Nearly US$38 billion lost through illegal transfers in 10 years

From 2003 to 2012, Egypt lost US$37.68 billion due to illicit financial outflows, according to a new report from non-profit research organization Global Financial Integrity. 

This put Egypt in 23rd place, out of 145 developing economies in the study, with average yearly outflows of over $3.7 billion per year. This figure was dwarfed by China, which held the top spot, with over $125 billion per year.

In the MENA region, Saudi Arabia saw average illicit outflows exceeding $30 billion, the United Arab Emirates with more than $13.5 billion, and Iraq with $11 billion. Syria’s outflows were on-par with Egypt during the period studies, also at around $3.768 billion per year.

Overall, the report found that between 2003 and 2012, the developing world lost $6.6 trillion in illicit outflows. In 2012 alone, more than $991 billion went missing, a new record.

These funds are lost to tax collectors, hurting government budgets and helping to mask corruption and fuel the global illicit economy.

Illegal capital flight increased at a rate of 9.4 percent per year, far outpacing overall economic growth.The IMF estimates that global economic growth in 2012 was around 3.2 percent.

The illicit outflows tracked by the GFI report also exceed the combined totals of development aid and foreign direct investment received by developing economies. According to World Bank data cited by the report, development assistance amounted to $809 billion from 2003 to 2012, while FDI during the same period was $5.7 trillion.

Illicit capital flows are by nature difficult to track. The GFI reaches its estimates by tracking global trade statistics and looking for discrepancies between export and import figures reported by trading partners. It also looks for  illicit “hot money” — short term transfers between financial markets — by calculating the differences between a country’s current account and capital account, which should balance each other out.

Since many illegal transactions are made in cash or by other forms of money laundering not tracked by the report, the actual figure is likely to be much higher.

Of the financial flows tracked by the report, the vast majority — 77.8 percent in the 10-year period covered in the report — were due to trade mis-invoicing, in which businesses deliberately mis-state the value of imports and exports in order to avoid taxation or siphon off unreported profits to offshore accounts.

Egypt stood out for its high prevalence of under-invoicing, in which the price of goods stated on an invoice is less than is actually paid. For example, an Egyptian businessman could report artificially low earnings for products he exports, and then direct the unreported difference to an offshore account.

Among countries in the GFI report, Egypt had the 12th highest level of under-invoicing, with some $25.2 billion lost this way from 2003-2012.

This report comes on the heels of two other reports on global corruption. Transparency International, which ranks countries based on perceived levels of corruption, ranked Egypt at 95, out of 175 countries surveyed, putting it solidly in the middle of the scale. Global business analysis firm Ernst & Young ranked Egypt’s private sector as the most corrupt in the world.


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