corruption by consumption” in that it • aims at seizing production capital which will bring in more money • is a more rapacious form of encroachment on state property with more sophisticated tactics
Example: Illicit transfers of state assets in ownership diversification • In corporate restructuring: • lowering the value of the state assets in an asset assessment process • setting higher dividend rates for individual shares than state shares • split individual shares only, not those owned by the state • establishing “shadow companies”
Collective Corruption • “Collective corruption“: government officials collude with each other or with people outside the government in corruption • Collective corruption takes place under certain conditions: • when concerned value or anticipated benefit is high; • when the technical difficulty of corruption requires greater co-operation; and • when the stake is so high that divided responsibilities among collaborators help reduce risks
Cross-border Corruption • Transnational corruption: cross-border collaboration of corrupt government officials with overseas individuals or organizations • Opportunities expanded as China becomes more integrated into the global economy • Examples: • smuggling • Transnational money laundering • Overseas Flight of Corrupt Officials
Controlling Corruption: Institutional framework & policy tools
Klitgaard’s formula: corruption = monopoly + discretion – accountability
Controlling Corruption: three pronged approach • Reducing opportunities: as authority devolves from upper levels, local officials become the ultimate authorities in determining who gets what, how and when; • Reducing incentives: the deep involvement in local business affairs place economic interests at arm’s length of local officials • Enhancing supervision: multiple entrustment chains of power make it difficult to monitor bureaucratic behavior
Anticorruption Agencies • The Central Discipline Inspection Commission of the CCP and its local branches • The Supervision Ministry • Anti-corruption Bureau of the People's Procuratorate • The National Bureau of Corruption Prevention
Roughly 173 regulatory provisions have been adopted in the past three decades; more than half were made in the last decade alone.
Integrity regulations include - • Provisions against bribery, illegal gratuities, and improper gains • Provisions on the disclosure of information about conflicts of interest • Provisions setting forth specific procedures for dealing with conflict of interest situations • Provisions specifying accountability mechanisms and penalties to ensure compliance
Two challenges • How to implement the rules more effectively? • How to engage the public and enhance downward accountability?
Hong Kong’s success • Hong Kong is regarded as one of the cleanest societies in the world, ranked 14th by TI’s CPI among 182 countries in 2012 • Hong Kong’s ICAC is taken as a model of a powerful and independent anticorruption agency
The Old Days (1960s-1970s) Rampant corruption as a way of life, not just a fact of life • Police corruption • “Rent seeking” through public services (fire control, inspection, public hospitals, immigration office, etc.) • Other social problems: mafia, gambling, etc.
Peter Fitzroy Godber was a former Chief Superintendent of the Hong Kong Police. He engaged in a bribery scandal shortly and then fled to the UK. He was extradited back to Hong Kong and subsequently convicted for corruption.
Independent Commission Against Corruption in Hong Kong • Established in 1974 • Independent – answerable to Chief Executive • 3 – Pronged Strategy • Enforcement – Operations Department • Prevention – Corruption Prevention Department • Education – Community Relations Department
The power of the ICAC • Right of arrest • Right of investigation • Right of search • Right of getting information on property • Right of investigating unexplained property
Institutional Building against Corruption • Market economy • Judicial independence • Freedom of speech • Civil service (effective and efficient) • Rule of law