Tag Archives: corruption

Supporting Small Business in Ukraine

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More than a year after the EuroMaidan protests took the world by surprise, Ukraine’s political and economic struggles continue. Developments in the country since the new government came to power highlight the ongoing challenges of systemic overhaul following an exciting, rapid transition. These challenges clearly illustrate the link between democratic development and economic reform, so central to CIPE’s work. Accomplishing the tasks facing Ukraine, from combating corruption, to reducing the barriers to doing business, to creating space for public-private dialogue, will be no easy feat.

The success of Ukraine’s economic and democratic development largely depends on ensuring the success of the country’s small and medium-sized enterprises (SMEs). The entrepreneurial and flexible nature of SMEs makes them integral to achieving a number of the country’s goals: economic diversification; closer integration with Europe; building an adaptable economy; stimulating job growth; and boosting productivity.

Ukraine thus seeks to emulate the ways in which SMEs have helped make the U.S. economy among the world’s most successful. Boosting SMEs will require both giving the business community – and SMEs in particular – a seat at the policymaking table, and providing these firms with extensive support and training. CIPE’s partners are playing an important role in both of these processes.

CIPE’s primary focus in Ukraine has been to reduce policy barriers to business through cross-regional advocacy. Since opening the Kyiv office in 2010, CIPE has developed an extensive network of partner business associations and chambers of commerce across the country that work to represent and support Ukraine’s citizens through the work that they do.

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Public Procurement: The Nexus of Public and Corporate Governance in Combating Corruption

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Governments around the world spend trillions on public procurement each year for everything from office supplies to military equipment to infrastructure megaprojects like this $5 billion Panama Canal expansion.

 

By Kirby Bryan

For over a decade, the World Bank Group’s Doing Business index has served as quintessential tool for determining how well a country’s institutional infrastructure is suited to the promotion of a productive business environment. But something was missing. Businesses and governments interact on levels beyond permitting and regulation: the public sector can also be a client.

Public procurement can provide opportunities for corruption. When seeking lucrative public contracts, companies look for any opportunity they can take advantage of that will improve their ability to secure a successful bid. Unscrupulous government officials can use their influential positions to attain favors and gifts from businesses pursuing public procurement tenders.

In March 2015, the World Bank Group, in conjunction with the George Washington University Law School, held a release event for the first installment of its Benchmarking Public Procurement Index

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What Drives Corruption and How Can Institutions Respond?

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What are the drivers of and institutional responses to corruption? Are current anti-corruption instruments used domestically and internationally effective? These were the key questions of a fascinating day-long event organized last week in Washington, DC by the George Washington School of Law and the International Bar Association, among others.

The event gathered a distinguished group of speakers from the government, academia, international organizations, law firms, and non-profits, as well as an engaged audience of anti-corruption scholars and practitioners.

While the discussion touched upon a multitude of corruption-related topics, the following aspects of corruption raised at event were the most valuable insights for me:

  • Corruption as a violation of public trust. Janine Wedel, a Berkeley-trained anthropologist and a professor at George Mason University, emphasized that corruption is more than just simple quid pro quo. Instead, it is a sophisticated network rooted in informal power, influence elites, and often aided by the post-Cold War global economic openness as the revolution of the digital age.
  • Corruption as a governance problem. Nikos Passas, professor at the Northeastern University, pointed out the roots of corruption in discrepancies between legitimacy and legality (lawful but awful conduct by government officials or businesses) and in unlawful but useful behavior (e.g., bribing a doctor to treat a patient in a failing healthcare system). International norms such as the United Nations Convention Against Corruption help by creating agreed-upon legal standards, but improving on-the-ground governance in countries around the world still has a long way to go. Read a Q&A with Nikos Passas here.
  • Private sector as a force for anti-corruption. Baker & McKenzie’s Tom Firestone stressed that a broad-based business community in a given country can be an effective force in anti-corruption efforts. He recounted his experience in Russia where local businesses resisted corrupt encroachments of the state. Local firms, after all, have a strong interest in the rule of law and a level playing field in the business environment. But they can’t do it alone.
  • Inter-governmental cooperation makes a difference. Kathryn Nickerson, Senior Counsel at the Department of Commerce highlighted the importance of the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery in International Business Transactions responsible for monitoring and implementation of the OECD Anti-Bribery Convention.
  • Corruption as an attack on human dignity. Sarah Chayes, the conference’s keynote speaker, talked about her recently published book, Thieves of State: Why Corruption Threatens Global Security. She pointed out that there is a moral dimension to corruption – it leads to widespread moral decay and individual humiliation that goes beyond money. In extreme cases of corruption-ridden countries, it is not the weakness of the state that leads to corruption. Rather, the institutions of the state have evolved to make them a conduit for corruption that permeates entire societies.

Anna Nadgrodkiewicz is Director for Multiregional Programs at CIPE.

Populism and the Internet in Latin America

The rapid growth of the Internet in Latin America between 2001 and 2008. Today 57% of South Americans use the Internet. (Charts: ZookNIC)

The rapid growth of the Internet in Latin America between 2001 and 2008. As of 2014 57% of South Americans are online. (Charts: ZookNIC)

By William Vogt

Since the rise and fall of the Arab Spring, debate has raged in the fields intersecting communications, technology, and international affairs: will Internet growth be a liberalizing influence that will create stable, prosperous democracies?

So far, this answer appears to be a qualified “no.” Connected and educated youths have not created the groundswell necessary for reform in many politically unstable countries. On the other hand, investments in information communications technologies (ICTs) have greatly improved local economies in many developing countries and hold promise in exposing and rooting out corruption.

In this last point, fighting corruption, the rise of the Internet as a social and economic force has created perplexing political trends. Increased Internet penetration does reduce at least one key aspect of corruption affecting free market interactions: barriers to market entry (for producers and consumers) due to opaque regulations and powerful oligarchies. In fact, studies have shown that merely the act of searching broad terms like “corruption” on an online search engine has significant impacts on the ability of the state to engage in corrupt, anti-competitive practices like demanding bribes from businesses.

This trend, however, does not hold globally and there is one part of the world that has created a particularly worrying balance between the forms of democracy and what is functionally a system of corruption: Latin America. Over its long history this region has developed a unique political culture with a prominent role for the ideology frequently described today as “populism.”

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Can Ukraine Stamp Out its Corruption Culture?

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Ukraine’s “Euromaidan” protests were driven by activists fed up with corruption. Can the new government turn things around?

When it comes to opportunity for anti-corruption reform on a massive scale, few countries have ever been as ripe for change as Ukraine today. Western countries and the International Monetary Fund are pushing hard for transparency and clean government. They enjoy unprecedented leverage over Ukraine’s political and economic elites, who need billions in loans to stave off economic ruin. Ukraine’s populace, which took to the streets a year ago to oust a president reviled for his flamboyant corruption, is maddened at the lack of a single, high-profile corruption prosecution since then. Investors, once attracted to Ukraine by a highly educated workforce, cheap industrial assets, and some of the world’s most fertile farmland, have made it clear that corruption is a deal breaker.

Freshly elected Ukrainian leaders committed to reform and European integration are taking seemingly drastic steps on the anti-corruption front. In October, they passed an impressive package of laws that provide the framework to investigate, prosecute and imprison wrongdoers. Just as important, the new laws require the training and monitoring of the tens of thousands of public servants – from traffic cops to school principals to MPs – who collectively represent the “demand side” of Ukraine’s corruption equation.

To implement these new laws and flesh out the details, Ukraine’s elected leaders are turning to technocrats from countries counted as anti-corruption success stories – mostly Georgia and Lithuania. They are laboring away this winter in various ministries and in the Presidential Administration, trying to figure out how to train and empower the men and women who, in the face of a decades-old corruption culture and vastly outnumbered by colleagues benefiting from the status quo, will be the shock troops of anti-corruption reform. Taken together, these are impressive, ambitious moves in a country of 45 million, by far the largest state in the post-Soviet space to attempt such a housecleaning.

All this was on display last week during a fact-finding mission by CIPE’s lead anti-corruption expert in Ukraine, Drago Kos, who also serves as the chairman of the Working Group on Bribery of the Organisation of Economic Cooperation and Development. Kos, a plainspoken man who began his career in the Slovenian police force, spent a week in Kyiv, building rapport and sharing opinions with the Ukrainians at the forefront of the anti-corruption effort.

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Outcry Against Corruption Helps Drive a Change of Leadership in Sri Lanka

Sri Lankan election officials carry ballot boxes under police guard. (Photo: VOA News)

Sri Lankan election officials carry ballot boxes under police guard. (Photo: VOA News)

While it is hard to identify all of the issues that drove Sri Lankans during the country’s recent – and for many observers, surprising – elections, a cry for change was evident. Voters had clearly grown tired of corruption, cronyism, and authoritarianism, and there have been widespread calls for investigations into a range of alleged human rights abuses.

On January 8, in an unexpected turn of events, 15 million Sri Lankans, representing a 75 percent voter turnout, went to the polls and ousted incumbent President Mahinda Rajapaksa in favor of Maithripala Sirisena, Rajapaksa’s former Health Minister who shocked many by declaring his intent to run for office. Rajapaksa, who was South Asia’s longest-serving political head of state, in office since 2005, had turned increasingly authoritarian. He called these elections two years early, seeking a third term. It seems unlikely that he anticipated the defection of Sirisena and a number of other parliamentarians.

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How the Trade Facilitation Agreement Fights Corruption at the Border

Moving goods across borders is a source of corruption around the world.

The process of moving goods across borders is a major source of corruption around the world.

As the world commemorates International Anti-Corruption Day, renewed progress in the implementation of the Trade Facilitation Agreement (TFA) provides a reason for optimism in the fight against corruption.

Reached during last year’s World Trade Organization (WTO) accord in Bali, the TFA creates binding commitments across 159(+) WTO members to expedite movement, release and clearance of goods, improve cooperation on customs matters, and moreover, help developing countries effectively meet these obligations.

The TFA is also a potentially invaluable tool for tackling corruption as the simplification of customs procedures can greatly reduce opportunities for corruption. As the World Bank’s Customs Modernization Handbook sets forth, customs procedures are a key source of corruption, as officials and workers seek bribes in order to move goods in and out of the country.

Given the formidable barrier that corruption poses for both developed and developing countries, one may question how explicitly this agreement will challenge corruption, and what this will look like in terms of activities creating outcomes. In an Economic Reform Feature Service article released by CIPE today, Laura B. Sherman, senior legal adviser at Transparency International USA, breaks the larger TFA into its individual components and addresses in practical terms how each will translate into activities that prevent corruption.

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