Is the world creating a “paradise for corruption” that weakens its resilience to future disasters?

Countries around the globe are set to launch the biggest round of infrastructure investment since the post-2008 financial crisis stimulus measures, according to the World Economic Forum, addressing a US$15 trillion shortfall of spending to maintain global growth to 2040.

But could they be inadvertently increasing community exposure to future disasters by fuelling corruption?

The OECD head of bribery and corruption recently warned that governmental relaxing of procurement regulations and speeding up of processes is creating a “paradise for corruption”.

The United Nations Development Programme estimates that $1000 billion are paid in bribes every year, which costs some countries up to 17 per cent of their GDP.

The construction and infrastructure industry has been consistently labelled the most corruption prone industry in the world by Transparency International and World Bank. According to the OECD, half of bribes paid are in industries with the largest spending on infrastructure, namely the extractive (19 per cent), construction (15 per cent) and transportation (15 per cent) sectors.

The fragmented nature of the construction industry, the difficulties in monitoring complex procurement processes and supply chains and the large amounts of money changing hands makes corruption easy to cover up. Large amounts of public funding injected into infrastructure and construction projects are frequently syphoned off into private hands (up to 40 per cent in some countries) and poorly constructed buildings and infrastructure due to corruption kill, maim and make homeless, hundreds of thousands of already-vulnerable people every year.

Transparency International notes that the impact of corruption is especially threatening for fast-growing cities in low- and middle-income countries where corruption can be high.

For example, in 2017, building collapses killed 228 people during an earthquake in Mexico City due to poorly constructed buildings signed-off by private building inspectors hired and paid by developers. This was despite strict building codes and Mexico’s reputation as an international leader in earthquake safety.

As one disaster expert poignantly said recently, when visiting a community devastated by a so-called natural disaster – “this is not a disaster, it’s a crime scene”.

Australia’s history of corruption in construction

While Australia has better laws, regulations and governance in place to prevent corruption than many countries, ranking 12/180 and scoring 77/100 in 2019 on the Global Corruption Index, we have slid 8 points since 2012 and are not immune to these risks.

A report in 2018 by The Australia Institute singled out construction as one of the most corrupt industries in Australia and estimated that worsening perceptions of corruption and influence of big business over policy making in Australia reduced GDP by $72.3 billion, or 4 per cent.

Numerous other reports in Australia have highlighted the high incidence of corruption in the construction industry, the lack of transparency and public trust in infrastructure project approvals processes, the lack of ethics underpinning business practices in the industry, the costs and time overruns on infrastructure projects which cost tax payers hundreds of millions of dollars every year and the poor quality products which the industry produces.

And, an unprecedented three Royal Commissions has produced numerous allegations of corruption and a culture of lawlessness in the construction industry, although they largely ignored business corruption and it would seem that little has changed.

In NSW, privatised building certification has been placed at the root of the state construction industry’s poor compliance with building regulations and the recently appointed NSW Building Commissioner David Chandler OAM has repeatedly pointed to a lack of ethics in the construction industry as a root cause of many of its compliance and quality problems.

As governments around the world, including Australia, rush through construction and infrastructure projects in an attempt to rebuild devastated economies often seeking to bypass important processes to protect the community, there are concerns emerging that we may regret it in the future.

Donald Trump, for example, is contemplating a US$1 trillion investment in infrastructure. This is apparently inspired by Australia’s de-regulatory approach.

Certainly, as the world’s largest employer that provides jobs for the most vulnerable people, the economic and social value created by investing in more construction and infrastructure could be huge if we better adopted the principles of social procurement.

But governments around the world clearly need to be careful when throwing so much money around to prevent corruption that will make future disasters worse. Inevitably, it is the most vulnerable in our societies that will be worse affected and poorly constructed buildings and infrastructure will exacerbate the impact of future disasters, which will almost certainly come and further undermine our ability to recover again.

Greater transparency and integrity are needed in all countries, not less, and in Australia we need greater transparency around political donations and lobbying, to strengthen the independence of public institutions, to better prevent the abuse of power and misuse of public funds and we need to empower the press to keep the government honest as we invest to recover from this crisis.

Professor Martin Loosemore is a professor of construction management at the University of Technology in Sydney, and Professor David Sanderson is the Judith Neilson Chair in Architecture at UNSW, a role that involves research and teaching in urban poverty, vulnerability and resilience.


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One Response to “Is the world creating a “paradise for corruption” that weakens its resilience to future disasters?”

  • Roger Birchmore says:

    For years the tendering process has been defended because of its apparent transparency and public trust, despite having a huge range of other weaknesses. Which alternative procurement strategies have a track record of eliminating tendering’s weaknesses whilst providing transparency and trust?

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