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No, aid doesn’t cause corruption – the problem starts with us

No, aid doesn’t cause corruption – the problem starts with us

By Rupert Simons

The Mail on Sunday recently invited its readers to sign a petition against foreign aid, claiming it caused corruption. On the same day, the Panama papers were released, providing a gripping insight into the dealings of the global elite from Iceland to Ecuador.

It’s tempting to link these two stories, and conclude that “we don’t know where the aid is going, so we might as well cut it.”

Tempting, but wrong. What the Panama papers actually show is that corruption is a global problem. Mossack Fonseca’s 14,000 clients came from over 50 countries, including the UK and other European countries who like to lecture others on corruption. The fact that many of their activities were legal doesn’t make them acceptable.

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Mossack Fonseca HQ. Photo from Wikimedia Commons.

By contrast, aid agencies are sharpening their tools for preventing corruption in aid programs and making data available for citizens to fight it.

Aid is becoming more transparent. Agencies like DFID publish detailed accounts of where the money goes. Yes, there are too many loopholes and exemptions. Not enough people are using the data. But the new Aid Transparency Index, published this week, shows that transparency is becoming the norm for donors of all shapes and sizes.

Aid is also tightly controlled. Rather than theft, the biggest problem with aid is when it’s spent on things that don’t help local people. A BBC investigation found that nearly half the aid intended for Syria went to pay overheads. This amount can be cut substantially by giving cash or food vouchers to refugees, which are both preferable and cheaper.

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Transparency word diagram. Photo from Alex Howard (Flickr).

Finally, giving aid to help countries improve their tax and budget systems can produce excellent returns. A £24 million investment by DFID in the Rwanda Revenue Authority helped increase the tax take by a factor of six. Laws matter too. I managed a governance project in Liberia that helped attract foreign investment in infrastructure and natural resources. The President told us to concentrate on investors from countries like the United States where bribing a foreign official is a criminal offence.

Even when people in aid-dependent countries use tax havens, the Panama papers show that people in rich countries enabled them to do so. Most of them had lawyers and accountants in New York and London as well as in Panama. Most of the tax havens are territories or dependencies of rich countries, like the British Virgin Islands. The beneficiaries of this system are the rich and powerful everywhere. The losers are the rest of us. Let’s stop blaming the people who rely on aid and clean up our mess first.

Rupert Simons is CEO of Publish What You Fund, which recently released the Aid Transparency Index. He previously worked with the Liberian President, and helped set up a situation room for Sierra Leone’s National Ebola Response Centre. You can follow him on twitter @RupertSimons.

Featured image shows a word diagram. Photo from Beth Kanter (Flickr).

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