THE CERTAINTY OF CORRUPTION

[As you read this, bear in mind that Neal Asbury has been doing business in over 100 countries for over 20 years. His is the voice of deep experience. –JW]

Corruption is a difficult subject to get your arms around and is even more complicated when discussing it in the context of the developing world. As corruption occurs in the shadows of our day-to-day work, it is not easily probed. However, it is omnipresent and overwhelming. The World Bank believes corruption costs the global economy over $1 trillion per year. Imagine what that would do to alleviate extreme poverty?

Is gripping poverty a result of corruption or is rampant corruption fueled by abject poverty? This is a tough circle to square. It is hard to comprehend the extent to which poverty is so devastating to the human condition and spirit unless you have lived with it.

To see children joyfully playing each day in rivers and canals where raw sewage flows. To see their mothers cooking with and washing clothes in same filth. To see the shanty towns of homes built out of cardboard and rotted wood a few feet away from busy railroad tracks. To see the sick without medicine or food. To see the street children sniffing glue, not to get high, but so they will not feel the pangs of hunger. Those beautiful little girls could be my daughters. It rips your heart out.

Your first reaction is to want to save them all. The enormity of the situation finally sinks in. After living with and seeing it everyday, callousness develops, making you sufficiently numb. It becomes blindingly obvious that all men are not created equal. Countless millions will die in complete misery that never had a chance for any other existence.

The inescapable gravity of poverty pulls at the moral compass of a nation. Think about the customs officer, internal revenue official, member of the judiciary or government worker that earn less than $100 a month to raise a family and support their elderly parents.

Under their control are documents that have a major impact on financial issues and peoples’ lives. There is big money persistently being thrown at them, many times their monthly salary, to simply look the other way. Based on their income alone, they can not afford medical treatment to save their parents or tuition for their children. They can not even afford the most basic shelter and one decent meal a day. The nation’s rulers are corrupt, business leaders are corrupt and your boss and co-workers are corrupt. What would you do?

Then there is the attractive woman with no resources of her own who becomes the mistress of a married man of means. When he no longer finds her attractive, she demands her young daughter take her place in the bedroom to save her stipend and gallant life style. This deep wound is then passed on to the next generation and perpetuates itself. The number of parents who prostitute their young children for a few dollars to American and European pedophiles that frequently visit will astound you.

Poverty and corruption are one in the same.

Transparency International recently released their Corruption Perceptions Index (CPI) for 2005. It has created quite a stir around the world. Transparency International was founded in 1993 and is a non-governmental organization that is devoted to monitoring and providing information on corruption. It is based in Berlin, Germany with 90 national chapters around the world. More than two thirds of the 159 countries surveyed experience serious levels of corruption.

The Corruption Perception Index (CPI) ranks countries by degrees which corruption is perceived to exist amongst politicians and public officials. It reflects the views of businessmen and analysts around the world including local experts in the countries being evaluated. CPI defines corruption as the abuse of public office for personal gain.

The CPI is based on perception as it is impossible to know the full extent of corruption at any given moment. The only way to gauge corruption is by the experiences of those directly impacted and who confront the realities of corruption in a particular country. The CPI uses a scale of 0-10 with 0 being highly corrupt and 10 being highly clean. A score of 5 and below is considered to be seriously corrupt.

It may surprise some that China is seriously corrupt with a score of 3.2. It scored worse than Egypt, Laos and Syria. This has important implications as China had a historic $162 billion trade surplus with the United States in 2004. This will shamefully and unsustainably increase in 2005. To put this into perspective, the total crude oil imports of the United States in 2004 was $166 billion or roughly the same as our trade deficit with China alone.

This brings to light a real dilemma. China is one of the most seriously corrupt countries in the world. To get our trade deficit under control we must quickly sell more American products to China. However, American exporters must deal each day with corrupt government agencies and practices.

At the same time, American businessmen must contend with the Foreign Corrupt Practices Act (FCPA). This makes it against U.S. law to give any sort of bribe, kick back or “facilitation fee” to a government official of a foreign country to obtain business or gain some advantage.

With the extent of corruption in China, it is impossible to avoid this reality to win contracts or to run China-based subsidiaries that sell U.S. made products. To make significant progress for American exports to China, it will be impossible to stay within U.S. law. Meanwhile, more American jobs are lost each day while our manufacturing industry is being hollowed out by the unfair and corrupt practices of one of our most important trading partners.

The Foreign Corrupt Practices Act (FCPA) is a silly, archaic law that is a real impediment for American companies competing overseas. It is a law that our European, Japanese and Korean competitors do not have to comply with.

FCPA was enacted by Congress in 1977. The trigger for FCPA was the Lockheed Scandal whereby the American aircraft manufacturer paid a “facilitation fee” to some Japanese government officials in the course of trying to sell its aircraft. Some of these funds found their way to Japanese Prime Minister Kakuei Tanaka and eventually forced him to resign from office.

Though I don’t subscribe to paying fees to foreign government officials in the normal course of business, this is a law we do not need. It should be up to the U.S. companies overseas, fighting for the American worker, to police themselves.

Japan had a CPI score of 7.3 and Korea a score of 5.0. Japan was overall 21^st on the list and Korea 40^th. This is not surprising. The Keiretsu of Japan and the Chaebols of Korea, which are the large business conglomerates that essentially run these economies, are intrinsically secretive and non-transparent. The money flowing between them and public officials is enormous.

Facilitation fees are part of the everyday business culture especially in construction projects and government procurement. This is one of the reasons why it is difficult for foreign companies to break into these markets. When corruption is part of the prevailing business culture, it is risky to allow outsiders in for fear of being exposed.

In Southeast Asia, Singapore was the cleanest country with a score of 9.4 and was 5^th overall just behind Iceland, Finland, New Zealand and Denmark. However two other important countries in region, Indonesia and the Philippines, have consistently been rated amongst the most corrupt countries in the world.

Indonesia had a score of 2.2 and was 137^th while the Philippines was slightly better with a score of 2.5 and 117^th on the list. It is not surprising that two of the most celebrated cases of government corruption and plunder involved the leaders of these nations.

President Haji Mohamed Suharto ruled Indonesia from 1967-1998. $73 billion is thought to have passed through his family’s hands during Suharto’s 32 year rule. According to Transparency International, Suharto embezzled more money than any other world leader in history. His wife, Madame Tien Suharto was so monumentally corrupt that she was endowed with the nickname “Madame Ten Percent”.

Singapore’s ex-Prime Minister and elder statesman Lee Kuan Yew revealed in his memoirs that he met with two of Suharto’s daughters during the height of the Asian Economic Crisis in 1998 and urged the Suharto children during this period of calamity to completely withdraw from the market and not engage in any further projects.

He added the international fund managers were focused on the economic privileges the Suharto children were enjoying and their control of almost everything created a total loss of confidence in the economic soundness of Indonesia. With equal frankness, the Suharto daughters responded they could not and would not accept his advice. As a result of their greed, the Rupiah (the Indonesian currency) went into a free fall and business came to a grinding halt. Tens of millions of dirt poor Indonesians sunk even deeper into poverty.

In 2002, an Indonesian court sentenced the favorite son of former President Suharto to 15 years in jail for paying a hit man to kill a Supreme Court judge. Tommy Suharto had ordered and paid for the killing of the judge whom had sentenced him to 18 months in prison over a multi-million dollar real estate scam.

When Tommy could not overturn his corruption conviction by bribing the judge, he ordered his assassination. The 15 year sentence was seen as a joke as the murder charge carried a maximum penalty of death. He further won a reduction of his sentence to ten years in June 2005. He is the first member of the Suharto family to be found guilty and jailed for a criminal offense.

President Suharto saw himself as a “mega sultan of a mega country” and as such believed that he and his family were entitled to such privileges as those accorded to royalty.

Current Indonesian President Susilo “Bambang” Yudhoyono came to power a year ago after a landslide victory with promises to fight corruption. Apparently, it takes about 20 minutes after being elected on a platform to fight corruption to become corrupt. The former Religious Affairs Minister is on trial for a scandal involving state funds misused for the hajj (the holy pilgrimage to Mecca).

There is a giant scandal at Pertamina, the state-owned oil and gas giant, of officials smuggling $850 million of oil for their personal benefit. The Agricultural Ministry is suspected of purchasing inferior Bird Flu vaccines to inflate the profits of company they were purchasing the vaccine from.

Illegal logging is a major problem with elements of the police and military being paid off to look the other way. This unstoppable abuse of the land has created an ecological disaster with huge forest fires often burning out of control covering the region with thick smoke and making the air as far away as Singapore unhealthy to breathe.

The Indonesian Legal Aid Foundation (LBHI) reports that 70% of the country’s court officials are corrupt. To illustrate this, we were awarded a substantial contract for a resort hotel under construction in Manado, an island at the eastern end of the archipelago.

Unfortunately, we had to bring legal proceedings against the owner to collect our final payment. We retained the Jakarta branch office of one of the largest and most respected American law firms. After a year of preparing for litigation, the firm dropped our case without explanation. Apparently they were physically threatened and decided it unsafe to proceed.

Shortly afterward, I was delivered a judgment from a court in Jakarta against our company for several hundred thousand dollars! There was no trial, no briefs, and no appearances, just a ruling stating I needed to fork over the cash or face serious consequences. Fortunately, soon after this sham ruling, the government of President Suharto collapsed and the judges went running for cover. The court records must have been trashed as I have not heard anything further about this.

Corruption is deeply engrained in the Philippines. It is the land of goons, guns and gold. Corruption impacts all aspects of life. It is from the top down. Perhaps the most infamous crooks of the 20^th century are Ferdinand Marcos and his wife Imelda. There are various guesstimates of how much Marcos and his cronies stole however a widely circulated estimate is $20 billion.

Executive Order #1 of President Cory Aquino when she took office in 1986 established the Presidential Commission on Good Governance (PCGG) to restore to the Philippines the vast amounts of wealth stolen by Marcos and his cronies. Sadly, very little has ever been recovered and no one in the Marcos inner circle has spent a night in jail for their blatant crimes and plunder.

What is more amazing is how soon people forget. A common trait found in seriously corrupt countries is the tradition to embrace those whom made it regardless of means. Many of the most well known Marcos cronies that stole billions of dollars from the Philippine people are back in positions of power and respect.

Edward Cojuangco, who controlled the coconut monopoly for Marcos, today controls San Miguel Corporation, the largest and most prestigious Philippine corporation. Lucio Tan besides owning Fortune Tobacco and Asian Brewery controls Philippine Airlines. Joseph Estrada was elected President and is now under house arrest for plunder. Before being overthrown by street protests in 2001, he rehabilitated many of the Marcos goons.

Two of the Marcos children have been elected to public office. The eldest daughter Aimee is a Congresswoman from Ilocos Norte and their son Bongbong is Governor of Ilocos Norte Province (Governor Bongbong!?). The Philippines also managed to recently elect both the wife and son of disgraced President Estrada to the Senate.

Ferdinand Marcos had modest personal financial resources when winning the Presidency in 1965. This was quickly to change as he and his wife ran the Philippines as their own personal piggy bank. In 1998 Imelda Marcos declared in an interview with a local newspaper “we practically own everything in the Philippines from electricity, telecommunications, airlines, banking, beer and tobacco, newspaper publishing, television stations, shipping, oil, mining, hotels and resorts, coconut and sugar mills, small firearms, real estate and insurance”.

She mused these assets were not accumulated by any illegal means but because of wise investments. I would sure love to know her financial advisers and put them immediately to work on my portfolio!

The latest squabble of the oligarchy making headlines in Manila concerns Imelda’s jewelry that was left behind in Malacanang Palace when American helicopters evacuated Marcos and his family just before the mobs broke down the gates. The first to arrive in the Marcos living quarters after their departure was Tingting Cojuangco, the sister-in-law of Cory Aquino.

It is alleged she broke into the safe and gathered up some of Imelda’s most valuable jewels before they could be secured by the new government. It is also alleged that the saintly Cory Aquino received a box full of this jewelry encrusted with diamonds and other valuable stones. She never reported it to the PCGG that she set up to recover Marcos assets for the benefit of the Philippine people.

The Philippine government now wants them back to auction off for the national treasury. Imelda wants them back because they are “rightfully hers”. Cory and Tingting aren’t budging. For some further irony Ferdinand Marcos still has not been buried. He is being kept refrigerated in his home province of Ilocos Norte while his family negotiates and waits for permission for him to be buried in The Heroes Cemetery in Manila.

It is not surprising to see that most African countries are at the bottom of the list. Nigeria, black Africa’s most powerful and rich country has a score of 1.9 and is 152^nd. For many Nigeria is the definition of corruption. Botswana, Namibia and South Africa are the only African countries listed in the top 50 of clean countries.

Since 1960 when Nigeria received independence from Britain, it is estimated Nigeria’s rulers have stolen over $400 billion. This is about the same amount of all Western aid to Africa over the same period.

When the G-8 leaders at their recent summit in Scotland discussed for Africa a Marshall Plan (funds given by the United States to rebuild Europe following World War II), Nigeria’s rulers had already taken for themselves the equivalent of six Marshall Plans.

For anyone visiting Nigeria, it is striking to see how far reaching and open corruption is practiced. Upon arrival at Lagos International Airport, I had a small problem with my vaccination papers and was held in a room until the Chief I was visiting was paged in the arrivals area. He was escorted back to where I was. He handed the immigration officer a wad of Naira (the Nigerian currency) and I was happily on my way.

Many of Nigeria’s leaders are schooled in the United States. They would not think about doing the things they do in Nigeria while living in America. Once they arrive back home, their demeanor and actions radically change. They have complete disregard for their countrymen when it comes to enriching themselves.

I have listened as some Nigerians tried to explain to me their endemic corruption and poverty is a result of colonialism. They state Nigeria was created by the British to secure their economic dominance and that the three major tribes of Nigeria are incompatible and would not be one nation if not for the manipulation of the British.

I don’t buy it. There are many countries with colonial pasts where corruption is well contained. Hong Kong scored 8.3, United Arab Emirates 6.2, Botswana 5.9 and Malaysia 5.1. Furthermore, they fail to recognize Nigerian Chiefs were selling their own people into slavery well before they were colonized.

The fact is the Black leaders of African nations are anti-Black African. They despise and discriminate against their own people. They have no second thoughts about doing it.

Venezuela had a score of 2.3 and was 130^th on the list. Only Paraguay in Latin America scored worse than Venezuela. Like Indonesia and Nigeria, Venezuela is a rich country and member of OPEC. It is also one of the world’s most corrupt nations.

Since Hugo Chavez took power, corruption has become much more widespread and out in the open. As the government controls everything, there is no limit to the amount of corruption that is possible. Only the Catholic Church has had the guts to say anything about it.

A trick that Chavez and his military thugs employ comes straight out of the Corrupt Despotic Rulers Handbook. In fact I have personally had this one used against me before.

The Internal Revenue Department imposes an outrageous tax assessment against a targeted company. A variation is to file a trumped up and exaggerated case of tax evasion and have it hit the evening news. The owners of these companies feel vulnerable and agree to sell their businesses for a song. Chavez is building his empire and will use the profits to fund his radical form of nouveaux-Castro ideology.

The United States scored 7.6 and was 17^th on the list. There are disturbing developments within our country that we must carefully watch. It is an immutable fact that poverty breeds corruption while corruption begets more corruption.

In the United States, those living below the poverty line increased from 800,000 to 1,100,000 in 2004 or an increase of 38%. If we extrapolate this for the next 10 years, there could be 26 million Americans living in poverty within a decade. This still does not take into consideration the erosion of the American middle class.

There is an ongoing downward shift in American incomes. As such, there will also be a substantial increase of Americans in the lower middle class whom are just barely making it. Corruption in the United States is likely to accelerate at all levels.

It is important we immediately open our eyes and see the connection between our endless trade deficits and our economic decline. The wealth of America is being sucked out by our trading partners while poverty seeps in. The implications are truly scary.