Tag Archives: corruption

Russia’s Rent-Seeking Downward Spiral

It is clear that if we do not start taking action today, including by carrying out structural reforms, we could end up going into a lengthy period of economic stagnation tomorrow. Our economy is still based primarily on natural resources rather than on manufacturing. Our economic system has changed little in essence. Where does most of our money come from? From oil, gas, metals and other raw materials.

– Vladimir Putin, Annual Address to the Federal Assembly, April 3, 2001

Fifteen years later, the Russian economy envisioned by that progressive speech by Putin in April 2001 seems to be a distant memory. Russia’s economy, and budget, are still largely dependent upon the sale of oil and the majority of Russian industry is still based on extractive industries. The modern vision of Russia in that speech, one deeply embedded into the international system, where property rights are protected by the undiscriminating rule of law, has been replaced by a cynical “managed” system of crony capitalism where profits are skimmed off by insiders while Russia has isolated itself by its actions on the international stage.

Since 2001, record-setting commodity prices have supported increased social benefits, military spending, and infrastructure investments, each of which has supported corruption schemes where insiders profit off of the state’s largess (see the cost of the Sochi Olympics as Exhibit A). High commodity prices also allowed the Russian government to slowly smother individual rights and free speech at home and, largely through key investments in media, buy the country a larger voice in affairs abroad.

Rather than pulling away from a resource-based economy, Russia’s entire economy appears to now be moving in near perfect correlation with energy prices (see chart below).

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Democracy that Delivers Podcast #14: Arian Ardie on How Indonesian Companies are Coming to Grips with Anti-Corruption Compliance

Democracy that Delivers Splash-01

CIPE Indonesia Program Coordinator Arian Ardie (Twitter: @aajkt) talks about the burgeoning Indonesian economy, foreign investment opportunities, and how Indonesian companies are coming to terms with what anti-corruption compliance means for them. Ardie also discusses the challenges of meeting cultural norms while being compliant with international business practices, and the inherent “sloppiness” of implementing decentralization and democracy in one of most populous countries in the world.

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Democracy that Delivers Podcast #12: CIPE’s John Morrell on Tackling Corruption — What Can Be Done to Change “Business as Usual”?

Podcast hosts  Ken Jaques and Julie Johnson with John Morrell (center)

Podcast hosts Ken Jaques and Julie Johnson with John Morrell (center)

In this week’s podcast, CIPE’s Regional Director for Asia John Morrell discusses when he witnessed for the first time how lack of governance and corruption undermines democracy and how that experience shapes his work today. Morrell talks about business-led solutions to corruption challenges and a CIPE project underway in Thailand that is changing the business culture in that country. Morrell also discusses his early career experiences in the Philippines and a non-profit he founded there to support an orphanage for abandoned children.

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Listen to past episodes of our show here.

Like this podcast? Please review us on iTunes to help other listeners find the show!

How Kenya’s Private Sector is Addressing the “Supply Side” of Corruption

Photo: Citizen Digital

Photo: Citizen Digital

A recent report by Kenya’s Ethics and Anti-Corruption Commission (EACC) paints a rather grim picture of the extent of corruption in Kenya. In the top 10 counties by average bribe size, bribes range from KSH 80,000 (about $800 US) to about KSH 6,000 ($60 US) — in a country where the average monthly wage is just $76. Situations where bribes are most commonly solicited include obtaining basic services such as medical attention or a national identity card. Not surprisingly, Transparency International puts Kenya at 139th out of 168 countries in its latest corruption ranking.

Even a cursory review of Kenyan daily news coverage shows that corruption at all levels (from county to national) and in all its forms (from bribes to graft) is a major issue of concern for the country. Many commentators express frustration at the extent of the problem and the dearth of constructive solutions. Against that background, CIPE and its partner organization, the Kenya Association of Manufacturers (KAM), are working to help change Kenya’s corruption-tainted narrative and provide the private sector with tools to proactively build integrity into business operations.

To that end, CIPE, KAM, and Global Compact Network Kenya (GCNK), where KAM serves as the secretariat, created a joint training program for Kenyan companies on anti-corruption compliance. The training is based on CIPE’s Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets and was adapted to the unique needs and concerns of local businesses. As KAM’s Chairman Pradeep Paunrana put it, “You cannot clap with one hand, it takes two people to make a corrupt deal.” Through this initiative, Kenya’s private sector is taking responsibility for holding itself to a higher standard and disrupting the “supply side” of corruption.

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Carrots Before Sticks: Celebrating International Anti-Corruption Day with Successful Anti-Corruption Approaches

On Wednesday the world celebrated the International Anti-Corruption Day, designated in 2003 by the United Nations (UN) General Assembly when it adopted the UN Convention against Corruption. Recognizing the importance of fighting corruption in that way was a major step in a growing global effort to remove the taboo around addressing corruption in the international discourse on development. Indeed, the new expectation of governments and businesses alike is to face corruption head on everywhere it cripples democracies and markets.

This year’s theme for the International Anti-Corruption Day is breaking the corruption chain. CIPE’s work with private sector organizations in countries around the world reflects precisely that objective. In many environments where corruption has become entrenched, is very hard for an individual or a company to stand up against abuses such as bribery or extortion. Furthermore, it is hard for businesses to make a credible commitment to integrity without sufficient knowledge on how to build proper management systems to prevent corruption in daily operations. These limitations can be overcome through better anti-corruption compliance and collective action. These private sector-led approaches have the power to break corruption chains and make a real difference.

Earlier this year my colleague Frank Brown and I presented CIPE’s experiences from Russia, Kenya, Ukraine, and Thailand at the Society of Corporate Compliance and Ethics Institute in Las Vegas. To celebrate the International Anti-Corruption Day, we captured key takeaways from our presentation in CIPE’s latest Economic Reform Feature Service article:

Article at a glance:

  • Corruption is primarily an institutional issue and combating it requires proactively preventing corrupt practices through supply- and demand-side reforms.
  • Collective action and anti-corruption compliance are practical approaches that reform-minded businesses can use to build a critical mass of companies committed to operating with integrity.

Companies in emerging markets can greatly benefit from improving their anti-corruption practices, which makes them more attractive business partners in global value chains.

Read the whole article here.

Anna Kompanek is Director for Multiregional Programs at CIPE.

Fighting Kleptocracy

The world -- including global financial centers -- needs to come together to fight kleptocracy. (Photo: Wikimedia Commons)

The world — including global financial centers — needs to come together to fight kleptocracy. (Photo: Wikimedia Commons)

Corruption is often thought of as an individual problem where a corrupt official abuses his or her government position for personal gain. But what happens when an entire government, or the ruling class of an entire country, is engaged in corruption? When corruption becomes systematic and institutionalized, the damage is much greater – and the tools to fight it increasingly require international cooperation.

Two weeks ago the World Movement for Democracy held its eighth international conference in Seoul, Korea. Discussions of the corrosive effect corruption have on democratic renewal abounded throughout the conference. However, a discussion on kleptocracy chaired by the National Endowment for Democracy’s Carl Gershman brought out the enormous scale of illicit cash flows from kleptocratic governments, and the direct influence they can have on enabling authoritarian push-back was made clear. Presenters on the panel highlighted the need for both international coordination on efforts to improve investigation, journalism, and the tracking of money flows, and also support for in-country efforts to strengthen local watchdogs and activists.

From the CIPE perspective, we offered a strategy based on the old adage “follow the money”: to contend with and reduce capital flows from illicit gains we need to understand how such funds are siphoned off, how they move around the world, and what institutional responses we can promote to slow and stop them. Kleptocrats often use a mixture of state and private institutions to steal money, and then establish complex networks of shell companies and other fronts to launder funds. They then use global financial institutions to move “clean” money into markets where it can be securely invested.  A comprehensive strategy is needed to combat this complex crime at all levels.

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Sustaining the Momentum in Thailand’s Fight Against Corruption

Photo: CAC

Photo: CAC

Corruption has been a major roadblock to a meaningful and sustaining democracy in Thailand. According to CIPE Asia Regional Director John Morrell, “corruption was the stated justification for the military’s ousting of an elected government in 2006 and the Supreme Court’s sacking of another elected government in 2008.” In Transparency International’s 2014 Corruption Perception Index, Thailand was ranked 85th out of 175 countries.

To address this corruption issue in Thailand within the local context, CIPE partnered with Thai Institute of Directors (IOD) and launched a Collective Action Against Corruption initiative in 2010. This project is unique in that CIPE and IOD aim to combating the supply side corruption in the private sector through a coalition of member companies, established in this initiative, which vowed to adhere to the highest standards of corporate governance, compliance, and anti-bribery protocols.

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