Outsourcing some government functions can help developing countries overcome corruption, suggest Kris Mitchener and Noel Maurer in the Hoover Digest. In particular, they write about the positive results that a number of countries have experienced from turning over the administration of revenue collection to foreign entities. The U.S. government actually did this for the Dominican Republic, Haiti, and Nicaragua in the early part of the 20th century. Today, the British non-profit Crown Agents has been contracted by Angola, Mozambique, Latvia, Kosovo, Macedonia, and Bulgaria to run their customs services. The results have been very positive:

In Angola, revenue jumped more than 50 percent in the first year of operation (2001), doubled in two years, and tripled by 2004, during a time when oil prices remained low and Angola lowered tariffs to meet commitments under the General Agreement on Tariffs and Trade. Mozambique saw a similar increase. In Bulgaria, revenues jumped 19 percent during the quarter in which teams led by Crown Agents began operating.

Why does this work?

Crown Agents officials face a completely different set of incentives from officials in a high-corruption government. Crown Agents employees risk losing attractive, high-wage career paths and damaging the credibility of their organization should they decide to engage in or tolerate corrupt behavior. Because the agents had an incentive to maximize revenue collection and punish corrupt behavior, Angola was able to break the corruption equilibrium in customs, generate greater public revenue, and show the way to further reforms.