According to a report by the American think tank Global Financial Integrity (GFI), the total illicit capital flight from Ethiopia, Kenya and Somalia amounts to 1.2 billion dollars annually in the years 2000-2008. This is almost as much as the United Nations appeal to meet the urgent needs for food, water and emergency relief in the Horn of Africa.
"When droughts turn into famines it is caused by political failure both nationally and globally. One important global cause in this case is that countries are deprived of resources as a result of illegal capital flight," says Anne-Marie Helland, Director of Development Policy and Norwegian Church Aid.
The capital flight is caused by big companies that move profits out of the country before they are taxed, as well as corruption and crime. Tax havens around the world play a key role in this illegal business.
"It is sad to see that such large sums of money every year disappear from the countries that today need the money more than anyone else," says Helland.
Could have been better prepared
It is very unclear where this money would have ended up if it had not been channeled out of the country, especially in the case of Somalia where there are major internal governance problems. But there is little doubt that local and national authorities would be better equipped to prevent and deal with disasters if illicit capital flight were to be reduced, believes NCA.
"Transparency in tax havens and control of illicit capital flight could save lives," Helland argues.
Urge Norwegian authorities to take action
NCA states that emergency relief to the Horn of Africa is essential in the situation we are in now, but also believes there should be more emphasis on the underlying causes in order to prevent similar disasters in the future. One such cause is illicit capital flight.
- A first step in the fight against illegal capital flight is to introduce so-called country-by-country reporting on the Oslo Stock Exchange. This may help us to prevent companies operating in poor countries evade taxes, says Helland.
The figures from GFI are estimates based on figures that exist for the three countries. For Kenya and Somalia a quantity of data is lacking, and this makes the estimates more uncertain. The estimate of 1.2 billion U.S. dollars comes from Ethiopia (920 million dollars), Kenya (217 million dollars) and Somalia (72 million dollars).
Contact:
- Anne-Marie Helland, Director of Development Policy, Norwegian Church Aid, tel 95 92 17 13
- Jens Aas-Hansen, press officer, tel 98 20 25 05