Developing countries losing billions to corruption every year

Corruption is costing developing countries billions of euros annually, which is money that could make a significant difference, Tamira Gunzburg argues.

By Tamira Gunzburg

12 Sep 2014

These are times of great political change in the EU. The parliament is now firmly in place and the proposed commission will soon be put to vote. A brand new mandate lies ahead, dotted with opportunities to further strengthen Europe's economy and its position in the global arena. What if through these same policies, and without much budgetary effort, the EU could also help free up to $1 trillion in funds currently being stolen from the world's poorest countries?

According to new research, this is the amount of money that is being siphoned out of developing countries every year as a result of corrupt activity involving shady deals for natural resources, the use of anonymous shell companies, and tax evasion. In developing countries, corruption is a killer. When governments are robbed of their own resources to invest in health care or food security, it costs lives. In Nigeria, funds lost each year to 'oil thieves' could pay for essential services, including vaccinating all 29.7 million children under the age of five. That's three times the population of Sweden, and could save more than a million lives over time.

"The key word here is secrecy - it is the opacity around who is behind the companies that allows corruption to thrive"

Why should the EU lose sleep over this? The uncomfortable truth is that much of the money diverted from the budgets of poor countries ends up in EU member states, channelled through banks and secret companies in places such as London, Luxembourg and Nicosia. The key word here is secrecy - it is the opacity around who is behind the companies that allows corruption to thrive. The lax regulatory environment in the EU continues to enable that.

It is in regulation, therefore, that the solution lies. By requiring businesses and governments to be more transparent, we can shine a light on the resource flows and corporate structures that might otherwise harbour shady activities. This is within the remit of what the EU can do, and the opportunities are plenty. For example, soon negotiations on the EU's anti-money laundering rules will kick off. The European parliament has said it wants to make public who owns European companies and trusts, to crack down on the abuse of anonymous shell companies. France and the UK are moving on this too. We'll be looking to the Italian presidency and soon to the new commissioner to bring all member states to this level of ambition.

"The best way to fight corruption and money laundering is to ensure that there is no place to hide"

After all, the best way to fight corruption and money laundering is to ensure that there is no place to hide. Last year, the EU pioneered similar transparency standards requiring oil, gas, mining and logging companies to publish what they pay to governments in countries where they extract natural resources. Together with the US laws, this is the beginning of a global standard, and it will fall upon commissioner [Jyrki] Katainen traveling to Australia next week for the G20 finance ministers' meeting to persuade his counterparts in countries like Canada, Australia and Brazil to follow suit.

The new set of EU leadership has the opportunity to take a lead in stemming the financial haemorrhage from developing countries. ONE estimates that up to 3.6 million lives could be saved if the revenues were instead invested in health systems.  With budgets still squeezed in the EU, it is in this kind of win-win legislation that we should be making the difference, with no time to lose.

Read the most recent articles written by Tamira Gunzburg - PM+: EU needs to put its 'money where its mouth is' on development aid promises

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