Crime, Law and Social Change

, Volume 60, Issue 2, pp 147–164

The limitations of neoliberal logic in the anti-corruption industry: Lessons from Papua New Guinea

Authors

    • Development Policy CentreAustralian National University
    • Crawford School of Public PolicyAustralian National University
Article

DOI: 10.1007/s10611-013-9450-1

Cite this article as:
Walton, G.W. Crime Law Soc Change (2013) 60: 147. doi:10.1007/s10611-013-9450-1

Abstract

To acknowledge concerns about the rising power of the private sector, key international anti-corruption organisations have supported initiatives that emphasise the role that businesses play in corruption. Yet the way these initiatives have impacted the practices and perceptions of anti-corruption organisations in developing countries has received scant attention. As businesses can be key perpetrators of corruption, understanding the way anti-corruption organisations respond to the private sector can highlight the efficacy of anti-corruption efforts. Drawing on interviews with anti-corruption policy makers in Papua New Guinea (PNG) conducted between 2008 and 2009, this article shows how two international anti-corruption organisations perceived and worked with the private sector. It finds that there have been some initiatives designed to address, and raise awareness about private sector corruption in the country, reflecting international trends. At the same time the private sector is viewed, often uncritically, as an anti-corruption champion; this has affected the way anti-corruption organisations engage with businesses operating in the country. This article argues that despite a change in international discourse about the private sector’s role in corruption, in developing countries like PNG, neoliberal logic about the nature of the state still guide anti-corruption activity. These findings have implications for the efficacy of international anti-corruption efforts.

Introduction

The way scholars and practitioners conceptualise the private sector’s role in corruption, and the fight against it, has substantially changed over the past two decades. In the past, anti-corruption activity was almost exclusively focused on government officials. However, in a neoliberal1 world, where non-state actors have greater power and influence, the anti-corruption industry increasingly acknowledges the role businesses can play in corrupt transactions. To this end there have been global compacts, legal instruments and definitions developed to focus on private sector corruption.

In light of numerous high-profile cases of private sector corruption–such as Enron, Arthur Anderson, and Siemens–these initiatives are to be welcomed. But there are lingering questions about how serious the anti-corruption industry is about fighting private sector corruption. Indeed, critical theorists assert that the ‘anti-corruption agenda’ promulgated by international anti-corruption organisations is both a product and facilitator of neoliberalism, and that this has undermined the anti-corruption industry’s efficacy. Still, little is known about how international anti-corruption organisations operationalise their concerns about private sector corruption. Nor is there much evidence about the way anti-corruption actors–employees, volunteers, activists and board members–perceive the shift in international discourse towards recognising the private sectors role in corruption. Without this empirical evidence, the ability of anti-corruption efforts to address private sector corruption is unclear.

This article argues that while international attitudes towards private sector corruption have shifted, international anti-corruption organisations operating in developing countries are guided by neoliberal logic. This undermines their fight against corruption. The article first reviews the literature around the anti-corruption industry’s concern with private sector corruption. Second, it summarises the literature about private sector corruption in Papua New Guinea (PNG), the case study of this article. In the third section the methodology guiding this research is outlined; it is here that the two international anti-corruption organisations that are the focus of this case study are introduced. The fourth section shows how those associated with these organisations perceived the private sector’s role in corruption and anti-corruption, and the way these organisations engage with the private and public sector. The article concludes by examining the implications of these findings.

The private sector: friend or foe?

Over the past two decades key international organisations associated with the anti-corruption industry2 have made great efforts to shine a spotlight on the private sector. To this end there have been numerous charters and legal instruments developed to curtail private sector corruption–including the United Nation’s Global Compact’s Principle 10 against Corruption, the UK Bribery Act, the United State’s Dodd-Frank Act, and the Organisation for Economic Development and Cooperation (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. There have also been moves to re-conceptualise corruption: since the 1990s many academics and anti-corruption organisations have defined corruption as the ‘abuse of entrusted power for private gain’, as opposed to the previously ubiquitous ‘abuse of public office for private gain’. The newer definition does not necessitate the participation of state officials (and can thus include business-to-business corruption) while the older definition necessitates the involvement of at least one state official. The most recent definition thus places greater emphasis on potential private sector corruption. Holmes [36] argues that this reconceptualisation recognises the increasing role that businesses play in the control and distribution of resources in the neoliberal era.

Despite these changes, the way many scholars and policy makers understand the role of the private sector in the fight against corruption has not changed much. Scholars, mostly economists [1, 31, 60, 74], have argued that the private sector is a key partner in the fight against, rather than a perpetrator of, corruption [51]. Ohnesorge [60], for example, suggests that economic policy solutions that prioritise economic deregulation, liberalisation and privatisation are crucial for addressing corruption. To support such policy solutions economists and practitioners draw on large-scale data sets [1, 31]. For example, Goel and Nelson [31] examine the relationship between economic freedom and corruption, where economic freedom is:

The degree of government intervention in the economy, where this intervention could take…many forms, including the regulatory environment, the fiscal burden imposed on the private sector, and trade policies. Societies with less government intervention are presumed to be more “economically free.”

They find that higher economic freedom, more than political freedom, results in lower levels of perceived corruption. Their conclusions suggest that policies that allow for greater private sector freedom in the economy help address corruption. As a result of such analysis, many economists consider the state a site for rent seeking, while the private sector is, by and large, not [79].

Key international organisations within the anti-corruption industry also strongly reflect this position. The World Bank [81: ii], for example, asserts that ‘reforms that clarify the role of the state, reduce excessive regulatory burden, and promote competition can result in stronger firms, more jobs, and better public services’ and, in turn, help mitigate corruption. But it is not only the World Bank that takes this position–for an example see the United Nations Development Program’s policy on corruption in the Pacific [78]. While narratives and approaches to tackling corruption vary from donor to donor [40], many have come to support the reduction of state involvement in the economy, particularly through privatisation and deregulation, as an effective policy solution [38, 72].

Donors and international non-governmental organisations (INGOs) support anti-corruption initiatives to address corruption and facilitate market-oriented reform. For example, the USAID sponsored Center for International Private Enterprise (CIPE) invests in anti-corruption initiatives in developing countries to help strengthen ‘democratic institutions, [encourage] economic growth, and buil[d] relationships between the public and private sectors’ [21: 8]. For CIPE, anti-corruption helps smooth the way for both democracy and private sector investment, which they–like many others in the anti-corruption industry–see as inextricably linked.

Critics of the international anti-corruption industry refute the purported benefits of such neoliberal reform. For example, de Maria [23] provides evidence from Africa to counter the notion that increased ‘economic freedom’ reduces corruption. Examining five sub-Saharan countries with the most number of privatisations of state-owned-assets between 1979 and 2002, he finds little evidence to prove that privatisation reduced perceived levels of corruption. Rather, de Maria suggests that privatisation may have simply provided corruption with ‘another floor…to dance on’ [23: 11]. For many scholars the capitalist system is the key cause of corruption, with the spread of neoliberal policies exacerbating corruption around the world [1618, 35, 58, 71]. Holmes [37: 11], for instance, writes that:

The spread of neoliberalism since the 1970s, which accelerated in the late 1980s, has significantly contributed to the apparent rise in corruption. Neoliberalism’s focus on ends over means, flexibility, competition, homo economicus, consumption, free trade, and reducing the role of the state (state “downsizing”, monetarism rather than Keynesianism) helps to explain that connection.

Anti-corruption critics are careful not to discount the importance of fighting corruption in developing countries. Indeed, Brown and Cloke [16], strident critics of the anti-corruption industry, welcome efforts to curb corruption involving private and public sector elites. They are concerned, however, that most anti-corruption efforts focus on corruption in developing country governments, while overlooking the involvement of Western corporations. Likewise, William and Beare [80] argue that the overriding rationale for fighting corruption is to mitigate risk for capital flows into developing countries. In this view, ‘corruption is targeted, not so much for the injustices it extracts from ordinary people, but for the structural problems it could cause private investment’ [24: 324].

Some believe this bias is evidenced by the way private sector involvement in anti-corruption activities is framed. In a review of Transparency International’s (TI) Source Book–an influential resource for TI and other anti-corruption organisations–Hindess [35] notes that the book acknowledges that the private sector can be a purveyor of corruption. But he argues that in considering the private sector a key partner in the fight against corruption, rather than a target, the Source Book, ‘reflects a presumption on the part of many international agencies that a properly organised private sector possesses an innate capacity for self-regulation’ [35: 1392]. Others have also expressed concern about the nexus between the private sector and international anti-corruption organisations. Critics suggest that the practice of anti-corruption has resulted in an unholy alliance between the private sector (particularly Western corporations), Western governments and their donor programs, multilateral organisations (including the World Bank, IMF and OECD), and international non-governmental organisations (INGOs). For some, this is evidenced by TI’s failure to meaningfully respond to, or speak out against, the root causes of the global economic crisis (GEC) [19, 58].

For critics, the absence of a broader analysis of and response to private sector corruption undermines the fight against it, which may explain the lack of tangible progress made against corruption since international donors adopted it as a priority in the 1990s [24]. The underlying concern of these critics is summed up by Brown and Cloke [18: 290], who suggest that:

Without properly examining the complexity of corruptions, without examining the roles and responsibilities of business, governments and supra-national institutions alike, there can be no valid assessment of corruption [and thus no effective program for addressing it].

As geographers, Brown and Cloke [16] call for academics and others to look at the local to global linkages of corruption in order to better understand its causes.

The private sector, corruption and anti-corruption in Papua New Guinea

This article draws on analysis of corruption and anti-corruption actors in PNG—a Pacific parliamentary democracy situated to the north of Australia. This section summarises popular and academic narratives about the private sector, corruption and anti-corruption in PNG.

The level of corruption in PNG is difficult, if not impossible, to accurately measure: corruption by its very nature is conducted in secret, hiding the extent of the problem away from researchers and the public. Having said this, there are many who view corruption in PNG as acute [39, 63, 64]. The country has rated poorly in a number of global indicators of corruption, including TI’s Corruption Perceptions Index and the World Bank’s Worldwide Governance Indicators (WGI) [48]. These indicators do not identify the degree of private sector involvement in corruption per se, however. To get a sense of the role that the private sector plays in corruption in PNG requires an examination of other sources.

According to the media, anti-corruption organisations and academics, the private sector plays a crucial role in corruption in PNG. Drawing on TI’s 2009 report on corruption and the private sector around the world, including PNG [27], the Australian Broadcasting Commission described corruption in the private sector in the country as ‘rife’ [29]. Academic David Kavanamur argues that there is a prevailing culture of businesses ‘winning tendered projects by building commissions or kickbacks, at the request of corrupt politicians and bureaucrats, or lobbying…to avoid competitive bidding processes’ [49: 3]. He adds that, ‘collusion between state officials and private companies is threatening to become the norm, as part of the national cultural mind-set’ [49: 3].

There is considerable evidence of private-sector corruption in PNG to back up these assertions. This is most apparent in the forestry sector, which has the worst reputation for corruption in the country. The 1989 Barnett Report [14], named after former Judge Thomas Barnett, offers a seminal account of corruption between logging companies, landowner organizations and the state. The impunity with which logging companies have engaged in corruption and other malfeasant activities was highlighted in a report from New Ireland province, which asserts:

Some of the [forestry] companies, are now roaming the countryside with the self-assurance of robber barons; bribing politicians and leaders, creating social disharmony and ignoring laws in order to gain access to, rip out, and export the last remnants of the province’s valuable timber. These companies are fooling the landowners and making use of corrupt, gullible, and unthinking politicians…It is doubly outrageous that these foreign companies have then transferred offshore secret and illegal funds…at the expense of landowners and the PNG Government (Commission of Inquiry Interim Report No. 4, Vol 1., P 85, Cited in The Asia-Pacific Action Group [73: 5]).

Concerns about corruption in the forestry sector continue, with academics, NGOs and the media reporting large-scale corruption involving government ministers, land- owner companies, bureaucrats and logging companies [10, 27, 33, 52, 54, 55, 70]. The Malaysian logging company, Rimbunan Hijau PNG (RH PNG) has become a symbol for many of all that is wrong with the logging sector in PNG. The company is the largest forestry business in PNG, generating around half of the output of the forestry sector [43: 6] and has been frequently linked to corruption [10, 30, 33], with Greenpeace [33: 6] noting that:

Rimbunan Hijau has close connections to PNG’s political elite. The [then] Prime Minister has been directly involved in the logging industry and his Deputy has been criticised in an Ombudsman Commission report for ‘arbitrary and irresponsible’ interference in directing the unlawful allocation of the Kamula Dosa logging concession to Rimbunan Hijau.

The reach of corruption in this sector is deeply concerning.

There have also been instances where the mining sector has been found to be corrupt or suspected of corruption. Marshall [56], for instance, recites an instance of transnational corporation Broken Hill Proprietary Co. Ltd (BHP) paying a landowner to testify at a hearing into the company’s environmental record at the Ok Tedi Mine. Around the country and in the blogosphere there are accusations of grand scale corruption and ‘sweetheart deals’ (favorable agreements between government and mining companies) in the mining sector. But, very little is known about the extent of corruption in this sector. Despite efforts by local and international advocates [69], including the two organisations included in this case study, the country has yet to implement the Extractive Industry’s Transparency Initiative (EITI)–an initiative aimed at making the payments made by mining industries to governments transparent. Even so, as Johnson [45] notes, the EITI would not be a magic bullet for addressing corruption in PNG. After looking at financial flows of the Porgera Gold Mine (located in the highlands province of Enga) he argues that an EITI would only partially address the problems of poor transparency and accountability in PNG. Johnson suggests that accountability should go beyond tracking payments made from mining companies to governments; he argues for audits that track payments from government to all organisations involved with mining at the national level–including landowners associations and sub-national level governments [45]. Such initiatives are particularly important give that PNG is going through a resource boom–with the International Monetary Fund predicting that mineral exports accounted for 77 % of export earnings in 2012 and are set to rise [42].

While corruption undoubtedly aids some businesses, for others it is viewed as a hindrance. The Institute of National Affairs (INA), a think-tank supported by PNG businesses (including a number of multinational corporations and prominent local businesses), conducts an occasional survey into the views of businesspeople on the country’s business and investment environment. The last two surveys were conducted in 2002 and 2007, with 243 responses collected from all provinces in 2007 [13: 11]. After law and order, corruption was nominated as the most serious hindrance to business and investment, up from the fourth most serious concern in 2002 [13]. For many businesses, corruption in PNG not only involves cost, it also involves greater uncertainty. Fewer respondents to the 2007 survey believed corruption would lead to a positive outcome. These legitimate businesses thus have an incentive to address corruption: in doing so they may reduce this taxation on their own businesses.

Privatisation and deregulation: panaceas for corruption?

Some believe that reducing government control over resource rents, and creating conditions for greater private sector investment, would best address corruption in PNG [32, 39, 49]. For example, Gosarevski and colleagues [32] believe that reducing unnecessary government regulation and opening up the economy to foreign direct investment would deprive politicians and bureaucrats of the rents that enable corruption. It would, they argue, also result in greater opposition to corrupt transactions, thereby implying that the private sector is less prone to corruption than the public sector, and that empowering the private sector could help induce support for anti-corruption initiatives.

Privatisation of government assets has been practiced–in fits and starts–since the early 1990s, but it culminated with the Morata government (1999–2002), which sold or transferred state holdings in mining, oil palm plantations and banking. This government also set up a framework for privatising a host of other state owned enterprises [22]. Privatisation has had some success in PNG; it meant the government was no longer both an investor and overseer of the mining industry [22], and it led to the improved performance and greater transparency of the National Superannuation Fund (NASFUND) after elite bureaucrats and politicians associated with the fund were implicated in corruption and mismanagement [65]. On the other hand, there are many who suggest that privatisation has exacerbated corruption in PNG. Kaman, for instance, suggests that the process of privatising water in the National Capital District (which incorporates the capital Port Moresby) lead to ‘startling accounts’ of bribery and corruption [46: 1], and Curtin [22] suggests that privatisation has been accompanied by dubious transactions. Similarly, May writes that moves towards privatisation through the corporatisation of government operations has had mixed results and has sometimes ‘clouded issues of accountability’ [57: 6].

PNG’s ranking on the Control of Corruption3 component of the World Bank’s WGI index, shows that the country’s ability to address corruption has diminished significantly since the mid 1990s. Figure 1 highlights this dramatic downturn–with PNG’s perceived control of corruption reducing significantly from 1996 to 1998, and again from 2002 to 2003 after the period of significant privatisation (1999 to 2002). This downturn occurred despite the country’s Regulatory Quality ranking—a measure of the ability of the government to formulate and implement policies and regulations that permit private sector development [47]–improving over the same period (also shown in Fig. 1). The relationship between privatisation, deregulation and corruption in PNG deserves further research (which is beyond the scope of this publication), but this analysis does suggest that privatisation and deregulation should not be considered as magic bullets for solving corruption, and that they may even help perpetuate it (or at least the increase the perception of corruption occurring).
https://static-content.springer.com/image/art%3A10.1007%2Fs10611-013-9450-1/MediaObjects/10611_2013_9450_Fig1_HTML.gif
Fig. 1

Control of corruption and regulatory quality (Percentile Rank 0-100): Papua New Guinea. Source: Kaufman et al [47]

In the past citizens have met the threat of market-oriented reform with fierce resistance. In 1995, citizens protested against an IMF/World Bank proposal to convert communal land into alienable assets (in the hope that such reform would make it easier for businesses to invest). At the height of the privatisation program in 2001, thousands of students and citizens rallied at Parliament House in protest against the threat of privatisation of government services including Telikom, Elcom and Post PNG. The protest tragically resulted in the deaths of three students from police bullets [15]. Tom Olga, a leader of the 2001 student riots, turned people’s disdain for land reform and privatisation in to votes–in 2007 he ran against the then Prime Minister in his seat of Western Highlands Provincial and won (albeit narrowly).

More recently, deregulation has been ushered in without such violence, and with some success. Most notably, the liberalisation of the telephony market, while opposed by the political elite, has been welcomed by consumers who have witnessed massive investments into infrastructure by private companies, resulting in lower call rates and significantly increased mobile phone coverage. In a land with poor roads, no train system, and extremely rugged terrain, the increased reach of the telephone network has made a difference to the lives of Papua New Guineans from all walks of life. It has helped with medical emergencies, social interaction, access and information about markets and has even improved banking services [28]. Still, policy makers are cautious about privatisation for fear of political and civil unrest. For example, the Asian Development Bank’s (ADB) recent benchmarking study of PNG’s state owned enterprises calls for their privatisation, but notes that full privatisation is ‘not always politically feasible’ [2: ix] (in other words it could lead to further civic and political unrest). As a result the ADB suggests partial privatisation (such as joint ventures and public-private partnerships) be attempted–which it considers more palatable.

Opening the way for the private sector is also problematic because PNG is devoid of all but the most elementary institutions to deal with private sector corruption. The country’s constitutionally mandated Ombudsman Commission focuses almost solely on corruption involving state officials [61]. This leaves it to the police–who are themselves sometimes subsidised by mining companies to keep the peace [26]–or donors and civil society to highlight the role that the private sector plays in corrupt transactions in the country. There has also been resistance to anti-corruption initiatives during phases of privatisation: in the early 2000s the Privatisation Commission rejected efforts to adopt ‘integrity pacts’ (agreements made by businesses and public sector employees not to engage in corruption) which were pushed by the local chapter of TI (one of the organisations examined in this article) [53].

Research methods

This article draws on individual interviews and focus-group discussions with members, employees, board members and volunteers associated with two anti-corruption organisations operating in PNG. Grey materials (particularly those published between 2008 and 2009) from these organisations were also reviewed. Individuals associated with each organisation were chosen as research subjects through snowball sampling; 20 semi-structured and 20 unstructured interviews were conducted over a total of 10 months between 2008 and 2009. Interviews were mostly conducted in Port Moresby, the capital of PNG, while six interviews were undertaken in Canberra, Australia.

The first organisation, Transparency International PNG (TI PNG), is a chapter of the Berlin-based INGO Transparency International. TI PNG started operating in the country in January 1997; its vision is for PNG to become ‘an independent nation in which government, politics, business and civil society and the daily lives of our people are free of corruption’ [76: 6]. In 2008, the organisation’s work revolved around five overarching strategic priorities: advocacy, civic and electoral education, membership and building coalitions, legislative initiatives and policy research [76]. All theses priorities, except for the legislative initiatives strategy (which focused on the design of legal instruments), were aimed at keeping the Government of PNG accountable through awareness-raising activities (although as we will see, in 2009 it did support an initiative aimed directly at the private sector). In 2008, TI PNG received a total income of K1,061,420 (US$498,4434), employed eight staff and was supported by 14 voluntary Directors [76: 20].

The second organisation, the Australian Agency for International Development (AusAID)–the Australian government’s overseas aid program–started operating in PNG in 1974 (although with PNG a colony of Australia until 1975, Australia’s involvement with PNG pre-dates this). AusAID is PNG’s largest international donor. In the 2008–09 financial year–the time when most of the research for this article was conducted–AusAID contributed 49 % of its PNG budget of AU$355.9 million (US$362.63 million) to ‘governance’ initiatives, far outstripping funding in other areas such as health (18 %) and education (12 %) [6: 37]. The governance budget has funded a variety of specific anti-corruption initiatives–including support for civil society organisations and coalitions, the supply of experts into government departments and ministries, and assistance for the Ombudsman Commission of PNG [6].

Anti-corruption organisations and private sector ‘champions of transparency’

This section shows how AusAID and TI PNG conceptualised the private sector’s role in corruption and the fight against it. It also presents how each organisation engaged with the private and public sector.

AusAID

AusAID recognises that the private sector can play a role in corrupt transactions. For example, its Office of Development Effectiveness’ assessment of corruption in PNG, Indonesia, and the Solomon Islands acknowledges that the private sector contributes ‘to corruption when it offers bribes to government officials or colludes to defraud the state’ [59: 23]. Furthermore, the organisation defines corruption as the ‘misuse of entrusted power for private gain’ [4: 1]—a definition that acknowledges that the private sector can play a pivotal and wide-ranging role in corruption. In turn, AusAID takes measures to monitor private sector partners, which deliver much of its aid program, for corruption. AusAID provides fraud awareness training to contractors and other partners, and carries out due diligence checks and audits [8, 9]. Contractors are obligated to report potential fraud when partnering with AusAID. AusAID also broadly supports the EITI in developing countries; however, despite Australia’s vast mineral wealth the country has only recently conducted a pilot of the EITI itself–to ‘test the applicability and usefulness of the EITI in the Australian context’ [12].

Overall, AusAID takes the view that the private sector is an ally in the fight against corruption, not a foe. So, in its seminal anti-corruption policy, Tackling corruption for growth and development: A policy for Australian Development Assistance on Anti-Corruption [4], AusAID takes pains to point out the corruptibility of governments due to the weakness of the state, poorly defined or implemented rules and regulations, low wages, absence of meritocracy, and ineffective oversight mechanisms. On the other hand, whilst acknowledging that the private sector can be a party to corruption, the problem of corruption in the private sector is explained away:

While foreign companies may be targets for illicit rent seeking behavior, bribes may also appear necessary to win business. However greater transparency and international competition, and an increased awareness of the costs that corruption imposes on business, have seen the emergence of private sector champions of transparency [4: 5].

To pave the way for these ‘champions of transparency’, the organisation calls for ‘corporatising and, in some cases, privatising state-owned enterprises’ [4: 10] as a part of its anti-corruption strategy.

In PNG, AusAID focused its anti-corruption activities almost exclusively on the government, with the agency most prominently employing two approaches to mitigate corruption in the public sector. First, AusAID sought to address possible government corruption through technical assistance (TA)5 programs–estimated to account for half of Australia’s total contribution to PNG [41]. TA programs involve the placement of Australian experts in key positions within the PNG Government to transfer capacity and knowledge, and monitor systems of governance [5]. Programs that take this approach include the Ombudsman Commission Institutional Strengthening Project, the PNG-Australia Treasury Twinning Scheme and the PNG Advisory Support Facility (Phase I) [44]. Each of these TA programs feature Australian and Papua New Guinean consultants working with Papua New Guinean partners. Consultants assist the implementation of a range of ‘practical targets’ (including planning, monitoring and expenditure controls) that seek to improve the effectiveness and efficiency of Papua New Guinean public sector organisations [44]. Despite criticisms–including those by the then PM of PNG, Sir Michael Somare [50]–and calls for TA to be scaled back, AusAID and those who independently reviewed AusAID’s TA programs, regarded TA as an effective strategy against government corruption [41].

Second, AusAID supported non-state actors in their efforts to monitor the government and push for greater transparency and accountability from the state. For example, the Democratic Governance Program, a program that supported private sector and civil society initiatives, stressed that ‘anti-corruption initiatives have a high priority’ [3: 1]. The program seeks to fund a range of organisations including TI PNG and The Media Council of PNG, to demand good governance from the state [7].

So, much of AusAID’s good governance work (which is anti-corruption by another name) was targeted at shaping the actions of the Government of PNG.

Some of those associated with AusAID did not believe that addressing corruption in the private sector could or should be a part of its mandate. For example, when asked whether he thought AusAID was doing enough to curb private sector corruption, one senior advisor suggested that this was not AusAID’s role, saying that:

All aid programs generally operate through the public system because in developing countries the public sector is responsible for service delivery.

This respondent went on to say that while he and his colleagues understood that there was a lot of corruption involving the private sector, particularly in the forestry sector, the ‘private sector will only be more transparent and accountable if the government forces it to be more transparent and accountable, and if the government isn’t transparent and accountable it is unlikely the private sector [will] be’. The government was seen as a means through which private sector corruption could be curtailed, despite (as shown previously) the key role the private sector plays in corruption and the economy.

While acknowledging that the private sector could be corrupt, many respondents believed that the private sector was primarily an anti-corruption champion. For example, one junior employee said, ‘the private sector in Papua New Guinea [is] a very strong force in driving social, economic and other agendas’ and thus helps the fight against corruption by ‘speaking out against it [corruption]’. The private sector was also lauded for its efficient management approaches. ‘Businesses are doing much, much better than the public service [in addressing corruption]…because of their good management’, a senior employee said. In turn, many respondents argued that the public sector could learn from the private sector’s management principles. For example, another senior employee said, ‘the private sector lights the way [for the government]’. Thus, for many associated with AusAID, the private sector had an important role to play in fighting corruption through advocating against it and providing an example of how to effectively manage resources.

In sum, the anti-corruption and good governance programs promoted and implemented by AusAID and its partners considered possible corruption in the private sector, compared to corruption of the government, as a relatively insignificant threat. Those who work with AusAID mostly agree, suggesting that businesses are more effective and efficient–and less corrupt–than the government, and that addressing public sector corruption axiomatically addresses corruption in the private sector. This is a view that fits in with AusAID’s broader program of encouraging private sector development to help ensure good governance and sustainable development [11, 44]. These responses overlook corruption between companies and citizens (such as the example of BHP highlighted earlier) and between businesses. While AusAID defines corruption as ‘the abuse of entrusted power for private gain’, it mostly does not seek to act against corruption defined in this way.

TI PNG

Like AusAID, TI PNG acknowledges that the private sector can play a pivotal role in corrupt transactions. The agency has defined corruption in different ways over the years, but as a chapter of the global TI movement, the organisation essentially defines corruption as ‘the abuse of power for private gain’ [75]—a definition that focuses on private sector corruption. TI PNG’s awareness of the role that the private sector can play in corruption is also exemplified in its contribution to TI’s 2009 Global Corruption Report, which features corruption involving forestry companies in PNG [27].

During the research period (2008–2009) TI PNG was involved in efforts to address private sector corruption. For example, the organisation initiated and supported the Business Against Corruption Alliance (BACA), which was set up to ‘ensure businesses do not bribe or offer gifts to government officials to get contracts and permits to work in the country’ [77]. BACA was awarded US$20,000 from the British High Commission in PNG to bring together more than 200 members of the Port Moresby Chamber of Commerce and Industry (PMCCI) in the fight against corruption in PNG [77]. Its activities include producing workplace codes of conduct, and providing workshops and education materials. The PMCCI, which handles donations, helps manage BACA. This example highlights TI PNG’s support for self-regulation within the private sector.

The PMCCI has a strong relationship with TI PNG; staff of the former appeared at TI PNG fundraising events and actively supported TI PNG’s campaigns. This is not surprising given TI PNG’s broader dependence on the private sector funding and support. In 2008, although there were representatives from government, and civil society, its board was mostly composed of members from, or with experience in, business. This included mining companies, insurance agencies, the banking sector, and development contractors. In the same year the organisation received K152,574 (US$ 71,649) from business and corporate members [76: 22]. This sum did not include contributions to the Siaguru Endowment Fund; by 2008, local and transnational business supporters had helped to raise K1,032,000 (US$ 484,627) for the Fund, including a contribution of K250,000 (US$ 117,400) from the mining company Lihir Gold Limited (a then member of the PMCCI) [76: 21]. Contributions such as these are publically recognised by TI PNG in its annual reports, on its website and in the media. And according to one employee, they were ‘necessary’ given the uncertain and ‘dwindling support’ from international donors.

TI PNG’s relationship with the private sector was distinct to its affiliation to government. For a start, TI PNG did not receive any funding or direct support from the Government of PNG. This meant it could aggressively highlight potential government corruption through regular advocacy campaigns, without fearing a reduction in funding. During 2008 and 2009 the organization was constantly in the media highlighting government corruption or inaction [6668]. In 2005, in perhaps its most successful campaign, TI PNG organised tens of thousands of signatures against a private members bill calling for members of parliament to have ‘discretionary funds’ earmarked for their electorates increased from K500,000 to K1.5million [62]. The bill was withdrawn after TI PNG’s campaign. These confrontational efforts stand in contrast to the relatively conciliatory approach the organisation took towards the private sector in during the research period.

Respondents associated with TI PNG explained that the government was primarily, if not solely, responsible for corruption. As one employee explained, ‘obviously there must be [corruption in the private sector], but it wouldn’t exist if there were no corruption in the government’. Thus, as another board member suggested, ‘[when engaged in bribery] it’s not outward bribery or corruption, but what the private sector is doing is facilitating the operations of government’. In other words, the government set the rules of the game and businesses are reluctantly forced to service government demands for corruption. Given this, it was natural for some respondents to strongly support privatisation as a means of addressing corruption. A board member of TI PNG drew on the example of NASFUND as evidence of privatisation being a successful remedy to corruption. Asked if he thought that wide-spread privatisation would help to curb corruption in PNG, he answered: ‘Yes, be careful what you link with privatisation, somehow it’s linked with bad things, but yes, putting more into the hands of private enterprise and that culture of private enterprise [will enhance an organisation’s] performance [and help address corruption]’.

Respondents also lauded international mechanisms for regulating private transnational corporations. Reflecting on the impact of controversial mining companies in PNG, including the transnational corporation, BHP, which once owned Ok Tedi—a mine responsible for the largest environmental disaster of PNG’s history [20]–one board member said that: ‘the way they manage[d] themselves [was] of a very high standard, because they were subject to the Sydney stock exchange, the London stock exchange’. He argued that they and other Western mining companies had higher standards than Chinese companies–which he saw as less ‘accountable and transparent’.

In sum, like AusAID, TI PNG mostly considered the private sector as a partner in fighting corruption, rather than a potential source of corruption. This led to the organization promoting self-regulatory mechanisms to address private sector corruption. TI PNG did not seek to draw attention to corruption between businesses or between businesses and citizens. For TI PNG corruption was primarily about abuses of public office by government officials.

Conclusions

The literature review (the section Private Sector: Friend of Foe?) introduced Brown and Cloke’s [18] assertion that to address corruption effectively requires examining the roles and responsibilities of businesses, governments and supra-national institutions. In PNG—a country perceived by many to be acutely corrupt–corruption involves a range of local, national and transnational actors in the public and private sectors. What is most striking about PNG is the lack of anti-corruption initiatives that agitate against private sector involvement in corruption. This prevents the multiple causes of corruption, as described by Brown and Cloke, from being addressed systematically and comprehensively. This gap should be seen as an important area for the anti-corruption programs of donors and NGOs to concentrate some of their efforts.

AusAID and TI PNG have acknowledged, and have taken steps to address, corruption in the private sector. But while campaigns against the government are aggressive and, particularly for AusAID, well funded, businesses are by and large considered anti-corruption champions. Those associated with these organisations consider private sector corruption as a failure of government regulation, rather than a key part of doing business. When anti-corruption activities are aimed at business they often assume that the private sector–particularly Western transnational corporations–are capable of self-regulation. While the government may be more corrupt than the private sector in PNG, and while AusAID and TI PNG have had some laudable success in shaping popular perceptions about government corruption, allowing the private sector to mostly fly under the anti-corruption radar weakens anti-corruption efforts.

This case study thus highlights the role that neoliberal logic plays in shaping perceptions about, and solutions to, corruption. The opening up of markets through privatisation and deregulation–two aspects of neoliberalism–may have helped address corruption and mismanagement in some underperforming state owned enterprises; but it is unclear that it has made any significant impact on overall levels of corruption in PNG. Indeed, by opening up to transnational business, it is possible that the potential for corruption (particularly rent seeking) has increased. Moreover, it is clear that that many Papua New Guinean citizens passionately oppose privatisation. Despite this, the two anti-corruption organisations were convinced that privatisation and deregulation were antidotes to corruption. These responses come about because neoliberal claims about the state–in particular that it is the locus for rent seeking behaviour–were considered immutably logical.

As a result, Hindess’ [35] concerns about the tendency of anti-corruption organisations to view the private sector as more of a friend than a foe appears to be well founded in PNG. This article adds some nuance to Hindess’ arguments, however, by showing that the broader shift in rhetoric by actors in the international anti-corruption industry is somewhat reflected in anti-corruption activities and discourse in PNG. These responses hint at the potential for a more radical response to private sector corruption. For example, TI PNG’s campaign against private members bills, suggest that the organisation could mobilise citizens to demand transparency and accountability of mining and logging operations.

The influence of AusAID in the region could be leveraged to increase pressure on multinational organisations and governments to open up their books. As Johnson [45] highlights, putting pressure on government and businesses to provide information about financial flows should only be the beginning of the process. Civil society needs to be supported to understand who benefits from deals made between government and business. Citizens must also be supported to critically look at the nature of transnational capital, and the flaws of neoliberal systems of governance. Anti-corruption policies need to better engage citizens about private and public sector corruption. With their human and financial resources these two organisations could significantly reshape debates about and responses to corruption in PNG.

This analysis suggests that shining a spotlight on private sector corruption by altering definitions, making declarations and ratifying conventions are laudable and can help shift anti-corruption discourse and practice. But, in and of themselves, they do not change the accepted neoliberal wisdom that governments are essentially rent-seeking institutions while businesses are anti-corruption champions. While the GEC–an event that was unfolding during the research period of this article–has tarnished this idea, there are signs from other parts of the world that this catastrophe has done little to substantively shift key international anti-corruption organisations’ approach to dealing with the private sector [19, 58]. The findings of this article suggest that without critically examining the role that businesses play in corruption, the anti-corruption industry–despite some of the victories it has achieved–will fail to holistically address corruption.

Having said this, there is still a role for the private sector in the international fight against corruption. As this article has shown, some businesses have a natural interest in addressing corruption, as doing so can be good for business (although this is not always the case). The private sector can contribute to anti-corruption efforts, but its involvement should not come at the expense of (potentially) confrontational monitoring of local, national and transnational businesses for corruption and other malfeasant activities.

Footnotes
1

This article defines neoliberalism as a theory of political economic practices that posits that: ‘human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets and free trade…[where] state interventions in markets (once created) must be kept to a bare minimum’ [34: 2]. This theory is often achieved through deregulation and privatisation of state owned assets and the downsizing of the state.

 
2

The international anti-corruption industry comprises many different organizations, including non-governmental organisations, donors, international financial institutions, governments, activists, and think tanks. While acknowledging the variety of positions taken by actors within this industry, the industry’s discourse is mostly influenced by international donors, IFIs and nongovernmental organisations.

 
3

The Control of Corruption ranking is a part of the World Bank’s World Wide Governance Indicators, which are derived from a compilation of a number of enterprise, citizen and expert survey respondents in industrial and developing countries. It aims to capture ‘perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests’ [82].

 
4

All currency conversions in this article were calculated on 9 March 2012 on http://www.xe.com/.

 
5

The OECD DAC defines technical assistance (cooperation) as: ‘both (a) grants to nationals of aid recipient countries receiving education or training at home or abroad, and (b) payments to consultants, advisers and similar personnel as well as teachers and administrators serving in recipient countries (including the cost of associated equipment)’ [25]

 

Acknowledgments

I am grateful to Jon Barnett, Monica Minnegal and Leslie Holmes of the University of Melbourne for their suggestions on early versions of this article. Many thanks to Jennifer Lake and Anna Walton for editing advice. I also thank the people at AusAID and Transparency International Papua New Guinea for participating in my research. I remain responsible for the end result. The author has consulted for Transparency International Papua New Guinea in the past.

Copyright information

© Springer Science+Business Media Dordrecht 2013