kenya india africa corruption

East Africa against corruption cartels, for common market
graft ministry of land kickback bribe common market fuel subsidies

Why India's fuel subsidies actually benefit the rich

On the biggest continent, you should hear fewer demands for bribes while on the subcontinent you might find a new reason to fear the market. We trim, blend, and append three 2010 articles from: (1) Daily Nation, June 22, on African corruption by Dave Opiyo; (2) BBC, July 1, on African common market; and (3) The Christian Science Monitor, July 8, on Indian subsidies by Karthik Reddy, Guest blogger from the Adam Smith Institute, a UK leader market policies.

by Dave Opiyo, by BBC, and by Karthik Reddy

Service is set to improve at Kenya’s Ministry of Lands following the introduction of tough measures to dismantle corruption cartels.

Already, a minor reshuffle -- affecting 39 officials -- has been conducted in several Lands offices across the country as the crackdown on graft intensifies.

Several other officials have been transferred out of the ministry.

The Lands Ministry is a huge revenue earner, making Sh6 billion last year. “Services rendered to the public have been found to be unsatisfactory and riddled with malpractices,” said Lands Permanent Secretary Dorothy Angote.

“Corrupt acts are fuelled by weak oversight, poor records, and the lack of a national cadastre (map of the national property ownership),” added the PS.

She went on: “Connivance between the public and some officers in government has contributed to high levels of corruption.”

In March, after complaints of missing files reached alarming levels, the PS conducted an impromptu raid on some offices in her ministry and exposed a cartel of rogue officers.

With cameras rolling, thousands of files were found in the hands of officers who were allegedly soliciting kickbacks. Kenyans seeking the all-important papers are usually told their files cannot be traced or are simply lost.

But after parting with a bribe -- sometimes even shares in the land -- the documents quickly resurface. “The offices had been turned into mini Ardhi Houses where services offered by the ministry could be obtained without accountability,” said the PS.

In May, the ministry automated the land rent payment system to minimize corruption and expedite the pay process. Customers will pay land rent by depositing money directly into the account, hence reducing paper work.

The ministry has designed a “visitors tracking system,” currently awaiting implementation. This captures the visitor’s details, the offices visited and how often. It will assist in weeding out unscrupulous brokers.

JJS: Let’s hope that ending or at least reducing tariffs will also reduce opportunities for demanding bribes from productive citizens.

The idea is to boost jobs and prosperity by co-ordinating taxes, immigration, and trade in five nations.

The union is made up of Kenya, Uganda, Rwanda, Tanzania and Burundi.

As the BBC's Peter Greste reports, it is just the first step towards much closer integration of their economies.

JJS: Meanwhile, it seems another former British colony remains mired in corruption.

Strikes, demonstrations, and fires disrupted daily life across the country as tens of thousands took to the streets to protest a decision by the Indian government to reduce fuel subsidies.

For years, the country had fixed below-market prices for fuel, mandating that all of its state-owned retailers sell gasoline, kerosene, and gas used for cooking at a discount. The recent decision permits the sale of gasoline at market prices, and, though the state has retained price controls for kerosene, cooking gas, and diesel, these subsidies will decrease.

The price of gasoline is expected to rise by less than eight percent, while kerosene, cooking gas, and diesel will rise by eleven, thirty-three, and five percent, respectively.

The government has been spending £10.7 billion annually on subsidies for these products, an expense it will slash by more than £2.8 billion. These savings are not unimportant for the administration, which has increased spending and borrowing to record amounts in recent years, and is trying to reduce its budget deficit of 6.6% of GDP.

Unions and members of the political opposition have attacked the decision as a cruel measure that will harm India’s poorest, as the subsidies have long been defended as necessary to provide access to vital fuels. Indians are accustomed to insulation from market forces, to leaving others to pick up the bill.

Yet consider, the poor in India do not use considerable amounts of fuel, which is instead consumed by wealthier Indians who have been able to purchase appliances and automobiles as the economy has grown. Fuel subsidies primarily benefit not the lower but the middle and upper classes.

Furthermore, the economic rent seeking behavior that is incentivized by the current system encourages government corruption and the concordant diversion of subsidized petroleum, ensuring that much of it does not reach the poor; only sixty percent of subsidized kerosene in India reaches its intended recipients.

The Indian government has more to do in the way of eliminating price-distorting subsidies and trade barriers in the country’s slow march toward a more open market.

Meanwhile the intensity of the opposition to the price hike is suggestive of the oft-observed difficulty of ending subsidies once those who benefit become accustomed to their free ride.

JJS: Both sides seem right. The poor should not be left to suffer. And government should not subsidize and distort costs. Luckily, there is a way to meet both ends. Here’s how:

Cut back the fuel subsidy (and many other subsidies and taxes); instead, pay citizens a dividend from the rental value of land and resources. Even a small one would go a long way for the poor. Plus, the recovery of the socially-generated value of land and resources (whether by taxes, fees, dues, or other means) would spur owners to put their sites at best use, which raises the demand for labor, and the wages paid to workers.

Both India and Africa have dabbled in this public revenue reform before. Both could take a giant step forward by implementing this geonomic reform much more.


Editor Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Should We Pay to Keep Oil in the Ground Or Share It?

Land clashes common with 153 indicted MPs0

Rethinking aid in Africa

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