Corruption in Bangladesh: Background causes and current scenariokground causes and present scenariokground causes and

present scenario

N N TARUN CHAKRAVORTY

Background• Debate on the effect of corruption on growth and

development• efficiency enhancing strand / speed money theory

(Leff ,1964; Huntington, 1968; Lui, 1985; Leys, 1965; Khan, 2006; Morgan, 1964; Mankiw, 2000)

• efficiency reducing strand / sand the wheel theory (Myrdal, 1968; Rose-Ackerman, 1978; Mauro, 1995; Shleifer etal, 1993; Kaufmann et al, 1999; Reinikka et al, 2004; Brunetti et al, 1998; Mo, 2001), Tanzi et al, 2001; Gymiah-Brempong ,2002; Shleifer et al, 1993; Fisman et al, 2007; Chakravorty, 2014)

Debate…

• Third strand: May be beneficial in a second best world i.e. when bureaucracy is stuck in corruption and institutions are dysfunctional (Rose-Ackerman, 1978)

• Indeterminate or no effect: (Wedeman, 1997; Shaw et al, 2011)

Bangladesh: corruption   ‘96 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11

Bangladesh 51 91 102 133 145 158 156 162 147 139 134 120

No. Of countries on the lowest or below

3 0 0 0 1 1 8 18 33 41 43 63

Nigeria 54

Haiti 145

Chad 158

Haiti 163

Somalia 179 180 180 178 182

Bangladesh: poverty

1992 1996 2000 2005 20100.00

10.00

20.00

30.00

40.00

50.00

60.0056.60

50.1048.90

40.00

31.51

Poverty headcount ratio at national poverty line (% of population) Bangladesh

Poverty headcount ratio at national poverty line (% of population) Bangladesh

Bangladesh: growth

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

GDP growth rate in BD as compared to SA

GDP growth rate BD GDP growth rate SA

Bangladesh: development

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20120

10

20

30

40

50

60

70

80

90

100 Infant mortality rate in BD as compared to SA average

Mortality rate, infant (per 1,000 live births) BangladeshMortality rate, infant (per 1,000 live births) South Asia

Corruption: background causes

• The reason why institutions have remained cumbersome, fragile and unresponsive to people’s needs is rooted in the colonial period, which was further aggravated during the Pakistan period Lewis (2011)

• Result of centuries of oppression and exploitation by corrupt Pakistani administrators and rulers Urch (2008)

• A corrupt bureaucracy: a legacy of Pakistani army rule

• ‘Freedom fighter’ factor and leniency • Appointment of freedom fighters and party men

Corruption: background causes

• Expropriation of SOE’s and handing over to party men• Discretionary power• Authoritarianism in democratic process, absence of

opposition parties• Difference in the causes of corruption between 1972-

1975 and 1975-onwards• Mutual understanding between political parties not to

put the corrupt opponents under trial while in power• From 1976 onwards, handing over of SOE’s involved

corruption• Crony capitalism, false democracy…

Corruption: current scenarioResponse to questionnaire / questions How respondents rank 

obstacles

Refusal  to  attend questionnaire

40.65% Bribe  as  no.1 obstacle

22.8%

Refusal  to  answer ‘bribe’ question

14% Bribe  as  no.2 obstacle

22.8%

  negative positive Refused Extortion  as  no.1 obstacle

3.3%

If  paid  bribe  to  carry out business 0% 67% 28.3%

Extortion  as  no.2 obstacle

27%

If  paid  bribe  during operation 0% 87.5% 12.8%

Bribe as a retarding factor

49%

If  paid  extra  to  get things  done  in  gov. offices  e.g.  renew license

0% 78.1% 21.9%

Either  bribe  or extortion  as  a retarding factor

49%

Corruption: current scenario  Official fees(BDT)  paid has to pay

Formation  of  a company

60,000.00 to 100, 000.00

2,403,241.56

Total informal pay 2,633,141.00

During operation 1, 036, 577.00

For  export,  per invoice

400.00

For  import,  per consignment

10, 000.00

For CA/law firm 1,292,531.00For CnF 1,569,540.00

Story of bribery 1

• Turn-over of the company: BDT 420, 000, 000.00

• Taxable turn-over: BDT 100, 000, 000.00• VAT payable: BDT 15, 000, 000.00• Share for the VAT collector: BDT 1, 000,

000.00• Paid as VAT to the state: TK. 5, 000, 000.00 • The firm owner : TK. 9, 000, 000.00 for

himself

Story of bribery 2• Monthly electricity bill: TK. 600, 000.00 TK. 7, 200, 000.00 for a year Bill paid: TK. 4,000, 000.00 Amount unpaid: TK. 3, 200, 000.00Meter reader is paid: TK. 1, 500, 000.00 The owner misappropriates: TK. 1, 700, 000.00 • Monthly gas bill: TK. 250, 000.00 TK. 3, 000, 000.00 for a year Bill paid: 1, 500, 000.00; Bribe: TK. 750, 000.00 Misappropriation by the owner: TK. 750, 000.00

Story of bribery 3

• To get a contract like equipment supply to BD gov. a foreign company has to pay 2.8 million US dollars to each of the five concerned ministries. Therefore, in total a company has to pay 14 million US dollars to get hold of such a contract from the Bangladesh government.

Conclusion• Absence of true democracy• Political favouritism, crony capitalism• Expropriation and handing over of SEO’s involved

corruption• No trial and punishment of the corrupt• Corruption has been a norm in Bangladesh and

people are desensitized and no protest from the people against corruption

• Businessmen are the most corruption in Bangladesh