Multinational corporations' corrupt practices affect the South in many ways. They undermine development and exacerbate inequality and poverty. They disadvantage smaller domestic firms. They transfer money that could be put towards poverty eradication into the hands of the rich. They distort decision-making in favour of projects that benefit the few rather than the many. They also increase debt; benefit the company, not the country; bypass local democratic processes; damage the environment; circumvent legislation; and promote weapons sales.

Increasing Debt

Bribes put up the prices of projects. When these projects are paid for with money borrowed internationally, bribery adds to a country's external debt. Ordinary people end up paying this back through cuts in spending on health, education and public services. Often they also have to pay by shouldering the long-term burdens of projects that do not benefit them and which they never requested.

The US company, Westinghouse Electric Corp, provides an infamous example. Westinghouse won a contract in the early 1970s to build the Bataan nuclear plant in the Philippines. It was alleged that it gave President Ferdinand Marcos US$80 million in kickbacks. The plant cost $2.3 billion -- three times the price of a comparable plant built by the same company in Korea. Filipino taxpayers have spent $1.2 billion servicing the plant's debts -- even though the plant has never produced a single watt of electricity because it was built at the foot of a volcano near several earthquake faultlines. The Philippine government is still paying $170,000 a day in interest on the loans taken out to finance the nuclear plant and will continue to do so up to the year 2018. Commented Philippines Treasurer Leonor Briones recently:

"It is a terrible burden which never fails to elicit feelings of rage, anger and frustration in me. We're talking of money that should have gone to basic services like schools and hospitals"

Source:Dr. Susan Hawley

"Money laundering is the handmaiden of international corruption ... Those who take bribes must find safe international financial channels through which they can bank their ill-gotten gains. Those who provide the bribes may well assist the bribe takers to establish safe financial channels and launder the cash."

Frank Vogl, Transparency International

"America cannot have it both ways. We cannot condemn corruption abroad, be it officials taking bribes or looting their treasuries, and then tolerate American banks making fortunes off that corruption."

US Senator Carl Levin

Private banking services and offshore financial centres are the major conduits and repositories for bribes and corrupt gains. An estimated US$40 billion from poor and former communist economies finds its way into US or European banks every year, much of it illegitimately gained. Some $30 billion of Western aid "used as part of the Cold War game of winning friends" has ended up in Swiss bank accounts alone. Leaders from some African countries have collectively had up to $20 billion on deposit in Switzerland's banks. Haiti's "Baby Doc" Duvalier is known to have kept $300-900 million in offshore banks, while Philippine President Marcos salted away well over $2 billion in Western banks

Much of poor country debt is related to the Cold War, when both sides pushed money at their supporters. Zaire's ruler, Mobutu Sese Seko, was one of the world's most corrupt leaders and it was for his government that the word “kleptocracy” was first coined. Mobutu became one of the world's richest men, with a personal fortune estimated at more than $10 billion and palaces in Europe and Zaire. But the West saw Mobutu as a loyal ally in the Cold War (in part for his support of the US, in its backing for Unita in Angola). In 1978 the IMF appointed their own man, Edwin Blumenthal, to a key post in the central bank. He resigned two years later, complaining of “sordid and pernicious corruption” that was so serious that “there is no chance, I repeat no chance, that Zaire's numerous creditors will ever recover their loans.”

Shortly after Blumenthal's report to the IMF, it gave Zaire the largest ever loan given to an African country. ^[1] When Blumenthal wrote his report, Zaire's debt was $5 billion; by the time Mobutu was overthrown and died in 1998, the debt was over $13 billion. In the six years after Blumenthal's report, the IMF lent Zaire $600 million and the World Bank $650 million. In those six years Western governments lent Mobutu nearly $3 billion. Commercial banks refused to lend more to Mobutu during that period.

Patricia Adams in her book Odious Debts ^[2] estimates the Philippines dictator, Ferdinand Marcos, and his wife Imelda, pocketed literally one-third of the Philippines' entire borrowing – much of it in the form of kickbacks and commissions on aid and loan-funded projects. His personal wealth when he was overthrown was $10 billion.Source: Jubileeresearch.org

“The private banking boom has its origins in the debt crisis and is a major reason for the continued indebtedness of many poor countries”, it notes. “Because of the debt crisis in the late 1980s onwards, Western banks had fewer opportunities to lend to Third World countries and thus started to pursue wealthy individuals in the Third World to encourage them to place their wealth in private bank accounts.

“The result was a revolving door. International loans to developing countries were creamed off by those in power and transferred into banks, ironically often to `private banking' branches of the very same international banks that had issued the international loan in the first place.”SOURCE:WWW.GREENLEFT.AU

While the Corruption Perception Index does provide an invaluable ranking for investors trying to assess country risk, it is of little use to the citizens of oil-rich Nigeria, for example, to be informed by the CPI that their country is among the world’s most corrupt. Nigerians and others like them want to know where their money has gone.Consider the brutal Nigerian president Sani Abacha, who died in 1998, allegedly in the company of Indian prostitutes, but not before he had raked off billions of dollars of oil money from state coffers. Or to take a more recent example, we now know more or less how relatives and associates of the former Kenyan President Daniel arap Moi diverted hundreds of millions of dollars into their pockets through a web of shell companies, secret trusts and other evasive structures. Two jurisdictions that happily soaked up the embezzled wealth of both regimes are worth highlighting: Switzerland and the United Kingdom. “The UK authorities and banks”, the BBC reported after a bit of the money was eventually returned, “were found to have been even less cooperative than the Swiss, despite the latter’s long and sullied reputation for protecting allegedly stolen assets.”The Corruption Perception Index (CPI) ranks the countries of Africa as the primary locus of corruption, but it ignores the global infrastructure of international financial secrecy that has helped bleed trillions of dollars in illicitly generated money not only out of Africa but also out of the Middle East, Latin America and Russia into the financial centers of the richest countries in the world especially Britain, Switzerland, Lexumbourg, Austria, Liechstentein and in France where Omar Bongo, Obiang Nguema, Denis Sassou Ngeusso and a host of African leaders have bought several properties using funds stolen from their countries. For example, the CPI ranks the countries of Africa as the primary locus of corruption, but it ignores the global infrastructure of international financial secrecy that has helped bleed trillions of dollars in illicitly generated money not only out of Africa but also out of the Middle East, Latin America and Russia into the financial centers of the richest countries in the world.

Six of the companies later confessed to offering bribes. Yet, far from receiving support for its stand from Western governments, Pakistan's anti-corruption agency was warned by the British, US, Japanese and Canadian governments that its investigations would put off other investors. The IMF, meanwhile, made a package of loans conditional on the government dropping the charges against the companies involved.When consultants Morgan Grenfell urged against the sale of the Uganda Commercial Bank, the World Bank and IMF insisted the sale go ahead. Sold to a Malaysian engineering consortium linked to the brother of the Ugandan president, the bank had to be re-nationalised in 1998 “after running into trouble giving out millions of dollars worth of dubious loans”.

Source:

greenleft.org.au

Corruption in Africa is costing the continent nearly $150bn a year, according to a new report.

The African regional body, the African Union (AU) has drawn up a convention to stamp out malpractices which the study says are hitting the poorest the hardest.

From the bottle of whisky slipped under the counter to speed a traveller's way through customs, to the presidents and ex-presidents living way beyond their declared means, it results in an assumption that no business will ever get done without a present changing hands.

The report before this week's meeting of the African Union in the Ethiopian capital, Addis Ababa, makes no attempt to excuse these "gratifications" as part of the culture.

It says that corruption is costing Africa more than $148bn dollars a year, increasing the cost of goods by as much as 20%, deterring investment and holding back development.In Uganda, often held up by the IMF and World Bank as a model of the success of their policies, the government has set about privatising 142 state-owned enterprises since 1992, the sales of which was expected to net US$500 million. However, by 1998 the process had been halted twice by parliament because of corruption: at the end of that year, the government account set up to hold the proceeds of privatisation was empty.The cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion is estimated at between $1 trillion and $1.6 trillion per year.

The Swiss government, backtracking under public pressure, promised today to widen a hunt for what is alleged to be billions of dollars belonging to Zaire's embattled ruler, Mobutu Sese Seko.

The government previously said an informal survey of Swiss banks had found no trace of Mobutu's controversial fortune, estimated by Swiss media to total about $4 billion spread among secret bank accounts in the Alpine republic. A Swiss newspaper reported last weekend that one of Mobutu's sons regularly gave his business partners a Swiss account number when he did business for himself or the family.The Federal Banking Commission, the country's banking watchdog, said it will expand its investigation to locate all the money. From Washington Post

Despite the promise to find all the money, Swiss authorities have failed to do so.

Mobutu assets stay frozen

The Swiss government has once again extended the freezing of assets deposited in Swiss banks by the late president of Zaire, Mobutu Sese Seko.

The deadline for returning the assets worth around SFr8 million ($6.54 million) to Mobutu's family has now been pushed from February 28 to April 30 to give legal authorities more time to work on the case.What do Mobutu, Abacha, Omar Bongo, Obiang Nguema, Denis Sassou Nguesso, Jose Eduardo dos Santos and Lansana Conte have in common? Their bankers. All leaders have numbered Swiss, French, British accounts in order to deposit ill-gotten gains. Why? Bank secrecy.