Corruption in Arms Trade

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Publisher and Managing Editor IKRAM SEHGAL wrote an article entitled CORRUPTION IN ARMS TRADE for THE NATION which DJ is re-producing with thanks

While commissions are a part of business transactions, bribes and kickbacks have been a common occurrence. Commissions are legitimate per se and do not constitute any illegality but when excessive they have been mostly used to influence the sales or purchases with bribes and kickbacks to the representatives of the purchasing agency, politicians or government officials who could be in a position to influence both sales and purchase thereof, they are illegal. Over the years commissions paid out in the arms trade have gained notoriety. In the late years of the nineteenth century some conflicts were conveniently arranged by the manufacturers such as Vickers and Krupp to boost their sales (remember arms merchant Basil Zaharoff). At the height of the Cold War, large outlays were set aside in the 'free world' for defence purchases, most of it unrelated to the fight against communism. To influence the sales of defence equipment, large commissions (direct translation 'bribes') were paid, mostly to tin-pot dictators, absolute monarchs, etc. With the Soviet Union fading out as a Superpower in the 80s, the need to shore up autocratic regimes lessened dramatically and commissions paid out to middlemen, became more known to the public at large. Morality replaced pragmatism. Military machines like the Shah of Iran's fed the ruler's megalomania and kept the population under control but all this cost a great deal of the oil money available, a sizeable percentage disappearing as bribes into numbered accounts of the Shah's relatives, cronies, etc. Equipment was marked up by as much as 100% or even more, helping to maintain a very opulent lifestyle. A number of sensational disclosures in the late years of the last century and public outcry of the divergence of a sizeable portion of funds from the exchequer have brought corruption in arms trade into focus as an aberration to be brought under control.

Transparency International (TI), the brainchild of Peter Eigen, has done pioneer work in establishing institutional safeguards against corruption. The well-known TI Corruption Perception Index (CPI) ranks countries by the degree of corruption perceived among public officials and politicians, drawing on a composite index ranking 99 countries, with polls and surveys of residents and non-residents. Pakistan took second place during the Ms Benazir regime in 1995. By 1999 we had made some improvement, descending to 12th place. To address the issue of corruption in arms trade, the Swedish Government took the initiative through its Ministry of Foreign Affairs and held a Colloquium in association with TI in Stockholm at the Villa Brevik during 3-6 February 2000. A rather unique gathering of speakers and participants was drawn from representatives of governments and the arms industry, academics and NGOs were assembled to coalesce a moral force to control corruption hitherto considered 'taboo' to even speak about.

The Swedish Minister for Trade, Mr. Leif Pagrotsky declared the Colloquium open with the remarks that almost all countries have rules and regulations to curb corrupt practices but due to the bond of silence between those involved, different forms of corruption continues to flourish in many places. He said that the real losers - government, competitors and society at large - rarely have the possibility to react before the damage is done. He said that the cost of corruption is high, for industry it takes the form of lost business opportunities and invested marketing resources, for governments and the public at large the fairness and effectiveness of public services are diminished and scarce funds are invariably diverted so that confidence in the political and administrative systems that underpin society is eroded. Dr Leif Pagrotsky mentioned that the Indian BOFORS case in the mid-80s had shown Swedish industry and politicians alike the enormous bad-will that can result from corrupt business practices. He felt that excessive secrecy is why corruption is so strongly associated with defence-related business, in this day of instant information available on the internet there is no reason, political or military, for this secrecy. Decisions that cannot stand public scrutiny should not be taken in the first place.

Paul Beijer, Director Swedish Ministry of Foreign Affairs then took the chair, assisted by TI, represented by Joe Roeber and Frederick Galtung from UK. Joe Roeber gave concrete examples of corruption in various countries, these included USA, Britain, Europe and the Third World, etc, not excluding Pakistan, mentioning the commissions paid in submarine and aircraft deals. He said arms trade is 'hard-wired for corruption', mainly because of the very special treatment it receives from governments and the secrecy that is sanctioned to cover every aspect of its operation. The other feature is rank apathy, to quote De Gaulle 'you cannot teach people to be good and bribery is a way of life in many countries'. Joe Roeber said 'arms exporters in the rich west bribe the political elite of poor countries to buy weapons they may not need with money they probably cannot afford. Their governments support them on grounds of national economic interest, jobs and security. But there is a price, which is to add uselessly to the supply or arms and unproductively to the burden of debt on the backs of the poorest people in the world', unquote. Presentations were then made by Francois Heisbourg of Matra France, Thomas Tjadar of Celsus Sweden, Dag Tornblom of the Association of Defence Industry, Sweden and Dr. Parris Chang, a member of Taiwan's Legislative Assembly.

Retired Admiral Tahilaini from India, formerly Chief of Naval Staff in the 80s and now representing Transparency International in India, was very candid about the Bofors issue. There were warning signals but in the haste to acquire the weapons and the inordinate interest shown by the then Indian Chief of Army Staff, Gen Sunderji, the exposure of the bribery by an enterprising Swedish reporter came as a rude shock in New Delhi. It is widely believed that the major beneficiary was the late Indian PM Rajiv Gandhi, though only part of the Bofors papers handed over by the Swedish Government to India have been released, as much as 11-12% of the value of the guns is estimated to have gone into secret accounts, The BJP Government is keeping the scandal very much alive, clearly using it now for political purposes to target the Congress Party led by Rajiv Gandhi's widow Sonia.

Thomas Delare of the US State Department gave a very detailed presentation of the US Foreign Corrupt Practices Act and how the US Government had taken initiatives for adoption of a binding agreement between nations to prevent manufacturers from giving bribes, prosecuting those who did and also those who took the bribes, indulged in money laundering and tax evasion. A number of countries had ratified a detailed OECD resolution on clamping down on corruption. Pakistan was not one of the signatories. Given the elite 'club' of commission agents who deal in the arms trade and their dominating influence in the hierarchy, Pakistan is not expected to become one of the signatories soon. The information that may become available may be embarrassing. Scott Mckay of Lockheed Martin gave a presentation on the part of industry, spelling out the safeguards that major US companies like his have instituted to ensure that the nexus between commissions paid as legal remuneration for business transactions do not end up as bribes. Company officials indulging in any activity with even a hint of illegality were to be terminated forthwith and the US Justice Department informed about the evidence for their prosecution. Dr. Reuben Pedatzur of the University of Tel Aviv, a former pilot in the Israeli Air Force and an Air Force analyst, besides being a journalist for the widely circulated Israeli newspaper 'Maariv' described the continuous investigation process in Israel into purchases of arms, this led to the celebrated conviction of a high ranking Israeli officer Brig Gen Rami Dotam to a long term in jail in 1992 for accepting bribes of over US$ 10 million. He said corruption was possible because of (1) the extensive network of personal alliances between manufacturers representatives and high ranking defence personnel and (2) government. and defence ministry control of most local defence industries. Sounds familiar? There were presentations by Mary Wareham of Human Rights Watch on 'Landmines' and Dr. Ravi Singh Pal of SIPRI Sweden besides engaging arguments by Dr. Ian Anthony of SIPRI and Admiral Vidagal of National Naval Syndicate, Brazil.

In the final stage the Colloquium split into three groups comprising (1) industry (2) government and (3) NGOs and Academics. Their discussion points were then pooled in to give a possible action plan to be recommended for the future on a broad front. Stockholm was a very important initiative, for third world countries having limited resources, there is a critical need to check such corruption. One hopes that Pakistan, always under pressure because of declining availability of foreign exchange in the face of security imperatives, will take concrete steps to ensure elimination of corruption of arms trade in the future. Instead of putting in money into corrupt hands, 'more bank for the illegal buck', let's strive to get 'more bang out of our buck'.