Table Of ContentCorruption and its Manifestation in the
Persian Gulf
Corruption and its
Manifestation in the
Persian Gulf
Hossein Askari
The George Washington University, USA
Scheherazade Sabina Rehman
The George Washington University, USA
Noora Arfaa
The World Bank, USA
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
© Hossein Askari, Scheherazade Sabina Rehman and Noora Arfaa 2010
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Contents
Preface vi
Acknowledgments viii
1 Introduction to corruption in the Persian Gulf 1
2 Islamic teachings and corruption 46
3 A review of the causes and consequences of corruption 58
4 The impact of oil and gas dependency on corruption 77
5 Corruption, economic growth and the petroleum sector in
the Persian Gulf 101
6 Addressing corruption, the natural resource curse and
intergenerational equity in the Persian Gulf 124
References 143
Index 153
v
Preface
While corruption is pervasive in all countries the world over, it has
perhaps received the most notoriety in developing countries that have an
abundance of mineral deposits, such as diamonds, oil and natural gas.
Among these developing countries, the oil- exporting countries of the
Persian Gulf have, deservedly or undeservedly, received the most attention
in the popular media.
In this book, we look at what constitutes corruption, how it is measured,
whether it is more acute in Persian Gulf countries than in other countries,
and what special forms it takes because of the dominant position of the
oil and natural gas sectors in these economies. We then examine the
major factors that promote corrupt practices and how corruption aff ects
economic and social development.
While corruption is pervasive in developing countries, some in the
media attribute the corruption in this region to their shared religion, Islam.
Islamic teachings on corruption are very clearly articulated – corruption
is unacceptable. Islam condemns corruption as socially destructive and
economically detrimental, and admonishes those who engage in it.
We then turn to a more detailed empirical examination of the role of
oil and gas in promoting corruption, the special characteristics of cor-
ruption in countries with signifi cant endowment of oil and gas resources,
and the eff ect of corruption on economic development and growth in the
Persian Gulf. Finally, we turn to how corruption may be minimized in
these countries.
It is evident that signifi cant oil and gas endowment has been a key
element in the manifestation of corruption in many oil- exporting coun-
tries, and especially in some of the Persian Gulf countries. While corrup-
tion adversely aff ects the interests of the current and future generations of
citizens in all countries, in these oil- exporting countries the adverse eff ects
are more pervasive. As Robert Solow articulated in his famous article of
1974, for intergenerational equity to be preserved, other forms of capital
must replace the depletion of capital in the form of oil and gas to preserve
a constant capital stock. Wasteful expenditures such as those on arms
and wars, and even productive expenditures that enrich certain segments
of society who are in the position to benefi t, and corruption all rob every
generation of citizens. We conclude that intergenerational equity can be
vi
Preface vii
only addressed through a fund that takes in all oil and gas revenues and
issues an annual sum of equal real purchasing power to citizens of all
generations. For this to happen, the intergenerational role of corruption
in resource- abundant economies has to be acknowledged and publicized
more strenuously. This eff ort has to be, in part, supported from outside
the region to put pressure on the leadership in these countries, or it is
unlikely that signifi cant steps will be taken in this direction.
Acknowledgments
We are grateful to our editors at Edward Elgar for signifi cantly improv-
ing our message. We are also indebted to Karlygash Dairbayeva for
Chapter 4.
The authors are grateful to their families for their unending support.
viii
1. Introduction to corruption in the
Persian Gulf
Corruption, in some form or another, has existed since the earliest
emergence of structured social organizations. Given the diversity of
socio- economic and governance characteristics throughout the world,
large diff erences exist in the level and typology of corruption. Moreover,
researchers and institutions have defi ned corruption from diff erent per-
spectives as they attempt to capture this diversity. Diff erences in the
manifestation of corruption are particularly salient between developing
and developed advanced economies. This becomes even more pronounced
where there is a valuable and exhaustible national resource, such as oil or
natural gas.
In this book, we discuss the impact of oil and gas endowment on the
Persian Gulf oil- exporting countries (PGOEC).1 In Chapter 1, we discuss
the nature of corruption and provide an introduction to its manifestations
in the PGOEC. This chapter is divided into two parts: Part I provides an
overview of some of the challenges in defi ning and measuring corrup-
tion; while Part II provides both a descriptive and analytical account of
corruption in these countries. In Chapter 2, we focus on the treatment of
corruption in Islam. Chapter 3 contains a review of the causes and conse-
quences of corruption. In Chapter 4, we look at the impact of oil and gas
dependency on corruption, and in Chapter 5, we examine the impact of
corruption on economic growth and the role of the petroleum sector in the
economies of the Persian Gulf. Finally, in Chapter 6, we examine the rela-
tionship of corruption, the natural resource curse and intergenerational
equity, and off er an approach for transforming the curse into a blessing.
PART I: DEFINITIONS AND MEASURES OF
CORRUPTION
Defi nitions of Corruption
There are numerous defi nitions, measurements and typologies of
corruption. Many of these defi nitions were created by multilateral,
1
2 Corruption and its manifestation in the Persian Gulf
international and government organizations, but there are a rapidly
growing number of private market sector defi nitions of corruption
that now serve as global indicators. Since the early 1990s, when cor-
ruption was seen as an important factor in international development
and economics discourse, those working in the fi eld and studying the
issue have debated its precise defi nition. Perhaps the most widely cited
defi nition and the one with the broadest consensus is ‘the misuse of
public offi ce for private gain’ (Kaufmann and Siegelbaum, 1997: 419;
Treisman, 2000: 399). In addition, international organizations such as
the United States Agency for International Development (USAID) and
in some instances the World Bank use this defi nition to guide their own
program of work in addressing corruption. Many argue that according
to this conventional characterization of corruption, the public domain
is distinctly separated from the private sector; in addition, public sector
actors are the primary perpetrators, and corruption is universally for
private gain or based on selfi sh motives. Moreover, the term misused (or
the term abuse as used in some cases) generally implies the application
of some kind of legal standard.
However, while this may be the most widely cited defi nition, ques-
tions have emerged about the scope and precision of this defi nition. For
instance, some have argued that the defi nition of corruption should be
expanded to include private sector actors rather then just those in the
public sphere, and should necessarily include violations of certain norms
beyond the legal standard. Moreover, while some contend that its scope
should be broadened to take into consideration the various socio- cultural
aspects of the phenomenum, others argue that a defi nition that is more
limited in scope and standardized better serves the needs of researchers.
Jain (2001: 73) sheds light on the importance of how corruption is defi ned
when stating that although it may seem to be a simple issue of semantics,
how corruption is defi ned provides the basis for what researchers choose
to model and measure. Moreover, how corruption gets defi ned or concep-
tualized will ultimately guide the direction of anti- corruption legislation
and other eff orts to combat corruption.
Until recently, each multilateral agency had its own perspective and
mechanism to measure, rank and record corruption. However, in early
2006, an International Financial Institutions Anti- Corruption Task
Force was established by the major multilateral institutions (African
Development Bank Group, Asian Development Bank, European Bank
for Reconstruction and Development, European Investment Bank Group,
Inter- American Development Bank Group, and the World Bank Group)
in order to establish a consistent and harmonized approach to combat
corruption in the activities and operations of member institutions. They
