CORRUPTION VS. GOOD GOVERNANCEHow International Business Can Improve for Nigeria

Plan of Study

Corruption Good Governance

Reputable sources Primary research Major NGOs

Transparency International Global Integrity World Bank

Topic:

Nigeria

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

0102030405060708090

Overall Score

USABulgaria

Costa Rica

Ecuador

Tanzania

Nigeria

Lebanon

Country

Global Integrity Index 2007

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

Getting creditProtecting investors

Paying taxesTrading across borders

Enforcing contracts

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

Rule of lawAccountabilityTransparencyParticipation

Property RightsRegulation

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

Conclusions

Potential Policy?

Simplify complex tax system & customs

Increase privatization

Encourage democratic processes: free press, auditors

Increase transparency Accountability

Focus on incentives, prevention, & reforms