Corruption is an enormous, global challenge, likely costing more than $1 trillion annually, or $120 for every person worldwide. World leaders have long promised to tamp down on corruption, but unfortunately, we’re getting nowhere. Now, new research identifies a surprisingly straightforward, cheap way to reduce corruption that can make countries hundreds of millions or even billions of dollars.
Part of the reason it is so hard to tackle corruption is that it is incredibly valuable for the officials to take bribes, while customers paying up often get better or quicker service. Yet, politicians have promised to reduce corruption substantially from 2016 to 2030 as part of the so-called Sustainable Development Goals (SDGs), agreed to by all governments worldwide.
Unfortunately, politicians aren’t delivering. The corruption perception index from Transparency International shows that, globally, there has been absolutely zero progress over the last decade. The world was as corrupt in 2022 as when the measure started in 2012. We’re not going to curtail corruption in 2030 — or at any time on current trends.
Reducing corruption isn’t the only global promise we’re missing. In fact, it is just one of the hundreds of grand SDG promises for 2030, and we’re failing at nearly all of them. On current trends, we will reach the development promises half a century late. We need to improve, and now is the right time to start this conversation. This year is the halftime point for the SDG promises, but we are nowhere near halfway to achieving them.
The think-tank Copenhagen Consensus has worked with dozens of the world’s top economists for years to identify the areas where the most progress on the SDGs can be made. We should embrace the smartest policies first. The think tank’s new research on corruption shows that improving public procurement should be a priority for many governments.
In almost every country, the government is the largest buyer of works, goods and services from the private sector. Public procurement is almost $13 trillion, or 15 percent of global GDP. In the countries where the poorest half of the world’s population lives, procurement makes up an astounding half of all government expenditure.
This procurement can be made less corrupt and more effective by putting the whole system online, making it transparent. Electronic procurement, or “e-procurement,” allows many more companies to hear about procurement offers, ensures more bids can be submitted and means governments lose less money through corruption and waste.
Regrettably, four-in-10 low- and lower-middle-income countries still lack a full e-procurement system. Researchers studied the costs and effects of 11 e-procurement initiatives in low-income countries like Bangladesh and Rwanda, middle-income countries such as Ukraine and Tunisia, and high-income countries like Italy and South Korea.
The research shows it takes a year on average to plan for an e-procurement system, 1.5 years to design and build it, and 2.5 years to pilot it. Over the first 12 years, costs average $16.7 million, irrespective of a country’s size — a trivial sum compared to most government budgets.
There are many benefits. A well-designed e-procurement system allows for proactive monitoring and the identification of corruption and means concerns can be automatically flagged for action. And e-procurement increases the number of bidders: In India’s Karnataka State, suppliers increased from 130 to 4,800 in the first three years. And governments can spend less on advertising for bids when they have an easily accessible system. The Philippine government saved $9 million annually on newspaper advertisements.
Significantly, introducing e-procurement speeds up procurement. In South Korea, e-procurement meant the duration of bid processing was cut from an average of 30 hours to just two. In contrast, in Argentina, the time of the process fell by more than 11 days. Of course, doing things quickly isn’t the same as doing things well. But there is evidence that digitizing procurement means better oversight and improved service delivery. India, for example, saw a 12 percent increase in road quality grade after shifting to an e-procurement system.
The most important and well-documented consequence is that e-procurement cuts the overall cost of government spending. Research shows the average saving is 6.75 percent — and that matters when you spend billions. For the average low-income country, the savings across the first 12 years amount to more than $600 million. For each dollar spent, the low-income country will realize savings worth $38. For lower-middle-income countries, the average savings are more than $5 billion over the first 12 years, meaning each dollar spent creates more than $300 of social benefits. This makes e-procurement one of the world’s most effective policies.
Ending corruption entirely may not be in our grasp. But there is compelling evidence that worldwide, e-procurement can reduce it at low cost while making societies much better off.
