Author Archives: Frank Brown

Economic Journalism Driving Democratic Debate

NND

When Maxim Tsoi, a journalist for the Kyrgyzstan newspaper Vecherny Bishkek, made the four-hour drive last spring to the town of Talas on the border with Kazakhstan, he was expecting to gather some local color to illustrate provincial life for readers in the capital city. What Tsoi came away with was a little different. After interviewing local bean farmers, customs officials, and border guards, he had material for a story on the pros and cons of Kyrgyzstan joining the Eurasian Economic Union.

The issue of whether Kyrgyzstan should join the Russian-led Eurasian Economic Union, which so far includes Kazakhstan and Belarus, is a source of frequent debate in Bishkek. Membership in the Union has significant implications for the country’s political and economic elites. In the border town, Tsoi found farmers in favor of joining the Union and getting privileged access to new markets. Local resellers of Chinese imports, however, were opposed since they would be facing new tariffs.

“Most of media outlets here in the capital only write about what happens in the capital. So, the material from these trips is quite interesting to everyone, to the journalists and to the readers,” said Tsoi in an interview from Bishkek.

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The Advantage of Targeted Anti-Corruption Measures

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Thanks to its Special Economic Zone status, many foreign companies assemble cars and electronics in the Kaliningrad region for the broader Russian market. But corruption remains a major barrier.

At public events on corruption, no matter how sophisticated the participants and no matter how narrow the subject, the discussion invariably seems to wander off topic. Often the audience members want to speak about a high-profile case like the suburban Washington, DC, politician’s wife who stuffed $79,000 into her undergarments when federal agents came knocking. Sometimes, speakers wander off into digressions on how one nation or another is inherently corrupt because of cultural and historical factors. Frequently, attendees simply conflate different kinds of corruption – petty, political, commercial – into in insoluble morass.

This was the case at a recent CIPE-supported event held in November in Kazan, Russia. One of the 70 participants began to derail a technical discussion of Russian legislation with a series of questions about recent arrests of regional political leaders on bribery charges. Some of the audience perked up. Others looked uncomfortable, not expecting this at a conference on how to boost investment by improving firm-level compliance with anti-corruption laws.

Igor Belikov, the event’s moderator and head of the Russian Institute of Directors, deftly reined in the discussion and with a bit of humor brought it back to the subject at hand – how mid-sized firms can reap the benefits of globalization by putting in place anti-corruption compliance programs that give the firms better access to multi-national companies’ global value chains.

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Survey Asks Corporate Leaders about Anti-Corruption Efforts

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Surveys attempting to measure illegal or frowned-upon behavior are notoriously difficult to execute in a useful way. This is especially true when it comes to surveys asking global corporate leaders how well they are following anti-corruption laws.

On the one hand, such surveys can end up underestimating the problem when companies are reluctant to acknowledge behavior that can result in multimillion dollar fines. On the other hand, surveys can overestimate corruption issues or give a false sense of a growing problem simply because awareness is growing as more and more executive and managers undergo mandatory training on all the different ways to run afoul of U.S., UK and Canadian anti-corruption laws.

Such surveys become even more problematic when the organization conducting the survey stands to benefit from results that highlight whatever problem the organization is in the business of solving.

So, with all those caveats out of the way, it is worth noting that Ernst & Young’s 2013 Europe, Middle East, India and Africa Fraud Survey is quite useful, both for its scope and for its findings. The recently released survey is based on anonymous interviews, conducted in late 2012, with 3,459 people from companies in 36 countries. Interview subjects ranged from employees to board members, directors, and managers. The majority of the companies surveyed employed more than 1,500 workers. For sheer breadth, the survey is noteworthy. The results are, too.

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Russian Businesses Learn Benefits of WTO Membership

russia-webcast

The World Trade Organization (WTO) welcomed Russia in August of last year as its 156th member — the last of the world’s large economies to join. The process, taking nearly two decades, had been steeped in anxiety and high expectations within Russia.

Now that Russian firms and their foreign counterparts can better grasp the practical consequences of WTO membership, corporate executives, entrepreneurs, and regional development officials are turning to the nuts and bolts of membership. Moscow-based CIPE partner the International Institute of Management for Business Associations (IIMBA) is at the forefront of these efforts, holding a raft of classes and webinars designed to help Russian businesses understand the promises and pitfalls of WTO membership. IIMBA is helping shape the discussion on the issue, taking a no-nonsense approach free of the sparring which grabs headlines having to do with U.S. agricultural imports and Russian rules benefitting the automobile industry.

betsy-headshotOn March 5, CIPE helped introduce a highly-informed U.S. point of view into IIMBA’s ongoing WTO series with a presentation by Elizabeth Hafner, Deputy Assistant U.S. Trade Representative for Russia and Eurasia at the Office of the U.S. Trade Representative. Hafner, based in Washington DC, first gave a presentation on  the benefits of WTO membership for Russian businesses via webcast from CIPE’s Washington office. She then took live questions from some of the 182 participants connected to the webinar from Kazakhstan, Uzbekistan, and a host of Russian cities including St. Petersburg, Volgograd, Moscow, and Ufa. Watch a webcast of the presentation.

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Fighting for Small Business in Ukraine

(Photo: Associated Press)

(Photo: Associated Press)

Veteran Ukrainian legislator Ksenia Lyapina is optimistic about the makeup of the newly elected parliament, the Verhovna Rada. Not only is she being joined in the 450-member body by six new deputies with an explicitly pro-entrepreneur agenda, but her party has some muscular new allies on key votes: both figuratively and literally. In the first two days of the new Rada’s proceedings in mid-December, pushing matches, brawls, and fistfights broke out on the floor. Lyapina liked what she saw among the 37 deputies in the Svoboda (“Freedom”) party.

“Now, we’ve got Svoboda with us. They’ve got some young men in good physical shape,” she said at a restaurant near the Rada on December 13, shortly after the closing of the second day of the proceedings. “Before, we were being beaten all the time,” added Lyapina, a refined woman who is one of Ukraine’s leading experts on issues of importance to small and medium-sized enterprises (SMEs).

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Holding Candidates Accountable in Ukraine

A candidate for a seat in parliament representing Lviv region speaks at a

A candidate for a seat in parliament representing Lviv region speaks at a meeting with private-sector representatives.

In a cavernous, ornate hall inside the Palace of Railroad Workers in the western Ukrainian city of Lviv, 10 parliamentary candidates faced off in late September opposite an equal number of local business owners and leaders of business associations. Over the course of three hours, the group grappled with issues of importance to the local business community, ranging from tax rates to economic development initiatives. What emerged was a deep skepticism among businessmen, especially on the parliament’s ability to tackle corruption issues, and a written pledge by most of the candidates to adhere to a set of five legislative priorities established by the local business community with CIPE support.

This was a scene repeated across Ukraine in the run-up to October 28 parliamentary elections. In 10 regions, including Lviv, CIPE supported the process as part of a year-long effort to raise the profile of business concerns in the 450-seat parliament.

According to CIPE Ukraine director Nataliya Balandina, an added dividend of the project has been a boost in the standing of the local CIPE partner organizations that organize the candidate forums and pledges. “It is not just the candidates and politicians are learning that small and medium businesses are capable of taking action and spreading information quickly, but it also ordinary citizens who learn about these [business] organizations for the first time and see what they do,” says Balandina.

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Lviv: Between East and West

Lviv's old town.

One of the nominees for best foreign-language film at this year’s Academy Awards was the movie “In Darkness” set in the western Ukrainian city of Lviv during World War II. The film is a fictionalized account of how a group of Jews survived in the sewers of Lviv during the Nazi’s World War II occupation.

Lviv is a remarkable city, both for its Hapsburg Empire-era architecture and for its location on the fault line between East and West. In the 20th Century alone, the city found itself located in the Austro-Hungarian Empire, interwar Poland, a Nazi-occupation zone, the Soviet Union, and finally, independent Ukraine. In his book The Clash of the Civilizations, historian Samuel Huntington divides the world into vast geographic spheres based on culture, history and religion.

Lviv is precisely the kind of city where such tensions have played out over the centuries, between languages, faiths and mindsets. In Lviv, identity is paramount. To this day, within Ukraine, Lviv prides itself as a bastion of all things Ukrainian in the face of threats – actual or imagined – from the country’s substantial Russian-speaking population.

Given its history and place in the Ukrainian imagination, Lviv was a strong candidate to host a four-day CIPE seminar last month for business association leaders. The city’s entrepreneurs have a reputation for cultivating business ties with counterparts in the European Union, whose border lies 70 kilometers from Lviv. The city’s elected officials understand the need for government to nurture rather than prey upon entrepreneurs. CIPE hoped that the 32 seminar participants, all but a handful from other regions, would imbibe some of Lviv’s best practices.

The organizers of the seminar, CIPE’s Ukraine country director Nataliya Balandina and program officer Dmytro Naydin, were not disappointed. “We wanted to demonstrate how in Lviv, business really works with authorities, how they really have good discussions and have really good dialogue for developing strategy for the region,” said Balandina. “Lviv is the first region to create an active coalition of SMEs that works so closely with the regional government.”

CIPE’s experience in Lviv illustrates a broader point – the importance of taking into account and embracing regional differences when running national programs. Business association leaders from the bustling capital of Kyiv work in much different circumstances than their counterparts from eastern coal-mining districts or those in the Crimea, the country’s leading tourist destination. Of course, sometimes these differences are overstated. Recent polling of political preferences shows some erosion of regionally based parties influence. In parliamentary elections set for October, Ukrainian voters will provide a concrete indication of what sway regional differences continue to hold.

Many such differences are rooted in history. To learn more about that history, the Oscar-nominated “In Darkness” is a good place to start. The Washington Post reviewed it last month. A former colleague, David Lee Preston, wrote a compelling piece in The Los Angeles Times on the connection between his mother’s real life experience in Lviv’s sewers and the screen dramatization. For a broader, truer version of the region’s history than that found in the film, historian Timothy Snyder’s recent Bloodlands: Europe Between Hitler and Stalin offers a commanding account of how Ukraine bore the brunt of both Hitler and Stalin’s deadly policies that killed millions of civilians. “Bloodlands” offers the most compelling explanation I have found to explain Ukrainian entrepreneurs’ fatalism and passivity on the one hand and healthy skepticism of government and remarkable ingenuity in the face of adversity on the other.