How New Technologies like Blockchain Can Help Fight Corruption
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- Authors: CHRIS WELLISZ
- Published: March 1, 2018
Overview
- 21st century technologies such as blockchain and big data offer new tools to promote transparency and integrity.
- Corruption remains a significant global problem, undermining growth, diverting public funds, and discouraging human capital investment.
- Examples in the article show practical applications of digital tools by activists, startups, charities, and governments.
Case studies and implementations
- Ukraine — ProZorro.Sale
- An electronic auction system created by activists to bring transparency to sales of public assets.
- In its first 13 months, ProZorro.Sale handled $210 million.
- Ukraine’s population cited as 44 million.
- Ukraine ranked 131st among 176 countries on Transparency International’s Corruption Perceptions Index 2016.
- AID:Tech and humanitarian aid
- Platform ensures integrity of charitable contributions and social welfare payments using blockchain.
- Irish Red Cross pilot: five hundred electronic vouchers worth $20 apiece were redeemed in Lebanon; no funds were lost.
- AID:Tech reported raising between $3 million and $5 million from investors and planned to open offices in Singapore and Dubai.
- Company goal: have at least 100,000 people on the platform by June.
- Signatura and Teneris (Argentina and procurement)
- Signatura provides digital signing and notarization using blockchain to ensure immutability.
- Used in Córdoba to make financial disclosure forms visible and immutable.
- Teneris: procurement platform to solicit bids, reducing opportunities for bribery and bid rigging.
- Supercivicos (Mexico)
- Mobile app for citizens to report substandard public services with GPS-tagged videos to build a database for civic groups and agencies.
Technologies and mechanisms described
- Blockchain (distributed ledger technology)
- Functions as a means of exchange and as a database that automatically registers transactions.
- Records are encrypted and stored across a network of computers rather than in a central location, making them difficult to alter or steal.
- Originally developed for Bitcoin; adapted for multiple uses including remittances, social welfare, aid distribution, land-title registration, document notarization, and procurement.
- Big data
- Aggregates and analyzes government spending and contracting data to detect patterns of waste, fraud, and corruption.
- Can reveal irregularities such as concentration of contracts among specific individuals or firms.
- Complementary digital tools
- QR-code–enabled cards for beneficiaries to redeem vouchers.
- Dashboards for real-time tracking of spending by recipients.
- GPS-enabled citizen-reporting apps to map and document service failures.
Impacts, costs, and scale
- Global cost of bribery alone estimated at as much as $2 trillion a year.
- Comparison: $2 trillion is described as about equal to the GDP of Italy and many times the $142 billion in global development aid.
- IMF 2016 study cited: “Corruption: Costs and Mitigating Strategies.”
- ProZorro.Sale’s $210 million in 13 months compared to conventional privatization sales over the past five years (described as “almost as much”).
- AID:Tech’s potential customer base framed as “in the billions” for government and social-welfare agencies.
Limitations, challenges, and caveats
- Blockchain’s limitations
- Does not eliminate corruption that occurs after contracts are awarded (for example, use of shoddy materials).
- Immutable records do not by themselves enforce quality or physical compliance.
- Institutional and political constraints
- Digital tools require supportive institutions and political will to be effective.
- Example: IMF and World Bank criticized Ukraine for undermining its National Anti-Corruption Bureau and for failing to create an independent anti-corruption court.
- Quote: “E-tools are important, but institutions are far more important.” — Viktor Nestulia, Transparency International Ukraine.
Policy implications and recommendations
- Combine technology with institution building
- Digital platforms should complement, not replace, strong institutions, independent oversight, and anti-corruption courts.
- Use data analytics for oversight
- Big data can be deployed to monitor spending and contracting to spot patterns indicative of corruption.
- Mobilize citizen engagement
- Tools that enable citizens to report and document problems (with GPS, video, and public dashboards) can pressure officials and guide remedial action.
- Leverage private–public partnerships
- Start-ups and private firms can provide scalable solutions for governments, charities, and social-welfare agencies to increase transparency and reduce leakage.
- Design for direct transfers and traceability
- Systems that deliver funds directly to beneficiaries and provide real-time tracking can reduce intermediaries and opportunities for diversion.
F&D Magazine — CHRIS WELLISZ, March 2018
Content in this bundle
- محاربو التكنولوجيا الرقمية
- Guerreros digitales ● Ejercicio de equilibrio ● Finanzas y Desarrollo ● Marzo de 2018
- Les croisés du numérique
- Борцы цифрового фронта – Финансы и развитие – март 2018 года
- How New Technologies like Blockchain Can Help Fight Corruption - IMF F&D Magazine
- 数字化战士 - <金融与发展>, 2018年3月号·第55卷·第1期, 国际货币基金组织季刊