As with all other forms of corruption, we need data before we can investigate potential solutions.

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Paving the road to corruption

Just as corrupt customs officials might look the other way for a slice of the action, crooked politicians and contractors have been siphoning cash from road-building projects for as long as there have been roads. Road construction requires materials such as sand and stones and lots of manual labour, all purchased locally by contractors. The Tony Sopranos of the world have figured out that there is good money to be made by over-invoicing these contracts: Double the budget for supplies, buy some cheap concrete, and split the leftover cash with your cronies in the roads ministry. As with all other forms of corruption, we need data before we can investigate potential solutions. Here, we turn to Ben Olken, an economist at the Massachusetts Institute of Technology, who has devised an innovative method. Olken wanted to figure out how much money was being stolen from a World Bank construction programme in Indonesia. Under the terms of the programme, 600 villages received $9,000 each to build a local road. If Olken could determine how much was spent actually building each road, he could find out how much cash had “leaked out”. So, Olken sent teams of experienced engineers to all 600 villages to assess the quality of each road. The teams dug up road samples, measured pavement depth, and analysed whether a road had been “watered down” by using cheap sand instead of expensive gravel.

As part of the study, Olken also built in metrics that tried to ensure the money was well spent. Some villages were informed ahead of time that their road project would be audited. Others were ordered to hold “town hall”-style meetings to allow villagers to discuss and monitor construction plans. There was also a third set of “control” villages, where nothing special was done at all.

In the villages with no special oversight, road funds disappeared at an average of nearly 30%, about $2,700. Nearly as much was stolen in the villages with town-hall meetings. In the villages where contractors were forewarned about audits, theft dropped below 20% – still a sizeable loss, but a third less than appeared in the other two groups. From just this single innovative study, we can gain insights into the anticorruption efforts that will likely work best in other development projects.


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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).


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