Development assistance that aims to increase the sharing between the rich and the poor and to support equitable development processes is vital to reducing poverty. It is therefore of critical importance to ensure that development resources are used for this intended purpose and not diverted through corruption.

There is today an increased awareness of the development community in both donor and recipient countries that without countering corruption, aid is in danger of not reaching the poor or reaching them only partially. The discussion is moving towards a more open, serious and constructive quest for solutions. The credibility of future aid will depend on the ability of the aid system to demonstrate that it can address corruption pro-actively and comprehensively.

Transparency International’s national chapters in aid donor and recipient countries are working to create a world free of corruption. This puts TI in a unique position to address corruption and aid. TI has actively pursues policy dialogues with individual donors and multilateral institutions. TI has also been engaged with the Development Assistance Committee of the OECD and is a partner to the U4 Anti-Corruption Resource Centre run by Chr. Michelsen Institute.

In countries with weak governance and large flows of aid, civil society organisations have warned about corruption for many years. Aid can fuel corruption, but aid can also help building capacity for anti-corruption efforts. Donors have a special role to play. Today corruption is high on their agenda, thanks to the advocacy work by organisations such as Transparency International. But corruption cannot be approached as a developing country issue. It affects every sector, every bureaucracy, every country.

The concept of partnership between aid-receiving and aid-providing countries is firmly embodied in the United Nations Convention against Corruption (UNCAC). The ratification, implementation and monitoring of the convention is therefore a prioritised goal for TI and the anti-corruption movement.

With increasing levels of aid there is concern that corrupt politicians and business people may use this money to enrich themselves rather than improving living conditions for the poor. This risk was also voiced in response to the Tsunami disaster and the large volumes of aid allocated for disaster relief and reconstruction work in the Southeast Asian region.

Corruption in aid is generally associated with:

• grand corruption or corruption in major contracting projects involving public officials or politicians and private companies
• corruption of domestic origin in the recipient country spilling over into foreign assistance, mainly in the form of petty corruption
• corruption that is directly linked to internal policies and practices of donors themselves.

A common argument is that foreign aid presents perverse incentives to recipient governments by, for example, investing in sectors not prioritised by the government or by tying aid to procurement in the donor country. A related argument is that aid projects distort salary structures and create unhealthy competition for the various benefits that aid delivers. Privatisation policies are criticised for creating opportunities for corruption in countries with weak regulatory capacities. Aid agencies are also accused of ignoring, or even denying, evidence of systematic corruption and large-scale capture, especially if the disbursement of their own aid money is not directly involved.

For more information on the topic, please visit the sections on:

• Corruption in different forms of aid
• Anti-corruption policies
• Best practice examples