draining development.pdf - Khazar University

2 Draining Developmentcountries began appearing. In 2004, Transparency International estimatedthat 10 of the most notoriously corrupt heads of state in developing countriesmay have, together, spirited as much as US$60 billion out of theircountries during their respective tenures in office (Transparency International2004). In 2005, Raymond Baker estimated that more than US$540billion flowed out of developing countries each year thanks to a combinationof tax evasion, fraud in international trade, drug trafficking, and corruption(Baker 2005). In 2007, Christian Aid and the Tax Justice Networkproduced studies reporting similar figures (Kapoor 2007; TJN 2007).These reports and their implications were not lost on those lookingfor ways to fill the development finance gap. If, in fact, the amount ofmoney illicitly flowing out of developing countries was anywhere nearthe amounts estimated in these reports, even partially staunching theflow held significant promise for filling the gap. Two questions thusimmediately arose. Are the outflows large enough to justify efforts tostaunch them? And, if so, what can be done?In 2008, the Norwegian government asked the World Bank to undertakea research project that would address these questions. The Bank, inturn, commissioned the editor of this book to organize a conferencewith authors of original papers and to edit the proceedings. The purposeof this book is to assess what is known about the composition of illicitflows, the processes that generate these flows, the role of tax havens infacilitating them, and the effectiveness of programs aimed at either preventingthe flows or locating and recouping them once they have left.The book provides the first collection of analytic contributions, asopposed to advocacy essays and black box estimates, on illicit financialflows (IFFs). Some of the chapters present new empirical findings; others,new conceptual insights. All of them enrich the understanding of thedynamics of the illicit flows phenomenon. The book does not offer anew estimate of the global total of these flows because the phenomenonis too poorly understood.The chapters are based on papers first presented at a September 2009conference at the World Bank. Each paper had one or two assigned discussants,and the revisions reflect the often searching critiques of thediscussants, as well as additional comments from the editor and fromtwo external peer reviewers. The chapters have been written to be accessibleto nonexperts.