Theme: Procurement

Further insights from Armenia, Guatemala, Malaysia, Niger, and Tunisia illustrate access to information challenges

December 10, 2024 – New research from Transparency International Defence & Security (TI-DS) underscores the need for better access to information in the defence sector to curb corruption, ensure accountability, and improve civic engagement.

Published today, Unlocking Access: Balancing National Security and Transparency in Defence shines a light on opaque defence sectors worldwide at a time of increased geopolitical tensions and global military spending reaching record highs of $2.4 trillion.

Read the report

The report highlights challenges and good practices of transparency in defence budgets, procurement and policy processes using detailed case studies from Armenia, Guatemala, Malaysia, Niger, and Tunisia. The countries are at varying stages of progress in advancing access to information in their defence sectors and face a range of challenges, including conflict-driven secrecy, democratic backsliding, and stalled reforms.

Our analysis reveals that while international frameworks provide guidelines for transparency, implementation remains weak. Blanket national security exemptions are often used to justify withholding critical information, while public interest tests designed to balance the benefits of disclosing against the potential harm are mostly absent.

This lack of transparency increases the risk of corruption, mismanagement of funds, and fuels public distrust of the very institutions tasked with protecting citizens.

Michael Ofori-Mensah, Head of Research at Transparency International Defence & Security, said:

“The defence sector remains one of the most secretive corners of government, making it a breeding ground for corruption. Striking a balance between national security and the public’s right to know is crucial to ensure accountability, but far too often governments tip the scales towards secrecy. It’s time for transparency to be the rule, not the exception.”

Case study insights

Armenia has kept high levels of defence spending because of its decades-long conflict with Azerbaijan over the Nagorno-Karabakh territory, which recently concluded with major losses for Armenia. Access to information was enshrined in a 2003 national freedom of information law but has been severely curtailed by the 2024 states secrets law, which prohibits the release of information related to most defence spending.

Guatemala has endured a growing corruption crisis for the past decade, as the presidency and the powerful Public Prosecutor’s office stifled anti-corruption efforts, forced anti-corruption officials into exile, and blocked potential reform candidates from elections. As the Secretariat for Access to Public Information is required to work with the Prosecutor’s Office on access to information enforcement, implementation of the law has faltered until now.

Malaysia saw a peaceful power transition in 2018, but governance reforms – including access to information – have stalled, with the Official Secrets Act 1972 (OSA) severely limiting access to information. The OSA functions as the de facto national framework for access to information and overrules any other legislation on information access. There is little knowledge about the defence budget or expenditures, and almost no publicly available information about acquisition planning.

Niger experienced a military coup in July 2023 that has led to increased violence, stark reductions in foreign assistance, and a severe curtailing of access to information and other democratic rights. Even prior to the coup, defence income and military spending were mainly non-transparent, as were defence purchases. But a new far-reaching law was passed in 2024 that excludes all defence matters from public procurement, public accounting, and taxes.

Tunisia has seen democratic backsliding since 2021 which reduced government transparency. Though a strong access to information law exists, defence-related information is often kept confidential. Still, Tunisia has a strong access to information law, with an effective independent oversight body that has helped to implement the law throughout the public sector.

The report offers specific recommendations for each of these five countries to improve access information which broadly fit into these categories:

Balancing tests: Legal frameworks should require officials to assess the public interest versus potential harm before withholding information.
Proactive disclosure: Governments should regularly and proactively publish defence budgets, procurement plans, and financial results to enhance accountability.
Independent oversight: Review bodies should be established to monitor and adjudicate disputes over information access.
Civil society engagement: Defence planning and policymaking should be open to civil society for broader input and oversight

Notes to editors:

The case studies in Unlocking Access were produced using an updated version of our Government Defence Integrity Index 2020 – the leading global assessment of the governance of and corruption risks in defence sectors. The data was supplemented by interviews with local experts, and the review of policy reports and media investigations.

French and Spanish versions of this press release are available.

Despite widely agreed international standards for access to information in the defence and security sector, transparency remains insufficient to ensure accountability. National security exemptions are frequently applied in vague and undefined ways, limiting the release of precise, timely and detailed information that is crucial for understanding how government is functioning and protecting public interest, especially in areas as fundamental as national security.

Read the launch press release:

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Information exchange within government facilitates various types of accountability – from parliamentary scrutiny of executive decisions, to audits of the government’s use of public funds as well as disciplinary sanctions for public officials. More importantly, information disclosure to the public by government bodies also forms the foundation for meaningful citizen engagement and accountability. This is true not just for voting and activism, but for interest in the policies that determine the course of daily life, including whether the security forces are absent, overmilitarised, or well-balanced.

Legitimate national security interests are best safeguarded when the public is well-informed about government activities, including those undertaken to ensure safety and protection. Access to information enables public scrutiny of government action and facilitates public contribution to policymaking and national debate, thus serving as a crucial component of genuine national security, democratic participation, and sound policy formulation. Access to information is also a specific aspect of governance that involves the intentional disclosure of information. These policies require the release of information that is relevant to the public, and is also accessible, accurate and timely.

This report provides an overview of the state of defence transparency and access to information related to defence and security sectors worldwide, drawing on the Government Defence Integrity (GDI) database on institutional integrity and corruption risk. In light
of increasing global military spending (with a new world record of $2.443 trillion recorded in 2023) the overarching focus is on access to defence-related financial information, as transparency and appropriate oversight of defence finances remain critical for public
accountability, among others.

Further, this report also includes a review of global standards for transparency that apply to the defence sector, specifically the UN Convention Against Corruption (UNCAC) and the Global Principles on National Security and the Right to Information (or Tshwane Principles). This is coupled with specific exploration of five country cases (Armenia, Guatemala, Malaysia, Niger, and Tunisia) and insights from their legal frameworks and implementation experiences. It concludes with recommendations for good practice to enhance access to information.

Corruption undermines the legitimacy and effectiveness of government institutions in all sectors, but it thrives in areas where large budgets intersect with high levels of secrecy and limited accountability, write Michael Ofori-Mensah, Denitsa Zhelyazkova and Harvey Gavin.

The defence and security sector features all these risk areas, making it particularly vulnerable. The combination of secrecy, limited oversight and, often, high levels of discretionary power in decision-making, creates an environment ripe for corruption. This vulnerability not only undermines the ability of governments to fulfil their primary duty to their citizens of keeping them safe, it also undermines their legitimacy.

Transparency International – Defence & Security is working to address this issue. A key contribution is our recent involvement in NATO’s Building Integrity Institutional Enhancement Course. This program focuses on supporting national governments with capacity building in developing Integrity Action Plans aimed at strengthening the integrity of their defence institutions. Before drawing up these plans, defence officials must identify areas most at risk of corruption. This is where the recent enhancement aimed at improving accessibility and use of our Government Defence Integrity Index (GDI) becomes an invaluable diagnostic tool.

The GDI is the world’s leading assessment of corruption risks in national defence institutions. As a corruption risk assessment tool, it examines the quality of institutional controls to manage the risk of corruption in nearly 90 countries around the world on both policymaking and public sector governance and covers five major risk areas:

Financial: includes strength of safeguards around military asset disposals, whether a country allows military-owned businesses, and whether the full extent of military spending is publicly disclosed.
Operational: includes corruption risk in a country’s military deployments overseas and the use of private security companies.
Personnel: includes how resilient defence sector payroll, promotions and appointments are to corruption, and the strength of safeguards against corruption to avoid conscription or recruitment.
Political: includes transparency over defence & security policy, openness in defence budgets, and strength of anti-corruption checks surrounding arms exports.
Procurement: includes corruption risk around tenders and how contracts are awarded, the use of agents/brokers as middlemen in procurement, and assessment of how vulnerable a country is to corruption in offset contracts.

Within these areas, the GDI identifies 29 specific corruption risks, assessed through 77 main questions and 212 underlying indicators. These indicators examine both legal frameworks and their implementation, as well as the allocation of resources and outcomes.

It, therefore, provides defence institutions with a comprehensive assessment of corruption vulnerabilities and a platform to identify safeguards against corruption risks. Each indicator is scored on a scale from 0 to 100, with aggregated scores determining the strength of a country’s institutional practices and protocols to manage corruption risks in defence,: from A (low corruption risk/very robust institutional resilience to corruption) to F (high corruption risk/limited to no institutional resilience to corruption).

Our recent updates to the GDI website have significantly improved its functionality, allowing users to group countries by various categories such as region, income level, regime type, Stockholm International Peace Research Institute (SIPRI) group and intergovernmental body affiliation. For example, policymakers seeking to understand problematic areas within the EU defence sector can now explore specific indicators of interest and export the data for detailed analysis.

The enhancement also provides a functionality that enables comparisons across the 77 main questions of the GDI thus facilitating targeted assessments of particular risk areas and cross-country analysis.

Data from the GDI, both quantitative and qualitative, can be downloaded in .csv format, compatible with numerous data processing tools like Excel, SPSS, and Access. This feature allows users to generate customised spreadsheets containing only the information pertinent to their needs. The qualitative data, derived from expert assessor interviews, provides critical insights that complement the quantitative scores, offering a nuanced understanding of corruption risks.

(Note: these updates apply to the current 2020 iteration of the GDI. Our team is working on the 2025 GDI – you can find more information about it here)

The ongoing challenges posed by corruption in the defence sector demand sustained and coordinated efforts from both national governments and the international community. Initiatives like NATO’s Building Integrity Institutional Enhancement Course, supported by tools like the GDI, represent significant strides toward fostering good governance in defence institutions. But maintaining high standards of defence governance remains an ongoing challenge that requires vigilance and commitment.

Reforms are urgently needed to address the institutional gaps identified by the GDI. Integrity Action Plans, informed by comprehensive corruption risk assessments, are essential for guiding these changes. By prioritising transparency, accountability and resilience, countries can strengthen their defence institutions, reduce corruption and improve peace and security.

The Geneva Peace Week (GPW) is one of the important appointments on the international peacebuilding calendar, writes Francesca Grandi, our Senior Advocacy Expert. This year, it centred around the question: “What is Peace?”

A call to action and an opportunity for reflection, the forum brought together a wide array of stakeholders from the peace and security ecosystem and beyond, highlighting the cross-cutting nature of peacebuilding and the need for innovative and collaborative solutions for building lasting peace.

Building bridges

Transparency International Defence & Security (TI-DS) attended GPW 2024 to make the case for recognising corruption in the defence and security sectors as a key driver of violence and armed conflict, and to advocate for a more comprehensive and systematic inclusion anti-corruption measures in peacebuilding frameworks. We introduced our research and engaged with many panels. Colleagues in international NGOs, UN bodies, and Member States expressed a genuine interest in our work and acknowledged the importance of addressing corruption in the defence and security sector to build trust and resilience in fragile contexts. It was clear that more research and practical tools are needed to bridge what we know about corruption and armed conflict.

Anti-corruption as a preventive tool

In nearly every session, the themes of prevention, trust-building, and institutional resilience resonated strongly with our message that anti-corruption contributes to postive peace and security outcomes and provides a relevant lens across a wide range of peace and security issues.

Corruption hampers the effectiveness of security sector reforms, arms controls, and truth and reconciliation processes; it undermines the protection and promotion of human rights; it erodes trust between former combatants and government institutions, and thus the successful reintegration of ex-combatants, increasing the likelihood of conflict relapse.

We asked whether corruption is sufficiently integrated into international peace frameworks, such as the UN Pact for the Future. While some peacekeeping mandates include anti-corruption provisions, the absence of explicit references in key documents remains a concerning omission.

By addressing corruption as a root cause of conflict and ensuring that public resources are used as intended, we can build more resilient and inclusive societies and enhance the impact of localised and gender-responsive peacebuilding approaches. By integrating anti-corruption strategies in our peace responses, we can strengthen institutional integrity and help foster the public trust and the institutional resilience needed for lasting peace.

Next steps: Expanding partnerships and advocating

Moving forward, TI-DS remains committed to advocating for integrating anti-corruption as a key component of the global peace and security agenda and for including corruption prevention strategies in future peace interventions, emphasising their role in strengthening governance and peace processes.

As we continue our advocacy efforts, our focus remains on building partnerships, producing evidence-based research, and ensuring that anti-corruption remains at the forefront of global peace and security discussions. The GPW provided us with a platform to advance these objectives, and we look forward to furthering our work in this vital space.

Access to information is a cornerstone of healthy, accountable and transparent societies and essential for democracy.

By improving the public’s ability to obtain and use government-held information, citizens are empowered to participate fully in democratic processes, make informed decisions, and hold their leaders accountable.

Access to information is vital in all public sectors, but particularly so in defence and security where high levels of secrecy combined with substantial public budgets greatly increase the risk of corruption. Transparency and access to information in this sector provides a crucial bulwark against the misuse of funds, ensures accountability, and maintains public trust.

Ahead of Access to Information Day 2024, we’re excited to share details of our upcoming report which provides a comprehensive overview of the state of defence transparency and access to information worldwide.

Our report aims to strengthen accountability by enhancing access to defence information, in line with our broader goal to ensure informed and active citizens drive integrity in defence and security.

Utilising our Government Defence Integrity (GDI) 2020 database, which assesses institutional integrity and corruption risks, the report offers a detailed assessment of global defence transparency and access to information, with a focus on defence finances including budgeting information and spending practices. This is particularly urgent in an era of increasing military spending. The latest defence spending data from the Stockholm International Peace Research Institute (SIPRI) shows world military expenditure rose for the ninth consecutive year to an all-time high of $2.443 trillion in 2023. This represents an increase of 6.8 per cent in real terms from 2022, which is the steepest year-on-year increase since 2009.

Additionally, the report also includes a review of global standards for transparency that apply to the defence sector. This is coupled with insightful case studies from Niger, Tunisia, Malaysia, Armenia and Guatemala and a review of good practices. The report concludes with recommendations to enhance access to information in particular contexts.

We look forward to sharing the full report and the accompanying case studies shortly. Updates on the launch date will be provided via our X/Twitter and LinkedIn accounts.

This toolkit is designed for advocates, activists and stakeholders engaged in advancing good governance and anti-corruption standards in the defence and security sectors, as well as advocates working in neighbouring agendas, like development, human rights and peace and security. It provides practical guidance, resources, and best practices to navigate the complexities of corruption in the defence and security sectors.

Users can utilise this toolkit as a comprehensive reference manual, with sections dedicated to understanding key concepts, planning advocacy strategies, and implementing actionable initiatives. It also covers topics such as security sector reform, corruption in arms trade, military spending, but also stakeholder engagement and advocacy tactics, aiming to empower users in advocating for robust governance and transparency in the sector.

As world leaders convene in Washington DC for the 2024 NATO summit, Ara Marcen Naval highlights the need to address and prevent corruption in military spending.

As global insecurity rises, so does militarisation and defence spending. The latest data from the Stockholm International Peace Research Institute (SIPRI) shows world military expenditure rose for the ninth consecutive year to an all-time high of $2.443 trillion in 2023. This represents an increase of 6.8 per cent in real terms from 2022, which is the steepest year-on-year increase since 2009. This sharp rise demands our attention and underscores the urgent need for greater transparency in military spending.

Transparency International Defence & Security has long sounded the alarm on corruption – a hidden threat in times of rising military expenditure.

Corruption in the defence sector is multifaceted. While bribery is the most recognised form, corruption also includes conflicts of interest, embezzlement, nepotism, sextortion, and undue influence. This pervasive issue thrives in environments characterised by secrecy and wealth – factors that are especially prevalent in the defence and security sector. Often deemed too complex and sensitive for meaningful external scrutiny, this sector is fertile ground for corruption when oversight is inadequate.

The rise in defence spending is linked with increasing corruption risks. Increased spending must be accompanied by vigilant attention to corruption risk. There is a strong indication that the relationship between defence spending and corruption is cyclical. In countries experiencing state capture – where private interests corrupt a country’s decision-making to benefit themselves, rather than the public – elites are more likely to prioritise military spending, further perpetuating corruption.

Many defence institutions worldwide are ill-equipped to manage the higher corruption risks that militarisation brings. Transparency International Defence and Security’s Government Defence Integrity Index (GDI), which assesses countries on the strength of their safeguards against defence and security corruption, shows one-third of the world’s top 40 highest military spenders face high to critical corruption risks in their defence sectors. Even if some high spenders may have stronger domestic controls, they often export arms to countries facing much greater corruption risks.

Evidence shows that countries spending more on defence as a percentage of GDP tend to score lower in the GDI, indicating higher vulnerability to corruption. The 15 countries with the biggest military spending increases between 2021 and 2023 fall into c moderate to high corruption risk categories.

As international insecurity rises, so does global defence spending. However, the hidden cost of this escalation is the proliferation of corruption within the defence sector. When defence spending rises in countries where corruption safeguards are not prioritised, the issue becomes more serious. Corruption in the defence sector undermines peace and security by diverting critical resources and eroding public trust.

To manage the corruption risks associated with defence spending, NATO and its allies should:

Ensure comprehensive transparency and oversight of defence budgets, allowing the public to have a clear picture of spending plans.

Implement controls to reduce the risk of funds being lost to corruption as budgets are spent, such as granting parliaments, or a parliamentary defence committee, extensive powers to scrutinise spending and publishing the approved budget in an easy-to-understand form.

Integrate anti-corruption measures into arms export controls to prevent exporting arms to countries unable to manage corruption risks.

Utilise good governance and transparency as a tool for deterrence against foreign or domestic threats.

Only by addressing and preventing corruption can we ensure that defence and security sectors genuinely uphold national and human security, rather than exacerbating insecurity and putting populations at further risk of harm.

About the Government Defence Integrity Index (GDI)

The GDI measures institutional resilience to corruption by focusing on policymaking and public sector governance in national defence institutions. The Index is organized into five main risk areas: policymaking and political affairs, finances, personnel management, military operations, and procurement. Each indicator is scored based on five levels from 0-100, and scores are aggregated to determine the overall corruption risk level, ranging from A to F.

Header image: Dragoș Asaftei – stock.adobe.com

The scandals that shook the world into action in 2001 to prevent the illicit trafficking of small arms and light weapons (SALW) were often fueled by corruption. Arms brokers bribing government officials to create fraudulent export or import documentation played key roles in these schemes to violate UN arms embargoes.

In other cases, military or police personnel illicitly sold state weapons to insurgent or criminal groups for personal profit.

Several states are increasingly implementing new policies and approaches to better assess and mitigate corruption risks in arms
transfers and stockpile management. These laudable approaches, however, are still in their infant stages. There is also a lack of international coordination and cooperation on the ways in which corruption fuels arms diversion. It’s time for states to elevate their efforts to assess and mitigate corruption’s role in arms diversion by strengthening national and international action and cooperation.

As world military spending hits all-time high, findings from Transparency International highlight urgent need for transparency and accountability

April 24, 2024 – Rising military expenditure is outpacing countries’ safeguards against corruption and threatening national and global security, new research from Transparency International finds.

Trojan Horse Tactics explores the nexus between the risk of corruption in the defence sector and rapid militarisation fuelled by Russia’s full-scale invasion of Ukraine, conflicts in the Middle East and the Sahel, and heightened tensions in the Asia-Pacific.

Read the report

This comprehensive paper by Transparency International Defence & Security (TI-DS) examines the relationship between military expenditure and corruption through the lens of defence governance.

Analysis using the TI-DS Government Defence Integrity Index (GDI), which assesses nearly 90 countries on the strength of their corruption safeguards, combined with military spending data from the Stockholm International Peace Research Institute (SIPRI) reveals a clear trend. Countries that spend more on defence as a percentage of GDP tend to score lower in the GDI, indicating a higher vulnerability to corruption.

Additionally, the issue is becoming more serious. Data released by SIPRI this week shows world military expenditure rose for the ninth consecutive year to an all-time high of $2.443 trillion in 2023. This represents an increase of 6.8 per cent in real terms from 2022, which is the steepest year-on-year increase since 2009.

Corruption in the defence & security sector, including bribery, conflicts of interest, embezzlement, nepotism and sextortion severely undermines national security. These practices divert critical resources and erode public trust, weakening a country’s defence capabilities and stability.

Despite this, ‘defence exceptionalism’ – the idea that because of national security considerations the sector should be exempt from transparency norms – means that many countries neglect or completely ignore good governance standards such as parliamentary and civil oversight, accountability, and transparency rules.

Sara Bandali, Director of International Engagement at Transparency International UK, said:

“In an era marked by increasing militarisation, it’s crucial that we confront the deep-seated vulnerabilities to corruption in the defence & security sector.

“Our findings clearly indicate that rising military spending is linked with heightened corruption risks, which in turn threaten national and global security. Our previous research has shown how many defence institutions in countries around the world are ill-equipped to manage the higher corruption risks militarisation brings. If militarisation is to achieve the aim of upholding national and human security, these are issues which can no longer be overlooked.

“The evidence-based Government Defence Integrity Index not only identifies key areas of concern but also sets global benchmarks for accountability and transparency. We urge all countries to move towards these standards in response to growing insecurity.”

TI-DS calls on all countries to make transparency and accountability around defence spending a core aspect of the response to increased global insecurity by:

Improving transparency and appropriate oversight of defence budgets to ensure that the public has as comprehensive a picture as possible of spending plans.
Introducing controls to reduce risks of funds being lost to corruption as budgets are spent.
Integrating anti-corruption measures into arms exports controls. This is to prevent exporting countries providing arms to countries which cannot demonstrate their will and capacity to manage corruption risks.

Militarisation is back on the agenda. Since the start of Russia’s full-scale invasion of Ukraine, and amidst rising tensions in East Asia, the Middle East and the Sahel, governments around the world have been ramping up their defence spending. Where budgets increase, so does corruption risk, especially when sectors are lacking functioning transparency, accountability, and oversight. Evidence from Transparency International Defence & Security’s (TI-DS) Government Defence Integrity Index 2020 (GDI) clearly shows that most defence institutions around the world do not have the necessary resilience to withstand these risks.

This paper provides an overview of the nexus between corruption and increased defence spending. Studies that have looked into the link between corruption and military expenditure often relied on measures of corruption that were not specific to the sector. This paper aims to change that by utilising data from a tool that captures sector-specific knowledge on corruption risk. It combines data on defence spending from the Stockholm International Peace Research Institute (SIPRI) with indicator scores on institutional resilience to corruption in the defence sector from the GDI. The combination of these data sources offers new insights into the relationship between defence spending and corruption. The findings are of critical importance for all concerned about the implications of rising militarisation.

The rise in global insecurity is pushing many US security partner countries to reignite or revise a familiar but risky approach to expanding national defence industrial capabilities. Sometimes referred to as ‘defence offsets’ or ‘industrial participation’, this approach requires foreign defence companies to invest in the local economies of countries as a condition for the purchase of major weapons systems. Defence offsets can benefit local defence industries, but they also contain many aspects that make them particularly vulnerable to corruption. US defence companies are rapidly responding to these partner demands with increasing US government support and within an incredibly lax US regulatory environment.

April 11, 2024 – New research from Transparency International warns that the United States is ignoring potentially dangerous corruption risks around opaque defence contract payments (aka ‘offsets’) that threaten to undermine U.S. and international security.

As the U.S. escalates its defence collaboration globally, Blissfully Blind breaks down the complex web of corruption risks associated with offsets – financial sweeteners added to overseas arms sales in addition to the military hardware the country receives.

Read the report

Offsets are increasingly common parts of international arms deals but the huge amounts of money involved combined with a lack of transparency, especially for offsets going to economic sectors outside defence, makes them especially vulnerable to corruption.

Defence companies are incentivised to offer big offset packages to secure lucrative deals. Foreign officials in importing countries may choose to buy from whichever firm they can personally gain the most, regardless of whether they offer best value for the people they represent.

Gary Kalman, Executive Director at Transparency International U.S. (TI-US), said:

“The culture of offsets in international arms sales may seem an odd practice to the public. Imagine the look you’d get from telling a car dealership that you’ll only buy a car from them if they help fund your child’s school.

“The corruption and other risks of these side deals are so great that, in most industries, the practice is banned. Yet, in the defence sector offsets are standard practice.

“At the very least, we need the type of transparency and accountability called for this in this report.”

Key Findings:

The global value of defence offsets is projected to reach $371 billion for the 2021-2025 period, with U.S. defence firms estimated to provide between $36.5 billion and $52.4 billion for FY 2021 and FY 2022 combined.
Among arms importing countries, Indonesia, Malaysia, Oman, Saudi Arabia, Taiwan, the United Arab Emirates, and the UK all face high or very high corruption risk due to a lack of transparency, support for risky types of investments, and weak monitoring or enforcement around offset contracts.
Other arms importing countries, including Australia, India, Israel, the Netherlands, Poland, South Korea, and Ukraine have specific high-risk aspects of their offset policies.
Corruption in defence offsets can undermine efforts to obtain critical defensive capabilities, waste government funds, complicate U.S. government and defence company relations with key security partners and weaken citizen faith in governments.
Meanwhile, U.S. defence companies show weak controls to prevent corruption in offsets. Many lack explicit policies and procedures to address the risks.
The U.S. government’s ‘hands-off’ approach to overseeing offsets effectively leaves defence firms to mark their own homework. Regulation of offset agreements by the Commerce Department is inadequate.

This report comes at a critical moment. There are increasing demands for offsets from purchasing countries and greater collaboration with countries like the United Arab Emirates, Indonesia, Saudi Arabia, and Malaysia – all nations with minimal anti-corruption safeguards in their defence sectors.

And in the U.S., there are now moves by Congress to further weaken the already lax checks on offset arrangements by significantly raising the dollar value of arms deals that require congressional review before they can go ahead.

Colby Goodman, Senior Researcher at Transparency International – Defence & Security and author of the report, said:

“A surge in demand for defence offsets, inadequate anti-corruption measures by U.S. defence companies, poor safeguards in many U.S. partner nations, and lenient oversight from Washington has created a perfect storm of corruption risks, which has the very real chance of undermining any public benefit of the offsets to the importing country.

“It’s essential that these corruption risks are confronted and mitigated, with responsibility falling on both the U.S. and importing countries to enact meaningful reforms.”

The report makes a series of targeted recommendations to the U.S. government that would enhance the oversight of defence offsets and significantly address corruption risks, while also ensuring U.S. defence firms do not face unnecessary barriers to their business with international partners:

Increase transparency by strengthening reporting on defence offsets and political contributions. Prioritize detailed private disclosures through the State and Defence Departments and establish an interagency task force to improve overall private and public transparency.
Assess corruption risks by taking a proactive approach to mitigate corruption risks in offsets by reviewing agreements and conducting comprehensive studies on past arrangements. A focus should be on indirect offsets (investments not directly related to the equipment being sold in the contract) and partner country controls.
Penalize wrongdoing by enhancing the investigation and prosecution of offset-related corruption, establishing watchlists for offenders, and enforcing strict penalties for non-compliance with reporting requirements.
Encourage stronger foreign offset policies by urging U.S. partner countries to do the following: adopt transparent and effective offset policies, emphasize the disclosure of offset details similar to Australia, demand stricter oversight of high-risk activities, and ensure robust enforcement against violations.

Notes to editors:

Transparency International is a global network with chapters in more than 100 countries to end the injustices caused by corruption.

Blissfully Blind is a joint research report from Transparency International – Defence & Security, one of Transparency International’s global programs that works to reduce corruption in defence and security sectors worldwide, and Transparency International U.S.

The report was produced through a comprehensive approach that included reviewing U.S. defence offset laws and regulations, analysis of U.S. arms sales data and reports, and 30 interviews with industry experts, U.S. government officials, and representatives from partner countries such as India, Malaysia, and South Korea.

Defence offsets are side deals made between a purchasing government and a foreign defence company in connection with a major arms sale. They are an inducement offered by a defence company and/or a requirement by the purchasing government and would not exist without an arms sale. Offsets typically involve defence companies investing in the local defence industry or other economic sectors in the purchasing country. Offsets can be direct, that is tied to the specific equipment or service sold, or indirect, a broad investment unrelated to a specific contract.