Transparency and accountability are key measures in the fight against corruption, often referred to as “vertical enforcement”. Vertical enforcement focuses on a top-down approach, where governing bodies or oversight agencies monitor and act upon violations. This differs from “horizontal enforcement”, which involves peer-level accountability among organisations working collectively to ensure compliance. Vertical enforcement alone may not be enough in many developing countries. This article explores how a combination of “vertical enforcement” and “horizontal enforcement” can make anti-corruption efforts more effective, directly reflecting the principles and initiatives of the Fight Against Facilitation Payments Initiative (FAFPI). Drawing insights from the Anti-Corruption Evidence (ACE) Research Consortium and FAFPI, it delves into innovative strategies for fighting against corruption.
Defining Corruption
Corruption is defined here as the abuse of power by individuals in authority who violate laws, regulations, or ethical standards to obtain personal benefits. For example, a government official might demand an unofficial fee to approve a legally entitled construction permit, illustrating how facilitation payments perpetuate corrupt practices. Such payments may benefit the individual or associates with whom they are colluding. To address this, vertical enforcement has traditionally been used, emphasising the improvement of transparency and accountability.
The Principal-Agent Model and Vertical Enforcement
To better understand vertical enforcement, let’s look at the Principal-Agent model, a framework from agency theory. In this model, the principal—usually agencies or entities—oversees and enforces rules, while the agent is responsible for delivering specific outcomes, such as services or goods.
When a principal wants to stop corruption after it’s detected, two things must be improved:
- Transparency: This involves improving the availability of information and exposing violations so that action can be taken.
- Accountability: Improve the process of acting upon the detected violations.
With enhanced transparency, violations are revealed, and with improved accountability, addressing these violations becomes more efficient. In many advanced countries, this model works well because numerous organisations with the necessary power, capabilities, and interests continuously monitor and enforce anti-corruption measures. However, in developing countries, weaker institutional frameworks and widespread corruption often undermine this approach. For example, while transparency mechanisms may expose violations, enforcement is frequently hindered by a lack of accountability or collusion within enforcement agencies. This highlights the limitations of relying solely on vertical enforcement in such contexts.
- Power refers to an organisation’s ability to impose costs on another that breaks the rules.
- Capabilities refer to an organisation’s ability to operate successfully without resorting to corruption.
- Interest reflects a genuine commitment to anti-corruption efforts.
The Limitations of Vertical Enforcement in Developing Countries
In developing countries, vertical enforcement often falls short. One reason is the “unprincipled principal” problem, where those tasked with enforcing rules either collude in corruption themselves or lack the power to act, even when violations are exposed. For example, by operating an anti-corruption project, FAFPI has found a reporting system on a governmental anti-corruption webpage that was essentially useless—while violations could be reported, no action would ever be taken.
Another issue is widespread corruption. In some contexts, transparency may not help because it becomes difficult to pinpoint who to hold accountable. It’s like trying to discipline a classroom where everyone is talking at once—it’s hard to determine where to start. This creates a situation where no clear action can be taken, and corrupt practices persist.
Horizontal Enforcement: A New Approach to Anti-Corruption
In environments where vertical enforcement isn’t enough, ACE proposes focusing on horizontal enforcement—a strategy that involves organisations checking each other rather than relying solely on top-down control. Horizontal enforcement works by identifying and uniting actors that already operate ethically and don’t need corruption to thrive because they are productive and capable. Their organisational strength allows them to enforce rules among their peers and they are genuinely committed to anti-corruption efforts.
For example, if an honest firm is working with a corrupt supplier, why should the firm allow the corrupt supplier to have an unfair advantage? By uniting with other rule-following organisations, firms can collectively impose higher costs on those breaking the rules and put pressure on governments to enact reforms.
This concept of collective action is central to FAFPI’s strategy for fighting facilitation payments.
Fighting Facilitation Payments through Collective Action
Imagine you’re a contractor building a commercial property, and you’ve submitted all the necessary paperwork and followed the legal process to obtain a construction permit. The local government office is responsible for processing your permit application, but due to bureaucratic delays, such as long queues and administrative inefficiency, the approval process is taking much longer than it should—perhaps several months.
To bypass these delays and expedite the process, you are offered to pay a small payment to an official to ensure your application is reviewed more quickly and moves to the front of the queue. This payment doesn’t change the legal entitlement to the permit, and therefore it is a facilitation payment; it speeds up the administrative process, cutting through the red tape.
FAFPI emphasises that facilitation payments are the seeds of bribery and can lead to more severe acts of corruption. Despite being illegal in many countries, these payments persist due to systemic issues such as bureaucratic inefficiencies, lack of enforcement, and cultural acceptance in some contexts. For example, officials may exploit red tape to create opportunities for extracting these payments, while organisations may reluctantly comply to avoid delays. These systemic factors underscore the need for targeted anti-corruption strategies that address both individual behaviour and the broader environment that enables such practices.
To fight situations like this, FAFPI has created a collective action initiative, uniting organisations worldwide to collect data and build capacity. Data collection helps improve transparency, revealing violations, and capacity building helps organisations act upon a facilitation payment request. But FAFPI doesn’t stop there. By stimulating cooperation among organisations, it strengthens horizontal enforcement, enabling firms to check their peers and hold each other accountable through collective action.
A successful example of collective action approach is the Maritime Anti-Corruption Network (MACN), which unites shipping industry players to tackle corruption at ports worldwide. MACN’s collective action has led to tangible results, such as reducing bribery demands and increasing transparency in port operations, demonstrating the practical impact of horizontal enforcement.
In the case of the situation described above of red tape, addressing facilitation payments requires both anti-corruption efforts and tackling underlying bureaucratic inefficiencies, which can be facilitated by collective action initiatives. While horizontal enforcement—where organisations check each other to ensure compliance—helps limit corruption, it alone doesn’t solve the issue. Red tape can persist, continuing to encourage facilitation payments. Therefore, it’s also important to pressure governments to remove unnecessary market distortions and work collaboratively with networks like MACN and FAFPI to implement business-ready reforms that eliminate bureaucratic barriers. By doing so, we create an environment that stimulates ethical behaviour, where horizontal enforcement and the reduction of red tape together fight facilitation payments effectively.
Conclusion
Transparency and accountability remain essential tools in the fight against corruption, but they are not always enough—especially in the absence of collective action. By supporting initiatives like FAFPI, organisations can contribute to a larger movement aimed at addressing facilitation payments and fostering a transparent, equitable business environment. Together, we can build the foundations for a world free from corruption. Horizontal enforcement, where honest organisations unite to hold their peers accountable, is a powerful strategy that complements vertical enforcement. By aligning ethical actors and promoting responsible behaviour, initiatives like FAFPI are actively creating conditions where facilitation payments and other forms of corruption can no longer thrive. behaviour, initiatives like FAFPI are working to create an environment where facilitation payments and other forms of corruption can no longer thrive.
What’s your take on combining vertical (transparency and accountability) and horizontal enforcement strategies in developing countries?
