On Thursday, July 20, the Center for International Private Enterprise (CIPE) hosted a panel on the topic of “The Impact of Corruption on New Democracies in Asia.” Panelists included Thida Khus, Executive Director of the non-profit SILAKA in Cambodia; Charles Davidson, Executive Director of the Kleptocracy Initiative at the Hudson Institute; and Jennifer Anderson, Senior Program Officer for South Asia at CIPE. The discussion was moderated by John Morrell, Regional Director for Asia at CIPE. The panel discussion focused on how corruption in newly formed governments can erode the development of democracy, specifically in Cambodia and Afghanistan.
The government that is currently in power in Cambodia is the result of a 1997 coup that saw Khmer Rouge defector Hun Sen consolidate his power as the sole Prime Minister of the Southeast Asian state. At the federal level, Cambodia cannot be considered a democracy. However, Thida Khus and SILAKA, with the help of CIPE, are trying to democratize Cambodia from the ground up, which involves addressing day-to-day corruption. In pursuit of that goal, SILAKA works to improve transparency in the local public procurement process by supporting education initiatives, policy implementation, and training on good governance. According to CIPE, these efforts made contract awards in certain provincial governments 50 percent cheaper due to increased competition and reduced opportunities for corruption.
Afghanistan is a fledgling democracy with its own governance issues, corruption being but one of many. Following the U.S. invasion in 2001, foreign governments and NGOs poured billions of dollars of aid money into the economy only to witness much of that money to be diverted to corrupt ends. Large, internationally-funded and organized programs came in to try to remedy the widespread corruption, often to no avail. According to Jennifer Anderson of CIPE, these programs were largely unsuccessful because they lacked coordination and the practices that they implemented were not sustained after the program departed. In Afghanistan, CIPE works to develop long-term business development agendas, which often include strategies to reduce corruption by reducing the potential returns and thus making participation in corrupt activities less desirable.
In both of these countries, democracy remains a long way off and corruption is still rife in the political system. However, concerted initiatives like those of CIPE in Afghanistan, Cambodia, and elsewhere are important in reducing the effects of corruption on the most vulnerable of society.
The cases of Afghanistan and Cambodia also highlight the fragility of new democracies and developing economies. Much of the panel discussion centered on the concept of “kleptocracy,” or the idea of a country’s political system being fully captured by corruption, to the point that corruption is the system. Charles Davidson of the Hudson Institute’s Kleptocracy Initiative explained how the existence of such a system is all too common in nascent democracies, and how that, in turn, undermines the new democracy and leads to authoritarianism.
Foreign companies should be aware of the potential benefits and risks of starting business ventures in new democracies that are beginning to be incorporated into the global economy. On one hand, these countries provide attractive labor costs and regulatory environments; on the other, the existence of corruption and other business risks are unavoidable. Foreign multinationals seeking to do business in these areas must be prepared prevent corruption in their value chains, having both a legal obligation and financial incentive to do so, and therefore can help foster the development of democracy.
Find more information on CIPE’s anti-corruption programs here.