Gardening is one of the few hobbies in which sitting back and patiently watching plants grow constitutes as an activity. Effective gardeners know that the best gardens require the most planning – focusing on a specific design means early plantings, seasonal alignment of florals and a rich tapestry of species to truly see an anthropogenic ecosystem flourish. But in chaotic conditions, where digging rodents and dry weather wreaks havoc on predictability, growth can be more difficult to manage. But effective planning can help flora mitigate or adapt to even some of the harshest conditions.
As with flowers, so to with businesses – the fostering of a friendly business climate is one of the core tenants of economic liberalization, and policy planning must involve the balancing and execution of multiple regulatory actions to create a climate that removes hurdles from starting businesses, encourages investment and promotes infrastructure growth to support new ventures. But, as with gardens, a difficulty emerges in fostering a business-friendly economic climate in developing nations due to higher than average levels of systemic corruption and poverty, laughably-poor infrastructure and a lack of governmental stability. The World Bank’s Ease of Doing Business Rankings outline 10 criteria by which economic climates can be benchmarked against or measured from, with only Malaysia placing in the top 30 rankings internationally to represent developing economies (it landed in 23rd place, bolstered by existing protection to minority investors and strong energy infrastructure transmission capacity).
The ten factors by which nations are measured include themes of dealing with governments (ease of starting a business, dealing with construction permits, registering permits and paying taxes), attractiveness for investment (trading across borders and access to credit lines) and legal protections from chicanery (protection for minority investors, ability to enforce contracts and regular capacity to resolve insolvency). Issues of access to electricity and basic services are also measured, as an ability to tap into existing infrastructure greatly reduces needed capital investments for new ventures. As expected, 20 of the top 30 most attractive climates could be found in the OECD, a club of mostly rich countries. The first countries from both Africa and South America to appear respectively were Rwanda in 56th place and Mexico in 47th place respectively.
These two continental regions, often viewed as hubs for resource extraction and neo-mercantilist foreign investment, have an odd double standard that makes them more difficult to evaluate – the rankings index is based not off of polled data from firms, but from evaluations of governmental policies. And strict rules in weak states, which are found more prevalently in the Global South, mean the way business operates in theory and practice can differ drastically. Well-connected firms and organizations in countries with low rankings have seen speed in getting permits and real tax rates similar to firms in more attractive economic bastions (In one state, policies outline a 177 day process for construction permits that local firms say can take as little as 30 days) – leading to the question, to what degree does corruption factor into the unattractiveness of economic climates in the developing world?
Nations with higher rankings within the index are consistently found to have lower rates of graft and bribery than those who placed lower – partially a result of stable and functional bureaucratic infrastructure. Transparency International’s annually published Corruption Perceptions Index provides a similar benchmark to the Ease of Doing Business Rankings, save it examines endemic corruption in a given country’s public sector. In the 2016 index, African and South American countries did not fair well, though the issue of corruption was much discussed in the public sphere. Corruption scandals have plagued governments in the Sub-Saharan African region, with democratic elections seeing graft pushed to the forefront of campaigns in the DRC, Ghana and South Africa. Administrative anti-corruption efforts in Nigeria and Kenya have had little progress, with voters universally expressing frustration and dissatisfaction at the lack of progress made. A common practice of politicians in the region is to run on a platform of “anti-corruption” – laudable, but ultimately meaningless if change never materializes.
South America saw corruption bear a similar volume of headlines through the year, with an average state score of 44/100 (anything less than 50 signifies no effective action is being taken to address graft). The Panama Papers, Brazil’s Lava Jato scandal, and a widespread leadership crisis, either in lack of capacity to tackle systemic issues or in repeated visible attempts to amass personal power beyond their legislative mandate, made news consistently throughout the region, with voters crying out for judicial action against lawmakers. But untangling systemic corruption takes time, and while much has been made of efforts, unravelling complex webs has proven to be an act of much posturing and little progress. A universal suggestion in both regions is the increased strengthening of institutions that hold governments accountable and provide a more equitable playing field for citizens.
Therein lies the answer: increased corruption with a system creates an uneven playing field, where entrenched and well-connected incumbents see their performance continuously rise, and competition from smaller firms is oppressed. Regions with poor business climates see competition as a more fluid concept, with larger firms being offered 30 day permits and less-well connected newcomers being forced to play by established rules, or worse, face extended periods as penalties for avoiding bribery and obeying the law.
Hope exists – placing corruption under the spotlight does ensure the issue is discussed, and government promises to address it can have significance. President Temer’s support of an independent investigation in Brazil has lent credence to it’s findings, and two SSA countries held democratic elections that were ruled as exemplary by third party observers (disappointingly, out of 53 nations, this constitutes progress). But lawmakers must crack down on corruption to eliminate internal barriers to growth and policy implementation that too often see developing nations get in their own way when attempting to attract foreign investment. You can’t expect to grow flowers out of a garden that you keep stomping on – and it takes time and patience in waiting for a garden to bloom.