The Great Debate

The recent New York Times revelation that Wal-Mart paid bribes to grease the skids of rapid expansion in Mexico is not shocking to anyone who has built a retail business in a developing country. It would be shocking if they hadn’t.

Retailers paying bribes is a normal cost of doing business for some in developing markets. I was CEO of a chain of 75 specialty coffee shops around Asia for 10 years. It’s almost impossible to do business in places like the Philippines and Indonesia without someone communicating – usually tacitly – that they could make things hard for your business if you didn’t take care of them. We were smart enough not to try to do business in Indonesia. I wish I could say the same about the Philippines.

Here’s how it works.

We were based in Kuala Lumpur and roasted our coffee there. We saw the huge success of Starbucks in the Philippines and opened an office in Manila in late 2000 to get into the market. Our country manager was an ex-hotel executive, a Filipino, who had lived in Malaysia for many years and wanted to move home. Our Malaysia team was excited about our first expansion abroad.

By July 2001, we were ready to open our first shop, 1,500 square feet in a busy area of greater Manila. Part of our competitive edge was the freshness of our coffee, so shipping by air was part of our plan. We flew a ton to Manila a week before opening.

When it arrived, our freight agent called. Customs was backed up and wouldn’t be able to clear our shipment for a month.

By Jack Abramoff
The opinions expressed are his own.

Last week, Republican presidential candidate Newt Gingrich romanced the Tea Party activists, who demand that the corrupt swamp of Washington be drained. His intrepid spokesman, R.C. Hammond, had a more arduous task: convincing the world that the former Speaker was not swimming in that same swamp. As facts emerged revealing that Gingrich took almost $2 million in “consulting” fees from the beleaguered Freddie Mac, Hammond delivered proof that the Gingrich operation was master of the inside-the-Washington-beltway game. Spinning Gingrich’s perfidious (yet legal) trip through the infamous revolving door to post public service riches, Hammond posited that taking millions in consulting fees was actually a positive: since Newt now understood “why the system is broken,” he now knew “how it could be fixed.” In other words, now that he had participated in legal corruption, he was more qualified to be our President.

By that metric, I should be announcing my cabinet choices any day now. After all, in 2004, my lobbying activities became the basis for the biggest corruption scandal to hit Washington since Watergate. Gingrich’s candidacy may or may not survive these revelations, but there is a bigger issue to consider than whether this late-night-talk show hosts’ dream politician makes it to the Oval Office.

America is sick of its political leaders raking in millions of dollars in fees from special interests. At a time when the average American can barely afford enough gasoline to get to work, our politicians are converting their elected positions into major paydays. Newt is not the first and won’t be the last to do this. He just has the bad luck to be surging in the polls. But the problem with this latest round of “shoot the leading Republican candidate” is that it deflects attention from the need to change the system. Every time one of these “gotcha” attacks becomes personal, it loses its capacity to engender real reform.

In a long report on the war in Afghanistan for the U.S. Senate’s Committee on Foreign Relations last summer, one sentence stood out: “If we don’t get a handle on the money, we will lose this war to corruption.”

The money in this context meant the funds, from multiple illicit sources, that finance the Taliban who are fighting the United States and its allies in a war that is now in its ninth year. Dirty money is greasing corruption on a scale so monumental that Afghanistan ranks 179 (out of 180) on the latest index compiled by Transparency International, a watchdog group based in Berlin.

Part of the reason for the country’s dismal standing: for much of the war the U.S. military ignored the booming drug trade (Afghanistan accounts for around 90 percent of the world’s opium, the raw material for heroin) and the drug money flowing to the insurgents, estimated at up to $400 million a year. Add kickbacks contractors pay directly to the Taliban to avoid having their projects blown up or their workers kidnapped, add money diverted from development funds and soon you talk about serious money.

Earlier this month, Zambian economist Dambisa Moyo argued that Africa needs Western countries to cut long term aid that has brought dependency, distorted economies and fuelled bureaucracy and corruption. The comments on the blog posting suggested that many readers agreed. In a response, Savio Carvalho, Uganda country director for aid agency Oxfam GB, says that aid can help the continent escape poverty - if done in the right way:

In early January, I travelled to war-ravaged northern Uganda to a dusty village in Pobura and Kal parish in Kitgum District. We were there to see the completion of a 16km dirt road constructed by the community with support from Oxfam under an EU-funded programme.

The road is bringing benefits in the form of access to markets, education and health care. Some parents say their daughters feel safer walking to school on the road instead of through the bushes. Many families have used the wages earned from construction work to pay for school fees and medical treatment. This is the impact of aid.

Far from being all bad news for Africa, the global financial crisis is a chance to break a dependence on development aid that has kept it in poverty, argues Zambian economist Dambisa Moyo, who has just published a new book “Dead Aid”.

Moyo’s book, her first, comes out at a time when Western campaigners, financial institutions and some African governments have been warning of the danger posed to Africa by the crisis and calling for more money from developed countries as a result. The former World Bank and Goldman Sachs economist spoke to Reuters in London.

“I’m not saying its going to be easy, I’m just saying that there is a real opportunity for policymakers to focus on coming up with more innovative ways of financing economic development. In a way the crisis actually provides the African governments with the situation where they cannot rely on aid budgets coming through from the West.”