Corruption and Governance Challenges in the Capital Development Authority of Dhaka-Bangladesh: Understanding the Nexus of Principal-Agent Theory and Collusion Triangle

Introduction

Anti-corruption initiatives are often blamed for being ineffective because they lack a firm theoretical basis. Those initiatives are meant for the anti-corruption efforts that had been taken^[1]See, Marquette, H. and Peiffer, C., 2015. Corruption and Collective Action. [online] Available at: https://www.cmi.no/publications/5544-corruption-and-collective-action [Accessed 28 February 2020] over the last two decades. However, analyzing corruption has been predominantly guided by the principal-agent approach. On the other hand, it is also described as a collective action problem^[2]See, Zapata, M., 2018. Collective action theory applied to anti-corruption practice: A Bolivian case study. IACA Research Paper Series No. 07. [online] Available at: … Continue reading that enables us to come up with other solutions rather than merely looking at increasing the agent’s accountability towards the principle. In fact, the empirical findings support that monitoring accountability per se may not be effective; rather a holistic approach is required as corruption has been ‘institutionalized’ through collusion among the perpetrating entities. Neither principle- agent approach nor the collective action approach will work if this collusion is not broken out towards a broader holistic approach of combating corruption.

An empirical study has been published, which has come up with arguments in relation to the corrupt practices of the capital development authority of Bangladesh namely ‘Rajdhani Unnayan Kathipakkha’ (RAJUK). The findings of the study generate few new insights in the realm of anti-corruption research^[3]See, Afroz, F. and Rahman, F., 2020. Rajdhani Unnayan Kartripakkha (RAJUK): Governance Challenges and Way Forward. Transparency International Bangladesh. [online] Available at: … Continue reading.

Rationale

Dhaka, the capital city of Bangladesh, remained the most densely populated city on earth for three consecutive years^[4]See, Amin, M. A., 2018. Dhaka remains the world’s most densely populated city. Dhaka Tribune, [online] 14 October. Available at: … Continue reading. This is putting tremendous pressure on the livability of the city. The SDGs (Sustainable Development Goals) of the UN consider that sustainable development is not achievable without significantly transforming the way we build and manage our urban spaces^[5]See, United Nations, Sustainable Development Goals, 2015. [online] Available at: https://www.un.org/sustainabledevelopment/cities/ [Accessed 28 February, 2020]. The SDGs had a major impact on national policies and perspective plans. The city development authority took few initiatives to combat corruption and to enhance governance of this institution. On the other hand, the city has been ranked as the third least livable city of the world^[6]See, Dhaka Tribune, 2019. Global Livability Index 2019: Dhaka named 3rd worst city to live. [online] Available at: … Continue reading, which considered quality of housing as the central component. Building Code violations have become a major concern among other issues of city development. In the last couple of years, the world has observed devastating result of violation of building codes such as the collapse of multi-storeyed buildings, fires in high-rise buildings, etc. Those breaches caused the death of thousands of people. There were few initiatives to raise awareness against violation of building codes which had no or little impact in combating violations. Findings of the study has also some theoretical indications on – why the anti-corruption initiatives are not working and which initiatives may work in the existing political economy.

Findings of the research

RAJUK, the capital development authority, is to play three major roles such as- planning, development and development control of the spaces of the capital city. The governance of the institution is assessed based on certain indicators such as- transparency, accountability, participation, inclusiveness, corruption and irregularities. Enormous gaps have been identified in legal and institutional framework, which facilitated ‘opportunities’ for perpetrators to institutionalize corruption instead of governance. The study has identified a number of governance challenges, including corruption and irregularities being faced by the service seekers from the institution. A significant portion of the service providing officials, colluding with the political entity and the private brokers, possess discretionary power to harass the service recipients or the service seekers. The service seekers cannot place their trust on the official system. Furthermore, the perpetrators have immense ‘trust’ among themselves which increased discretion of the perpetrators of corruption. This ‘trust’ has ‘institutionalized’ unauthorized payment for services. There are certain rates of bribes for services that had been set unofficially. Studies found that every service recipient had to pay a bribe for receiving services. In other words, there was no incidence of receiving services without bribe. However, the amount of bribe depended on certain determinants. For instance, for the approval of building plans, the amount of the bribe depends on the location and size of the land, purpose of the building, number of the owners, number of stories, etc. Most strikingly, the amount of the bribe reaches at the highest level when the service seekers also want to violate codes to get an unlawful plan.

The service recipients had to make unauthorized payments for every service from the institution. While some of the services were to be provided without cost and some other with limited fees, the service recipients had to pay high amount of bribes for the services. For example, for the approval of a plan, the amount of bribe paid by an individual varied from an amount equivalent to 500 EUR to 4,500 EUR (considering 1 EUR = 100 Taka). Moreover, for a developer company or an individual developer the amount of bribe generally varied from 2,000 EUR to 40,000 EUR. In most of the services the unauthorized payment is five to eleven times of the required fee set officially. Irregularities are quite obvious for the development projects. There were instances where no fees were required but the service recipient paid more than 200,000 EUR for the approval of a large project^[7]See, Afroz, F. and Rahman, F., 2020. Rajdhani Unnayan Kartripakkha (RAJUK): Governance Challenges and Way Forward. TIB. [online] Available at: … Continue reading.

It has been noted that nothing is impossible if ’money’ is there. At the individual level it is done with the help of a broker who mediates and bargains on the amount of a bribe. There are incidences where development projects were planned without feasibility studies and sometimes exploit the local people rather than giving them proper compensation. There is a lack of transparency in the implementation of development projects. There are instances where clients’ files were concealed when they denied to pay a bribe; later on, in lieu of bribe, the files were found in the same office. The study found a number of housing projects that were illegally made in the flood flow zones, which is a clear violation of long-term development strategies set for the capital city. Those are affecting the livability of the capital city.

Apparently, there is a system in place for compliance with ‘complain redress mechanism’ and public hearing which are not working in reality. However, a section of corrupt officials can turn those into ‘opportunities’ to seek rents. They concentrate on making profit by abusing the entrusted power conferred upon them. Everyone posted in this institution is intended to have his own plot or flat using the collusion here. On the other hand, the local population are being displaced because of the newly taken housing projects. Those who complain and demand public hearings are harassed repeatedly due to their complaints   rather than paying bribes.

The Principal- Agent theory and the reality of collusion triangle

In the realm of anti-corruption research, the predominance of principle-agent theory is widely accepted. The above discussions suggest that mere application of the ‘principal-agent’ theory may not be enough to usher in appropriate anti-corruption measures. In order o have a proper theoretical application, it may be appropriate to have a better understanding of the problem. This will generate a potential role of the principal-agent approach to prove its applicability and usefulness with few modifications. A modified and explanatory version of the theory may be useful to initiate plausible anti-corruption measures as well.

For a long time, the principle-agent approach of analyzing corruption suggested for reorganizing bureaucracies^[8]See, Ackerman, S. R., 1978. Corruption: A study in political economy. New York: Academic Press. and reducing monopoly and discretion of agents^[9]See, Klitgaard, R., 1988. Controlling corruption. Berkley: University of California Press. whereas all the possibilities may have dependency on ‘principled principal’ which takes  for granted that the principal has the will to serve the function. Therefore, a ‘second principal-agent approach’^[10]See, Marquette, H. and Peiffer, C., 2015. Corruption and Collective Action. may be useful. By contrast, without taking into account the existing ‘political settlement,’^[11]See, Khan, M. H., 2010. Political settlement and the governance of growth enhancing institutions. Research Paper Series on Governance for Growth. School of Oriental and African Studies, University of … Continue reading that include a collusion triangle of the perpetrators of corruption, the main essence of the corruption incidents will be missed out and therefore, the suggested solutions may not be plausible.

In this section a modified version (Picture 1) of the principal-agent model has been presented. This has been established in accordance with the findings of the empirical research. The service recipients or the citizens may be conceptualized as ‘the principal’ while the ‘public officials’ working in the institution are considered as the agents. Here ‘asymmetric information’ dis-empowers people’s monitoring. But the information in hand is not helping the service recipients to get rid of corruption because of the collusion triangle or the ‘nexus’ that comes out of the existing ‘political settlement’. It is evident that the agent’s rational choice is not the only decisive factor. He or she performs from a given political settlement. Therefore, without taking that into account, the analysis will not result in a feasible or applicable solution. The prevailing political-economic condition leads the agent to act accordingly before doing the cost-benefit analysis and before making the rational choice. The agent colludes with the powerful political entity and the business entity to perpetrate corrupt practices. This nexus among the agent, the political entity and the business people, let corruption and irregularities to continue. The fragile accountability mechanism does not allow the ‘principal’ questioning the agent nor the nexus. Rather the prevailing ‘political settlement’ is stimulating this nexus that is being institutionalized where no one questions this concentration of power nor the abuse of power. On the other hand, each of the entities collude for its own interest. The agent usually makes this transaction with the help of a third person(s) who may be an official or non-official person.

Picture 1: Agent’s nexus with political and business entities^[12]For pictures used for explaining the theory, please see [online] : https://slideplayer.com/slide/10747610/; … Continue reading

In the given picture, developed based on the findings of the research, the agent acts in collaboration with the two other entities such as – politically influential leader and the private sector that also has certain level of influence. These elements of the ‘collusion triangle’ may change according to the services. But the presence of the triangle is obvious as far as the findings of the research are concerned.

Concluding remarks

The above analyses suggest that it is necessary to break down the illegal collaboration among the perpetrators of corruption. The rational calculation of enhanced monitoring and transparency may not work in silo. This factor is more accurate for a society where people’s lives are trapped in a corruption cycle. Engaging citizens in communities and social monitoring mechanisms should be enhanced. The legal barriers should be removed to disempower the bureaucrats not to abuse the entrusted power for personal or group interests. The illegal nexus among the perpetrators should be broken down to make an alternative collaboration to enhance citizens’ voice.

Fatema Afroz

Fatema Afroz is a graduate of the Master in Anti-Corruption Studies (MACS), and she also has master degree in Governance and Public Policy and bachelor degree in International Relations from the University of Dhaka (Bangladesh). Fatema is a researcher and currently works with Transparency International Bangladesh. Among her research interest areas are corruption, governance, gender, parliament, and compliance. She has co-authored a number of research papers, including on Governance Challenges of Capital Development Authority (2020), the National Household Survey (2015), Women and Corruption (2015), Parliament Watch (2009, 2011, and 2015), and Tracking Electoral Commitment (2012). Currently Fatema is working on a research on governance and right to information. She is also engaged with developing a project on corruption and governance in public sector. She is also working with UNCAC Coalition as Regional Coordinator for Asia -Pacific region.

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