Anti-Corruption Compliance in Kenya

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Transparency International’s Corruption Perceptions Index ranks Kenya in a distant 136th place. That low ranking confirms the sentiment often encountered in Nairobi: corruption is widespread in many aspects of life, from bribing a policeman to avoid charges for alleged traffic violations to graft at the highest levels of government, as poignantly described by a British journalist Michela Wrong in her book about Kenyan whistleblower John Githongo, It’s Our Turn to Eat.

Not surprisingly, many segments of the Kenyan society are fed up with the status quo and ready for change. That includes many companies in the private sector that see their growth potential and competitiveness stifled by the highly corrupt environment. Such companies are not waiting for the government to clean up its act and instead are taking the initiative to limit corruption through setting up or strengthening internal compliance procedures.

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Empowering Everyday Folks through Economic Journalism

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It is when citizens are well-informed, equipped with facts, and capable of conducting independent analysis that they can better engage in the policymaking process. Access to information at every level is the backbone of an active citizenry that can come together to keep government honest, responsible, and accountable. In Kyrgyzstan, however, most journalists lack the analytical skills to report well on crucial economic issues, and citizens lack the necessary understanding of core social and economic realities (and values) that are needed to keep a democracy in place 365 days a year. This lack of information not only undermines the population’s ability to support basic market-based democratic reform, but detracts from their ability to engage in the development of their country – of their village, of the region, of the nation at large. It is with this in mind that CIPE partner the Development Policy Institute (DPI) began their work several years ago to improve mass media’s capacity to inform the public on economic concepts during Kyrgyzstan’s fragile period of transition to market-based democracy with protected property rights and rule of law.

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Local Level Governance in the Philippines and Nigeria

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Government officials in towns, cities, states, and regions across the globe are often the first point of contact for citizens, civil society groups, and businesses seeking assistance in addressing a myriad of local challenges. Regional authorities are responsible for tax collection and are accountable to citizens for the stewardship of public finances. Local public officials are most familiar with the economic, social, and political challenges of their jurisdictions and are most adept at addressing these concerns through the delivery of public services and the passage of appropriate legislation. Often, solutions to problems can be found more quickly by engaging the appropriate local level authorities rather than waiting for the adoption of national level legislation. For these reasons, reforming local level governance is often the most effective way to strengthen democratic and economic conditions in a given country.

Local ownership of projects and a focus on local level and grassroots initiatives have been key components of CIPE’s work.

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A Guide for Anti-Corruption Compliance: The New Imperative in Global Value Chains

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This post originally appeared on Corporate Compliance Trends.

In many countries, fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources. While there is a broad global consensus that corruption suppresses competition and innovation, thus hampering entrepreneurship and economic growth opportunities, countering it presents a challenging task due to resistance to reform in corruption-tainted business environments. In many cases anti-corruption rules and regulations may be weak or unevenly enforced, government-led steps to fight corruption remain insufficient or ineffective, and bribes are a widely accepted part of doing business.

Yet businesses committed to anti-corruption are not helpless. They can lead by example by improving their own safeguards against corruption and act together to create a movement for integrity that makes clean business conduct the norm, not the exception.

In today’s globalized world, where international value chains stretch across borders and continents, anti-corruption compliance provides a vital competitive advantage. Ethical companies tend to have higher valuations, are more attractive to potential investors and employees, and are more likely to be engaged in long-term arrangements with their business partners. Increasingly, companies are expected to ensure not just the integrity of their own operations but also the conduct of their suppliers, distributors, and agents wherever they may be. Evidence of this comes from high-profile prosecutions of multinational firms that are not only subject to significant fines but also risk loss of share value and reputation.

CIPE’s newest publication, Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, is meant to help local companies around the world think about anti-corruption compliance as a strategic investment and take concrete steps to introduce or strengthen their internal compliance programs. Going forward, the guidebook will serve as the basis for CIPE training and capacity building initiatives for businesses in countries ranging from Kenya to Pakistan and Ukraine where, despite persistent challenges, many companies already are a part of global value chains or aspire to join them. In order to be competitive, they need tools outlined in the CIPE guidebook to translate their commitment to integrity into the day-to-day business operations. Stay tuned for the country updates!

Click here to get the guidebook.

Anna Nadgrodkiewicz is Director of Multiregional Programs at CIPE.

Mongolia Must Improve Its Institutions to Avoid the Resource Curse

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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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