How transparency can help the global economy to grow

stock market 2018

A view inside the London Stock Exchange. © European Union , 2017 / Source: EC – Audiovisual Service / Photo: Jack Taylor

This article is brought to you thanks to the strategic cooperation of The European Sting with the World Economic Forum.

Author:  Alex Konanykhin, CEO, TransparentBusiness

Countries around the world spend an estimated $9.4 trillion a year on procurement – 15% of global GDP. Indeed, UN figures estimate that public procurement can account for 15-30% of GDP for many countries. However, according to the UN’s Office on Drugs and Crime and the Organisation for Economic Co-operation and Development (OECD), 10-25% of the value of public contracts is lost to corruption.

This means that corruption – such as fraud, waste and abuse by government contractors – costs up to $2.35 trillion globally on an annual basis.

As Transparency International states in its July 2018 report on recommendations for open contracting: “Procurement is one of governments’ most economically significant activities, but it also poses one of the greatest public sector corruption risks.”

One of the main reasons this corruption can flourish? Countries have a lack of transparency when it comes to work being done by government contractors operating on an hourly basis. In virtually every country, government contractors work on an “honour system” where there are no procedures in place to verify invoices for the hours worked by these contractors.

In its 2017 report Fraud, Waste and Abuse in Social Services – Identifying and Overcoming this Modern-Day Epidemic, Accenture refers to this phenomenon as “self-certifying”: “Two primary issues are at the root of overpayments. The first is the frequent reliance on the customer to provide data and information that is then used in calculating their benefits. This ‘self-certifying’ of data can lead to customers making small changes and misrepresenting their situation in the knowledge that this will provide a higher amount of benefit.”

This occurs in both developed and emerging countries: Transparency International’s Corruption Perceptions Index 2017 found high corruption in more than two-thirds of nations.

One of the index’s five recommendations states: “Civil society and governments should promote laws that focus on access to information. This access helps enhance transparency and accountability while reducing opportunities for corruption.”

The value of transparency as an essential strategy to prevent fraud and waste has been cited by many organizations. In a May 2016 report, Corruption: Costs and Mitigating Strategies, the International Monetary Fund states:

“Although transparency is a general prerequisite for the proper functioning of the market, it is also a core component of an effective anti-corruption policy. Transparency plays a critical role in ensuring the efficient allocation of resources by allowing the market to evaluate and impose discipline on government policy, and by increasing the political risk of unsustainable policies. In addition to these important functions, transparency can play a key role in preventing corruption and promoting good governance. By providing the public with access to information relating to government decisions and financial transactions, transparency can effectively deter illicit behaviour. Indeed, a number of studies demonstrate a positive correlation between corruption and the lack of public budget transparency. The more transparent the budget in a given country, the less corrupt the country is perceived to be.”

More recently, the Americas Business Dialogue, in its 2018 report, Action for Growth: Policy Recommendations and Plan of Action 2018-2021 for growth in the Americas, states: “Productivity, transparency and effective accountability are intrinsically connected (…) Empirical evidence has shown that a lack of transparency and integrity can affect a country’s productivity and economic growth.”

Indeed, the call for greater transparency is one of the core principles of the Open Government Partnership’s (OGP) Open Government Declaration, which was founded in September 2011 by eight founding governments (Brazil, Indonesia, Mexico, Norway, the Philippines, South Africa, the United Kingdom and the United States) who originally pledged to the Declaration. Now, more than 70 countries have committed to the OGD and to making their governments more accountable.

One of the declaration’s three other core principles is that greater transparency in governments can be achieved around the world through increased access to new technologies: “We commit to engaging civil society and the business community to identify practices and innovative approaches for leveraging new technologies to empower people and promote transparency in government.”

It is clear that advances in technology have given governments more effective tools to identify and prevent fraud by government contractors and, by partnering with the private sector, governments can leverage even more resources for transparency to become more productive, efficient and valuable to its citizens.

 

Every year, the US spends $530 billion on procurement and as such, faces the same challenges as other countries when it comes to abuse of the procurement process. While legislation, such as the False Claims Act, has been enacted to prevent fraud by government contractors, it continues at an alarming rate.

One of the most notable cases is that of the computer contractor SAIC, which overbilled New York City $500 million on one municipal project. At the federal level, the Pentagon accused Defense Logistics Agency in 2013 of allowing taxpayers to be overbilled $757 million because of the company’s failure to verify that contractors’ invoices were accurate.

By enacting something as simple as the verification of billable hours through readily available software, countries can take a significant step forward in promoting a more effective government that better serves its people. Furthermore, such a step comes with no risk or cost, as the cost of the software is borne by the contractor.

As the Americas Business Dialogue states: “Transparency is a central element for achieving sustainable economic growth and improving lives[.]”

Through technology and public-private partnerships, it is now possible for both emerging and developed countries to advance transparency in government which will save millions of dollars that can be utilized to better serve citizens and strengthen nations. With stronger countries comes a stronger global economy.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Tokyo 2020 Olympics: from cardboard beds to recycled medals, how the Games are going green

Greece to stay in the euro area but the cost to its people remains elusive

The Monetary Union drives Europe into dangerous paths, CoR demands an EMU of regional content

Meet Alice, the battery-powered plane that could herald the age of electric air travel

Commission’s action against imports from China questioned

Fisheries: Commission proposes measures to conserve stocks of deep-sea species in the North-East Atlantic

Russia must urgently step up fight against foreign bribery

Threat from petty criminals who turn to terrorism, a growing concern, Security Council hears

Assembly President launches new initiative to purge plastics and purify oceans

Learning from our past mistakes: the mental health burden of two pandemics

Mobile technology saving lives: changing healthcare systems with simple technological solutions

Top officials say UN will support Bahamas’ rescue, relief efforts as Hurricane Dorian churns in Atlantic

Robots and chatbots can help alleviate the mental health epidemic

The dangers of data: why the numbers never tell the full story

The global economy is woefully unprepared for biological threats. This is what we need to do

Here are three ways blockchain can change refugees’ lives

Sherpa climbers carried out the highest-ever spring clean. This is what they found

Coronavirus Global Response: EIB and Commission pledge additional €4.9 billion

French Prime Minister passes Stability Program and takes his ‘café’ in Brussels this June

Paris, Washington, IMF against Berlin and ECB on money and interest

My twin from Guangzhou

This country came up with 5 novel ideas to tackle the pandemic

Antitrust: Commission fines Sanrio €6.2 million for restricting cross-border sales of merchandising products featuring Hello Kitty characters

It’s Time to Disrupt Europe, Digital First

EU Civil Protection Mechanism must be sufficiently funded to save lives

World Health Day: Statement by Commissioner Stella Kyriakides

This is what Belgium’s traffic-choked capital is doing about emissions

Warmer months ahead for many parts of the planet: UN weather agency

‘Stay at home’ UK tells people as global confirmed cases pass 380,000 – Today’s coronavirus updates

As India’s lockdown ends, a mental health crisis is just beginning

100 years on, UN labour agency mission focussed on growing inequality, says Director-General

Europe’s dirty air kills 400,000 people every year

GSMA Mobile 360 Series – MENA in Dubai, in Association with The European Sting

UK: Customs Union with EU or a longer delay of Brexit

Brexit: Six more months of political paralysis or a May-Corbyn compromise?

In the United States, there aren’t enough hours in the week to make rent

UN experts decry torture of Rakhine men and boys held incommunicado by Myanmar’s military

Rich economies not a promise of education equality, new report finds

Working together to end the AIDS-HIV pandemic

3 reasons why data is not the new oil – and why this matters to India

Superbugs: MEPs advocate further measures to curb use of antimicrobials

These are the best MBAs if you want to be an entrepreneur

Austerity lovers to put a break on Renzi’s growth vision for Europe? the Sting reports live from World Economic Forum 2015 in Davos

Brunei’s new penal code would enshrine ‘cruel and inhuman punishments’ UN rights chief warns

UN chief urges emergency fund support as one of the ‘most effective investments’ in humanitarian action

‘Power is not given, power is taken’, UN chief tells women activists, urging push-back against status quo

Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses

COVID-19 and German constitutional court decision top meeting with ECB’s Lagarde

Berlin wants to break South’s politico-economic standing

Businesses are thriving, societies are not. Time for urgent change

A Glimpse into the Future of the Health with Mobile Technology

A new roadmap for corporate climate governance

Hatred ‘a threat to everyone’, urges Guterres calling for global effort to end xenophobia and ‘loathsome rhetoric’

UN working to prevent attacks on civilians in eastern DR Congo

Western Balkans: European Parliament takes stock of 2018 progress

Brexit update: Will the EU grant extention to Britain preventing economic chaos?

Misinformation and growing distrust on vaccines, ‘dangerous as a disease’ says UNICEF chief

8 steps towards a sustainable economic recovery

We now know how much ice Antarctica has lost in the last 25 years – three trillion tonnes

Von der Leyen on EU long-term budget: our opportunity to make Europe fit for the future

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s