Truck and Barter

Can Google bring democracy to Arabs?

Technology never ceases to amaze me;

“Since Bahrain’s government blocked the Google Earth website earlier this year for its intrusion into private homes and royal palaces, Googling their island kingdom has become a national pastime for many Bahrainis.

The site allows internet users to view satellite images of the world in varying degrees of detail. When Google updated its images of Bahrain to higher definition, cyber-activists seized on the view it gave of estates and private islands belonging to the ruling al-Khalifa family to highlight the inequity of land distribution in the tiny Gulf kingdom.

A senior government official told the Financial Times that Google Earth had allowed the public to pry into private homes and ogle people’s motor yachts and swimming pools. But he acknowledged that the government’s three-day attempt to block the site had proved counterproductive.

It gave instant publicity to Google Earth and contributed to growing sophistication among Bahrainis in circumventing web censorship.

It also provided more ammunition to democracy activists ahead of parliamentary elections this Saturday, the second since King Hamad bin Issa al-Khalifa began introducing limited political reforms in 2001. “

Via FP blog.

Related;
Mahmood’s Den
Bahrainis use Google Earth to spy on royals' palaces

Afghanistan Drug Control- GAO’s views

A recent report from GAO; Afghanistan Drug Control: Despite Improved Efforts, Deteriorating Security Threatens Success of U.S. Goals

“The prevalence of opium poppy cultivation and drug trafficking in Afghanistan imperils the stability of its government and threatens to turn the conflict-ridden nation once again into a safe haven for traffickers and terrorists. To combat the drug trade, the U.S. government developed a counternarcotics strategy consisting of five pillars--alternative livelihoods, elimination and eradication, interdiction, law enforcement and justice, and public information. The Emergency Supplemental Appropriations Act of 2005 directed GAO to examine the use of all fiscal year 2005 funds administered by the U.S. Agency for International Development (USAID) and Department of State (State) for Afghan counternarcotics programs. To comply with this mandate, we examined progress under each counternarcotics pillar, challenges faced, and efforts to ensure that funds were used for intended purposes. To address these objectives, GAO reviewed pertinent USAID and State documents and met with cognizant U.S. and international officials in Washington, D.C., and Afghanistan. GAO makes no recommendations in this report. USAID, State, Department of Defense, and Department of Justice were provided a draft of this report, but did not provide formal comments.”

Related;
Afghanistan’s Other War
Afghanistan- on the road to a narco-state?

Podcast of the Day- Ponzi’s Scheme

Ponzi's Scheme: The True Story of a Financial Legend
“Before Charles Ponzi (1882-1949) sailed from Italy to the shores of America in 1903, his father assured him that the streets were really paved with gold and that Ponzi would be able to get a piece. Mitchell Zuckoff, Professor of Journalism at Boston University and former reporter and Pulitzer Prize finalist for the Boston Globe, observes in his engaging and fast-paced biography, Ponzi learned as soon as he disembarked that though the streets were often cobblestone, he could still make a fortune in a culture caught in the throes of the Gilded Age. Learn about Ponzi's mercurial rise and fall as he conjured up one get-rich-quick scheme after another. Zuckoff reveals how the Boston Post uncovered this 'robbing Peter to pay Paul' system (as it was then known), and how Ponzi's life unraveled.”

Related;
Pyramid Scheme Warning (this post had generated some lively comments)

THE PERFECT MARK; How a Massachusetts psychotherapist fell for a Nigerian e-mail scam

Charles Ponzi, we hardly know ye

Common Fraud Schemes

Economists and Integrity

Two economists who recently lost part of their titles;

Andrei Shleifer ’82 isn’t the only Harvard economics professor to have been stripped of his endowed title after allegedly getting his hands dirty.

Martin L. Weitzman, the Harvard faculty member accused of stealing horse manure from a Rockport, Mass., farm in April 2005, has also recently lost his title as the Ernest E. Monrad Professor of Economics.

David Warsh has an interesting column on the issue. He concludes;

“There is, indeed, a common thread running through both incidents: a rather startling arrogance; in each case a Harvard professor acted as though he were entitled to take whatever he wanted, regardless of the law. Granted, there is not much moral equivalence between a $900 quarrel in a small town, on the one hand, and, on the other, an unrepentant betrayal of an adoptive country, an alma mater, hundreds of employees and a raft of friends (which also cost Harvard well over $30 million and much reputational capital). Applying the same penalty to the perpetrator of a misdemeanor as to a man who smuggled Soviet-style values into the highest levels of government and education in the United States might seem to send no more weighty a message to the Harvard faculty than, Don't get our name in the newspapers by breaking the law. But perhaps it is too early to say.

Small gestures, cunningly contrived, can have big effects. The price of not doing the right thing is going up as well.”

What is Harvard teaching its students? Mankiw, please explain?

Related;
On the Subject of Hypocrisy: The Shleifer Affair

Truth and Truthfulness (podcast)
Philosophers and theologians explore ideas about truth and truthfulness.

The Story of Transparency International

Ashoka’s video, ‘Champion of Accountability; The Story of Peter Eigen and the founding of the Transparency International’ is available for download on Google Video. The interview gives an interesting overview of how the anticorruption agenda came to the forefront of international development agencies and reflects a personal story of courage and commitment to making this world a better place. A must see.

Related;
Q & A with Peter Eigen
Clean sheet: Transparency International’s new chapter
West failing to curb bribery overseas
Bribe Payers Index 2006
Fukuyama, Indrawati join the WB anti-anti-corruption corps
Corrupting practices
Using the Right to Information as an Anti-corruption Tool
Governance matters V

Multimedia (Radio National- Australia);
High Court decides on FOI and conclusive certificates; The High Court decision upholding the government's use of a conclusive certificate to snuff out a Freedom of Information request for tax figures on bracket creep and the first home buyer's scheme is being criticised as a dark day for democracy.

Inside Indonesia's media

Idea Laundering?

Corporate spin works in mysterious ways;

“So big corporations have devised a form of idea laundering, paying hundreds of thousands of dollars to seemingly independent groups that act as spokesmen under disguise. Their views wind up on the opinion pages of the nation's newspapers - often with no disclosure that the writer has financial ties to the companies involved. A few examples:

- James K. Glassman, a prominent syndicated columnist, denounced Super Size Me, a movie critical of McDonald's. Readers were not told that McDonald's is a major sponsor of a Web site hosted by Glassman.*

- John Semmens, a policy adviser at the Heartland Institute, wrote a column for the Louisville Courier-Journal that called Wal-Mart "a major force in promoting prosperity for everyone." Readers were not told that his think tank had received more than $300,000 from the Walton Family Foundation, run by the heirs of Wal-Mart founder Sam Walton.

- Steven Milloy, an analyst at the Competitive Enterprise Institute, wrote a column in the Washington Times that sided with the oil industry against windfall profits taxes. Readers weren't told that groups closely affiliated with Milloy have received at least $180,000 from ExxonMobil.”

*I didn't find McDonald's cited as a sponsor of TCS- a clarification welcome.

Perspectives on Thailand coup

The Economist worries;

“But the bigger danger lies farther south. Indonesia and Thailand were partners in the democratic experiment of the late 1990s. Thailand's democracy constitution of 1997 preceded by a year the downfall of Suharto. And Thailand's apparent success in taming its soldiers has been a model for Indonesia in transforming a deeply repressive society into one of Asia's most vibrant and open. So far, Indonesia's generals have behaved pretty impeccably, despite the many problems of that vast archipelago. It would be a tragedy if the dangerous events in Thailand gave them other ideas.”

Old soldiers, Old habits;

“Mr Thaksin graduated from Class 10 (a sort of fraternity) of the Armed Forces Academies' Preparatory School and went on to become a police colonel, and then a hugely rich businessman, before entering politics. He has continued to foster links with his former Class 10 comrades and, in recent months, has been accused of trying to land them top military jobs. In this he was pitted against the alumni of Class 6, principally General Sonthi and the commanding officers of the navy, air force and national police. All four of these men are members of the junta that has removed Mr Thaksin from office.”

The light side of the coup

Just How Corrupt Was Thaksin?

A view from Bangkok

Publius Pundit coverage

Barry Bosworth, a senior fellow at the Brookings Institution, talks with Bloomberg's Tom Keene from Washington about the characteristics of Thailand's economy, the outlook for economies in Southeast Asia and trade relations between the U.S. and Asia. Listen to the podcast.

'More tank festival than coup'

From Harry Clarke;

"On a nostalgic note, I was living in Bangkok when the 1985 coup happened and was most surprised at how unruffled the local population were by it. My housemaid just laughed when I expressed my concern. ‘Oh Mister, This always happen’. So the next day I got the bus from my home on the Superhighway out to my workplace about 40 km north of the city. We got stopped by army officers holding automatic weapons somewhere around the airport. When the officers got on the bus the young Thai girls on the bus giggled at the soldiers loudly. I remember being petrified with fear but the soldiers just got off the bus and we were on our way – the girls still giggling and me remaining very, very quiet. Later I was told that the giggling was an Asian way of handling a tense situation – maybe."

Corruption in the Suvarnabhumi Airport project

Thai coup worries regional press

Hungarians not happy with their leader

Hungarian Prime Minister admits he lied during the election campaign in a private conversation- at least he’s honest;

“You cannot mention any significant government measures that we can be proud of, apart from the fact that in the end we managed to get governance out of the shit. Nothing. If we have to give an account to the country of what we have done in four years, what are we going to say? …

Divine providence, the abundance of cash in the world economy, and hundreds of tricks, which you do not have to be aware of publicly, have helped us to survive this. This cannot go on. Cannot. And of course we can ponder for a long time, and a shitload of analyses can be carried out as to how each social group will be affected, this is what I can say to you. ….

Even if we work ourselves into the ground. We are doing a great and decent job among ourselves. We must do it. I am not talking about the New Hungary, developments, Hungarians beyond the border, relationship with churches, or another thousand things because these are not the most important things compared to the big picture…

I will only repeat this once at most: it is fantastic to be in politics. Fantastic. It is fantastic to run a country. Personally, I have been able to go through the past 18 months because one thing has inspired and fuelled me: to give back its faith to the left, that it can do it and it can win. That the left does not have to lower its head in this bloody country. That it does not have to shit its pants from Viktor Orban [chairman of opposition Fidesz - Hungarian Civic Alliance] or the right, and it should learn to measure itself against the world, rather than them...
I know that this is easy for me to say. I know. Do not keep bringing it up against me. But this is the only reason it is worth doing it. I almost perished because I had to pretend for 18 months that we were governing...

Instead, we lied morning, noon and night. I do not want to carry on with this. Either we do it and have the personnel for it, or others will do it. I will never give an interview at the end of which we part with each other in argument. Never. I will never hurt the Hungarian left. Never.”

Related;
Google News coverage
Timeline: Hungary
Does transition make you happy?
Colbert Episode on Hungarian Bridge-hilarious

Wolfowitz’s Second War

NYT reviews Wolfowtiz’s focus on corruption at the World Bank;

“In his first 15 months as president of the World Bank, Paul D. Wolfowitz has made the fight against corruption in poor countries a hallmark issue, waging an aggressive campaign that has led to the suspension of hundreds of millions of dollars in loans and contracts to nations including India, Chad, Kenya, Congo, Ethiopia and Bangladesh.

It is a new incarnation for Mr. Wolfowitz, a neoconservative intellectual who was a primary architect of the Iraq war during four years as deputy secretary of defense…..

“Anticorruption efforts are an essential part of development finance,” said Roberto Dañino, a senior vice president of the bank until early this year. “But getting rid of corruption is not a silver bullet. The bank should not overemphasize its anticorruption agenda at the expense of other policies required for development.”….

He has begun firing back at the critics at internal meetings and in public statements. He notes, for example, that the bank’s lending under his leadership actually rose slightly last year, to nearly $23 billion.

Mr. Wolfowitz says he has tried to rebut what he calls the myth that combating fraud is “somehow at odds with development or becomes an excuse not to provide assistance.” While no one knows how much of the bank’s resources have been improperly diverted, informal estimates range from 10 percent to the 25 percent that Mr. Wolfowitz says went to corrupt cronies and family members of Indonesia’s leadership in the 1990’s…..

The doubts center on Mr. Wolfowitz’s role as a leading advocate of the American invasion of Iraq, with many critics contending that his zeal on corruption reminds them of what they say was his messianic but unrealistic faith that installing democracy by force in Iraq, and by other means through the Middle East, would bring stability to the region.

The criticism has been especially sharp among Europeans at the bank, where many officials say that judgments about what constitutes “good governance” could rupture the bank’s delicate relationships with aid recipients, especially if the judgments are based on information gathered from dissidents and other critics in those countries…

Several longtime bank officials say they cannot remember when board members wrangled over the wording of a policy paper with a bank president. At recent meetings, directors demanded that Mr. Wolfowitz agree to a greater role for the board in any future decisions on cutting off aid.

In addition, members forced the deletion of language suggesting that the United Nations’ goal of reducing world poverty 50 percent by 2015 would have to take second place to the bank’s drive against corruption…

“I think some of the board members,” Mr. Wolfowitz said, “are legitimately afraid that as soon as you start criticizing, the next thing you’re going to do is wag your finger and say, ‘You’re not going to get money unless you behave.’ That’s not our objective. Our objective is to make the lending go up.”…

Mr. Wolfowitz’s management style also grates on some bank officials, with a number of them complaining that he has relied on a small coterie of loyal aides. “He presumes,” said Mr. Dañino, the former bank senior vice president and once prime minister of Peru, “that anyone who opposes him is either incompetent or corrupt.”

In his first 15 months as president of the World Bank, Paul D. Wolfowitz has made the fight against corruption in poor countries a hallmark issue, waging an aggressive campaign that has led to the suspension of hundreds of millions of dollars in loans and contracts to nations including India, Chad, Kenya, Congo, Ethiopia and Bangladesh.….”

Via Foreign Policy Blog

Wolfowitz’s focus on corruption should be lauded, it is one of the biggest impediments to the poverty reduction agenda. However pompous releases of reports, (see the latest release of governance indicators ) doesn’t help the poor person on the street. IFIs need to take a broader view of corruption.

Related;
Strengthening Bank Group Work in Governance and Anticorruption
World Bank Releases Largest Available Governance Data Source
Uses and Abuses of Governance Indicators
Rescuing the World Bank
Tackling Corruption is Essential in Making Poverty History
UK withholds World Bank donation

Fighting Corruption the Celtel Way

Mohamed Ibrahim, Founder and Chairman, Celtel International writes in the latest Development Outreach;

"Any international business operating in Sub Sahara Africa needs to face the issue of corruption. From the beginning Celtel adopted a very strict set of six values, the first of which is: “We are open, honest and transparent.” We applied these values at all levels: from the shareholders and the Board to a handbook for every employee.

When searching for shareholders we sought institutions who could contribute expertise and guidance as well as money. Early examples included the Commonwealth Development Corporation (now Actis), the British Government’s development finance arm and the International Finance Corporation —part of the World Bank Group. Both had many years of experience investing in Africa and were rigorous in ensuring that every Celtel investment and local partner passed their transparency scrutiny.

Right from the start Celtel was run as a Western institutionalized company (it is based in the Netherlands). We believe good governance starts at home. So we formed a very talented and experienced Board of Directors, with shareholder representatives and strong independent directors from the worlds of politics and business such as Lord Prior, formerly a UK Cabinet minister, Dr Salim Salim, the African statesman and a former Prime Minister of Tanzania and Sir Gerry Whent, the original founder of Vodafone.

Some might regard such a heavyweight Board as restrictive to a start up company. But for Celtel this has helped navigate some of the complex political currents. We made it clear that any requests for political donations and the like would be referred to the main Board and discussed by the representatives of major donor nations. It showed everybody that we were serious about our anti-corruption stance and it was a great protection.

It also brought recognition to Celtel: when giving the inaugural IFC Client Leadership award, Peter Woicke, former IFC Executive VP, said Celtel is “a company that sets the gold standard for its peers anywhere in the world, a company that is a role model for others, regardless of sector, region or country.”

I don’t know whether every company can afford a corruption repellant board of directors especially when honest people are an endangered species in a lot of poor countries.

Related;
Business and the Millennium Development Goals: An Active Role for Globally Responsible Companies
See also Mohamed Ibrahim’s presentation at the PSD Forum
Measuring Corruption: Myths and realities
Corruption and prosperity don't go together in the Solomons
Fighting Corruption: Business as a Partner

Podcast of the Day- Diplomats and Parking fine corruption

The Case of the Unpaid Parking Ticket- podcast of the Tim Harford article in Slate.

Or listen to a Tim’s interview discussing the issue online;

“There's a depressing conclusion and there's an optimistic conclusion. The depressing conclusion is there's nothing you can do about corruption because, well, you know, these guys from Chad and Bangladesh, they're just corrupt. That's what a lot of people, I think, have read this paper and thought that. But I take a different view. Because there's a kicker right at the end of the paper, which is what happened when the law changed. There was the Clinton-Schumer Amendment in 2002. It meant that, OK, you couldn't fine people for committing parking violations. But you could, and you would, tow their cars. And you would actually deduct the parking fines from each country's allocation of foreign aid. So they really started to take a stand on this.

And guess what? Personal morality matters, but enforcing the law matters, too. Because when the amendment was passed, all of these parking violations, by all of these ambassadors, immediately fell by 90 percent. So there is hope for improving the world and stamping out corruption after all.”

There was an interesting letter in this week’s The Economist;

“SIR – In international events bronze medallists usually get little attention (“A ticket for corruption”, August 12th). However, when describing a new corruption ranking based on parking violations by UN diplomats you singled out Chad, the third-highest offender, and ignored Kuwait, the gold winner, which had twice as many infractions. I take solace in finding that my country's diplomats committed zero violations. Manuel Navas, Bogotá, Colombia”

Related;

Diplomats and parking fines;

“A study* by Raymond Fisman and Edward Miguel, economists at Columbia University and the University of California, Berkeley, gives a rare picture of how people from different cultures perform under new cultural norms. For instance, between 1997 and 2002 diplomats from Chad averaged 124 unpaid parking violations; diplomats from Canada and the United Kingdom had none. The results from 146 countries were strikingly similar to the Transparency International corruption index, which rates countries by their level of perceived sleaze. In the case of parking violations, diplomats from countries with low levels of corruption behaved well, even when they could get away with breaking the rules. The culture of their home country was imported to New York, and they acted accordingly.

The same applied to high-corruption countries. Their diplomats became increasingly comfortable with parking where they liked; as they spent more time in New York, their number of violations increased by 8-18%. Overall, diplomats accumulated 150,000 unpaid parking tickets during the five years under review.

Yet any moral superiority New Yorkers may feel should be tempered by the behaviour of the American embassy in London. Last year, embassy staff stopped paying the congestion charge—now £8, or over $15—for bringing cars into central London. The growing pile of unpaid charges now stands at $716,000.”

Blogs discussing the above paper; PSD blog, Marginal Revolution, Healthcare Economist

How Did Suharto Steal $35 Billion?

Why Is Chicago So Corrupt?

UN Diplomats Owe $18 Million in Parking Tickets

In The Economist this Week: Katrina, FEMA, and Corruption

The Oil-for-Food Scandal

Adventures in Cheating-A guide to buying term papers online

Some recent columns of Tim Harford;
Explaining the huge rise in teen oral sex
'Product sabotage' helps consumers
Overpaid, underworked and in charge

Bad weather equal bad government?

The latest edition of The Economist summarizes Leeson and Sobel paper on corruption and weather;

“According to a new paper by Peter Leeson and Russell Sobel of West Virginia University, natural disasters not only wreck property and disrupt lives, but also encourage graft. The academics compared the rate at which public officials were convicted for corruption in different states with the geographical distribution of natural disasters. Their correlation was striking. States which see lots of disasters, such as Mississippi, Florida and South Dakota, are also the most corrupt.

That link, reckon the authors, is not spurious. When disasters occur, the federal government dispenses large dollops of cash in affected areas through FEMA, the Federal Emergency Management Agency. A windfall of federal cash spawns graft in much the same way that oil wealth or foreign aid can cause corruption in poor countries. States with bad weather get more frequent gobs of FEMA cash and hence are more corrupt.

Help from FEMA encourages graft in many ways. Public officials can embezzle cash directly; they can overstate peoples' damage claims in return for a bribe, or demand kick-backs for rebuilding contracts. All told, the impact is big. The authors' calculations suggest that in the average state, an extra $1 per person in money from FEMA increases corruption in that state by 2.5%. Eliminating FEMA relief entirely would cut corruption by more than 20% in the average state. But don't hold your breath.”

Related;
Earlier post about the paper; Could bad weather be responsible for U.S. corruption?
Stevens admits to blocking the bill; Alaska Sen. Ted Stevens acknowledged holding up legislation that would open federal spending practices to public scrutiny.
Alaska Senator Stevens' successful investments
Sunlight Foundation
Porkbusters
CNN report on Sen Ted Stevens
A Constitutional Counterrevolution
Competent Government through Amendment: Reviving Madison's Vision by Cost-Benefit Analysis and Incentive

Traffic Fatalities and Corruption

An interesting paper- Traffic Fatalities and Public Sector Corruption by Nejat Anbarci, Monica Escaleras, and Charles Register. Abstract;

“Traffic accidents result in 1 million deaths annually worldwide, though the burden is disproportionately felt in poorer countries. Typically, fatality rates from disease and accidents fall as countries develop. Traffic deaths, however, regularly increase with income, at least up to a threshold level, before declining. While we confirm this by analyzing 1,356 country-year observations between 1982 and 2000, our purpose is to consider the role played by public sector corruption in determining traffic fatalities. We find that such corruption, independent of income, plays a significant role in the epidemics of traffic fatalities that are common in relatively poor countries.”

Related;
World report on road traffic injury prevention;"Every day around the world, more than 3000 people die from road traffic injury. Low-income and middle-income countries account for about 85% of the deaths and for 90% of the annual disability adjusted life years (DALYs) lost because of road traffic injury. Projections show that, between 2000 and 2020, road traffic deaths will decline by about 30% in high-income countries but increase substantially in low-income and middle-income countries. Without appropriate action, by 2020, road traffic injuries are predicted to be the third leading contributor to the global burden of disease and injury."

Multi-country study on helmet wearing

Ten Leading Causes of Death- US

'Psychological' traffic calming

International Road Traffic and Accident Database (IRTAD)

A master-dispenser of illegal spoils

The Economist has an obituary of the ex dictator of Paraguay Alfredo Stroessner;

“For 35 years, from 1954 to 1989, Alfredo Stroessner ruled there. Under him, although he brought electrification, asphalt roads and friendship with America, the place became yet more isolated and benighted. The economy was based on contraband: whisky, cigarettes, passports, coffee, cocaine, luxury cars, rare bird skins, anything, until the unofficial value of Paraguay's exports was said to be three times the official figure. The style of government was a spoils system, underpinned by terror of a vicious network of spies and secret police. Foreign policy was a buddies' brigade with other dictators—Videla of Argentina, Pinochet of Chile—to co-ordinate counter-terrorism and assassinations. And the most famous tourist was Josef Mengele, the fugitive doctor of Auschwitz, riding into a village in the Paraguayan wilderness to be welcomed and protected….

His main machine of power was not the army. Although he was a distinguished soldier, rising to brigadier-general by the age of 36, and indeed had done nothing else in life since he was 17, he did not trust military men. He himself had skilfully ridden the divisions in the army to seize power from a civilian president in 1954. His policy was to keep the officers sweet with a cut from the smuggling revenues or a share of the contracts for his grandest project, the Itaipu hydroelectric plant built with Brazil on the Paraná. Some cronies amassed fortunes. General Andrés Rodríguez, who eventually overthrew him in what he contemptuously called a cuartelazo, or barracks revolt, built himself a replica of the Palace of Versailles…

…Paraguayans as a whole, however, were much slower to be disillusioned. It was true that he treated the country as his fief, to the point of picking out teenage girls for himself when he presented school diplomas; but he paid for the girls, set them up in houses, and gave their relatives money. You could argue that the Itaipu project left Paraguay with only 2% of the energy and 15% of the contracts; but that 15% had given the country, for eight years in the 1970s, the highest rate of growth in Latin America. General Stroessner was a master-dispenser of illegal spoils. Yet the dark truth of his Paraguay was that he co-opted even his opponents into that system with him.”

Eric Rasmusen offers an interesting anecdote;

“One former American ambassador to Paraguay, Robert E. White, remembered General Stroessner as darkly brilliant at profiting from others’ mistakes. Once, Mr. White recalled, the Paraguayan ambassador to Argentina had gambled away the embassy’s entire budget. The ambassador was immediately summoned to Asunción and was handed a confession to sign. General Stroessner then promoted him to foreign minister. “He could never have an independent thought or deed after that,” Mr. White explained.”

The above is a common denominator of all dictators. The sad story is how otherwise decent people remain silent in the face of such corruption and abuse of human rights and let people corrupt to their bones sit in the offices of government and parliament.

Related;
Ex-Paraguayan ruler dies in exile
Alfredo Stroessner: revisiting the general
Timeline: Paraguay
Even Angels Ask! Corruption of Public Discourse in Islamic Countries
Development as Accountability
Corruption of Legitimacy

Some Maldives related news;
Allegations of Corruption Against Top Ministers
ADK Hospital Leader; a clear-cut case of corruption
Sixteen Reasons why President Gayyoom Should Face Justice
Two Promoted In Kinbidhoo Health Centre Following Political Pressure

Dictators Watch- Burma

The military dictators of Myanmar (Burma) has got another asset to maintain their tyranny over the Burmese people and play around with neighboring giants- ten trillion cubic feet of natural gas;

“The Great Game of the 19th Century was played between empire builders Britain and Russia, using Afghanistan as their football in seeking control of central Asia. Today, there is a new great game under way between two very different competitors -- China and India. But this time the ball is Burma…

Burma is saturated in more than ten trillion cubic feet of natural gas, and possibly also oil, beneath its offshore waters, which stretch from the border of Bangladesh in the Bay of Bengal down to within sight of Thailand's azure blue coastline, dotted with tourist resorts. It is that rugged and undeveloped coastline of almost 1,000 miles that particularly interests the new great game players.

After much wrangling, and especially after a first-ever visit by an Indian head of state, President Abdul Kalam, to Burma last March, New Delhi thought it had secured exclusive purchase from Burma of 5.6 trillion cubic feet of natural gas. That was the quantity onfirmed by independent U.S. assessors Gaffney, Cline & Associates to be in just one undersea block, known as A-1, of the Shwe field near the port of Sittwe. But while India was sizing up the route of a 960-mile land pipeline bypassing Bangladesh, China swooped in and signed a memorandum of agreement to buy the A-1 gas.”

Related;
Burma: Orwellian state, with teashops
Burma's confusing capital move
Annan pays tribute to UN envoy in Myanmar upon his resignation
Junta Pressures Social Welfare Group;
“Rangoon’s only funeral service association, under pressure by authorities, is likely to be taken over by a military-backed civilian group, according to social workers in Rangoon”

Dictators for Life?

A new report from Freedom House ‘Countries at the Crossroads: A Survey of Democratic Governance’ finds;

“The countries of the Middle East and North Africa received the lowest scores in this survey. Yemen saw a significant drop, owing chiefly to severe restrictions on press freedom. During the two years covered in the survey, Yemeni journalists faced numerous incidents, including "violence, death threats, arbitrary arrests, and convictions under weak laws governing the freedom of the press." In Jordan, freedom of association and assembly became even more restricted after Interior Minister Samir Habashneh demanded that professional associations completely halt all activities deemed political, and after the governor of Amman announced that "any kind of event, gathering or meeting, save for weddings, should obtain prior approval."

However, there were some signs of modest progress in the MENA region. Morocco has enjoyed gains since the last review, principally in the spheres of Accountability and Public Voice and Civil Liberties. In a significant development, the country's interior commission in the Chamber of Deputies approved new legislation to reform the process involved in the formation of political parties and the campaign finance law, including providing parties with an annual subsidy.”

The Story of the Toddy Thief

Dhivehi Observer’s editor explains why he calls Mr. Gayoom, president of Maldives, Golhaabo;

“Toddy 'is the sweet sap of a variety of Asian palm tree used as a beverage, either fresh or fermented'. Toddy collecting is a long standing traditional occupation in the Maldives, but despite being hard and risky, it does not provide a substantial income. In fact, they are classed amongst the lowest income earners. To collect the toddy, the flower casing (bud) is cut at the top end before it blossoms and an empty coconut shell is hung to collect the drip (sap). It can take several hours to fill a shell, which usually has a capacity of about 500 ml. This coconut shell collector is locally called 'Golhaa', a word that originated from snail shell because it looks like a coconut shell according to linguists. When filled, the collector, known locally as 'Raaveriya' (toddy collector) or 'Ruh Araameeha' (palm tree climber) climbs up the tree and empties the toddy into a container made of two coconut shells in a vertical configuration, called 'Raa Badhi'. Raaveriyaa then walks around the island selling the toddy by the glass, and if he cannot sell his daily collection, it is cooked to make liquid sugar called 'Dhiyaa Hakuru', which the Maldivians love to eat with rice, coconut and dried fish, in addition to being a main ingredient for several local sweet dishes, such as cakes and sweet breadfruit dessert, among other.

The addition of 'bo' to 'Golhaa' to form 'Golhaabo' came as follows. Down South, in an island, there was a notorious thief, who would drink the hard collected toddy from the Golhaas before the toddy collector could climb up and fetch it. When the people of the island found out about this person, they named him 'Golhaabo', where 'bo' literally means 'drinker', because he steals from the Golhaas and drinks the toddy, taking away the hard earned produce of the toddy collector. People of the island made fun of him and soon he migrated to Male', the capital but even in the capital people shouted 'Golhaabo' at him every time they saw him and in retaliation, he would scream abuse at the people and even sometimes run after small children (in the same way now Golhaa Force, Gayyoom's militia police, runs after and beats the hell out of our youth when they chant 'Golhaabo Faibaa' (Get Off Golhaabo) during demonstrations and gatherings). In fact, it was this old man who was named 'Golhaabo' initially, after being tortured by Gayyoom several times for no reason, that went near the Presidential Palace and shouted "It is true I stole and drank the toddy of a destitute poor toddy collector, it is true I stole his hard earnings, but I was hungry, but look at you 'Maumoon', you are drinking the produce of every single Maldivian, so the title Golhaabo is more suited for you than me, you are the real 'Golhaabo', not me, you are stealing mercilessly from the poorest of the poor". After this incident, the poor soul was tortured, injected with tranquilisers and has been held captive at a mental institute after declaring him insane.”

A DO commentator thinks that people identifying Mr. Gayoom as ‘Golhaabo’ represents a political maturing of Maldivians- which we find hard to accept.The culture of small island communities may also explain the popularity of ‘name calling’.

* The picture shows 'Raa Badhi'- the small container for toddy collection made from coconut shells.

Related; Peter Boettke has an interesting post on tension between rational choice theory and anthropology.

Singapore, a heaven for corrupt cronies?

In an earlier post I mentioned that Professor Acemoglu doesn’t think that Singapore is a democracy. The following article suggests the country’s financial sector also has serious flaws of transparency;

“Singapore finally agreed to negotiate an extradition treaty last year after years of Indonesia begging for one. The process has been ridiculously drawn out. At least six rounds of talks have been held. Indonesia is angry and feels that Singapore is being obstructionist. But why should Singapore be slow? Probably because it is a haven for Indonesian crooks on the run, and they bring their money with them. Billions of dollars in corruptly obtained funds have flowed into Singapore's property market and its banks.

It's a sensitive matter because financial services account for 22 per cent of Singapore's economy. You can imagine the situation from Jakarta's point of view. Singapore lectures Indonesia about the importance of the rule of law while giving its criminals a haven….

The US doesn't have an extradition treaty with Indonesia but co-operation by US officials saw the fugitive Indonesian David Nusa Wijaya, wanted in connection with embezzlement of about $US140 million, return to Indonesia from San Francisco earlier this year….

But that didn't stop India from signing such a treaty with the Philippines in 2004, or Australia from signing one with Indonesia. Fugitive Indonesian banker Hendra Rahardja, who embezzled almost $US300 million, was on the verge of being extradited from Australia in early 2003 when he died of cancer in Sydney. His funds in Australia were frozen and returned to Indonesia….

A corollary of Singapore's reluctance to sign an extradition treaty with Indonesia is its apparent lack of fussiness about the sources of the funds attracted to its banking sector…

Singaporean officials make all the right noises when it comes to monitoring illicit funds. But there is a perception that in practice Singapore is not fully meeting international expectations and obligations. One person involved in monitoring international money flows for a Western government told me last week that the results of Singapore's efforts to date were disappointing.

And a senior fund manager in the region had this to say: "Singapore has truly become the global centre for parking ill-gotten gains. The private banking teams are huge and in practice ask almost no questions (compared with the branches elsewhere, including Switzerland)…”

I’m interested to hear what the Singapore economist thinks of the issue. Singapore is a favorite place for Maldivian cronies; the second president of the country exiled himself to the country after according to some looting the state’s treasury and world’s longest serving foreign minister also ‘retired’ to the country.

Singapore has signed the UN Convention on Corruption though haven’t ratified it.

Related; Singapore to ban outdoor protests at IMF meeting

Some comments on the issue are at Singabloodypore.

Corruption declining in lot of transition countries, Except

World Bank has published a new report, “Anticorruption in Transition 3-Who is Succeeding … And Why?” which suggests that incidence of corruption has declined in quite a few of transition economies- Russia seems to be an exception;

“Most observers believe that corruption in Russia has worsened in recent years, although the exact magnitude of recent changes and the severity of the current situation are subjects of continued debate. The Executive Opinion Survey carried out annually by the World Economic Forum (2005) confirms a worsening in experts’ perceptions of the governance environment in Russia from 2004 to 2005. Most notable is a decline in perceptions of judicial independence and protection of property rights and an increase in the burden of organized crime on business. Surveys of small businesses undertaken by the Center for Economic and Financial Research (CEFIR, 2005), a Russian think tank, indicate that corruption fell from 2001 to 2002 but then worsened again by 2004. Russian firms that participated in the BEEPS also showed a similar pattern—a dip in assessments of corruption as a problem for business from 1999 to 2002 followed by an increase through 2005. (Reported bribe frequency rose to 2002 and then stayed level.) However, the BEEPS firms—500 in 2002 and nearly 600 in 2005—also reported a decrease in the bribe tax from 1.4 percent of revenues in 2002 to 1.1 percent in 2005.The most negative picture of corruption in Russia was painted last year by another Russian think tank, Information Science for Democracy (INDEM, 2005), which reported that bribes had increased tenfold in the four years from 2001 to 2005.

These various results point in a similar direction—that corruption in Russia may have improved somewhat in the early 2000s but has grown as a problem in recent years.The decline in the bribe tax as measured by the BEEPS is not inconsistent with growth in corruption overall. The bribe tax measures the share of annual revenues paid in bribes, while the INDEM study reports on the aggregate dollar amount of bribes paid per firm per year. Given the rapid growth in the Russian economy in recent years, the declining bribe tax would still translate into a larger volume of bribery, and appreciation of the currency would increase the dollar-equivalent value even further. While the two sources may agree on the direction of change, however, the magnitude of the BEEPS and INDEM results do differ markedly. The BEEPS results imply an approximate increase in the volume of bribery of 50 percent from 2002 to 2005, while the INDEM study reports a staggering growth of nearly 900 percent from 2001–2005.

These worsening trends occurred despite a number of reforms undertaken by the Russian government to streamline public administration. For example, to ease the entry of new firms the government sponsored new legislation in February 2002 that cut the number of activities that required licensing and lowered the cost of obtaining licenses. Similarly, to improve the system of tax administration, the government lowered corporate tax rates and widened tax bases in 2001.Tax revenues increased and compliance clearly improved as a result (Ivanova, Keen, and Klemm, 2005).Yet the BEEPS results indicate that neither the easing of licensing rules nor reductions in tax rates have led to reductions in the frequency of bribery in these areas. Indeed, unofficial payments for business licenses are among the highest in Russia of any transition country, and Doing Business ranks Russia 143 worst out of 155 countries in “dealing with licenses.”

One explanation for the seeming failure of policy reforms to reduce corruption may be inconsistent or ineffective implementation of these reforms in practice. As Russia spans two continents and eleven time zones, it is not surprising that both the impacts of specific reforms and trends in corruption appear to vary significantly among regions. The CEFIR report (2005) claims that many business licenses “do not seem to be legitimate” even if they may have gotten cheaper. A second explanation focuses on deterioration in external oversight. Expanding restrictions on the media and some nongovernmental organizations in recent years may have reduced the ability of these groups to disseminate information about government activities and thereby help to hold public officials accountable. A vibrant and diversified civil society with ready access to information is an essential building block for accountability in government.

The results for Russia underscore the fact that policy reforms may be necessary but are not always sufficient to reduce corruption in and of themselves. Fundamental institutional strengthening to ensure policy implementation, build checks and balances, and promote accountability in government is also essential.”

- Box 3.1 Trends in corruption in Russia, p.38

Chart above, Figure 4.15 Clusters based on relative frequency of bribes in specific areas, p.71

For Comment; Why isn't there more demand for better governance in Russia? Is it all beacause of Putin? Or more of cultural thing?

Related;
Business Associations; Good for Development or Not
Moscow Gets Mortgaged

No link between fast growth and corruption or pollution?

According to World Bank country director of China, David Dollar;

“In general, China's transition to a market economy appears to be both more advanced and somewhat less damaging than we thought. Only 8 percent of the firms in this random sample of manufacturing are majority state-owned. Though they control one third of the assets in the sample, this still suggests a larger private sector than previous estimates. The extent of the transition varies dramatically:, from 99 percent private firms in Wenzhou or Jiaxing on the southeast coast to 60 percent in Anshan in the old northeastern rust belt. But in the cities where the private sector flourishes, firms reported far less red tape—from faster times through Customs to fewer days dealing with bureaucracy and less frequent demands for bribes.

While corruption is inherently hard to measure, we get pretty good response rates on the question of whether firms have to pay bribes to get loans from commercial banks, which are still largely state-owned. In southeast cities such as Hangzhou or Xiamen, 1 to 2 percent of firms report paying bribes to gain loans; the figure is above 10 percent in more than 20 cities of the center and west.”

Related;

Huangbaiyu - a new village being built in rural China - comprises homes that aim to test building materials, technologies, techniques and working processes- a model for zero energy consumption. Listen to the podcast.

Architects Without Frontiers- Listen to a podcast discussion with a member, Sam Crawford a Sydney architect concerned about how architecture can be perceived as a plaything of the privileged. In this piece he talks about his commitment to building a youth centre in Malawi.

Green China?

Alleviating Indoor Air Pollution in Poor Rural Areas of China -webcast- (should we be spending millions on indoor air pollution or on something else?)

Russia- an improvement for corruption!

A survey from a Russian think-tank finds;

“The principal feature of the practical everyday corruption resides in the fact that the volume of the everyday corruption market (i.e. sum of the bribes to be paid by citizens within one year) has not undergone any specific alterations along with a relevant increase from US$ 2,8 billion to 3,0 billion respectively. Although such a stable position is the result of the two dynamic processes being interacted. The first process may be seen as some corruption risk increase (authorities' corruption pressure onto citizens) and corruption demand decrease (citizens' readiness to bribe). The same trend reveals in some decreased everyday corruption intensity (average number of bribes per one briber annually) under significant growth of the average bribe amount. The second process appears as this average bribe amount within everyday corruption realm can be absorbed totally by national consumer prices' growth.”

Related;
Ticketing corruption

Putin recalls kissing boy's belly

Russian energy giants bring global clout

Russia and the WTO (subscription required)

Indonesia has come a long way

Pablo links to a blog of Indonesia’s defense minister (which cannot be independently verified).

Even if this is a hoax, I think everyone would agree that Indonesia has come a long way since time of Suharto.

Earlier posts which talked about corruption in Indonesia; Excessive Anti-Corruption Drive Hurting the Economy?, Advice to Mr. Wolfowitz on Fighting Corruption

Movie Recommendation from World Bank

“If you cannot imagine how a movie about electricity privatization can move you to tears …” - Jonathan Walters, World Bank

Pablo recommends the film ‘Power Trip’- a documentary about electricity privatization in the former Soviet republic of Georgia. Watching the trailer it gave me the feeling it was very one-sided as commented by one critic;

“Paul Devlin's documentary focuses on Piers Lewis, project director of AES-Telasi. A former classmate of Devlin's, their relationship slants the film in favor of AES managers, portraying them as a fun-loving group of world travelers on an altruistic crusade to save a picturesque country from a descent into a new dark age…

While his interviews with Lewis, AES general director Michael Scholey and CEO Dennis Bakke amply express management's point of view, the people of Tbilisi are either portrayed as thieves who vandalize company equipment, rigging dangerous and illegal connections to siphon off the electricity, or are shown in various stages of distress. Devlin takes his camera into the street to film impressions of the people, but he shoots them, not as individuals, but as a chaotic mob..”

Here is John Giraudo, VP and Chief Compliance Officer, AES Corp. talking about corruption;

“My company, The AES Corporation, is in the thick of improving economic development. We provide an essential good— electricity to many third world countries—27 countries in fact. We are part of the local infrastructure in Venezuela, Brazil, Argentina, Nigeria, China, India, Pakistan, Ukraine, Kazakhstan and many other developing countries. Through 15 distribution companies we deliver electricity to more than 10 million people---for example we keep the lights on for nearly everyone in the city of San Paolo Brazil, the entire country of Cameroon and many of the suburbs of Kiev. As a company, listed on the US stock exchange, we are one of the biggest channels of private sector money to poor countries. It is difficult to think of another private-sector company with such a large investment in third world infrastructure.

Because of our presence in all these places in the world we see lots of corruption—petty corruption and official corruption. Indeed, the biggest challenge our people face in doing business overseas is to resist the corruption around us…”

Now I think I would definitely see the film. I wonder what Georgians think of the movie.

More reviews; The Boston Globe, Village Voice

Corruption of Corruption Watch Dogs

BBC reports that the head of TI Kenya has been sacked over fraud (via Tom Palmer). Earlier I posted about Mr.Githongo.

Nowadays everyone’s favorite topic seems to be corruption and the huge costs it imposes on the society. Why has corruption become such an important topic for the international development community? Has it anything to do with the end of the cold war and the need for international development agencies to find another rational for helping developing countries under the mantra of improving governance?

Related;

Tyler Cowen on the driving license corruption in India - see also this video about what it actually means to be driving in India.

More the same paper at PSD blog- Corruption kills.

The benefits of corruption are not worth the costs

An interesting paper on corruption; Does Corruption Produce Unsafe Drivers? by Marianne Bertrand (University of Chicago Graduate School of Business, NBER, CEPR and IZA), Simeon Djankov (International Finance Corporation), Rema Hanna (New York University Wagner School of Public Service) and Sendhil Mullainathan (Harvard University and NBER)- quite a handful of authors. Here’s the abstract;

“We follow 822 applicants through the process of obtaining a driver’s license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as “failures” on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal “agents” to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents’ pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.”

I learned about it via Sepia Mutiny.

Related Links;

Driving in New Delhi- Don't complain about standing in line at the DMV

Parking tickets, diplomats and corruption

Peter Foster in New Delhi ( the blog of Daily Telegraph's South Asia correspondent)

TI India chapter

Could bad weather be responsible for U.S. corruption?

Asks Peter T. Leeson and Russell S. Sobel in the following paper; Weathering Corruption

Abstract; Could bad weather be responsible for U.S. corruption? Natural disasters create resource windfalls in the states they strike by triggering federally-provided natural disaster relief. Like windfalls created by the .natural resource curse.and foreign aid, disaster relief windfalls may also increase corruption. We investigate this hypothesis by exploring the effect of FEMA-provided disaster relief on public corruption. The results support our hypothesis. Each additional $1 per capita in average annual FEMA relief increases corruption nearly 2.5 percent in the average state. Eliminating FEMA disaster relief would reduce corruption more than 20 percent in the average state. Our findings suggest that notoriously corrupt regions of the United States, such as the Gulf Coast, are notoriously corrupt because natural disasters frequently strike them. They attract more disaster relief making them more corrupt.

Related;

Disaster Relief: Type I & Type II Errors

May be report cards like this could help.

Development as Accountability

Here’s an interesting speech (though not by content) by Malaysia’s former finance minister Anwar Ibrahim;

“Ibrahim spoke on governance and accountability as drivers for social change, led by development organizations. He drew upon his experiences in Malaysia to illustrate this point, highlighting the positive results from anticorruption initiatives. Ibrahim also tied accountability to freedom, calling it the process of “civilizing power,” and he advocated cooperation with the World Bank to countries that are working toward good governance.”

The speech was high on quotations and referred to Ibn Khaldun, Thomas Jefferson, Isaiah Berlin, Amartya Sen, Mancur Olson, and Kafka amongst others. He also went on to suggest that World Bank should have an independent office of accountability with a broad mandate. His book Asian Renaissance, published in 1996 is decent enough book. I wonder how Mahathir would react to his speech.

Related video; Anwar Ibrahim clarifies his role at the World Bank

I haven’t come across a good economics blog on Malaysia. Let us know if you’ve come across one.

Corruption in Infrastructure

“A very promising research area is the use of randomized field experiments. A recent paper by Olken (2005) reports the results of such an experiment in Indonesia which measures missing expenditures in over 600 village projects. To do so, the author relied on a comparison of the villages’ official expenditure reports with estimates of the prices and quality of all inputs used in road construction and maintenance, each made by independent engineers. This approach allows a separation of the sample into sub-samples designed to test the effectiveness of various types of policies in reducing corruption.

What do these studies show? Most of the evidence confirms the expectations. First, the basic data analysis from the Global Competitiveness report suggests that the frequency with which firms have had to make undocumented extra payments or bribes to get connected to public utilities or to gain public contracts is, on average, negatively correlated with the income of the countries. These responses suggest that the poorer a country is, the bigger the corruption problem in infrastructure. While useful these data are also far from being precise. They are based on executive surveys which are known to have their share of problems. More importantly, it tells us little about what the government or the residential infrastructure users think about corruption. Second, corruption can be tracked to greater constraints on utility capacity and lower competition among utilities. This is found by Clarke and Xu (2004) for 21 Eastern European countries. They also find that public ownership in that region is more correlated with corruption than private ownership of utilities. Third, corruption can be associated with higher than expected costs. The most detailed studies ( Flyvbjerg and various colleagues) show that excess costs can be attributed to procurement rules that give bidders an incentive to announce low costs to increase their chances of winning projects, then renegotiate….

What can we do to reduce corruption in infrastructure? There are basically four main directions in which theoretical researchers have been pushing for over 20 years: (i) privatization, (ii) regulation and related processes, (iii) increased decentralization, and, (iv) adoption of participatory process in the selection, implementation, and supervision of projects. Since many countries have tried these recommendations, we now have enough new facts to analyze. This analysis is still very young but already yielding interesting results.”

Infrastructure: A survey of recent and upcoming issues

The paper comes from the Annual Bank Conference on Development Economics - ABCDE Tokyo 2006.

Here’s a podcast overview and a video of the opening session.

A related conference in South Africa- see especially the paper 2010 World Cup- Infrastructure Challenges.

PSD Blog has more on corruption.

An Expert on Corruption

A professor at GMU Janine Wedel has written a lot about the alleged corruption case involving Andrei Shleifer, himself considered a world’s leading authority on corruption. Here is her article in the Boston Globe written in March- the following two paragraphs were cut from the original piece.

"The system is virtually incapable of dealing with such players' infractions and lack of transparency in a timely fashion. It is not for lack of inquiries. A series of governmental and business investigations into the handling of U.S. assistance for Russian economic reforms entrusted to Harvard began as early as 1996. That year the Government Accountability Office published a report calling USAID's oversight over Harvard's Russia project "lax." (GAO staff entrusted to me a copy of their original draft report, which is even more critical.) The following year the Justice Department embarked on its investigation. Yet another case charging Harvard University, Shleifer, and another Harvard principal with fraud was brought by The Forum Financial Group, a Portland, Maine-based mutual funds firm working in Russia. That case was settled out of court in 2002. Only recently has Harvard opened an investigation.

While these probes were in process, Shleifer's star, like that of many such players, was steadily rising, not falling. Remarkably, Shleifer has continued to testify before congressional committees and publish articles in reputable journals as an expert on corruption, work with a World Bank anti-corruption unit, and write for Foreign Affairs on the supposed success of Russian "reforms"--without disclosing his role in crafting them. He was awarded the American Economic Association's prestigious John Bates Clark Medal in 1999. And, of course, he remains a tenured full professor at Harvard."

David Warsh’s latest column also talks about the issue;

"Why worry about it if the government didn't have enough evidence to charge him with a crime?

Certainly it is true that criminal and civil law represent different perspectives on conduct. Only the government can charge a crime. The accused is guilty if convicted. The logic of the code, its very language, is that of misdeed, punishment and rehabilitation.

Civil law, on the other hand, governs relationships among private individuals and delineates their rights and obligations. Disputes over torts and contracts ordinarily lead to some kind of compensation for the aggrieved party. There is a sense that such disagreements are an inevitable part of doing business. In most cases, there is not much shame.

And while government pursued a criminal investigation for a time -- a grand jury was empanelled and heard a good deal of testimony -- nothing came of it in the end. Thus Shleifer and Harvard are not said to have been convicted of anything, or to be guilty, or even to have done anything illegal. Instead they are described as having been found to have committed various frauds and breached their contract, respectively….

…A 31-year-old Russian expatriate -- deemed a leading authority on corruption, no less! -- who immediately begins semi-publicly flouting American law and communist sensibility to line his own pocket, and who, after he is caught, persuades the great Harvard University to maintain his innocence. Does this sound like material for a Frank Capra movie or a John Adams opera?

The Shleifer problem is symptomatic of confusion over a distinction that goes much deeper than that between the civil and criminal law -- between the ethical systems that govern the private and the public realms. The locus classicus here, at least in Western civilization, is to be found in Plato, I suppose. …"

For Comment; What do you think is the moral of the story? I wonder what Mankiw thinks about the whole issue.

A Lot of Noise from an Ex World Banker

"Is it time for a financial sector assessment? And, if so, will she be able to keep Basel out of her hair? "

Per Kurowski, a former Executive Director at the World Bank was kind enough to post a lot of interesting comments on a couple of our posts. I haven’t seen his book referred to by any World Bank bloggers- I wonder what might be the reason. I’ve collected some of them below;

World Bank and Dictators

“For a start it is not and cannot ever be the role of World Bank to take upon its shoulder the responsibility for fighting dictatorships, whenever and wherever they are. That responsibility has to be shared by many more, preferably all. There are thousands of way you can get rid of a dictator, including extravagant one as offering 5 million visas to all people in Turkmenistan so that they are all able to go and live elsewhere and the dictator dies of loneliness but, to serve a useful purpose, they should all first be able to answer the question of what to do after the dictator is gone? Build a nation? Outsource the government? Send them all to universities, so that they can be taxi drivers in New York?

It is a very delicate matter to get involved in trying to change other peoples or other countries life, and pure good intentions are not enough. That said and reading the description of the Father of the Turkmen People he sounds like a very insecure person with a tremendous inferiority complex and in need of asserting his importance anyway, anywhere, anytime, something that is frequently quite useful for profiling dictators in general. If this is right, one way to do it, a peaceful alternative, would be to rob from him all his mantles of respectability, laughing and scorning him out of power. Careful though, don’t confuse the target, you do not want to scorn the belief and the blind faith in their leader that many locals might already have developed. If this is the chosen strategy, it would then be clearly contra productive to have a technician from the World Bank go and have a serious talk with him…among technicians. By the way since so many governments keep themselves elevated only by means of the lot of hot air they inflate themselves with, we should not underestimate the risk of a catastrophic domino effect.
But, do not think for a moment that my comments are in jest. No, it is way too important for the world to find a mechanism to get rid of the rogues, in the name of that overriding sovereign right we have as citizens of a very small and interrelated planet. We cannot and should not allow for too many too infectious diseases to poison our planets future."

Fighting Poverty with the Espresso Book Machine

"This machine is best for that odd or old special book that it would be to expensive to have in the inventory. As you would have to ship the machine, the paper, the inks and what have you plus arrange for the university in Mozambique to duly pay the royalties to the author I seriously doubt it would work for our friend of Mozambique. But you know the saddest part of it all? That is that in his desperate plea for a book in microeconomics, he might actually get a really bad one. A book that got printed just because the author was the friend of someone, or in cahoots with someone. "

Don’t Worry, Everybody will get a chance to be rich

“Don’t Worry, Everybody will get a chance to be rich” YES!... And perhaps even the rich will get their chance of being a little bit poorer. Whatever, it is clear that we do not have the tools for measuring where we really want and should be heading.

For instance, the GNP figures, currently just the result of adding, could perhaps explain more if we also did some subtractions; like of the cost for consuming more than your world equitable share of energy; the cost of developing an energy addiction; and perhaps even the cost of the time wasted daily answering automated phone calls from computers that want to get more intimate with your family’s finances."

Budget Support – Another Passing Fad in the Development Community?

"I find absolutely nothing rhetoric about the need of country ownership but indeed much abusive and self-serving interpretations of what it really means and, foremost, on how its existence is evidenced. In a country where there exists a generalized commitment for taking the next step up the ladder of development, almost any help in any way will do some good. Where this national sense of responsibility and a real we want, we can, and we will do it attitude does not exist, almost any help, in any way, would do little good and could even be harmful. Now these are the facts, and their recognition is a must, even though of course that does not make the life of a developing institution any easier… but, then again why should their life be easy?"

Advice to Mr. Wolfowitz on Fighting Corruption

"In relation to the World Bank’s fight against corruption I have no doubts whatsoever that the most important first step it needs to take is to make perfectly clear what it cannot be expected to do. For the World Bank to help create the impression that certain risks of corruption are effectively taken cared off, would be collaborating and camouflaging for corruption.

For this I would recommend that all projects include in their documentation, a very simple one page Public Notice that lays out the most important risks of corruption in the operation, making clear what the World Bank is doing to diminish them but, much more importantly, what is not in their hands to do. That page should then surf transparently the web in order to enlist the civil civilians in the fight.

As an institution the World Bank is always well served by a good dose of humility and should always fight the corruptive arrogance of believing it can do it all on its own. The world needs, more than ever, a World Bank that needs the world."

Mr. Metaphor and the First Law of Petropolitics

Now go and read his book, Voice and Noise.

How Corrupt is the United Nations?

- Of $100-billion-plus worth of transactions, $1.8 billion diverted as illicit payments
- More than 2,200 companies were involved
- Illicit kickbacks came from companies and individuals from 66 countries
- Illicit surcharges were paid by companies from or registered in around 40 countries

Source: Global Economy- Governance and Corruption, World Bank Global Seminar Series 2006

Related:

Volcker Report

A review of UN procurement systems by NIGP

A Very British Dossier on Trade and Poverty

DFID has released a dossier on why trade really matters in the fight against world poverty. Some quotes from the report;

- The EU, for example, underwrites its fishing industry by about £500 million a year, more than a quarter of which goes to support 850 vessels to fish outside EU waters, threatening African fisheries. African countries can get income from allowing European boats to fish African waters, but deals are often badly negotiated, sometimes netting a royalty of less than 1% of the catch value.

- If EU and US cotton subsidies were removed, cotton exports from sub-Saharan Africa could increase by up to 75%.A pound of cotton can be produced for 12 pence in Burkina Faso compared with 42 pence in the US.

- For example, fruit and nuts imported into the US can have a tax of 200% slapped on them, and for meat brought into the EU this can be as much as 300%. People in Japan or Korea buying imported rice may pay a tax of 10 times the original price of the rice.

- Trade may be the single most potent tool in the fight against poverty, but it won’t work in isolation. The Commission for Africa estimated that we need to provide up to £12 billion a year to get developing countries on the road to becoming global trading partners

Some thing not in the report; African Union estimates that corruption costs Africa 148 billion dollars a year.

Corruption of Legitimacy

“The debate on corruption is truly difficult and complicated. Even though we should be pleased that such an index exists, I am worried that the mere fact that we are trying to reduce corruption to terms of a measurable dimension may lead us to oversimplify the problem dangerously.

The index, in principle, only measures the perception of corruption in general terms. This is defined in ample terms as “the abuse of public office for private gain.” In this sense, and because of the nature of the problem, I am sure that when using the term “gain” we are referring mostly to a monetary benefit. This avoids measuring other aspects of corruption that could be just as important or more.

For instance, I believe that the appointment of someone to public office for reasons other than his or her capacity or professional integrity is a corruption that is even more pernicious and costly to the country than the sum of all monetary corruption put together.”

Per Kurowski, former World Bank Executive Director, in his book, “Voice and Noise”, pp.98-9.

By focusing too much on the economic measurement of corruption, we might be forgetting the real cause of corruption in the first place; ruling elite may not have any popular legitimacy in the first place.

Related;
- Mr. Githongo goes to Washington
- Excessive Anti-Corruption Drive Hurting the Economy?

Note: the photo I stole from this post at Mahalanobis

Budget Support – Another Passing Fad in the Development Community?

OECD has made an ‘independent’ evaluation of development aid delivered in the form of ‘budget support’ (currently some $5 billion or 5 % of all aid)- as opposed to project aid;

“The evaluation points out that when a developing country’s government has the political will to reduce poverty, budget support can be an effective way for donors to deliver aid. Overall, it has helped to strengthen the relationship between donors and developing country governments, and encouraged better coordination between different donors. It has helped to strengthen planning and budget systems, making them more transparent and therefore accountable. It has also helped to prioritise areas of expenditure that target the poor like health and education.

The team of evaluators found no clear evidence that budget support funds were, in practice, more affected by corruption than other forms of aid.

They noted however, that donors should be prepared to better analyse political risks and gauge support for poverty reduction by a government. In some cases, the evaluation found that political risks had been under-estimated by donors.

While there were increases in expenditure in areas such as health and education, any increase in the incomes of the very poor is not yet evident.”

My Take; Every now and then development practitioners need compelled to reinvent themselves and delivering aid through ‘budget support’ may be fashionable way to fight poverty with the rhetoric of country ownership and predictability of aid. My worry is that this might be pushed too far without realizing that budget support is not a panacea to the deep rooted problems of the developing world. People in international institutions will find justification for anything their bosses tell them with fancy equations and econometric jargon. Look at this publication- Budget Support As More Effective Aid?. This book reminded me of Steven Pinker’s book Words and Rules- where he looks at irregular verbs from every imaginable angle of scholarship. The publication looks at budget support from every imaginable angle available to an economist. Then there is also the issue of fungibility which will always remain in the closet.

Related Links;

- Owen has a related post at CGD

- Managing Volatility and Crises: A Practitioner's Guide

- Are donors to Mozambique promoting corruption?

- Earlier related posts; World Bank and Dictators, Fighting Poverty with the Espresso Book Machine, From the Coffee House to the World Bank - Institutions and Development, ‘Fearful Pig’ is resigning as the President

Advice to Mr. Wolfowitz on Fighting Corruption

This time from Ruth Levine at CGD;

“Evaluating the impact of anti-corruption programs may seem far-fetched. How, after all, could one measure the prevalence or cost of corrupt practices, which by definition are hidden from view? Moreover, how could the effects of specific programs be assessed? While not easy, such evaluation is indeed possible. For instance, in path-breaking research completed last year, Ben Olken of Harvard University compared the impact of audits and grass-roots participation on “missing funds” in a road-building project in Indonesia using a randomized field experiment. Earlier work by Harvard’s Rafael di Tella and others estimated the cost of kick-backs for procuring medical supplies by comparing variation across public hospitals in Latin America…

The U.S. and other countries that own the World Bank have a rare opportunity to fix this problem. As corruption-fighting programs are put into place, donor and recipient countries can request and fund careful, credible and independent third party evaluation of Bank and other agencies’ programs. Collect information about starting conditions, roll out programs so that sensible comparisons can be made, conduct rigorous evaluations and, when the results are in, publish them regardless of whether or not they make the funders and implementers look good. If Mr. Wolfowitz and his friends really want honesty and transparency, they could start by closing the evaluation gap.”

Related:

- Measuring Corruption in Road Building Projects in Indonesia

- Business Against Corruption – Case Stories and Examples ( recent UN publication via CIPE Development Blog )

Corruption quote of the day

“I am completely mystified by just what your problem is....People who deal with the arms trade, even if they are sitting in a government office...day by day carry out transactions knowing that at some point bribery is involved. Obviously I and my colleagues in this office do not ourselves engage in it, but we believe that various people who are somewhere along the train of our transactions do. They do not tell us what they are doing and we do not inquire. We are interested in the end result.”

- the reply of a British army chief to a query from Britain’s ambassador in Venezuela as to whether the government was prepared to tolerate bribery in arms deals.

Such facts and more others ( British royal family received more than £1 million in farm subsidies from the European Union) are being revealed since introduction of Freedom of Information Acts around the world.

Related Links:

- Bibliography of Access to Information Resources

- Governance Organizations Directory

- Global Integrity

- The cost of the ERM Cirsis- UK Treasury

- Alasdair Roberts’s weblog

Q&A on World Bank and Corruption

Council of Foreign Relations has got an interesting briefing on the World Bank’s new strategy relating to corruption;

“In April Wolfowitz called corruption a chief threat to development in poor countries, saying it distorts markets, lowers investment, and "encourages people to apply their skills and energies in nonproductive ways." He has made anticorruption a major theme of his first year as president and vowed to set in motion a country-by-country process to attack the problem. The moves come at a time of increasing scrutiny of the bank's own role in corruption. A recent study by U.S. News & World Report quotes analysts as saying more than 20 percent of the funds disbursed by the bank each year may be wasted through corrupt practices. A Northwestern University professor, Jeffrey Winters, says his research found nearly 100 billion dollars of World Bank funds have been squandered by corruption over the years. The bank rejects these claims and says it is difficult to calculate how much of its funds have been distorted by corruption.

But experts say there is a clear correlation between corruption and stagnant growth on the world's poorest continent: Africa. The African Union has said corruption costs the continent $148 billion per year. The Heritage Foundation says two World Bank entities provided nearly $70 billion [in 1995 dollars] in development assistance to 48 countries in sub-Saharan Africa between 1980 and 2002. But at least twenty-three of those countries experienced negative growth in gross domestic product (GDP) in that period. Bruce Rich, an expert on multilateral banks for the organization Environmental Defense, says the World Bank's problems stem from a failure to ban corrupt contractors and companies from its programs and investigating fraud by government officials. "I think you have to start somewhere and the bank can start by ensuring that its own loans are clean, which it didn't do in the past.”

The most recent Global Monitoring Report promises to be part of this effort quantify the fight against corruption and improve governance in poor countries.

“Governance and corruption often are used synonymously. But they are quite different concepts—and conflating them can be very damaging. Public sector governance refers to the way the state acquires and exercises the authority to provide and manage public goods and services—including both public capacities and public accountabilities. Corruption is an outcome. It is a consequence of the failure of any of a number of accountability relationships that characterize a national governance system—from a failure of the citizen-politician relationship (which can lead to state capture) to a failure of bureaucratic and checks and balances institutions (which can lead to administrative corruption). Fighting corruption requires strengthening governance system across its core dimensions.”

A French journalist in the press conference on the Report asked the following question;
“You highlight how important it was to fight corruption and how important was good governance. I'm wondering why the World Bank gave this decision point to Congo while there was plenty of evidence that the country was stealing oil and steel monies through sham companies in the Bahamas and the British Virgin Islands.”

Watch the conference to find out the World Bank response.

Related Links:

- World Bank Stalks Corruption

- Interview with John Githongo and George Ayittey

- Podcast discussion with the lead author of Global Monitoring Report.

- Other posts related to corruption

Corruption Quote of the Day

“the proceeds of corrupt practices in Africa…are often laundered and made respectable by some of the most well-known banks in the City of London…It is estimated that a third of the money stolen by the Nigerian military dictator Sani Abacha, and found by the Swiss authorities in Swiss banks, had been deposited first in the British banking system until it was clean enough to bank in Switzerland…”

Mohamed Ibrahim, founder of Celtel International , referring to Royal African Society Report on Corruption (via Pablo at PSD blog)

The General Abacha is estimated to have stolen $3 billion to $5 billion from the state coffers.

Mr. Githongo goes to Washington

We should thank Kenya for at least two things with regard to the world wide fight against corruption; for the very courageous Mr. John Githongo, former anti-corruption chief of Kenya and the its links with the formation of Transparency International. According to Sebastian Malleaby, “Peter Eigen, the World Bank’s former representative in Kenya, grew so frustrated with the Bank’s refusal to confront corruption that he left to set up Transparency International, a corruption watchdog, in 1993. Several of his former colleagues wanted the Bank to back his experiment with a donation, but this was opposed as a violation of the Bank’s apolitical charter by the chief counsel.” (p. 417-18, The World’s Banker).

Githongo in a recent event at Cato explained in more detail the ongoing corruption sagas that are continuing in Kenya and offered his insights in the fight against corruption. A couple of points he made are well worth highlighting; that security related procurement has become the last refuge of the corrupt and retribution not prosecution should be the focus. The corrupt politicians are more than happy to go to court and more often they have better paid lawyers.

Professor George Ayittey was actually the more accomplished speaker at the event; he pointed it out that in a lot of countries the governments are in effect vampire states ruled by bandits and thugs. As he says, “We remove one rat from office only for the next cockroach to do the very same things!”

So what does this all mean for well-meaning westerners who are dieing to help Africa; more foreign aid says Bono and Sachs.

"Foreign aid has done more harm to Africa than we care to admit. It has led to a situation where Africa has failed to set its own pace and direction of development free of external interference. Today, Africa's development plans are drawn thousands of miles away in the corridors of the IMF and World Bank. What is sad is that the IMF and World Bank "experts" who draw these development plans are people completely out of touch with the local African reality."

Ayittey suggests smart aid focusing on developing a free and independent media, a vigilant civil society and improve the rule of law by directly assisting the people.

The opportunity costs of corruption are huge; according to George Ayittey, African Union estimates it costs Africa 148 billion dollars a year. In Kenya a recent report highlights,

The Kibaki government had spent $12.5 million on luxury cars, largely for personal use by top Kenyan officials. That is enough to pay for eight years of school for 25,000 children or provide anti-retroviral treatment for an entire year for nearly 150,000 people living with HIV/AIDS

It heartening to hear that recent set backs for democracy in Kenya haven’t led to general apathy among the people, ‘people even pity the politicians’ and even civil servants have come forward with complaints of misuse. Too often civil servants forget public service means serving the people not individuals.

One has to be aware that corrupt governments are often able to talk the rhetoric that the international community likes to hear and will enact elaborate anti corruption laws and as Ayittey jokingly says, “If you tell government to reduce spending, they will open a 'Ministry of Less Government Spending”

Related Links:

- George B. N. Ayittey presentation at Princeton on his book ‘Africa Unchained’ (webcast)

- The New Path for Africa: Establishing Free-Market Societies (audio of Ayittey at Independent Institute)

- Githongo’s Report on Kenya corruption and an interview with him at TI

- Two Kenyan bloggers comments on the Githongo Speech; Whisperin Inn and Medusa

- TI Kenya

- Rhetoric and Reality- An AEI conference on Africa; one of the presenters is George Ayittey (webcast)

- Interview with Robert Guest, African editor of the Economist

Excessive Anti-Corruption Drive Hurting the Economy?

Sebastian Mallaby in his book, The World’s Banker, narrates an anecdote about a discussion with Wolfensohn, Indonesia’s former dictator Suharto and Zhu Rongji, Chinese vice premier (emphasis mine);

Suharto was talking to Zhu, and he summoned Wolfensohn over; and then he broached the subject of corruption. The latest corruption rankings produced by a watchdog group called Transparency International were most upsetting, Suharto declared, for they rated Indonesia as less corrupt than China; he had been happier with the previous year’s results, which had recognized his own country as the more energetic embezzler. Zhu looked visibly annoyed, but Suharto carried on. “Don’t you think we should tell the president of the World Bank about corruption in this part of the world?” he asked Zhu, who maintained a stony reticence. The Suharto looked at Wolfensohn. “You know, what you regard as corruption in your part of the world, we regard as family values.”

Suharto’s family values resulted in the embezzling of 15-35 billion dollars from state coffers. The country has come a long way and the government appears a little bit over-zealous nowadays in dealing with corruption. When tsunami struck in Aceh the governor of that province was in jail and was sentenced later to 10 years for the corrupt purchase of a helicopter in 2001.

Recently the country’s finance minister expressed concern that the current anticorruption drive was seen as rather excessive, discouraging government officials from making decisions, thus jeopardizing the economy;

In an effort to eradicate corruption the government has tightened bidding and procurement procedures, as stipulated in a 2003 presidential decree, resulting in much lengthier tenders. Many government contractors have complained about the lengthy process of bidding…

…A reluctance of PLN [state power firm] directors, for instance, to take prompt action in replacing old generators could disrupt the electricity supply. The public would face a situation whereby SOE directors would rather sacrifice public interests than sacrifice their personal safety. It would be ironic if a deterioration in public services occurred, not because of a lack of funds, but because of the war against corruption.

For Comment: Is the Indonesian Finance Minister right? Should the country be complacent in its fight against corruption?

Related Links;

- Stealing from People, an interesting publication from Governance Reform in Indonesia. Papers include Corruption Through The Perspective Of Culture and Islamic Law and Anti-Corruption and NGOs in Indonesia.

- Reflections on Corruption in Indonesia by Gary Goodpaster
“Suharto was a stationary bandit running a stationary bandit regime. Under Suharto, businesses that bribed or shared wealth to obtain economic opportunities, advantages, or protection did get services in return. They obtained licenses, land and environmental concessions, security of investment, contract enforcement, and assistance in managing labor disputes.”

- TI Indonesia Chapter

- An Indonesia Anti Corruption NGO

- I couldn’t find any Indonesian economics related blogs; there is one by a Phillipine economist (Go Figure) and another by a Mauritian economist. Asia Finance and Asia pundit ( warning: not always work safe) are closest I could find. Another thing I learned; Jakarta ( Indonesia capital) in Korean means ‘The Perfect Crime’.

- Money and Politics in Indonesia

- How Multinational Investors Evade Developed Country Laws – give Indonesian examples

The Right Way and the Wolfowitz’s Way to Deal with Corruption

In a previous post I commented about Wolfowitz finding his top priority at the World Bank; battling graft. Finally the Economist magazine has catch up with the story and talks about it in the latest edition.

“CORRUPTION” was once a word that the World Bank did not use. Its staff spoke instead of “implicit taxes” or “rent-seeking behaviour” lest they be accused of meddling in politics. A decade ago James Wolfensohn, then the Bank's president, broke the taboo with a speech about the “cancer of corruption” and began a campaign to improve poor countries' governance…

To lead the anti-corruption drive, Mr Wolfowitz has beefed up the Bank's Department of Institutional Integrity, an internal watchdog set up by his predecessor. The unit now has 22 investigators and will get 12 more. Staff have been told to get involved in the preparation of projects rather than simply react to concerns about graft….

Mr Wolfowitz's management style has added to the concern. He relies heavily on a small group of advisers he brought with him, none of whom are development experts. Bank insiders complain that the newcomers have no idea how to run the organisation and that their corruption drive is aimed more at impressing America's Congress than at helping the world's poor. Several top veterans have left….

Dennis de Tray who recently left the Bank to join Centre for Global Development argues, “more practical advice and less rhetoric would be a good way to increase our effectiveness in the fight against corruption,” and “Dealing with corruption and poor governance is tantamount to dealing with development. This is a long-term agenda, not a go or no-go variable except in extreme cases,”…. “If we are not careful in the way we deal with corruption, we will set up even sincere and committed leaders for failure and could end up creating just the failed states we are trying to prevent.”

He may have a point; recently the Bank held up more than $800 of money for Indian health care and a recent Bank report suggests that India has levels of child under-nutrition double those of Sub-Saharan Africa and the country has almost 40 percent of the world’s malnourished children. It is alleged by the Economist that concerns about debt relief to Congo was raised in the last minute after revelations of a newspaper report that the country’s president spend over $ 81,000 on hotel bills in a trip to New York. Without a clear criteria, there will always be charges of arbitrariness; there are plenty of leaders of poor countries who doesn’t worry much about their spending habits.

The Economist has got good advice for Mr. Wolfowitz;

- Bank's experts need to create more objective and nuanced gauges of graft.
- needs to lay out guidelines governing the Bank's lending. Just how much graft is tolerable in a country before the Bank pulls the plug?
- to concentrate on the vulnerable parts of the economy. The Bank already seeks transparency in oil and other extractive industries. It should demand equal scrutiny in public infrastructure, such as road building. And where countries score badly, it should not lend money.