Corruption Challenge Thailand

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DEVELOPMENT ECONOMICS AND

Prof. Robert Klitgaard

DEVELOPMENT ECONOMICS AND THE CORRUPTION CHALLENGE

Keynote Address

4th National Conference on Collective Action against Corruption

Bangkok, 8 October 2013

WHAT IS “CORRUPTION”?

• The word is related to “spoiling”The word is related to spoiling

• Historically, a judge’s selling a decision

• More generally, corruption is the misuse of office for private gain

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KINDS OF COSTS

• Economic costs Economic costs

• Social costs (inequity and injustice)

• Political costs (undermines democracy, solidarity, and human rights)

INVESTMENT AND GROWTH

• Countries with poor governance have

L i t t th thi l• Less investment, other things equal

• Less benefit from each dollar of investment.

• Who loses the most? The poor.

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WHAT IS SPECIAL ABOUT CORRUPTION?

• Duty vs. money: A service should be allocated by merit or eligibility or y y y g yneed, not according to bribes.

• An economic crime

• Calculation, not passion

• Supply and demand

• The institutions designed to control corruption can themselves be corruptedp

• When corruption is systemic

WHERE DOES THAILAND STAND?

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SOURCES

• Corruption Perceptions Index 2012

Gl b l C ti B t 2013• Global Corruption Barometer 2013

• Legatum Prosperity Index 2012

• Global Competitiveness Report 2013-14

• Structural equation modeling

CORRUPTION PERCEPTIONS INDEX 2012

• Transparency International’s combination of many surveys

• Thailand ranks of 176 countries

• Worse than Burkina Faso, El Salvador, Malawi

• Malaysia ranks 54, Indonesia 118, Singapore 5

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GLOBAL CORRUPTION BAROMETER

Thais rated 12 institutions in terms of corruption on a 1 to 5 scale:

1 ti 5 t l t1 = no corruption, 5 = extremely corrupt

• Military does best 1.8

• Political parties 4.0

• Police 4.0

• Courts 3.7

LEGATUM PROSPERITY INDEX 2012

“Most people would agree that prosperity is not just about money but also about the quality of life. The Index defines prosperity as both also about the quality of life. The Index defines prosperity as both wealth and wellbeing, and finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens.”

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EIGHT DIMENSIONS

The Index benchmarks 142 countries around the world in eight categories: 1. Economy;

2. Education;

3. Health;

4. Entrepreneurship & Opportunity;

5. Governance;

6. Personal Freedom;

7 Safety & Security; and 7. Safety & Security; and

8. Social Capital.

THAILAND

• Ranks of 142 countries

• Malaysia 45

• Singapore 19

• Indonesia 63

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THAILAND

• Are business and government corrupt?Are business and government corrupt?

Thailand , world average

GLOBAL COMPETITIVENESS REPORT 2013-2014

• World Economic Forum surveys >13,000 respondents in 148 countriescountries

• Data on 111 variables related to business competitiveness

• Comparisons across countries

• Closely watched by international investors and financial institutions

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GLOBAL COMPETITIVENESS INDEX

• Thailand’s overall rank in 2013-14

• Malaysia 24

• Indonesia 38

• Singapore 2


In some dimensions,Thailand is quite competitive

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• Strength of investor protection 13 (of 148 countries)

• Better than Japan, Norway, France


• Gross national savings 24

• Better than Australia, Netherlands, USA

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• Business impact of rules on FDI 21

• Better than Germany, Belgium, New Zealand


• Degree of customer orientation 15

• Better than Canada, United Kingdom, Finland

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• Hiring and firing practices 31

• Better than Ireland, Israel, New Zealand


• Availability of financial services 26

• Better than Japan, Denmark, France

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• USA • Belgium

BRAVO THAILAND! BETTER THAN

• France

• Germany

• Australia

• Japan

• Sweden

• Denmark

• Ireland

• U K • Japan • U.K.

• USA $49,922 • Belgium $43,686


• France

• Germany

• Australia

• Japan

• Sweden

• Denmark

• Ireland

• U K • Japan • U.K.

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• USA $49,922 • Belgium $43,686


• France 41,141

• Germany 41,513

• Australia 67,723

• Japan 46 736

• Sweden 55,158

• Denmark 56,202

• Ireland 45,888

• U K 38 589• Japan 46,736 • U.K. 38,589

WHAT IS THAILAND’S GDP PER CAPITA?

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$5678


$5678

Median of countries above:About $46,000

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• USA $49,922 • Belgium $43,686


• France 41,141

• Germany 41,513

• Australia 67,723

• Japan 46 736

• Sweden 55,158

• Denmark 56,202

• Ireland 45,888

• U K 38 589• Japan 46,736 • U.K. 38,589

• Thailand 5,678

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• Diversion of public funds 101

• Worse than Gabon, Nepal, Nicaragua


• Public trust in politicians 127

• Worse than Nigeria, Pakistan, Mongolia

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• Favoritism in decisions by gov. officials 93

• Worse than Timor-Leste, Malawi, Cambodia


• Wastefulness of public spending 107

• Worse than Libya, Bangladesh, Senegal

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• Transparency of gov policymaking 93

• Worse than Ecuador, Uganda, Mozambique


• Reliability of police services 109

• Worse than Liberia, Nepal, Zambia

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• Bangladesh • Nepal

OH NO THAILAND! WORSE THAN

• Bolivia

• Burkina Faso

• Côte d’Ivoire

• Malawi

• Nicaragua

• Nigeria

• Pakistan

• Senegal

• Mozambique • Zambia

• Bangladesh $818 • Nepal $626


• Bolivia

• Burkina Faso

• Côte d’Ivoire

• Malawi

• Nicaragua

• Nigeria

• Pakistan

• Senegal

• Mozambique • Zambia

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• Bangladesh $818 • Nepal $626


• Bolivia 2532

• Burkina Faso 603

• Côte d’Ivoire 1054

• Malawi 253

• Nicaragua 1757

• Nigeria 1631

• Pakistan 1296

• Senegal 1057

• Mozambique 650 • Zambia 756


“What are the most problematic factors for doing business in Thailand?”in Thailand?

1. Corruption

2. Government instability

3. Policy instability

4 I ffi i t t b4. Inefficient government bureaucracy

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STRUCTURAL EQUATION MODELING

• Dreher et al. (2007) estimate how much corruption affects a country’s GDPaffects a country s GDP

• Estimates for 100 countries in 1997

STRUCTURAL EQUATION MODELING

Because of corruption, Thailand lost

of GDP

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CONCLUSIONS

• Thailand has many competitive advantages

• The Thai people• The Thai people

• Macroeconomics

• Geography

• Some legal frameworks

• Among the foremost barriers to Thailand’s economic progress is

YOUR QUESTIONS AND COMMENTS?

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Corruption Challenge Thailand

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