Task Force on Financial Integrity & Economic Development
An upcoming report by Global Financial Integrity finds that Ethiopia, which has a per-capita GDP of just US$365, lost US$11.7 billion to illicit financial outflows between 2000 and 2009. More worrying is that the study shows Ethiopia’s losses due to illicit capital flows are on the rise. In 2009, illicit money leaving the economy totaled US$3.26 billion, which is double the amount in each of the two previous years.
The report, titled Illicit Financial Flows from Developing Countries over the Decade Ending 2009, shows that the vast majority of the rise in illicit financial flows is a result of increased corruption, kickbacks, and bribery while the remainder stems from trade mispricing.
Ethiopia is one of the poorest countries on earth. Plagued by famine, war, and political oppression, 38.9% of Ethiopians live in poverty, and life expectancy in 2009 was just 58 years. In 2008, Ethiopia received US$829 million in official development assistance, but this was swamped by the massive illicit outflows. The scope of Ethiopia’s capital flight is so severe that our conservative US$3.26 billion estimate greatly exceeds the US$2 billion value of Ethiopia’s total exports in 2009.
The people of Ethiopia are being bled dry. No matter how hard they try to fight their way out of absolute destitution and poverty, they will be swimming upstream against the current of illicit capital leakage. The global shadow financial system happily absorbs money that corrupt public officials, tax evaders, and abusive multi-national corporations siphon away from the Ethiopian people.
What can be done? The first step the international community should take is to hamper the ability of corrupt and tax-evading Ethiopians to launder their money in the global financial system. This could be accomplished by establishing a global system of automatic exchange of tax information. In this way, Ethiopian authorities could much more easily track the bank accounts their tax evaders have established around the world. Furthermore, the G20 governments could push for an end to shell companies by calling for beneficial owners of all companies, trusts and foundations to be known to government authorities. This would make it far more difficult for the corrupt and the criminal to hide their ill-gotten gains behind a wall of corporate secrecy.
These two measures would immediately curtail the flow of billions of dollars leaving the country each year. And, by preventing the flow of so much money, countless lives will benefit.
Editorial Note: Later this month, Global Financial Integrity will release its new report, Illicit Financial Flows from Developing Countries over the Decade Ending 2009, measuring illicit financial flows out of 160 different developing countries. Revealing more data from the upcoming report, Ms. Freitas wrote last week that Syria lost US$23.6 billion in illicit financial outflows from 2000-2009.
*Sarah Freitas is an Economist at Global Financial Integrity in Washington, DC and a co-author of “Illicit Financial Flows from Developing Countries over the Decade Ending 2009,” a December 2011 report from GFI.
**************
From the Editor of https://transformingethiopia.wordpress.com/
It would be recalled that in a May 2011 report entitled Illicit Financial Flows from the Least Developed Countries: 1990–2008, the UNDP revealed that Ethiopia had lost US$ 8.4 billion. The UNDP acknowledges that the figures are only estimates because “data are either non-existent or spotty due to widespread on-going or recent conflict and/or weak statistical capacity.” In Ethiopia’s case, however, all macroeconomic and partner country date have been complete.
Based on that, it shows illicit transfer had cost the country each year since 1998, this here being the period of huge transfers: 1998 (€200.2 million), 1999 ($248.9 million), 2000 ($94.5), 2001 ($565.5 million), 2002 ($332.2 million), 2003 ($96.0 million), 2004 ($541.2 million), 2005 ($814.8 million), 2006 ($1.4 billion), 2007 ($1.3 billion) and 2008 ($2.1 billion). From 1990 – 1997, the following was the transaction: 1990 ($55.5 million), 1991 ($96.0 million), 1992 ($20.8), 1993 ($51.4 million), 1994 ($0.0), 1995 ($75.3 million) and 1996 ($62.0 million) and 1997 ($0.0).
The UNDP report also indicated that, during this period, according to these figures, Ethiopia had lost on average $475 million a year. During this period, the average ratio of non-normalized (adjusted data) illicit financial flows (IFF) to GDP is equivalent to 3.57 percent. As percentage of Ethiopia’s shadow economy, its loss through IFF is estimated to be on average as high as 38.64 percent.
According to this report by the UNDP, “Illicit financial flows involve the cross-border transfer of the proceeds of corruption, trade in contraband goods, criminal activities, and tax evasion.”
No comments:
Post a Comment