It is widely accepted that corruption retards growth by deterring
foreign investment and encouraging brain drain. It leads to the
misallocation of economic resources and distorts competition. It
depletes the affected country's endowments - both natural and
acquired. It demolishes the tenuous trust between citizen and state.
It casts civil and government institutions in doubt, tarnishes the
entire political class, and, thus, endangers the democratic system
and the rule of law, property rights included.
This is why both governments and business show a growing commitment
to tackling it. According to Transparency International's "Global
Corruption Report 2001", corruption has been successfully contained
in private banking and the diamond trade, for instance.
Hence also the involvement of the World Bank and the IMF in fighting
corruption. Both institutions are increasingly concerned with
poverty reduction through economic growth and development. The World
Bank estimates that corruption reduces the growth rate of an
affected country by 0.5 to 1 percent annually. Graft amounts to an
increase in the marginal tax rate and has pernicious effects on
inward investment as well.
The World Bank has appointed last year a Director of Institutional
Integrity - a new department that combines the Anti-Corruption and
Fraud Investigations Unit and the Office of Business Ethics and
Integrity.
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