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 Forbes.com 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 François 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.)

Technorati Tags:Africa Economics corruption Business Cameroon Nigeria Equatorial Guinea Angola