About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Thursday, August 23, 2012

Looking at failure of public services

It is not corruption per se but the fragmentation of power that explains Uganda’s crisis

Two things stand in contradiction of one another regarding corruption in Uganda: On a positive note, it seems not to have undermined economic growth – at least, not yet. Uganda has sustained impressive rates of economic growth over the last 25 years. On the negative side, corruption seems to have led to a precipitous decline in the ability of the state to deliver public goods (hospitals, schools, roads, bridges, electricity dams) and public services (education, healthcare, agricultural extension services, electricity, etc).

Why is this so? The existence of the right macroeconomic policy framework – a largely liberalised, deregulated and privatised economy backed by low inflation – has saved a significant chunk of economic activity from the dead hand of an incompetent and corrupt state. Secondly, it seems corruption does not harm growth when thieves invest their loot in the economy. The moralists will hang me for this. However, economic reality does not follow morality – so I will accept the sentence.

But why has corruption eroded the ability of the state to serve its citizens? There is no evidence that corruption per se undermines the ability of the state to deliver these vital public goods and services. Some of the countries that developed the best infrastructure such as South Korea, Taiwan and Indonesia in the 1980s and 1990s had extremely high levels of corruption. Equally in the recent past, nations like Tunisia had high levels of corruption. Yet they had also been successful at delivering quality roads, hospitals, schools and health and education services to their citizens.

The experience of South Korea or Tunisia shows that corruption is like a tax – it only increases the cost of doing business. Instead of building a road at US$ 50m, this cost may go up to US$ 75m. Companies do not opt out of areas of investment because of a high tax rate. Corporation tax in the United States, Canada and Germany is above 35 percent. But this has not stopped companies from investing in those regions.
One could argue that taxes are credible and predictable costs of doing business while corruption is the opposite. Granted! But the experience of South Korea and Taiwan is empirical proof that corruption does not stop states from delivering quality goods and services. The problem in Uganda is that the cost of delivering public goods increases while the quality becomes worse.

Why is this so? It seems to me that the primary source of the problem is the way political power is distributed. Our country enjoys a rare and contradictory reality – power is at once centralised and personalised in the person of the president while at the same time it is highly defuse among different fragments of the state: the bureaucracy, intelligence services, oversight institutions (the Inspectorate of Government, Parliamentary committees, Public Procurement Authority), the mass media etc.

Public officials everywhere possess power to allocate lucrative rights over scarce resources. One need not be surprised therefore that holding other factors constant, public officials would seek to grab for themselves a share of the rights the help to allocate. The problem for Uganda, however, is that the power to allocate these resources is distributed across many yet uncoordinated centers as illustrated above.

Thus, when one of these centers allocates rights to a particular lucrative contract, other centers can effectively challenge the initial allocation. For example, assume the ministry of Energy allocated the right to an oil well to Tullow. You can never be sure that Tullow will hold this right. Other arms of government can effectively challenge this initial allocation. In our case, one of the companies that that lost in the initial allocation may petition PPDA to reverse the decision of the ministry of Energy oil committee.

Once PPDA decides to investigate the matter, regardless of its motivations, it will prompt all those who had bided initially to seek to influence its decision. Money will begin to flow from the various bidders to PPDA officials. Whoever wins this bribing battle at PPDA can never be sure he has a deal because anyone of the losers can petition the IGG – another institution with power to cancel a public contract. Again, the process of bidders trying to influence the decision of the IGG begins afresh and more money flows.

Whichever way the IGG decides, his/her decision is not final. Losers can petition parliament thus shifting the bribing competition to the committee handling the matter. Finding legislators fresh from an election (and therefore highly indebted) or about to go into one (and therefore desperate for cash), competition for the prize will get more intense.

At this point, many other forces may be mobilised – especially the press. Bidders may pay off reporters and columnists to support their cause – or given the paucity of our journalists, simply feed them wrong or one-sided information. Others will field people on radio talk shows to argue their case. Whichever is the case, debate in the media will be ferocious.

But because power in Uganda is equally personalised and centralised at State House, bidders may try to influence key players – real and assumed – around the President. Some members of the first family may be recruited so that the battle for a tender pitches a brother-in-law to the president against his son-in-law. Intelligence organisations may be drawn into the battle and will offer their own biased reports to the chief of state.

Thus, the battle for a government contract will consume parliament and the mass media, drug in intelligence services and the President. No one will be spared. The actual financial cost of bribes may be low. But the resultant uncertainty and the time it takes to resolves such issues (often more than six years) make it difficult for the country to get a good deal.
It is not the corruption of the system per se that has made it difficult for Uganda to get better public services. It is lack of centralised control over bribe taking that makes matters worse. There are too many centers of power and therefore many bribe takers. I am not sure that removing these official centers would solve the problem. This is because this formal distribution of power seems to reflect its actual constitution in the country.

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