The financial rationale for combating corruption in transport infrastructure is very strong. Budgets are large, often making up 10-20% of a country's national budget. The road subsector alone may constitute the majority of a developing country's annual infrastructure budget. Additionally, the large numbers of tangible goods and services in the transport sector-such as permits and contracts with multiple points of entry at central and locallevels-lend themselves to corruption. The prevalence and style of corruption varies considerably between countries and agencies. Leakage from corruption may be as low as 5% but can often amount to 20% of transaction costsin corrupt countries or even more in some instances. Similar levels of wastage are possible through inefficiency and ineffective resource use, so collectively strengthening governance and capacity in the transport sector could potentially save 10-40% of sector expenditures. Beyond the direct costs of resource leakage, corruption frequently diverts funds to projects with lower economic rates of return. Corrupted construction is often substandard, reducing project sustainability and increasing the need for maintenance and rehabilitation. Transport infrastructure is fixed and subject to considerable local influence on land use and social and economic development, so not only are the opportunities for extracting rent potentially highbut the impacts are also significant and long term. These economic lossesmay be as large or larger than the direct financial costs of corruption. Furthermore, significant institutional costs are often associated with corruption. Corruption is rarely, if ever, limited to one sector, and the effects of corrupt practices in the transport sector are likely to spill overto other sectors and the broader economy. Thus, there is a broad rationale for combating corruption to ensure institutional integrity and sustainability within and across sectors. Despite the considerable financial, economic, and institutional costs of corruption, within government departments the capacity for due diligence in combating corruption is often low. In the engineering profession, which constitutes a major part of transport infrastructure spending, rigorous systems of checks and balances exist regarding the roles of owner, supervisor, and supplier; contract provisions; regimes for testing and certifying quality; measuring and payment for quantities; and obligations and sanctions. Many of these systems have legal status, but where they are weakly applied or individuals conspire, corruption may emerge. Even within international financial institutions and donor agencies, institutional integrity and anticorruption practice areas remain nascent. At the same time, the transport sector has substantial potential for stemming corrupt practices where they may exist. This chapter explains therisks and forms of corruption throughout the value chain of public expenditures for transport infrastructure and services, offers tools for identifying fraud and corruption as well as remedies, and develops strategic management mechanisms to combat corruption in the transport sector. The focus of this chapter is thus geared to strengthening integrity in the transportsector and, toward that goal, to helping establish operational practices for institutional strengthening and anticorruption work in the sector. Thefirst section reviews the political and transactional anatomy of corruption by mapping key risk areas in the transport sector that are vulnerable to corruption at the national, sector, and project levels. The second section analyzes remedial options in a twin-pronged strategy-first with a focuson short-term controls, investigation, fraud detection, sanctions, and their enforcement in the transport sector; and second, through a longer-termpreventive approach that aims to build internal controls and capacity in ways appropriate to local conditions and the prevailing modes of corruption. For the covering abstract see ITRD E139491.
Abstract