Mongolia Must Improve Its Institutions to Avoid the Resource Curse

mongolia-mine

By Dash Enkhbayar

The West tends to illustrate Mongolia as an “example of a developing country that, despite the odds, managed to accomplish a peaceful transition to democracy.” However, simply achieving an electoral democracy does not complete a country’s democratic transition. Recent years have shed light on the major institutional flaws that still exists in the country’s public and private sectors.

Sandwiched between China and Russia, Mongolia has been attracting significant attention for the past couple of years due to its rapid economic growth and burgeoning mining sector. It recorded the world’s fastest GDP growth rate in 2011 at 17 percent, which put Mongolia in the international spotlight for investment opportunities.

But corruption, poor governance, and unstable government regulations threaten Mongolia’s economic potential. In 2013, due to unfriendly investment laws such as the Strategic Entities Foreign Investment Law, foreign direct investment (FDI) in Mongolia plummeted by 48 percent, which effectively scared away many investors interested in the nation. Mongolia is, in fact, not a model democracy that it seeks to invoke. Instead, the last few years have demonstrated that unless Mongolia seriously starts tackling its institutional weakness it may succumb to the “resource curse,” in which a country with an abundance of natural resources experiences poor economic growth and a worsening political climate.

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Reducing Third-Party Company Risks in Emerging Markets

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This post originally appeared on CIPE’s Corporate Compliance Trends blog.

As the world’s multinational companies seek profits in new, high-risk markets, they inevitably start depending on local businesses – third parties – to operate. Such partnerships bring with them both the promise of mutual growth and, for the multinational, responsibility for the behavior of its new local partner. That’s because aggressively applied laws such as the U.S. Foreign Corrupt Practices Act (FCPA) hold the multinationals responsible for third parties’ behavior.

Of the estimated 106 companies currently under investigation for FCPA-related violations, a significant number of them are related to suspected third party wrongdoing – assuming that past settlements made public are a reliable guide. So, how to reduce the corruption risks presented by doing business with third parties in developing countries where bribery is an accepted practice? CIPE is working on finding answers. So, too, is one of the world’s leading risk management firms,  SAI Global, which recently presented a webinar and offered a few tips on how to construct an anti-corruption training program for third parties.

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Youth Entrepreneurship at CIPE

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Youth play a vital role in shaping the future of every country in the world and yet they are often excluded from the economic and political decision-making process.  For those countries in the world that are striving for democracy based on market-oriented reforms, young people must play an active role as youth entrepreneurs expand opportunities, unleash individual initiative and help to cultivate individual citizens who have a stake in society and democratic governance.

CIPE recognizes the important role youth play in fostering democracy and the free market in developing countries.  As a result, CIPE focuses on building skills through entrepreneurship and management programs and supporting chambers of commerce and business associations that provide networking, services, and forums for young leaders.

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Introducing Corporate Compliance Trends, a Website for Anti-Corruption Compliance in Emerging and Frontier Markets

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The need for anti-corruption compliance programs in companies of all sizes in global value chains has never been greater. Since 2006, the U.S. government has settled or prosecuted nearly 300 corruption cases against companies from around the world, including many where the corrupt conduct originated from multinational corporations’ suppliers, vendors, and agents. The average cost of resolving these enforcement actions now tops $80 million.

Beyond the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, new anti-corruption laws with international reach are hitting the books, such as Brazil’s Clean Companies Act, introduced earlier this year. Similarly, many international bodies, including the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce, have introduced conventions and norms meant to combat bribery of foreign officials. Few doubt that this growing global trend toward rooting corruption out of international business conduct is here to stay.

Still, as a recent study found, the number of global companies with anti-corruption policies has increased by only 1 percent over the past two years, and a sizable minority of these companies have yet to implement even the most basic of compliance programs. Nearly 60 percent of global companies surveyed said they never train third parties despite the fact that many compliance actions have resulted from conduct by agents or intermediaries.

While governments and international organizations set anti-corruption rules and standards, and while law enforcement agencies around the world aggressively pursue potential violations, many companies simply lack sufficient practical knowledge on how to comply with these new global norms. Understanding what effective anti-corruption compliance looks like and how to set up internal compliance programs that mitigate the risk of corruption is an especially daunting challenge for firms operating in emerging and frontier markets, where the Center for International Private Enterprise (CIPE) has worked since 1983 with local partners such as chambers of commerce, business associations, and economic think tanks.

To share our experiences from supporting private sector-focused anti-corruption programs in high-risk countries around the globe, and to help advance international best practices on anti-corruption compliance in these countries, CIPE is launching this new website, Corporate Compliance Trends.

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Governance Principles for Business Associations and Chambers of Commerce: Now Available in Urdu

urdu-gov-principlesBusiness associations need strong governance systems and guiding principles in order to effectively serve their members and act as advocates for policy change. In Pakistan, business associations are mostly struggling to adapt effective governing mechanisms that could ease the path to successfully achieving their vision, mission, and objectives.

Societal norms are changing, the business environment is getting more complex and challenging, and following the principles of corporate governance should now be one of the foremost issues that business associations must address.

CIPE has a huge online library of resources and publications through which business associations can get instant guidance and support. In order to facilitate good governance principles within business associations, CIPE and the World Chambers Federation (WCF) developed a guide on Governance Principles for Business Associations and Chambers of Commerce. The guide was originally published in English and subsequently translated in to Arabic, French, Russian, Spanish and Dari languages.

To support and further simplify good governance principles in the country, CIPE Pakistan has produced an Urdu Translation of these principles (available here) for the benefit of business associations all across Pakistan that can be further guided with local language clarity.

Emad Sohail is a Senior Program Officer at CIPE Pakistan.

Citizens Work Together to Fight Corruption in Lebanon

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A lab technician went to the office of a public official to renew her work contract with a municipal laboratory in northern Lebanon. Several days after submitting her request, the official’s secretary invited her to come to his office. Hoping to finally receive his signature on her contract renewal, the young woman arrived at the office only to find that he wanted to get her alone behind closed doors, where he allegedly proceeded to make verbal and physical sexual advances on her.

She fled the scene and tried to see if she could get her contract renewed through another government department, which only referred her back to the same official. Having no other alternative, the young woman went back to the official’s office in January 2014, but this time she was prepared with a hidden camera to capture his behavior on video.

In the mountains of Chouf, residents of Brih and neighboring villages were displaced during the 1975-1990 Lebanese civil war. Their lands were subsequently occupied by other families and, rather than evacuating the lands and returning them to their original owners, the Ministry of Displaced Persons in Lebanon ran a program to offer compensation to the displaced.

But in 2014, although other villages had been paid, the former people of Brih still had not received their compensation. When they submitted a complaint to the Ministry, it claimed that the payment had been issued. But with residents presenting evidence that they had never received compensation, the question arose: where had the funds gone?

These are the types of cases that Lebanese citizens report to the Lebanese Advocacy and Legal Advice Center (LALAC), an initiative launched by the Lebanese Transparency Association (LTA) as part of its program with CIPE to combat corruption in Lebanon. Through LALAC, citizens can report corruption by calling the LALAC hotline, writing a letter or e-mail, or visiting one of three centers in person. LALAC provides clients with legal advice on the process of vindicating their rights (short of providing representation in court) and tracks the progress of their cases.

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Not Invited to the Party

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Zimbabwean economist Daniel Ndlela shares his thoughts on economic recovery as part of a conference hosted by the Southern Africa Political Economy Series Trust and the National Endowment for Democracy in May 2014. The conference, entitled “Zimbabwe Going Forward” featured Zimbabwean think tanks, private sector representatives, government and civil society. (l-r: Kupukile Mlambo, Deputy Governor of the Reserve Bank of Zimbabwe, Ndlela, and Abdulwahab Alkebsi, Regional Director for Africa, the Center for International Private Enterprise).

While 50 African heads of state prepared to visit Washington for the U.S.-Africa summit held earlier this month, one president who wasn’t invited decided to throw a party of his own. In Zimbabwe, President Robert Mugabe invited dignitaries and government officials to the State House on July 31 to mark the one year anniversary of his party’s victory over the opposition in national elections whose legitimacy was questioned by domestic and foreign observers alike.

The 90-year-old Mugabe, restricted from entering the United States due to targeted travel and financial sanctions, welcomed government friends to his official residence in Harare with a banquet and live music. Unfortunately, given Zimbabwe’s economic outlook, throwing a party is the last thing the President should be doing.

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