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200 International Trade in Services Tackling corruption in the construction sector Corruption can be detrimental to development. In construction, corruption may reduce the quality of infrastructure services and limit access, particularly for the poor. For the millions of people living in earthquake-prone areas, corruption has resulted in many lost lives, including in Italy and Turkey. In the words of James Lewis,“earthquakes don’t kill people; collapsing buildings do”(Transparency International 2005a, 23). Of the 156,000 deaths, 584,000 injured, and 9 million rendered homeless by 400 recorded earthquakes in the last 15 years, many have been the result of buildings that folded because of diluted concrete, excised steel bars, and other substandard building practices, some of which were fostered by corruption. Similarly, many poor roads are the result of corruption, and accidents occur and road safety suffers. Corruption in construction projects may lead not only to unviable, defective, dangerous, or environmentally or socially destructive projects, but also investments in uneconomic projects (Stansbury and Stansbury 2006). A fertile breeding ground for corruption is found in the process of obtaining construction permits and in government procurement. According to Reyna (2007), graft in the construction sector is estimated to amount to as much as 5 percent of Africa’s GDP. This is a higher share of GDP than the share some countries spend on health or education. Corruption has a negative economic effect not only on consumers, investors, and the government, but also on service providers. It damages companies by giving rise to uncertainty in the tendering process, wasted tender expenses, increased project costs, reduced business opportunities, extortion, blackmail, criminal prosecutions, fines, blacklisting, and reputational risk. The sector is prone to corruption because of the sheer size of projects, their uniqueness and complexity, the involvement of government, the large number of contractual links and irregular intervals between projects, entrenched national interests, and the nature of work that is easily concealed (Transparency International 2005a). Transparency International surveys business executives from around the world to estimate the prevalence of corruption. The data are published in the Bribe Payers Survey and used to generate two sector-specific rankings. The first ranks the bribery of public officials by sector; it measures the degree to which companies in each of 19 sectors are likely to bribe public officials. The second ranks state capture by sector; it measures the degree to which companies in each sector use contributions to politicians and political parties to achieve undue influence on government policy. The business executives who were contacted in 2008 indicated that the construction and public works sector is affected the most according to both rankings. The direct bribery of public officials is common relative to the situation in other sectors of the economy. Box 6.6 presents initiatives to tackle corruption at the corporate level.
Building Empires Overseas 201 Box 6.6: Initiatives to Prevent Corruption in Construction Projects Transparency International (2005b) has developed a list of initiatives that an owner could take to reduce the risk of corruption in a construction project. Immediate actions • Implement an internal anticorruption code of conduct and management program committing the owner to an anticorruption policy • Prepare contractual documentation that includes adequate contractual safeguards, such as anticorruption warranties, termination, and compensation rights in the event of corruption • Undertake greater due diligence focusing on the owner’s staff in key posts and on agents • Ensure that all prequalification, tendering, and project management procedures are fair, reasonable, objective, and transparent • Report allegations of corrupt practices to the authorities and to any applicable trade or professional associations; corruption can only be prosecuted if it is reported • Respect the minimum standards for public contracting (Transparency International 2005c) Medium-term actions • Seek to contract only with companies that have implemented an internal anticorruption code of conduct and management program • Support the introduction of an international externally audited ethical standard that companies can only attain and keep if they implement such an effective code and management program • Require the appointment of an independent assessor who monitors the prequalification, tender, and execution of a project to ensure, as far as possible, that it is operated free of corruption • Require the use of a project integrity pact for both tender and project execution; an independent assessor monitors compliance with the pact, which covers sanctions and arbitration mechanisms • Develop a fair, proportionate, and transparent blacklisting procedure that bans companies from tendering for the owner’s projects for a specified period of time after an offense Removing rules and regulations that are unnecessarily trade restrictive The construction service sector is generally subject to a large number of regulations. These are partly in place to counteract negative externalities or common market failures that are associated with the supply of construction services and that affect third parties and society in general. Pollution of air and water and the generation of noise are examples of negative externalities in the construction process. The regulations are also in place to help tackle asymmetric information
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Public Disclosure Authorized Public
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International Trade in Services New
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CONTENTS About the Editors and Cont
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Contents vii Boxes 2.1 Extent of Te
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Contents ix 1.4 Worker Remittances
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Contents xi 6.6 A Checklist of Ques
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xiv About the Editors and Contribut
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xvi Foreword Beyond describing the
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xviii Acknowledgments Finally, this
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1 Assessing the Potential of Servic
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Assessing the Potential of Services
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2 Increasing Labor Mobility: Option
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Increasing Labor Mobility 31 unders
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Table 2.2. Quantitative Estimates o
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Borjas, George “Heaven’s Doors:
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Increasing Labor Mobility 37 contri
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Increasing Labor Mobility 39 must h
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Worker categories covered Specifica
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Provisions on professionals Annex o
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Increasing Labor Mobility 45 The EU
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Table 2.7. Agreements between Austr
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Increasing Labor Mobility 55 Figure
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Increasing Labor Mobility 57 Bilate
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Increasing Labor Mobility 59 Jamaic
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Increasing Labor Mobility 61 factor
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Increasing Labor Mobility 63 indivi
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Increasing Labor Mobility 65 that a
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3 Legal Services: Does More Trade R
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Legal Services: Does More Trade Rhy
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Table 3.3. Trade in Legal Services:
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Table 3.8. Uruguay Round Commitment
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100 International Trade in Services
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Exporting Information Technology Se
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Brunei Darussalam 48.2 2.9 2,954 66
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Honduras 6.0 — 4,081 10.1 3.3 —
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Norway 85.0 30.6 31,726 82.0 78.0 5
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Uganda 3.6 — 306 5.1 — 170.0 41
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Exporting Information Technology Se
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8 Accounting Services: Ensuring Goo
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Accounting Services 265 exceeding 5
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Accounting Services 267 Links to la
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Accounting Services 269 The account
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Accounting Services 271 Box 8.3: Ex
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Accounting Services 273 service mar
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Accounting Services 275 Table 8.5.
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Accounting Services 277 Box 8.6: Re
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Accounting Services 279 Box 8.7: An
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Accounting Services 281 Table 8.6.
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Accounting Services 283 Restriction
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Accounting Services 285 Commercial
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Accounting Services 287 Colleges of
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Accounting Services 289 Administrat
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Accounting Services 291 IESBA (Inte
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350 Index Association of Certified
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352 Index Convention on Combating B
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354 Index Former Yugoslav Republic
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356 Index International Public Sect
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358 Index migrants. See labor mobil
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360 Index public-private partnershi
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362 Index Thailand construction ser
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ECO-AUDIT Environmental Benefits St
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