Monday, March 13, 2006

Global Business Reports: A Stewpot of Corruption

Bloggers Foreign Dispatch (USA) and Dibussi Tande (Cameroon) have posted recently on the subject of massive corruption in the West African nation of Cameroon. Dibussi’s excellent March 5th post “Why Cameroon is Poor and Corrupt” is a review of a chapter from the recently published book The Undercover Economist by Financial Times columnist Tim Harford. Dibussi writes,

"Harford argues that there is a flaw in the basic economic theory on how nations create wealth:

Economists used to think wealth came from a combination of man-made resources (roads, factories, telephone systems), human resources (hard work and education), and technological resources (technical know-how, or simply high-tech machinery). Obviously, poor countries grew into rich countries by investing money in physical resources and by improving human and technological resources with education and technology transfer programs.

According to Harford, this theory has a missing jigsaw piece: “Government banditry, widespread waste, and oppressive regulations are all elements in that missing piece of the puzzle.” This, he argues, is why Cameroon is poor: “Nobody who sees a Douala street scene can conclude that Cameroon is poor because of a lack of entrepreneurial spirit. But poor it is. The average Cameroonian is eight times poorer than the average citizen of the world and almost 50 times poorer than the typical American.” …
read more

Foreign Dispatch writes in his March 13th post “How Corruption Works in Cameroon”,

"Tim Harford has produced an excellent article on his impressions on Cameroon and why that country remains so desperately poor; what he has to say should prove a real eye-opener to do-gooders who think yet more grants, loan write-offs and aid appeals are the answer to ending poverty in the Third World. Those of us who know that part of the world well and refuse to subscribe to rosy visions of aid-bought uplift aren't the way we are out of hatred for the poor, but due to a cynicism inculcated by a lifetime of experiences of the sort Harford lays out in his article. When you know a society is rotten from top to bottom, no promise of jumbo loan writeoffs or messianism driven by the likes of Jeffrey Sachs will ever convince you that it'll make a damn bit of difference." …read more

And now for a word from our corporate sponsors…

While going through my email newsletter backlog I came across a special report by titled Capital Hospitality (Feb. 06 2006). There is quite a bit of good information in there about the global investment climate and opportunities around the world so if you are in a position to invest serious capital into emerging markets do read this report and related features. Here is a link to the Forbes Capital Hospitality Index 2005 for you global economists and finance professionals out there who only want to see the numbers in Black & White.

Heads Up!-date March 16th:
Pablo Halkyard of the World Bank Group's PSD blog has a brief post about the Forbes Capital Hospitality report with a link to an extremely cool (and useful) interactive world map tool. Now I can work with this new multicolored map tool vs. those dry numbers listed in black & white. Check it out as it is easy to use and understand. Danke Pablo!

Back to our original programming (post)...

One article from the Forbes report that caught my eye was a feature on the World’s Most Corrupt Countries titled A Stewpot of Corruption by Forbes editor David A. Andelman. He points to some very interesting and alarming facts and figures about corruption around the world. Below are a few excerpts from the article about this massive global problem:

Nearly half of the world's nations are corrupt, and many of them aren't doing very much about it at all. From corrupt courts and police to government ministries, even heads of state, the most fundamental rights and government services are dispensed largely to those who pay for it--under the table into just the right hands.

By international standards, 72 of 158 nations monitored by Transparency International and a German-based think tank at the University of Passau are deemed corrupt. They range from the tiny military dictatorship of Myanmar to some of the world's largest countries--Russia and Indonesia…

The article goes on to say:

…Africa is clearly the most seriously corrupt region, since nine of the 16 most seriously corrupt nations are on that continent, with Chad occupying the No. 1 spot. In 2002, the African Union estimated that the continent was losing $150 billion a year to corruption, and things haven't improved much since. Two of the 16 members of the current most-corrupt list are former Soviet republics, Turkmenistan and Tajikistan, while three are in Asia and two are in Latin America.

"My general perception is that in all these societies, there are people opposed to corruption and trying to do something about it who are overwhelmed by political forces that are much stronger than they are," says Laurence Cockroft, chairman of Transparency International U.K. and a leading African expert. "We can't see in the next several decades how that tug-of-war will work out." In many cases, corruption is used to maintain power for the ruling governments that may be fighting civil wars or insurgencies using diverted funds to buy arms. Such was the case of the president of Angola, where vast oil revenue was funneled via Jean-Christophe Mitterrand, son of the late French President Fran├žois Mitterrand, into a company controlled in part by the nation's president…

The related multimedia slideshow (photo gallery w/ text) highlights some of the world’s top stars in the corruption and dictatorship business, including Equatorial Guinea’s President Teodoro Obiang Nguema, a longtime ally of several Western countries including (ashamedly) the U.S.A. Here is what the Forbes article had to say about the ruler of this tiny, oil-rich West African nation:

One of the world's smallest oil powers, it is also among the most corrupt. During a recent U.S. government probe of Washington-based Riggs Bank, it was alleged that President Teodoro Obiang Nguema, his wife and son were apparently treating themselves to planes, big houses and shopping sprees in the U.S. Millions of dollars in cash were being lugged around Washington in suitcases--much of it from the enormous oil reserves Western companies are tapping. International monitors believe that 20% of oil revenue is going straight into Nguema's pockets.

Nigeria, West Africa’s largest oil and gas export nation, came out looking pretty good for its efforts to crackdown on rampant corruption in government and the private sector according to these statements by the Forbes report’s editors Jack Gage and David Adelman and Transparency International:

Other African nations are making valiant efforts to harden their stand against corruption--particularly Nigeria, where a reformist government has taken some important steps at the federal level. But as one leading, international corruption monitor said, "It probably doesn't go beyond the top dozen members of the government."

Under its current president, Nigeria is making a determined effort to clean up its act. President Olusegun Obasanjo has surrounded himself with a dozen senior government officials who are firmly opposed to the corruption that remains rampant. The president has begun issuing a monthly list of the amounts doled out to each of 33 states and more than 600 municipalities, so the funds can be monitored at the grassroots level. So far, it hasn't had much impact.

For additional information on this subject please see the resources listed below and remember, Corruption Kills! Big Time!

Transparency International - Global Corruption Report 2006
Transparency International - Corruption Perceptions Index 2005
Transparency International – Bribe Payers Index (May 14, 2002)

Deutsche Welle - Fighting Global Corruption from Germany (Aug. 23, 2005)

World Bank Group – Private Sector Development (search term = corruption)
World Bank Group – PSD Blog (search term = corruption)
World Bank Institute – Governance and Anti-Corruption

World Economic Forum – Global Competitiveness Report 2005-2006
BBC News Online - Africa Have Your Say - How can we fight corruption (Nov. 04, 2005)

Mother Jones – A Touch of Crude (Jan/Feb 2005 article about Equatorial Guinea’s President Teodoro Obiang Nguema Mbasogo. Read it and weep.)

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Imnakoya said...

There is corruption all over the globe, the major difference between say Africa and Europe is the presence of an independent press and effective judiciary system. These two bodies acting somewhat in synergy, have curbed corruption in many advanced democracies, unfortunately Africa to a larger extent is not yet at that level and until then- it's going to be a long and rough journey down the corruption lane.

On this: "President Teodoro Obiang Nguema, his wife and son were apparently treating themselves to planes, big houses and shopping sprees in the U.S. Millions of dollars in cash were being lugged around Washington in suitcases"...
What can the UN and other western nations do to curb money laundry by despotic and corrupt head of states and their cronies?

Black River Eagle said...

I will agree with you that the journey toward more transparency in government and business dealings in many developing nations will be rough and full of peril for those who are courageous enough to speakout but perhaps it will not take as long as you might think to significantly reduce rampant corruption in Africa.

The independent press and electronic media are already out of the sack in the form of new ways to communicate using modern media technologies i.e. online news sites, zillions of citizen journalists publishing to their weblogs and wikis, educational websites, and so forth. It is difficult if not impossible to shut these new voices down and they are having a growing impact on how information is distributed and shared globally. This in turn makes it difficult for lawmakers, law enforcement, and the judiciary to sit on their hands and do nothing about blatant, rampant corruption.

Add to this the outside pressures being exerted by influential people, major donor governments, international organizations and NGO's, and some businesspeople on the people responsible for massive corruption in developing nations and you have the ingredients for rapid change if you shake it just right. Sort of a "Shake the Snake" global cocktail.

In regards to corruption in the more developed societies around the globe it is still a HUGE problem and requires vigilant engagement on the part of citizens, the press and media, lawmakers, law enforcement, and the judiciary of these countries. A good case in point is the present trial of the former business executives accused of massive fraud within the U.S. based energy giant ENRON. The many people in the U.S. that were financially ruined by the (alleged) evil deeds of these greedy executives are calling for blood (looooong jail sentences plus finanical fines and a piece of their hides as souvenirs).

Europe on the other hand has a long way to go yet regarding prosecutions and convictions of its own corrupt businespeople and politicians. Heard anything new about the Parmalat accounting scandal down in Italy, or the Dutch food giant "what's his name" scandal, or the German telecommunication stock ripoffs by Mannesman and Deutsche Telekom, etc. etc.? No prosecutions of any real signifigance in any of these European fraud cases. Nada. Nichts!

Lastly, President Teo Obiang Nguema is one of the most dispicable and corrupt African dictators I have read about in a long time. He and his family members and cronies including the executives of the Washington, D.C.-based Riggs Bank AND various international middlemen should not be arrested and tried for money-laundering and corruption, they should be arrested and tried as accomplices to MURDER. Corruption, especially in poor countries like Equatorial Guinea, kills people. Period.

Fellow citizens in the United States of America should be especially outraged and outspoken in calling for justice to be done in regards to the questions raised as described in the Jan/Feb 2005 Mother Jones article and re: the facts already discovered in the U.S. Senate investigation into this affair. The present U.S. administration, U.S. lawmakers, and the U.S. oil and financial firms implicated in this scandal have been suspiciously mute on the subject.

Is it because Equatorial Guinea is an important exporter of crude oil to my oil-thirsty country, could that be it? Nah, couldn't be. Oder?

Keith said...


Just a quick one for now, but thanks for dropping by at Under the Acacias while I was in BF. I have known several of the PC workers working near Djibo and Gorom, and Nathalie's article reflects reality.

Thanks for your continued writing and commitment to Africa!



Dibussi said...

Hi Bill,
Thanks for directing me to your blog. It is quite interesting and refreshing. I will definitely add it to the list of blogs that I visit on a regular basis. Keep up the good work!


Black River Eagle said...

Thanks to Imnakoya, Keith, and Dibussi for stopping by and leaving comments.

I found a National Public Radio (NPR) interview with investigative journalist Peter Mass, author of the article "A Touch of Crude" published by Mother Jones magazine in January 2005. Peter speaks at length about his experiences in Equatorial Guinea before he was asked (not so politely) to leave the tiny West African country or face serious consequences. Here is the URL to the NPR interview (text and audio):

I would also like to thank Pablo over at The World Bank Group's PSD blog for linking to this post, and say thanks for the Hat Tip from my good friends at "ethiopundit". Please read Ethiopundit's latest post "The 7% Maskirovka" about corruption inside of Ethiopia's ruling regime. Here is the URL:

TheMalau said...

A close family member of mine is the head of WHO in Cameroon, and she tells me that the corruption there is so institutionnalized, that it is basically the norm; a sort of parallel system that has overwritten the primary system, to form this hybrid - and very "economicidal" - service market, where the price of every service is at the behest of the whims of whoever is providing that day... and it's "normal".

In that situation, try to write a budget for a - very scrutinized - UN agency...

Kieran said...

Thanks for providing those links.
Keep up the good work.

Jeff Chatellier said...

I liked the comment that said that corruption is a problem in all countries. Yet people are fascinated with corruption stories in Africa and blame corruption as sole reason why African countries are un-developed. The US has been and still is a haven for corruption with recent scandals involving one of the most powerful members of the US government and scores of other officials. Of course you have Enron, but that is still just the tip of the iceberg. The enire black market and crime industry in the US runs on corruption involving millions of people.

Any thoughts?

Black River Eagle said...

You are right Jeff in that corruption is a global problem with some of the worst cases taking place in highly developed societies i.e. North America and Europe. Just today there was a news report here in Germany about a sting operation that netted local city officials from Marbella, Spain (a popular tourist destination on the Costa del Sol). The mayor, police officials, and the DA I believe are accused of skimming billions of Euros off the top of lucrative construction contracts.

The "fear of corruption"" in sub-Saharan African countries is used many times as an excuse by foreign governments and businesspeople for not injecting more money into African economies. However, the flip side of the coin is that rampant corruption is real and particularly deadly for these countries and robs the citizens of any chance for a bright future.

Unless the corruption problems are reduced to some tolerable level and confidence is restored that substantial foreign investments will be protected by laws AND the diligent enforcement of the law, serious investment capital will remain a pipe dream.

Anybody else have thoughts on this?