December 26, 2013
If the IMF’s message on corruption is to be more than rhetoric, Lagarde needs to convey it both publicly and privately each time she meets with leaders of the world’s most corrupt nations.

“Zero tolerance for corruption must be foundational. The state must be the servant rather than the master of the people,” Christine Lagarde, the International Monetary Fund chief, said earlier this year. But during her early December visit to Cambodia, named the second most corrupt country in East Asia and the most corrupt in the region that has formal relations with the IMF, she said nothing of the sort.

Transparency International’s latest corruption perceptions index, published during Lagarde’s visit, ranked Cambodia behind only North Korea in East Asia, at 160 of the 177 countries surveyed. The Asian Development Bank has similarly foundthat corruption continues to be the “main area of concern for improving the business environment and overall governance in Cambodia.” This is nothing new. In 2005, James Wolfensohn, then the World Bank president, said that Cambodia was facing three major challenges: “corruption, corruption, corruption.”

The IMF recognizes that corruption threatens market integrity, distorts competition, and endangers economic development, all while undermining the public’s trust in its government. Yet the IMF chief failed to mention this scourge, even obliquely, during her first visit to the country as head of the IMF. Lagarde emphasized inclusive growth, recognizing the gross inequalities in the country, and encouraged greater investment in education and jobs. But she ignored the misappropriation of state resources that siphons away desperately needed funds for education and other essential government services.

Lagarde also did not publicly acknowledge other key governance problems that harm the economy, exacerbate corruption, and deepen social and political problems. Cambodia’s courts remain controlled by the ruling Cambodian People’s Party (CPP), making the rule of law a still distant dream for Cambodians and investors alike. She didn’t mention what even otherwise cautious diplomats consistently highlight: the land grab crisis that benefits Prime Minister Hun Sen, other government officials and their cronies. This is no small issue in what is still a largely agrarian country.

Lagarde’s silence on these matters was even more apparent since her trip coincided with a political crisis after a deeply flawed election manipulated by the ruling party. Just before she arrived, a coalition of independent domestic and international election observation groups detailed serious election irregularities that could have changed the outcome of a close election and would have prompted a re-vote in many countries.

She could have met with the leaders of the political opposition to discuss their economic proposals. Instead, the IMF acted as if none of this existed when Lagarde met with Hun Sen on his 10,550th day (more than 28 years) in power and publicly shared her belief that Hun Sen’s government is resolved “to lay down a firm foundation of good governance.”

While the IMF might argue that elections are beyond its mandate, it can hardly dismiss corruption. Corruption corrodes every sector of the country. When I visited Cambodia this year, parents told me their children could only take their tests if they paid extra, “off the books,” fees to their grossly underpaid teachers. A government employee whose salary was paid by the private sector, which is problematic in itself, described the look of horror on his boss’s face when he asked for a record of tax paid. He could only assume it went into his boss’s pocket.

The UN special rapporteur on human rights in Cambodia, Surya Subedi, has found corruption to be widespread at all levels in the judiciary. Judges rely on patronage and political protection for job security, compromising their independence. A recent United States government review of the investment climate in Cambodia echoed concerns about corruption within the judiciary, saying, “Business people, both local and foreign, have identified corruption, particularly within the judiciary, as the single greatest deterrent to investment in Cambodia.”

Cambodia experienced one of the highest national rates of forest loss from 2000 to 2012, according to a recent study. And while Cambodia’s Forestry Law prohibits logging of rosewood, Chinese import documents provided to The Cambodia Daily reportedly revealed that 36,000 cubic meters of rosewood logs were transported from Cambodia between 2007 and 2012.

The Asian Development Bank has also pointed to ongoing informal links between the ruling party, medium-sized and large businesses, and senior levels of government. It recognized high risks of problems in procurement, citing procurement specialists who suspect that tendering agencies engage in a wide range of dodgy practices, including an expectation of kickbacks from those who win government contracts. 

In recent years, the government has implemented superficial and ineffectual reforms to address corruption. But these spotty reforms also included an asset disclosure law that perversely criminalizes the public disclosure of the assets of government officials, while the new Anti-Corruption Unit is essentially a public relations unit for the government that lacks the power and independence to tackle high-level corruption.

Lagarde missed a major opportunity in Cambodia to highlight governance problems, but she can right this by speaking out when she returns to headquarters. If the IMF’s message on corruption is to be more than rhetoric, Lagarde needs to convey it both publicly and privately each time she meets with leaders of the world’s most corrupt nations.

Jessica Evans is the senior advocate and researcher on international financial institutions at Human Rights Watch. You can follow her on twitter @evans_jessica.

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