Policy Memo for the Emerging Markets (Kazakhstan And India)

Policy Memo for the Emerging Markets (Kazakhstan And India)

Corruption Emerging markets have the highest rates of corruption which occurs in the form of using money and authority to achieve an objective. Corrupt countries often develop at a slower pace than less corrupt countries, since the vice hinders the economy from functioning freely, and promotes income inequality. This policy memo provides a description of the causes and effects of corruption in Kazakhstan and India and explains how it can be controlled.

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Corruption in India Rampant corruption in India has affected its ability to reach its full economic potential. Over the years, there have been allegations that several wealthy and corrupt Indians have stashed away billions of rupees in Swiss banks. Indians also pay millions of rupees in bribes to public officials to get access to public services and favors. The main causes of corruption in India are excessive bureaucracy, complex tax and licensing structures, lack of clear laws and processes and monopoly of government departments.

Corruption is detrimental to the progress of India because it increases the costs of goods and services, leads to an uncertain economy and creates a market that only favors the well-to-do at the expense of the poor. Additionally, the high rate of corruption and government bureaucracy discourages the flow of Foreign Direct Investment (FDI) into the country (Hussain, 2012). There is rampant theft of private and public land and property by government officials and politicians, who cannot face prosecution due to their power and influence. Slum-dwellers are also involved in corruption where they rent out the houses they are allotted by the government to others to earn an income. The tendering and contracting process is also severely flawed as a result of cartels and mafias taking over the industry.

Corruption is not limited to government-funded projects, according to the World Bank, aid received by the government for development projects is misappropriated, and this further the disparity between the rich and the poor, and significantly slows down the rate of economic growth. The quality of healthcare especially in government hospitals has declined sharply over the years such that it has become increasingly complex for those without financial means to obtain good medical care.

It is reported that public officials, especially in the services, transport and real estate sectors, may be embezzling as much as US$13 billion per year. These industries are more susceptible to corruption because there are more middlemen involved and the contracts have very large values.

Remedial Measures towards Corruption in India Recent years have seen growing public dissent to the corruption menace, and the negative image it gives India in the international community. The government of India has implemented several measures to curb graft in the country. Under the immediate former president, Narendra Modi and the current president Ram Nath Kovind, the government has prioritized the elimination of corruption in the country. The Indian government realizes the effect that corruption has had on the country's economy and its social structure, and has therefore implemented policies to control it. These include the Right to Information Act (RTI) which gives citizens the right to access information about the government, such as how it uses the taxes it collected in a certain period (Ram, 2017). Secondly, there is a Central Vigilance Commission (CVC) whose role is to receive and act on cases of corruption, and also to supervise government agencies to ensure that they are corruption-free zones. The government has also moved to shorten the time between the registration of a case and the delivery of judgment for corruption cases. Additionally, the government has created an independent ombudsman to ensure that corruption cases are investigated, heard and prosecuted fairly regardless of one’s status in society (Verma, & Sharma, 2019). The government is also strengthening its anti-corruption laws to ensure that the vice is curbed before it happens.

Low-level corruption still prevails in India, however, between 2014 and 2018, under former Prime Minister Modi’s leadership, the government has been relatively free of

corruption scandals, a factor which attracted a high rate of Foreign Direct Investment into the country. To ensure that India does not slip back to being a haven for corruption, the current administration has to ensure that it continues Modi’s legacy of promoting transparency, good governance and fighting corruption.

Corruption in Kazakhstan Kazakhstan has one of the highest rates of corruption in the world, particularly in the allocation of public funds. Giving bribes and using connections to access public services is so rampant in the country that it has become an accepted practice. The rate of corruption is increased by the fact that basic services such as education are limited and relatively expensive, therefore, citizens have to use dubious means such as bribery and nepotism to access these essential services. Public hospitals are meant to be free, however, it is fairly common for medical personnel to ask for a bribe in order to provide medical services (Lillis, 2018). Additionally, due to the high rate of unemployment, it has become commonplace for parents to bribe public officials to secure jobs for their children during a recruitment exercise.

When the Soviet Union disintegrated, several changes occurred that led to an increase in graft. Kazakhstan went from being a socialist state to becoming a capitalist state and during the transition, several of the state’s functions weakened. The government became unable to adequately offer essential services resulting in the scramble for the few resources available.

Corruption permeated almost every area of government including the judiciary, military, law enforcement, land registration, customs, healthcare and education. The privatization of state corporations also contributed significantly to the spread of corruption due to the opaqueness of the process, and the conversion of state-owned resources to personal resources. In later years, the economic condition of Kazakhstan improved but the scarcity of resources had

already caused a major social disruption, therefore corruption persisted (OECD Publishing, 2017). To date, money laundering, bribery and transfer of money to offshore accounts are still rampant in Kazakhstan.

Multinational corporations report corruption as being the most significant deterrent of doing business in Kazakhstan. The licensing processes are complex, and due to the widespread corruption, there is an attitude of impunity especially among law enforcement officers and the judicial system. Realizing the impact that corruption has on the country’s economy, the government has put in place various reform measures to control the menace.

From 2016, the government renewed its commitment to fighting corruption through new laws that seek to create an open and accountable government. The government is gradually digitalizing its public services and has reduced the powers of the president in order to minimize autocratic rule which is prone to corruption due to lack of accountability. The Kazakh public service is also undergoing reforms to make it merit-based as opposed to being connections-based. Additionally, the prosecutor’s office has been given power and autonomy to prosecute individuals found engaging in corruption regardless of their position or status in society. The government and civil society are also working in tandem to create awareness on the importance of eliminating corruption. Since the implementation of these measures, the level of corruption in the country has reduced significantly, and this is seen in its improved corruption index rating over the years.

Remedy for Corruption The Kazakh republic has been slow to develop due to the pilferage of public resources through a corrupt system of government. As a result of lax anti-corruption laws, public funds were heavily looted for several years after the collapse of the Soviet Union. To reduce the

level of corruption, it is essential to develop strict rules to combat graft, and also create effective monitoring mechanisms to ensure that all government departments and agencies are involved in eliminating the scourge. The government should also enhance the independence and accountability of the public sector by creating distinct boundaries between the civil service, judiciary and institutions that audit the government. Accountability is also enhanced by making government information such as public expenditure and tax allocation accessible to the public. This helps to control embezzlement since public officials will have to account for the funds under their management (Satpayev, 2014). It is equally important to seal loopholes that enable the perpetuation of corruption. The Kazakhstani government should also hold the same standards of investigating and prosecuting all persons found engaging in corruption regardless of their status in society.

Reference Hussain, Y. (2012). Corruption free India, fight to finish. New Delhi: Epitome Books.

Lillis, J. (2018). Dark Shadows: Inside the Secret World of Kazakhstan. Bloomsbury Publishing.

OECD Publishing (2017). OECD Integrity Scan of Kazakhstan - Preventing Corruption for a Competitive Economy. Paris: OECD Publishing.

Ram, N. (2017). Why scams are here to stay. Aleph.

Satpayev, D. (2014). Corruption in Kazakhstan and the quality of governance. Chiba: Inst. of Developing Economies, Japan External Trade Organization.

Verma, A., & Sharma, R. (2019). Combating Corruption in India. Cambridge: Cambridge University Press.