Corruption vs. Good governance How International Business Can Improve for Nigeria
Plan of Study Corruption Good Governance Reputable sources Primary research Major NGOs Transparency International Global Integrity World Bank
Nigeria Corruption perceived to be at high levels Weak policies that deter investment Political instability Weak infrastructure Complex tax system Large labor force Natural resources (oil) Coast Line and Ports String private sector Lots of FDI Cons Pros
Research Questions What is corruption and how is Nigeria ranked? What do businesses consider when deciding to invest in a country? What have other countries done to combat corruption and improve good governance?
Findings: Corruption State corruption is the misuse or abuse of entrusted power via legislation, mutual understanding or agreement for private gain. Corruption can involve bribery, embezzlement, extortion, fraud, patronage (nepotism, cronyism), rent seeking and graft
Findings: Ranking Nigeria Different organizations that rank countries on governance and corruption Transparency International Global Integrity World Bank Nigeria’s ranks and scores are weak
Corruption Perceptions Index (CPI)
Global Integrity Index
Worldwide Governance Indicators (WGI)
Findings: What Businesses Look For When Investing in a Country Ease of doing business Starting and closing a business Dealing with licenses Employing workers Registering property
Trading across borders
Comparative Study Nigeria Federal Republic Independence: 1 Oct. 1960 (from UK) Population Growth Rate: 2.4% GDP- per capita (PPP): $2,200 Malaysia Constitutional Monarchy Independence: 31 Aug. 1957 (from UK) Population Growth Rate: 1.6% GDP- per capita (PPP): $14,400 Botswana Parliamentary Republic Independence: 30 Sept. 1966 (from UK) Population Growth Rate: 1.5% GDP- per capita (PPP): $14,700 Chile Republic Independence: 18 Sept. 1810 (from Spain) Population Growth Rate: 0.9% GDP- per capita (PPP): $14,400
Research Questions What are the cultural perceptions of governance? Do the people feel the government is corrupt? Do they feel it could do more to attract international investment? Are the people interested in attracting more FDI? What do business and international organizations generally define as good governance? What institutions and policies are necessary for international business and investment?
Findings: Cultural Perceptions Nigerians still perceive their government to be corrupt Corruption has become an institution, but not a cultural institution Citizens are not seeing improvements, despite substantial oil revenues Calling for improvement of basic conditions Unemployment Poverty Infrastructure
Findings: Attracting Business Government has been seeking international investment: China, Libya, India Many NMCs still unwilling to make risky investment People and companies seek improvements: infrastructure, transparency, property rights, land use Trade and imports vs. industry protection Benefits of FDI
Findings: Good Governance Governance process of making and implementing decisions Can be applied to all organizations: political institutions; local, national, international governments and corporations Several organizations and institutions have developed guidelines for good governance
Findings: Institutions and Securities Common themes among all definitions, applicable to Nigeria, will address the corruption problem as well as stimulate international confidence and investment
Research Questions What are the impacts of corruption? How does corruption affect the investment climate and international business? What are the economic and social costs of corruption? What can be quantified? How far-reaching are the affects of corruption? What is the economic potential of Nigeria? With good governance, what kind of investment could Nigeria expect to attract?
Findings: Impacts of Corruption Costs higher Threatens stability Skews development Uneven playing field Harms reputation and trust in the state Deters investment
Findings: Costs of Corruption Impossible to know exact cost Measure erosion of public confidence and gov’t legitimacy? Possible to estimate magnitude of corruption Bribes: $1 trillion of $30 trillion world economy (World Bank survey, 2001-2002) Not counting embezzlement or fraud President Abacha: $5 billion (Transparency International) Also favors, presents, services Halve corruption = 400% increase in income/capita Corruption = 20% tax on foreign investors
Findings: Economic Potential Strong, large private sector Educated professionals Many foreign firms already present FDI greater than most other African countries Many natural resources Lots of oil Trying to attract more FDI with incentives