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DOES E-GOVERNMENT INHIBIT CORRUPTION ?

A final paper for Public Administration Course

Prof. Ginandjar Kartasasmita


GSAPS Waseda University

by Sofyan, Lury (4009R046-8)

lury.sofyan@gmail.com

Tokyo, February 2010


INTRODUCTION
The role of ICT is magnificent. Almost all sectors in the world can benefits from the

existence of ICT. How about government? Although so called “e -gov” becomes a

familiar term nowadays, however e-gov practiced has not make use the full potential

benefit that can be gained from e-gov (Homburg, 2008) 1 . Nevertheless, there is

optimism toward the role of e-gov in combating corruption; on the other hand, there is

also some neutral impact assessment reports continue to expose cases where corruption

persists even after the introduction of e-gov (Ojha et al, 2008).

I raise the corruption issue and e-gov because this issue is the most prominent

issue, besides global warming. Corruption is considered to be the ultimate challenge of

public administration and e-gov is considered to be the part of a “ruling” of ICT in all

human’s life.

Basically, this paper tries to address the important question: Does e-gov inhibit

corruption? In order to do that, this paper tries to elaborate the impact of e-gov in

combating corruption and investigate the relationship between them. Furthermore, this

paper also conducted an empirical study using simple econometrics which involves 108

countries around the globe.

LITERATURE R EVIEW

Klitgaard, MacLean-Abaroa and Parris (1996) explained that the phenomenon of corruption is

very often a result of prevailing socio-economic and governance conditions in a city or country.

1 Homburg (2008) Page 103: He argued that the full range of possible interactions (by e-gov) (managerial,
consultative, participatory) is not reflected in any of the national policies discussed (mainly Europe & US)

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Factors such as poverty, scarcity, and lack of access to basic services, lack of information, overly

bureaucratic institutions and low incentives for civil servants come together in various

permutations and combinations to give rise to Corruption. Improving governance in general,

and enhancing transparency and public participation in particular, can go a long way in

tackling the problem of corruption at the local level.

Klitgaard, MacLean-Abaroa and Parris, argue, however, that "corruption is a crime of

calculation, not of passion. People will tend to engage in corruption when the risks are low, the

penalties mild and the rewards great." Based on this assessment, they propose a simple

heuristic formula for analyzing the tendency for corruption to exist:

C =M +D -A

Corruption = Monopoly + Discretion - Accountability

In explaining this formula, they state that corruption tends to flourish "where officials have a

monopoly power over a good or service, unlimited discretion in deciding who gets that good or

service or how much they get, and there is no accountability whereby others can see what that

person is deciding." Accordingly, they advocate: improving the positive incentives for

municipal officials, including reforming civil service salary structures to make them competitive

with their counterparts in the private sector; promoting competition in the public and private

sectors, which would include privatization, contracting out and, where necessary, the

elimination of corrupt municipal programs; simplifying rules and regulations and informing

citizens of their rights and the service standards to which they are entitled; enhancing

accountability and transparency through clear standards of conduct, openness in bidding and

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contracting, and institutional reforms2 . In relation to e-gov role in combating corruption, those

arguments are justifying & strengthen, particularly the transparency, necessity of e-gov in

enhancing transparency. This theoretical argument is also support by some empirical studies.

For the present empirical studies, literature addressing the relationship between e-

government and corruption is organized along two dimensions: first, studies which take a

micro view and focus on the description and outcome of specific e-government projects; and

second, studies which do not focus on any particular e-government project, but take a macro

view of the outcomes of e-government in a country/state. This paper emphasizes on the second

approach.

Among important studies, Ojha et al (2008) summarized some studies related to above

issue “e-gov and corruption”. They came up with this table:


Authors Study Context & Findings

Shahkooh, More than 180 countries were clustered on the basis of Transparency International’s
Fasanghari, & CPI index and United Nation’s E-Government Readiness Index. Also, correlations
Abdollahi (2008) between these two indices were computed. These two analyses indicated that e -
government readiness index and corruption are very closely related.

DiRienzo, Das, The study investigates the relation between Digital Access Index (DAI) and CPI
Cort, & Burbridge (Transparency International’s corruption index) for a sample of 85 countries, while
(2007) controlling for other relevant variables. DAI was found to have a positive influence
on CPI, but it adds to the model’s explanatory power by only 3.5%. Also, these
85countries were clustered into four groups, based on DAI, masculinity, economic
freedom, and economic development.

Pathak, Singh, A survey of 400 citizens was conducted in Ethiopia. The regression model
Belwal, & Smith comprising the exogenous variables Government Citizen Relationship and e-governance

(2007) model could only explain 8.2% of the variance in Corruption Reduction.
Andersen, & In this cross-country study pertaining to the period 1998-2003, the variables
Rand (2005) INTERNET (number of internet users per 1,000 people) and eGOV (a dummy, which
is assigned the value one if a country’s e-government is either interactive or

22
Klitgaard, MacLean-Abaroa and Parris, 1996

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transactional) were regressed on CPI (Transparency International’s corruption
index). The authors conclude that the path of causality mainly runs from INTERNET
to CPI.
Mahmood Drawing from literature, the author posits four variables i.e. regime type, a sense of
(2004) crisis, a renewed ideology, and political will as salient to the success of ICT-led reforms.

Reasons for greater success achieved in e-government led reforms in Andhra Pradesh
(India), but not in Bangladesh, have been investigated through these four variables.

In a nut shell, looking above studies, there are still existed pros and cons about the relationship

between e-gov and corruption. Therefore, it is interesting to investigate further on this

controversial issue.

The latest study by Shahkooh, Fasanghari, & Abdollahi (2008) is the most

comprehensive study. They investigated the relationship between e-gov and corruption by

using Corruption Perception Index as proxy of corruption and e-government Readiness Index

as proxy of e-gov development. They used K-means clustering method in SPSS and found

that there is a meaningful relation between e-government and transparency score in 180

countries. Furthermore, they argued that Clustering of countries in terms of relation between

their e-government and transparency scores showed that most developed countries with high e-

government scores and less corruption were placed in cluster 1. Therefore, e- government

strategic plan of some developed countries in cluster 1 were investigated and their common

features were extracted to be recommended for developing countries.

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MY E MPIRICAL W ORK

For this paper, to see the relationship between e-gov an corruption, the same approach as

Shahkooh, Fasanghari, & Abdollahi (2008) is conducted. However, this paper will use different

analytical tool and only use data in year 2008.

DAT A & METHODOLOGY

This study using the data 108 countries from Transparency International; Corruption Perception

Index (CPI) year 2008 and United Nation; e-government Readiness Index (eRI) 2008. The

summary of the data is as followed:

Variable Obs Mean Std. Dev. Min Max

cpi2008 108 4.474074 2.279792 1.3 9.3


indexre~2008 108 .5160519 .1909352 .1142 .9157

Different type of analytical tools from Shahkooh, Fasanghari, & Abdollahi (2008) is used. This

study uses regression analysis (Ordinary Least Square Method) and define CPI as dependent

variable and (eRI) as independent variable. Or in other words, the relationship is showed in

this model:

CPI2008 = A + b1 eRI2008 + u

F INDINGS

Relationship between e-gov an corruption is significant (either using 5% or 10% significant

level) (result please see appendix). Holding other variables fix, 47% variance of the CPI is

determine by variance of eRI.

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CONCLUSION

Everyone would agree that e-government enhance transparency, thus, it inhibits corruption.

However, to be critical is beneficial & as student we would like to argue more on scientific

evidence which supported by empirical studies.

Among studies existed, surprisingly, there are pros and cons towards the relationship

between e-government & corruption. Some studies found that there is a strong connection

between those two variables, but some studies failed to found the relationship and they found

that corruption is still ubiquitous even after e-government implemented.

Using the same approach as Shahkooh, Fasanghari, & Abdollahi (2008), but different

analytical tool, this study (incorporate 108 countries) found the same result as Shahkooh,

Fasanghari, & Abdollahi (2008) that there is a strong and positive relationship between e-gov

and corruption. Furthermore, a visualization of those two variables is also confirming the

relationship between them, that, a country which has higher eGI is also having higher CPI, and

vice versa.

Corruption Perception Index (CPI) & e-governance Readiness Index (eGI) - 108 countries in 2008

10

0
0 20 40 60 80 100 120

CPI-2008 e-GovIndexreadiness-2008

Note:
1. For more information about CPI Index & eRI (formulation & factors included on the index) please see references

2. To see the relationship more clearly, e-government readiness index is timed by 10

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For developing countries, this finding is very important and re-highlights the previous
studies which support the role of e-government on combating corruption. Policy on combating
corruption can be effectively supported by the proliferation of e-gov. However, developing
country should also consider some important issues in implementing e-gov, particularly on
absorbing the role of citizens as user in the stage of e-gov development3 . This is very important
and considered as one of the key factor of the success of e-gov 4 . Lastly, there is a big
opportunity of e-gov in inhibiting corruption. Enhancing factors that determines the e-
government readiness index would strongly affect corruption perception index.

3 Success factor of e-gov: Us er Involvement 15.9%, Executive Management Support 13.9%, Clear
Statement of Requirements 13.0%, Proper Planning 9.6%, Realistic Expectations 8.2%, Smaller Project
Milestones 7.7%, Competent Staff 7.2%, Ownership 5.3%, Clear Vis ion & Objectives 2.9%, Hard -Working,
Focused Staff 2.4%, Other 13.9% (CHAOS report (2009)

4
Of e-govern ment projects in developing/transitional countries, it is estimated that 35% are total failures;
50% are partial failures; and only some 15% can be fully seen as successes (www.egov4dev.org)

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MY C OMMENTS ON INDONESIA E- GOVERNMENT
Focusing on Single Identification Number (SIN)

I calle d SIN as the r e al public adm inistr at ion and t he “t rue” public adm inist r at ion r eform for t his ICT
age , why? Be cause of t he se se ver al re asons:
1 . Tr adit ional appr oach would not outr e ach t he spee d of infor m at ion changing in the age of ICT.
Alt hough sur ve y dat a is st ill ne ede d (num be r of pove rt y, num ber of une m ployme nt , e t c), we
ne ed more dynam ic dat a t hat could be updat e d “ inst ant ly” once t he obje ct change t he ir
at tr ibut e s. Gover nm e nt policy nee ds m or e accur ate infor m at ion so that t he policy could be
dir e cte d m or e e ffe ct ive ly. SIN e nable s t he form at ion of a dat abase t hat st ore s all cit ize ns’
dat a. This dat abase is not st at ic but dynam ic be cause it r e lat e s “ all” dat a fr om “ all” public
inst it ut ions using dat abase t e chnology w hich is com m on use d by m any pr ivate indust r ie s (e x.
banking syste m s)
Badan Pusat St at ist ik dat a is pr oven t o be inaccur at e as w e have e xample fr om
var ious “ failed” pr ogr am be cause of the dat a re liabilit y. Bant uan L angsung Tunai & Daft ar
Pe sert a Pe m ilu is t he be st exam ple t hat we ’ve dedicat ed a huge am ount of m one y & e ner gy
using the wr ong way over and ove r again.
2 . The ult im ate sickne ss of public adm inistr at ion “ corr upt ion” also c an be addre sse d e ffe ct ive ly

t hrough SIN . Com binat ion of t axat ion dat abase & banking syste m w ould e asily tr ack one ’s

pe culiar asset incre me nt al com pare to one ’s income . This pr e ve nt ive appr oach syste m w ill

com pre he nd t he re pre ssive appr oach by KPK which w ill give a t re me ndous psychological

e ffe ct t o societ y. SIN also could be dr ive n t o highe r t ax re ve nue t hus higher t ax r at io. Tax

e vasion and m one y launder ing will be m or e e asy t o dete ct be cause the inter link of t he dat a.

3 . Public ser vice s will be m or e e asily t o de live r . One doe sn’t re quire filling t he same

inform at ion over and ove r again since it alre ady st ore in t he dat abase and one could not

e asily m isuse cit ize n id t o cove r t he ir cr im e or e ve n te rr or ism . Coor dinat ion among public

inst it ut ions could be str e ngt he ne d by ope ning m ore channe l of infor m at ion fr om one t o

anot he r .

Som e challe nge s:

1 . Som e polit ician s will challe nge t his ide a t o hidde n t he ir we alth t hat or igins fr om corr upt ion.

2 . Ego am ong inst it ut ions. “ Who got the infor m at ion he got t he pow er” , this not ion is st ill

e xist wit hin public inst it ut ion s. The y tr ie d as the y can t o host SIN , not for national pur pose s

but only for t he ir int ere st s.

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R EFERENCES

e-Govern men t for Development www.egov4dev.org (retrieved 17 Feb 2010)

Klitgaard, MacLean-Abaroa & Parris (1996). A practical approach to dealing with municipal malfeasance.
UMP workin g paper

Shahkooh, Fasanghari, & Abdollahi (2008). A Proposal for Corruption R eduction in Developing
Countries Based on E -government World Applied Sciences Journal 4

The Standish Group (2009). CHAOS Summary 2009. www1.standishgroup.com (retrieved 17 Feb 2010)

Transparency International. Corruption Perception Index 2008. www.transparency.org (retrieved 17 Feb


2010)

United Nation – Human Settlement Program (2004). Transparency & Corruption .


http://testcurrent.unhabitat.org/cdrom/TRANSPARENCY/h tml/transpc.html#ref (retrieved
17 Feb 2010)

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A PPENDIX

Result using STATA:

. reg cpi2008 indexreadiness2008

Source SS df MS Number of obs = 108


F( 1, 106) = 95.12
Model 263.023344 1 263.023344 Prob > F = 0.0000
Residual 293.104064 106 2.76513268 R-squared = 0.4730
Adj R-squared = 0.4680
Total 556.127408 107 5.19745241 Root MSE = 1.6629

cpi2008 Coef. Std. Err. t P>|t| [95% Conf. Interval]

indexre~2008 8.211439 .841938 9.75 0.000 6.542215 9.880663


_cons .2365459 .4630109 0.51 0.610 -.6814183 1.15451

Note:

Since P Value is smaller than both significant level 5% & 10%, it can be concluded that ther e is no strong evidence

to reject hypothesis alternative (Ha), therefor e, Ha is accepted; there is a positive significant relationship between

CPI-2008 & eRI-2008

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