IMF and corruption

Abitter attack on corruption at a global level by Christine Lagarde, Managing Director of the International Monetary Fund (IMF), drew our attention this week. Ironically, as Ms. Lagarde spoke, here in Colombo, two women entrepreneurs told a gathering of the Sunday Times Business Club (STBC) that they have never paid a bribe to ‘get things moving’.

“I have never paid a red cent (bribe) to anyone,” said Ramya Weerakoon, a mid-1970s businesswoman who founded Ramya Holdings and transformed it into a diversified business group. Echoing similar views was ‘brought-up-on-family-values’, Yasisurie Kiribandara, Head Designer/Founder Yasisurie Pvt Ltd, at the same event.

Ms. Lagarde, speaking at an event in Washington hosted by Brookings Institution entitled, ‘Addressing corruption with clarity’, this week, was reported to have said the fund is helping its member countries to effectively tackle corruption “as it undermines the ability of states to deliver inclusive growth and lift people out of poverty”.

She said a recent survey of global youth revealed that young people identify corruption, “not jobs, not lack of education, as the most pressing concern in their own countries”. She goes on to say that corruption is a corrosive force that weakens the vitality of business and stunts a country’s economic potential.

Strong points indeed! The IMF’s call will strike a chord in Sri Lanka where corruption is not only rampant but allowing the corrupt at the top to go free while catching ‘sprats’ is how the system has worked. The recent jailing of former President’s Secretary Lalith Weeratunga and former public official Anusha Palpita in election-related offences is just the tip of the iceberg.

Hopefully, it will send a strong message to the powerful forces of corruption that prevail today in the public and private corridors of power.

Having said that, is the IMF, the new policeman of corruption, squeaky clean itself or is this just another papering-the-cracks exercise in the fight against corruption? Can the IMF be perceived as a paragon of virtue when questions of impropriety have been raised not only in the case of Ms. Lagarde but also her predecessor, Dominique Strauss-Kahn?

Mr. Strauss-Kahn, a French politician, was forced to resign as managing director of the IMF on May 18, 2011 due to his involvement in several financial and sexual scandals. However, despite this appalling record, he was hired by the Sri Lankan government later.

The Sunday Times reported in a January 19, 2015 story that the former Central Bank hierarchy had hired LSK and Partners headed by Strauss-Kahn as an advisor on foreign investment for a fee of US$750,000 (Rs.937,725). He visited Sri Lanka from October 26 to 28, 2014 with the banking regulator ‘proudly’ announcing the visit of the shamed, former IMF chief.

Five years later, on December 19, 2016, Lagarde, also a French politician, was found guilty of negligence by a court, after a trial in France over compensation awarded in 2008 to Bernard Tapie, a well-connected French businessman, when she was finance minister.

Media reports said that “although she has avoided a sentence, Ms Lagarde had denied wrongdoing and the verdict came as a shock. The IMF had backed her through the judicial saga and prosecutors said while she had made a bad decision, they did not see it as an offence”.

Corruption is described as a form of dishonest or unethical conduct by a person in a position of authority, often for personal benefit. Corruption is not only through cash transfers but can come in different forms for personal gain.

So how can the IMF talk about corruption when its own corridors are yet to be swept free of this evil?

While Lagarde’s alleged act of corruption was an old case in the 1990s, it doesn’t absolve her of question marks over a squeaky, clean image that the IMF should have at the top of the organisational ladder. For that matter, any politician, powerful government official or business leader who comes down hard on corruption may not be clean either. Somewhere on the road to the top, they have resorted to an act of bribery or corruption.

While both the businesswomen who addressed the STBC forum on women entrepreneurs, said they have never given a bribe and don’t intend to in the future, the reality is that nothing gets done in Sri Lanka without a (small incentive). The amount varies from the small official to the top official and similarly in the case of the local government politician to the minister.

A major grouse among civil society activists who helped Maithripala Sirisena win the presidential election in January 2015 on a platform of ‘no’ to bribery and corruption and violation of people’s fundamental rights, is that investigations and probes into corruption are slow, allowing crooked politicians to re-group and attack the government.

To be fair, the IMF campaign against corruption is not without foundation. The annual cost of bribery, just one part of corruption, is estimated to be between $1.5 trillion to $2 trillion, amounting to roughly two per cent of the global Gross Domestic Product.

According to Transparency International’s annual Corruption Perceptions Index (which ranks countries in terms of least perceived corrupt) in 2016, the top five were Denmark, New Zealand, Finland, Sweden and Switzerland, with a top score of 90 to 86.

Sri Lanka was at 95th position in the list of 176 countries with 36 points, down from the 2012 score of 40 points. ‘Happy, happy’ Bhutan, a country that has made a name for inculcating a ‘happy society’, topped the list in terms of South Asian nations, at 27th position with a score of 65, rising from 63 in 2012. India was in 79th position, Pakistan at 116, Nepal at 131 and Bangladesh at 145.

The World Bank has listed over 1,000 companies across the world – mostly China, India, the US, UK, Canada and some from Nepal and Bangladesh as having violated the bank's fraud and corruption policies in procurement guidelines. These companies, including two from Sri Lanka, have been either permanently disbarred from eligibility to World Bank-financed contracts or suspended for short periods.

Meanwhile, snoring sounds from could be heard coming from the kitchen, even though it’s just late afternoon. Probably the woman was bored to death with this week’s highly complex discussion on corruption, even though some part involved a loud telephone conversation with my economist-friend,

The IMF’s tirade against corruption should be accompanied by a ‘Physician heal thyself ’ clean-up. The same applies to Sri Lankan authorities pushing ahead with a ‘corruption-clean’ administration. It is only if you are squeaky clean that you should expect others to follow. Otherwise, someday the truth will prevail and not set you free!