World Economy

Developing World Lost $1t to Corruption in 2012

Developing World Lost $1t to Corruption in 2012Developing World Lost $1t to Corruption in 2012

A global anti-corruption group said that nearly $1 trillion was illicitly drained from developing countries in 2012, representing a record level of corruption, money laundering and false trade documentation.

The Washington-based group Global Financial Integrity said illicit financial flows around the world grew at 9.4 percent a year in the decade to 2012, around double the pace of economic growth, draining funds especially from impoverished countries, AFP quoted the report, released on Monday, as saying.

The largest outflows came from giant, still poorly-regulated economies like Brazil, China, India and Russia, GFI’s new report says.

Money illicitly streamed out of China at a rate of about $125 billion annually over that period, for instance.

But also in the top 10 country sources of illegal capital outflows are a number of dynamic middle-sized economies: Malaysia, Mexico, Saudi Arabia and Thailand.

Mexico is third on the list of largest outflows at an average $54 billion a year.

In total, the report put the total illegal capital movements from developing and emerging economies in 2012 at $991.2 billion, greater than the combined sum of incoming foreign investment and foreign aid in those countries.

  Investment Wasted

“Emerging and developing countries hemorrhaged a trillion dollars from their economies in 2012 that could have been invested in local businesses, healthcare, education, or infrastructure,” said the study’s co-author, economist Joseph Spanjers.

“This is a trillion dollars that could have contributed to inclusive economic growth, legitimate private-sector job creation and sound public budgets.”

Over a decade, the total was $6.6 trillion, the equivalent of nearly 4 percent of the entire global economy. In terms of the relative size of the impact, the countries most hurt by the flows were in the Middle East and North Africa and in Sub-Saharan Africa.

The main way the money flows out of the countries is misinvoicing in trade transactions, which can allow exporters and imports to keep money out of the country.

GFI said individual countries and the United Nations need to focus on cutting down such flows to fight poverty and boost growth.

“It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on,” said GFI president Raymond Baker.

“That’s why it is essential for the United Nations to include a specific target next year to halve all trade-related illicit flows by 2030 as part of post-2015 Sustainable Development Agenda.”

The top 10 developing countries for illicit capital outflows in 2012:

  Most Corrupt Countries in 2014

Iraq, Afghanistan, Somalia and North Korea are among the world’s most corrupt countries, while others such as China, Turkey and Angola are increasingly becoming more corrupt, an annual corruption survey released Wednesday concluded.

In all, more than two-thirds of the 175 countries ranked struggled with a high perception of corruption, according to Transparency International’s (TI) 2014 Corruption Perceptions Index.

The anti-graft report is based on factors including whether public leaders are punished for corruption, the prevalence of bribery and how government institutions address citizens’ needs.

Denmark was the least corrupt country, followed by New Zealand, Finland, Sweden, Singapore and Canada. Britain was ranked as the 14th least corrupt nation. The United States ranked 17th overall, up from 19th last year, according to the rankings.

“Corruption is a problem for all countries,” TI said in a statement. “Leading financial centers in the EU and US need to join with fast-growing economies to stop the corrupt from getting away with it. The G-20 needs to prove its global leadership role and prevent money laundering and stop secret companies from masking corruption.”