Effects of Corruption in Developing Countries: The Facts and the Solutions

 Corruption in Developing Countries

Corruption is such a curse that slows down economic growth, development, and causes inequality in developing countries. Social and economic development is highly dependent on the level of transparency of the political institutions. If these institutions are well functioning, countries can make noticeable progress.

The penetration of corruption is widespread in developing countries. There are multiple ways to measure the level of corruption. An organization, Transparency International, has written a lot of reports about this particular problem in developing countries.   

The Causes of Corruption

Corruption starts when money is paid to avoid law, policy, and taxation. In the absence of stringent enforcement and without a strong judiciary, a significant number of the billions of dollars in bribes paid every year to government officials would go unreported. However, paying bribes for a business transaction is not illegal. In fact, business-related bribes are widely used and accepted in many developing countries. While businesses may be required to pay various fees, taxes, or tariffs to local government officials to do business. For example, this is done with the idea that in return these officials will provide due diligence services that will protect the investment.

Corruption in Developing Countries

There are also factors unique to developing countries that may explain why corruption in developing countries is worse. These include The lack of independent law enforcement or judicial institutions. This is particularly true in low-income countries.

This is particularly true in low-income countries. Power asymmetries between the poor and the rich, such as large groups of poor people who depend on local officials for basic services such as health care.

such as large groups of poor people who depend on local officials for basic services such as health care. Lack of democratic institutions and poor political norms. Countries in the developing world may lack a formal constitution, government structures, independent civil society, and multiparty systems.

The Effects of Corruption

In addition to major consequences in income distribution, corruption inhibits the economic growth of countries.

The earnings and productivity growth associated with local government corruption cost governments higher than their gross domestic product (GDP). It also causes a loss of productivity growth for companies involved in the public sector. The relative damage to national wealth rises as corruption spreads across national borders. Studies show that these costs, as well as other externalities from corruption, are three to five times higher in developing countries than in the developed world.

How to Tackle Corruption

If well-designed and clearly implemented, some anti-corruption tools can help significantly in the fight against corruption. In developing countries, anti-corruption activities can take the form of a government department or agency. They are expected to police markets, prevent fraud, and serve the public interest in the legal and regulatory frameworks. In contrast, corruption tends to take the form of personal influence peddling and corruption networks.

Reforms in a country’s tax system should maximize incentives for individuals and companies to pay taxes. In order to collect tax, governments have to reduce informal payments, secure from graft political support for the tax regime, reduce the cost of enforcement, and get the political will to enforce the tax laws.

Civil Society Organizations

Civil society organizations are organizations with a specific legal or moral identity and a political agenda, not organized for profit. They exist in a legal environment but are not subject to the authority of that environment.

There are several types of civil society organizations:

Coercive of Power

Commonly seen as the funding source of most civil society organizations. Civil society organizations have grown very rapidly since the end of World War II in part because of the invention of government-funded grants programs.

Demand for Advocacy

A natural end to a civil society organization’s activity. Public policies are often defined in terms of what is best for society rather than what is best for individuals.

Legislation and Enforcement

The Government Accountability Office (GAO) estimated that a huge sum of the government budget was being spent on corruption control efforts. This is a small amount of money as compared to that money spent by countries on the fight against AIDS, tuberculosis, and malaria, among other key priorities.

Thus, corruption is a significant issue that requires serious attention. According to the World Bank, the appropriate response by a country in the fight against corruption depends on the intensity of public awareness. There are many countries in the world that are highly corrupt and those that are much less corrupt.


A central question that must be addressed in the debate over the effective prevention of corruption is to what extent a country’s education system is responsible. A country that seeks to decrease corruption must also be able to boost economic growth and reduce income inequality. Education cannot, of course, be viewed in isolation from development challenges that are often associated with greater corruption. The latter is highlighted by the corruption rate, GDP per capita, and per capita income.

This report presents an evaluation of corruption in many developing countries with respect to measures of corruption, as well as the extent to which such measures were positively correlated with other measures of development (e.g., income and standard of living).

Private Sector

The traditional legal definition of corruption has its shortcomings. Many businesses in developing countries are known to pay bribes to local officials to expedite the passage of land and construction permits, improve bureaucratic procedures, and gain access to utilities. Private sector corruption has become a mainstay of business operations in many developing countries. Although some businesses bribe officials with the sole aim of raising prices or getting preferential treatment, there are also situations when businesses pay bribes simply to get what they want.

Corruption also occurs in some countries when taxpayers support corrupt public officials with their hard-earned money through payments for services or investments. A new approach to anti-corruption strategies may be useful.


Corruption is a global problem, but often, developing country citizens assume that corruption in their countries is worse than it actually is. To confirm that this assumption is false, one must look at countries that do well at reducing corruption levels. Some of the most successful countries in reducing corruption are also some of the poorest. Because poorer countries tend to have lower levels of corruption, it becomes all the more puzzling that they are stuck with the poorest statistics.

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