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FCPA Blog Daily News

« Satyam Boss Skimmed Cash, Paper Says | Main | A Sword That Heals »
Monday
Jan192009

Obama On Corruption

With his family ties to Kenya and Indonesia, and who can forget Chicago, Barak Obama should know plenty about public corruption -- and he does. The subject was clearly on his mind when he visited Kenya in 2006 (he's pictured left with his 83-year-old Kenyan grandmother).

A speech from that trip is now posted at wrageblog, a new antibribery compliance site from Alexandra Wrage. She's the founder of Trace International, the global non-profit group that conducts due diligence and stages compliance training. Few have done more for antibribery compliance than Alexandra. If anyone can give the blogosphere a good name, she can.

Getting back to Kenya -- it ranks a dismal 147th on the 2008 Corruption Perception Index, tied with Bangladesh, Russia and Syria. On the current Index of Economic Freedom, it's number 90, earning special condemnation for its weak rule of law: Lax property rights and extensive corruption hold down overall economic freedom. Corruption is perceived as pervasive, giving Kenya one of the world's worst scores in this vital area. Non-transparent trade regulations and customs inefficiency hurt overall trade freedom. As in many other Sub-Saharan African nations, Kenya's judiciary is underdeveloped and subject to the political whims of the executive.

No wonder, then, that when he spoke to a crowd at the University of Nairobi during his 2006 visit, then-Senator Obama didn't pull any punches. He warned that everything they've worked for, including their freedom, is threatened by corruption. From a talk covering the big themes of capitalism, bureaucracy, transparency and accountability, here's some of what he had to say:

Corruption is not a new problem. It’s not just a Kenyan problem, or an African problem. It’s a human problem, and it has existed in some form in almost every society. My own city of Chicago has been the home of some of the most corrupt local politics in American history, from patronage machines to questionable elections. In just the last year, our own U.S. Congress has seen a representative resign after taking bribes, and several others fall under investigation for using their public office for private gain.

But while corruption is a problem we all share, here in Kenya it is a crisis - a crisis that’s robbing an honest people of the opportunities they have fought for - the opportunity they deserve. . .

It is painfully obvious that corruption stifles development - it siphons off scarce resources that could improve infrastructure, bolster education systems, and strengthen public health. It stacks the deck so high against entrepreneurs that they cannot get their job-creating ideas off the ground. In fact, one recent survey showed that corruption in Kenya costs local firms 6% of their revenues, the difference between good-paying jobs in Kenya or somewhere else. And corruption also erodes the state from the inside out, sickening the justice system until there is no justice to be found, poisoning the police forces until their presence becomes a source of insecurity rather than comfort. . . .

In the end, if the people cannot trust their government to do the job for which it exists - to protect them and to promote their common welfare - all else is lost. And this is why the struggle against corruption is one of the great struggles of our time. . . .

We know that the temptation to take a bribe is greater when you’re not making enough on the job. And we also know that the more people there are on the government payroll, the more likely it is that someone will be encouraged to take a bribe. So if the government found ways to downsize the bureaucracy - to cut out the positions that aren’t necessary or useful - it could use the extra money to increase the salary of other government officials.

Of course, the best way to reduce bureaucracy and increase pay is to create more private sector jobs. And the way to create good jobs is when the rules of a society are transparent - when there’s a clear and advertised set of laws and regulations regarding how to start a business, what it takes to own property, how to go about getting a loan - there is less of a chance that some corrupt bureaucrat will make up his own rules that suit only his interests. Clarifying these rules and focusing resources on building a judicial system that can enforce them and resolve disputes should be a primary goal of any government suffering from corruption.

In addition, we know that the more information the public is provided, the easier it will be for your Kenyan brothers and sisters out in the villages to evaluate whether they are being treated fairly by their public servants or not. Wealth declarations do little good if no one can access them, and accountability in government spending is not possible if no one knows how much was available and allocated to a given project in the first place. . . .

An accountable, transparent government can break this cycle. When people are judged by merit, not connections, then the best and brightest can lead the country, people will work hard, and the entire economy will grow - everyone will benefit and more resources will be available for all, not just select groups. . . .

___________

And don't forget . . . the Securities Docket has information about a January 28, 2009, webcast on "game-changing developments in 2008 in the enforcement of the Foreign Corrupt Practices Act." The full scoop is here.
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