Last week the Stockholm International Peace Research Institute released its latest figures on world military expenditure, confirming that global defence spending is once again on the rise. Although a real terms increase of 1 per cent appears modest, underneath the headline figure lies a more striking trend: alongside dynamic economic growth in many emerging powers has come a massive expansion in military expenditure over the past decade.
The Brics have led the pack. China’s military spending increased by 169 per cent in the past decade, Russia’s by 112 per cent, India’s by 44 per cent, and Brazil’s by 43 per cent. But others in the G20 are investing at a similarly rapid pace. Saudi Arabia has increased its defence budget by an astonishing 125 per cent over the past decade, and now ranks third on the table of top spenders, despite resorting to international money markets to plug a growing budget deficit. Read more
President Muhammadu Buhari can hardly be blamed for all of Nigeria’s woes. He inherited a difficult situation when he was elected a year ago but you have to question how he has responded to the reality of low oil prices.
Pilfering and incompetent politicians have, in large part, accounted for why normal Nigerians haven’t enjoyed the spoils of its vast oil reserves. Around 61 per cent of Nigerians lived on less than a $1 a day in 2010 according to Nigeria’s own statistics agency. The CIA World Factbook put unemployment at nearly 24 per cent in 2011. That’s a problem in any country but particularly in one with such a large, young population looking for a living. Read more
In the usually predictable world of African presidents-for-life, it doesn’t get more exciting than this.
José Eduardo dos Santos, Angola’s president since 1979 and constitutionally allowed to stay in power until 2022, made the surprise announcement on Friday that he would leave “active political life” in 2018. He did not give clues as to whether he would still head the ruling MPLA’s list for the 2017 elections; nor did he name his successor.
Public discontent caused by Angola’s economic crisis and the fact that he mentioned a date for his departure suggest he may mean what he says. But the 73-year-old Dos Santos is a resilient player. His coterie has built up globalised interests whose ultimate guarantor is their control over Africa’s third largest economy. They are not going to go quietly into the night. Read more
The European Parliament on Thursday slammed Montenegro for its lack of progress in tackling institutional corruption and making any meaningful progress in improving the rule of law. The elaborate façade of prime minister Milo Djukanovic’s charm offensive towards the west is crumbling at his feet as his European interlocutors realise that the emperor is indeed quite naked.
The Central European Aluminum Company (CEAC) invested millions in the KAP smelter in Montenegro, only to see itself stripped of its ownership of the metal plant by the Montenegrin government. Following the government’s refusal to come to the negotiating table, CEAC has been obliged to initiate arbitration proceedings. Read more
The collapse of Ukraine’s governing coalition could not have been better timed, in what was a week of theatre led by President Petro Poroshenko.
Samopomych (Self Reliance), the ruling coalition’s most pro-reform faction, with Andriy Sadovyy, mayor of Lviv, at its centre, withdrew from the government on February 18, exactly two years after the massacre of the Euromaidan’s unarmed protesters. Read more
In the spring of 1987, I flew to Moscow with a team of several dozen US officials to negotiate what would become the last trade and economic agreement between the United States and the Soviet Union. In reality, it became a bit of a blueprint in addressing the privatisation of the Russian economic system under then General Secretary of the Soviet Socialist Republics Mikhail Gorbechev. Over the course of several days the Soviet and US teams addressed most sectors of the economy from finance and tourism to legal structures and manufacturing. Although our approach was far from perfect, it laid a foundation, along with perestroika and glasnost, that allowed Russia to prosper for more than 25 years.
Since that time, I have watched as Russia has gone from state-centric decay, to black-market driven. I have seen the system devolve from broken socialist idealism, to rampant capitalist greed run amok. Read more
Change is needed to spur economic stability in Africa. Effective public sector entities require transparency, accountability and more honest decision-making. Enhanced financial reporting – accrual accounting – will help African governments develop policies and programmes that deliver sustainable, resilient public services and stronger economies.
Cash-based accounting — used by many governments in the region — only goes so far. Accrual accounting means more accurate identification, measurement, recording and management of assets and liabilities. It means better, more informed decision-making and reduced fraud and corruption. In this environment, citizens are the ultimate winners. Read more
Despite estimates from organizations such as the IMF and the United Nations Office on Drugs and Crime (UNODC), it is impossible to know exactly how much money is “legalised” every year. They put the sum between 2 and 5 per cent of the global GDP; if so, around $2.5tn was laundered in 2014, more than the GDP of the Russian Federation, India, Italy or Brazil. The tragedy for the world is that these vast sums come from some of the most insidious crimes: the trafficking of women and children, drug smuggling, illegal arms sales and the funding of terrorist organizations.
This is big business and it presents all of us in the frontier and emerging markets in Africa, in particular, with a difficult reality. Illegal transactions or financial discrepancies can take place anywhere in the world. There is, however, a lower risk of detection in African countries because our compliance programmes are often not as robust as they should be and in some cases simply ineffective. Read more
This year, Ukrainians can look forward to progress in their favour in relations with Russia and with the European Union. At home, however, there will be growing political instability.
First, foreign policy. Progress on two fronts is closely interlinked. Ukraine gained its independence in 1991 when Russia had been weakened by an imploding USSR and a failed hard-line coup d’état. Vladimir Putin’s Russia of 2016 will increasingly come to resemble Leonid Brezhnev’s USSR of the late 1980s. Read more
Austria’s refusal to extradite Dmitry Firtash to the US is confirmation that Europe holds two contradictory positions on corruption. While the European Union urges Ukraine to fight corruption, some of its member states – such as Latvia, Cyprus (still the largest ‘foreign investor’ into Ukraine), the UK, Austria, France, Monaco and Switzerland, along with Caribbean offshore zones such as the Virgin Islands – continue to enjoy the fruits of corrupt proceeds that are laundered abroad.
Firtash, a Ukrainian gas mogul and former partner of Gazprom, had been charged in the US with involvement in an international racketeering conspiracy that allegedly paid $18.5m in bribes to government officials in India in exchange for permits to mine titanium for export to Boeing in Chicago. Read more
Not long ago, the world praised Chile as an exception among South American nations. We were the classic “star pupil”, the guy who is definitely not popular at school: instead of playing fine soccer, instead of dancing joyfully, we concentrated on homework. Nowadays, any observer of Chile’s reality can easily deduce that our glories have withered to a failed experiment, rather than blooming as a role model. Pushing the allegory further, the once brilliant student has ended up shoplifting and smoking dope. Read more
Only five months after being narrowly reelected, Dilma Rousseff, Brazil’s president, faces a growing array of problems, including a major bribery scandal and myriad economic challenges. Hundreds of thousands of Brazilians have taken part in recent protests against her, with many calling for her impeachment. And it wasn’t the first time demonstrations have rocked the country during Rousseff’s tenure –millions also took to the streets in the run-up to the 2014 World Cup.
But Rousseff is hardly the only leader of an emerging market to face public anger in recent years. Protest movements have erupted in the Middle East, eastern Europe, Asia, and Latin America. Emerging markets have benefited in many ways from globalisation, but rising incomes have also led to rising expectations. Newly empowered citizens in the emerging world are demanding more accountability from their leaders, and as a result we are likely to see more protests and upheaval. Read more
In 2004 and 2005, Bulgaria was unexpectedly hit by torrential rain that caused extensive flooding. To deal with the destruction, the government awarded nearly €67m to 257 flood-stricken municipalities (see map below). For many of Bulgaria’s impoverished municipalities, the funds were a substantial financial injection, and mayors and local councils were the ultimate authority on how the money was spent. Not surprisingly in a country ranked as the second-most corrupt in the EU, the media uncovered multiple instances of local politicians pocketing the money. According to estimates by opposition parties, €59m disappeared into the coffers of firms related to the ruling political coalition.
Distribution of flood funds, per capita (in lev)
So much is going wrong in Brazil that it is hard to keep up. For years, critics have accused the government of incompetence. Now its actions are looking catastrophic – so much so that there are good reasons to think President Dilma Rousseff, who began a second four-year term only on January 1, may not last much longer.
Here is our list of 10 things that threaten to bring her down. Read more
Narendra Modi, India’s pro-business prime minister, swept to power last year offering a new efficient form of government and a crackdown on the high-level corruption that has weighed on growth for decades.
But in a new report, analysts at Ambit Capital, a Mumbai-based brokerage, suggest that this otherwise positive shift may be negative for India’s rural economy – if only in the short-term. Read more
Mayors fronting drug cartels, a union leader splurging thousands on cosmetic surgery, and a multi-million-dollar mansion reportedly gifted to the president by a federal contractor. Enrique Peña Nieto’s first two years in charge have not been short of scandals.
Peña Nieto was pitched by many as Mexico’s great reformer. Since taking office in December 2012, the Institutional Revolutionary Party (PRI) politician has achieved the seemingly impossible, ushering through a string of key economic reforms with a view to boosting investment, competitiveness, and growth. Read more
By Alejandro Poiré of Tecnológico de Monterrey
What makes Mexico’s current political turmoil unique is that it has put the problem of corruption front and centre of the social agenda. Streets, schools, homes, corporate offices, union meetings and workplaces are teeming with a mix of anger and concern. There is an underlying feeling that it is corruption that lies at the root of our inability to protect the innocent from murder and abuse; that it is corruption that could derail the future promised by the remarkable reforms of the past few years.
As Mexico’s leading public intellectuals have argued, its current crisis, a crisis of corruption and rule of law, calls into question its very viability as a democracy. Yet its political elites have yet to grasp the depth of the problem. The government’s leadership style has pushed social allies away. Opposition parties, mired in their own decomposition, have not served as a channel for social outrage, and players on all sides of the aisle seem way too eager to look past their lamentable wrongdoings. Read more
How far to trust a politician? Often a tricky subject – especially in a country like Mexico, where impunity is rife and many elected representatives appear still to live by the maxim of the late Carlos Hank González, an influential politician and businessman (with a statue to his honour in the city of Toluca), namely: “A politician who is poor is a poor politician.” Read more
By David McNair, the ONE Campaign
As the G20 leaders meet in Australia to discuss economic growth, the elephant in the room is corruption. The uncomfortable truth is that at least a trillion dollars are syphoned from developing countries every year as a result of tax evasion, money laundering, bribery and other forms of financial crime. Much of this money flows through anonymous companies registered G20 countries.
But while campaigners and governments have fought hard to forge consensus among G20 leaders on ensuring that these secret firms that facilitate corruption are addressed, last minute politics between China and other G20 members threatens progress. Read more
By Mohammad Zahoor of Istil Group and the Kyiv Post
I have been investing and doing business in Ukraine since its independence in 1991. I first arrived, aged 19, from Karachi on a scholarship to study metallurgy at Donetsk Technical University and after the break up of the Soviet Union stayed on and eventually invested $150m in Istil Ukraine, creating the most technically advanced steel facility in the CIS. I left the steel business in 2008, and today Istil Group is a Ukrainian conglomerate operating in many areas including real estate, media, manufacturing and coal enrichment.
Now, like many entrepreneurs in Ukraine I find myself depressed by the conflict, which potentially will cut GDP by 7 per cent this year and continues to cost lives every day. However, as an entrepreneur I am also excited by the investment opportunities in Ukraine. But for these opportunities to be fully realised it is essential that the pro-western parties who dominated last week’s parliamentary elections address the long-running issue of corruption. Read more