Sunday, August 30, 2009

Former Israeli PM Charged for Corruption - a Test of Democracy

Mr. Ehud Olmert made history this week as the first former Prime Minister of Israel to face criminal charges. This came after a series of corruption allegations, probes and police investigations since as early as 2006. The ongoing corruption scandals had forced Olmert to resign earlier this year. Olmert however, has staunchly asserted his innocence despite growing evidence surfacing of impropriety while he was in office.

The indictment against Olmert was served at the Jerusalem District Court on August 30, 2009 and it reportedly includes counts of obtaining by fraud, fraud, breach of trust, falsifying corporate documents and tax evasion. It refers to three out of the four corruption-related cases standing against him:
(i) 'Rishon Tours' where he is accused of using his Travel Agency Rishon Tours to manage a special account for him and double charge for some of his travel and speaking engagements ,
(ii) 'Talansky' (Also known as 'Money envelopes' affair) where he is accused of receiving over 150 000 USD in cash envelopes from a Jewish-American Businessman Morris Talansky for political favours and
(iii) the 'Investment Center' where he is accused of acting in conflict of interest by arranging investment opportunities for a friend, Uri Messner, while he was industry minister.

Once again, I find the timing of this incident somewhat coincidental since in my last blog entry, when dealing with corruption in the construction industry in Trinidad and Tobago, I sought to draw a positive though cursory comparison between Israel's plan for economic development and the Vision 2020 Plan of Trinidad and Tobago.

Israeli Democracy?

Israel, a developing country as well, has been said to be "the only democracy in the Middle East" enjoying a special relationship with the United States, some considerable economic success, and engaging in sporadic requests for EU membership.

However, I would certainly not be the first one to suggest that numerous factors make this self styled democracy somewhat strained. Israel has had very fervent critics from inception, who have asserted that Israel's formal democratic status is a sham given that Israel is constitutionally termed a "Jewish Democratic State" with no separation of synagogue and state despite the fact that approximately 20% of its citizens are not Jewish. Even more controversial is that several laws are explicitly discriminatory. These can be traced back to Israel's foundation in 1948 which, driven primarily by the racist genocide suffered by Jews in Europe during the Second World War, was based on the notion of a Jewish state for Jewish people. Some of Israel's laws reflect this principle and as a result discriminate against non-Jews, particularly Palestinians who had lived on the lands for generations. The Law of Return for instance provides automatic Israeli citizenship for Jewish immigrants, whereas Palestinian refugees who were born and raised in what is now Israel are denied even the right to return home. Other statutes explicitly grant preferential treatment to Jewish citizens in areas such as education, public housing, health, and employment.

Leaders in post colonial democratic states like those in the English Speaking Caribbean may readily turn up their noses at this style of democracy where there is no separation of church and state and overt state sanctioned discriminatory action against citizens. Certainly here in the Caribbean, we may very well feel that if we were all to sit the Democracy test our States would achieve higher grades than Israel.

But, is this really true? Of interest, no doubt spurred on by the controversy surrounding its democratic status, Israel has established its own Israel Democracy Institute. Established in 1991, the Israel Democracy Institute (IDI) is an independent, nonpartisan, nonprofit think tank located on the seam between academia and government. Comprising a select cadre of Israel's leading thinkers, the Institute is the premier nongovernmental agent of change in the Israeli body politic and has been driving the process of Israel's transition from formal to substantive democracy.

In 2009 IDI produced a Democratic Index which ranks and compares Israel with several established democracies using several institutional, rights based and stability indicators. The Democratic Index reveals that despite some demonstrable improvement in some indicators, Israel still received low scores when compared with the developed democratic countries that participated in the study. The general trend change compared to the 2008 Index was mixed. Out of the 18 indicators updated this year, while seven registered improvement, six registered deterioration, and five showed no change. When comparing internationally, Israel’s ranking went up in three indicators, remained unchanged in ten indicators, and declined in four indicators.

Interestingly, the main improvement was recorded in the institutional indicators, following a slight rise in the political participation and representativeness measures. Olmert's resignation in February 2009 amidst corruption allegations which had been escalating since the last quater of 2008 caused a negative impact on the scores of Israel on the indicators of corruption and stability in the political system. Tzipi Livni, who replaced Olmert as head of the Kadima party, failed to form a coalition and, therefore, not for the first time, elections were called before the official end of the government’s term. According to the Index since both the process by which the government was dissolved and the bringing forward of the date of elections were set in motion by suspicions of corruption against the Prime Minister, there is room for drawing a connection between the growing levels of corruption and the increasing instability of the political system

It may be that the relative scores on the IDI Democratic Index that the very serious corruption allegations which forced Olmert to resign are negative indicators from the point of view of democratic governance and corruption levels. I take a different view and will develop that a little more below.

Juxtaposing Trinidad and Tobago and Israel for the purposes of useful comparison may not be as far-fetched as some may think on its face. The Heritage Foundation in Washington and the Wall Street Journal have developed Economic Freedom Index which they define as "the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself".

In developing the Index ten indicators were measured and the methodology is transparent, available for download here.

With the one qualification that I make absolutely no assessment of the merit or demerit of the methodology [since I must confess that being of legal background statistical measurement and analysis is not my area], I think the results are pretty instructive in the context of comparing these two nations. The results for both Israel and Trinidad and Tobago on each of the indicators are set out below:

Indicator Israel Trinidad & Tobago

1. Business Freedom 67.8 60.1
2. Trade Freedom 86.0 79.8
3. Fiscal Freedom 57.1 79.7
4. Government Size 35.1 75.6
5. Monetary Freedom 83.7 72.2
6. Investment Freedom 80.0 70.0
7. Financial Freedom 70.0 70.0
8. Property rights 70.0 60.0
9. Freedom from Corruption 61.0 34.0
10.Labor Freedom 64.9 78.3

Despite significantly outscoring Trinidad and Tobago on several indicators, the end result was that Trinidad and Tobago received the score of 68.0 and Israel received an overall score of 67.6 with the countries ending up back to back on the list of 179 countries, 41st and 42nd respectively!

I was struck by this, having whimsically embarked upon this blog item on Olmert's corruption charges, not expecting in my comparison of Israel and Trinidad and Tobago that I would find so many similarities.

What this index reveals, however, is that behind more or less similar average overall scores, we are actually dealing with two totally different small developing countries. One is small and seen as "the enemy of its region" surrounded by nations with which it has an almost war-like relationship, the other a small, oil state surrounded by semi-dependent, touristic tropical islands. That Israel scores poorly on government size is the direct consequence of it being in a state of war, something which translates immediately into a far above average government size. The rating is constructed in such a way that large government size is in normal circumstances positively correlated with an increased probability of corruption and reduced freedom. The other way around, the situation of Trinidad and Tobago with its oil wealth translated into a relatively free/capitalist structure with a small government - a situation normally assumed to lead to a reduced probability of corruption - reveals something quite remarkable: it is actually in the corruption indicator that the island state is posting its worst grade by far!

In other words, careful analysis of the component indicators unravels what was hidden when looking solely at the overall ranking. Although scoring similarly overall with Trinidad and Tobago slightly ahead, taking this on face value would be dangerous given the drastically different and remarkable scores on corruption levels. Israel with its large government (usually thought to result in higher corruption scores) is in actuality far less corrupt than Trinidad and Tobago with it's small government size.

No surprise really which is why I formed the view above. A system of governance
(i)which allows a state prosecuting office to operate independently and without interference in the investigation of a Prime Minister in office, (ii) has a strong media to aggressively expose alleged corrupt activity, (iii) which facilitates the voluntary resignation of a Prime Minister and (iv) which produces an institute like the Israel Democracy Institute is doing far better in terms of democratic governance and curbing corrupt activity, than let us say for arguments purposes Trinidad and Tobago.

This may not be off the mark given the following circumstances currently existing in Trinidad and Tobago:

1. Widespread allegations of corruption in the public construction sector - Commission of Enquiry appointed. Although the work is not complete, already damaging evidence adduced including the startling evidence of the Chairman of a State Company Board inviting a company to tender which shared his fax number and on which his wife's brother and brother in law were the directors. Awarding the contract to this company which was not the lowest or the second lowest tenderer.
2. Government officials steadfastly refusing to step down from office despite calls from throughout the country for them to do so.
3. Court ruling that the Integrity Commission established to protect integrity in public life acted unconstitutionally, unlawfully and maliciously in pursuing an investigation which was rumoured to be politically motivated.
4. Several important Government posts not filled for considerable periods of time, Director of Public Prosecutions, Solicitor General, Integrity Commission, Commissioner of Police,
5. Firing of a Government Minister for speaking out and calling for greater oversight over a state agency.
6. Allegations of the interference of the politically appointed Attorney General in public enquiries and prosecutions.
7. Threatened media - with a situation occurring where the Prime Minister caused two broadcasters to be suspended for criticising him on air.

These and many other incidents in Trinidad and Tobago may have contributed to the poor corruption score on the Transparency International Corruption Perception Index and the Index of Economic Freedom.

For me, I did not have to analyse the corruption indices and the Index of Economic Freedom to know that Israel was doing better than Trinidad and Tobago on the issue of confronting and enforcing the law against corrupt offenders. Whilst some may view the Olmert scandal as an indicator of high corrupt levels, I say it is arguably one of the strongest indicators of a robust democracy serious about addressing the issue of corruption.

Friday, August 28, 2009

Banda - Establishes Zero Tolerance Against Corruption Policy??

Banda Promising Reforms..

OK OK. It seems that almost as soon as LMG World TV asked the question in our last post - how will Banda respond to the Chiluba acquittal on all corruption charges - our question was answered. A mere 10 days after the controversial verdict, President Rupiah Banda yesterday announced the launch of a new national anti-corruption policy, hoping, no doubt, to erase doubts over his government's anti-graft credentials after former leader Frederick Chiluba was cleared of embezzlement.

Interestingly, after the verdict the head of Zambia's Task Force on Corruption, Max Nkole was fired and his appeal in the Chiluba case was withdrawn by prosecutors.

The resulting controversy has raised some doubts about whether Banda would continue the anti-corruption crackdown launched by the late president Levy Mwanawasa, which had won Zambia praise overseas and which we had also noted in the last post.

Some excerpts from news reports are quoted below:

Opposition parties have accused Banda of interfering in the courts to win Chiluba's acquittal on charges that he embezzled 500,000 US dollars of public money.

Banda said the new policy would reinforce government's commitment to eradicating graft and provide a framework for government agencies to cooperate with the public in investigations.

"We renew our resolve to uphold the motto of "Zero Tolerance Against Corruption". The war against corruption is the responsibility of everyone," Banda said.

"My government shall remain committed to the rule of law and respect for human rights," Banda said.

"Even as we fight corruption we should not lose sight of the constitutional rights of those accused," he added.

Banda credited the government's efforts in fighting corruption with helping fuel Zambia's record economic growth over the last decade.

"The government has over the last eight years implemented a wide range of reform measures to combat corruption, streamlined the management of public resources and enhanced service delivery," he said.

"The reforms had a positive effect on the economy until the onset of the global economic downturn," Banda said.

The top British aid official in Zambia, Mike Hammond, urged Banda to show commitment in the anti-corruption fight.

"If the government of Zambia is to build on the momentum of the past success, it must be seen to take action against those that do not abide by the rules, and no individual should be above the law," Hammond said.

Britain has given more than 13 million dollars since 2000 to support Zambia's anti-corruption agencies.

Chiluba contemplative in Court
Chiluba has accused Britain of masterminding his prosecution, saying the case was driven by "imperialists".

Monday, August 24, 2009

The Chiluba Story

As a precursor to our Zambia analysis, thought it might be useful to share some musings on Frederick Chiluba the former President of Zambia who earlier this week [17.08.09], was acquitted of allegedly embezzling nearly 500 000USD of state funds into accounts to pay for an extravagant lifestyle when he served as Zambia's first democratically elected leader from 1991 to 2001.

Like many others in the anti-corruption community, I was particularly surprised by the outcome of the trial because the circumstances of Chiluba's period of rule were well known to many. Several of Chiluba's colleagues had already been found guilty and jailed for embezzling state funds. Chiluba's own wife Regina was found guilty and sentenced to serve 3 years imprisonment for theft of state funds and Chiluba himself had lost a civil case wherein a UK court found that he had diverted approximately 46M USD into a London account.The Judge Peter Smith in that case, in his bold ruling, accused Chiluba of shamelessly defrauding his people and flaunting his wealth with an expensive wardrobe of "stupendous proportions". Smith subsequently went on to order Chiluba to leave his home in Lusaka which he found to be built on proceeds of embezzled state funds.

Not surprisingly therefore, the criminal charges filed against Chiluba in Zambia were just the last in a spate of investigations and prosecutions which most felt would go the way of the others. Many anti-corruption practitioners were anxious to see what the first internal criminal prosecution of an African leader for corrupt activity would yield and what broader repercussion such a judgment would have for African governance. The case was being called the "flagship corruption case for sub-saharan Africa".

Chiluba, a former bus conductor and trade unionist was hailed as one of a new breed of post independence African leaders who were democratically elected. Promising a spate of liberalization reforms and a commitment to a free market economy, some of which were in fact implemented, lamentably Chiluba, the second leader since Zambia's independence from British Colonial rule in 1964, followed the path of so many others on this unfortunate Continent. From very early on in Chiluba's reign it became obvious that things were not quite right. He started out by firing many of the independent thinkers in his Cabinet and surrounding himself with "yes men". It is said that corruption flourished as some Chiluba's cronies seemed more interested in lining their own pockets, than serving their country. [My foreign readers will forgive my local digression for a moment. There are some stark and very disturbing similarities between the widely held perception of Patrick Manning the current Prime Minister of Trinidad and Tobago and Chiluba in this regard but more on that in another blog!] Chiluba, then was perceived to have used his office to hound his predecessor, Kenneth Kaunda who had been the first post independence leader.

Kenneth Kaunda President of Zambia [1964 - 1991]

Although Kaunda had his own detractors, holding on to power through one-party rule, many saw Chiluba's intense prosecution of Kaunda as vindinctive. In 1997, Chiluba caused charges to be brought against Kaunda for conspiring in a failed coup plot and had him imprisoned. Chiluba had to be pressured by external forces to release Kaunda. Chiluba therefter used the judicial system again to attempt to strip Kaunda of his citizenship! After 10 years in power Chiluba who had gained quite a reputation for his flashy dressing, a fondness for expensive, monogrammed clothes, and high heel shoes to improve his diminutive height [he was a little over 5ft], had sold off state land at suspect prices and the state copper mine amidst scandal where much of the assets seemed to vanish for next to nothing. In 2001 Chiluba, true to form, fought to change the constitution so that he could remain in power for a third consecutive term, but acceded to internal party pressure to step down. His successor President Levy Mwanawasa [2002-2008]

in an anti-corruption campaign which he pursued until his death in 2008 successfully prosecuted Chiluba's colleagues and his wife Regina. Chiluba's defence in the criminal case was that the monies held in the account were actually proceeds of gifts given by businessmen and others to him personally and were not state funds. It was this money that he would have used to buy clothes totaling approximately 500 000 USD paid in trunks of cash in one instance. The court found in Chiluba's favour stating that the prosecution had failed to prove "beyond a reasonable doubt" that the money was state funds as opposed to gifts. It should be noted that the standard of proof in a civil case is much lower than in a criminal case i.e, the case must be proved "on a balance of probabilities".

To those of us from countries with far more sophisticated governance frameworks one of the first questions we would raise would be - Can a president personally receive monetary gifts of such large amounts??!! In Zambia, it would appear that the answer is yes! There is no law preventing a public official from receiving gifts of money nor any limit on the size of gifts. As I see it, these are the kinds of regulatory gaps in some newly democratic states which demonstrate the form of democracy without the accountability checks and balances which ensure democracy in substance. Regulatory inspection and overhaul needs to take place in order to begin to fight corruption meaningfully and sharpen enforcement mechanisms.

Preceded by Kaunda and Chiluba, and succeeded by Banda, Levy Mwanawasa who died in office in 2008 while pursuing his relentless anti-corruption campaign should not be forgotten. For those who feel that Africa is devoid of leaders who are willing to and capable of approaching the task selflessly and with integrity for the benefit of the people, his legacy will be that there is hope for African leadership. It has been said that Banda does not share Mwanawasa's exuberance to eradicate corruption and went "soft" on the issue. Already there are rumblings that the Chiluba trial was in some way politically influenced to cause the eventual outcome.

In the wake of this verdict all eyes will now turn to Banda. We at LMG World TV ask, which path will he follow? The worn path of post independence African rulers like Chiluba and Robert Mugabe or the rarer likes of Mwanawasa? Only time will tell, and we will be looking on.

Rupiah Banda President of Zambia [2008 - present]

Corruption & Africa : The Introduction

I have been waiting for quite a while for the inspiration to start my blog posting here on LMG World TV and just as I was beginning to think that I was devoid of one creative bone in my body, today as I began reading the latest in corruption news I felt the familiar writers twinge to express.

So here goes. This year I made two trips to the continent of Africa, one to Tunisia in MENA (Middle East North Africa) and the second to Nigeria (Sub-Saharan Africa). The differences between the two could not be more stark from cultural, lingual, political, historical and economic perspectives and perhaps the differences could lend some insight into the plight of Sub Saharan Africa states. Tunisia with a population of a little over 10 million is culturally very middle eastern in its food, music, language and identity (approximately 98% Arab - CIA Factbook), the language is arabic and french, political system is a parliamentary democracy and historically a former french colony. From an economic perspective Tunisia has a diverse economy, with agricultural, mining, tourism, and manufacturing sectors and a GDP per capita of approximately 7900USD.

Nigeria on the other hand with an approximate population of 149 million is a former British colony, culturally diverse with 50% muslim, 40% christian and the rest indigenous cultures. There are over 200 languages and an economy centered around petroleum and a GDP per capita of 2300USD. According to sources oil-rich Nigeria, has been long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management.

It would seem that Tunisia on a per capita basis is certainly more well off than Nigeria, providing its citizens with a higher quality and standard of living and this I did observe first hand when I was there, notwithstanding the grandeur of Nigeria's new capital city Abuja. Abuja, as ostentatious as LA, a city conceived and built from scratch by the Nigerian Government, some 20-30 years ago, to reflect the true essence of the country is full of fantastic structures, four and five lane highways, massive sometimes palatial homes but shockingly at night no traffic lights or street lighting! When I asked about why this was so, I was informed that there was not enough energy coming into the city!

No doubt, Sub-Saharan Africa is a fascinating continent reflecting a disturbing paradox of wealth and poverty. Some African countries can be said to be some of the richest in the world when one looks at the abundance of resources like oil, minerals, sunshine but also some of the poorest in the world when one considers the quality of life, health care and poverty statistics. Many writers have tried to explore the phenomenon about why Africa is poor with varying degrees of success.

It is clear that the answer or answers are not as simple as one would hope and some of the theories postulated will certainly ruffle the feathers of many. It certainly could not have helped Sub Saharan Africa to actualise when from very early its resource richness was seen as an object of plunder by external forces. It could not have helped that the growth of many of these nations was stunted by the mass exportation of slave labour or the subsequent "take vs build" and "divide & conquer" imperialist ideology, the remnants of which remain firmly embedded in the culture and thinking of the people. It could not have helped that people were thrown together with artificial boundaries regardless of culture, language or religion by external parties. It could not have helped that as the developed world in this century began to take responsibility for the travesty of Africa that the dis-empowering solution proposed was the "give a bible and some bread" philosophy without consideration of the longer term focus on sustainable economic growth and development.

Now while I am the first one to jump on the bandwagon of all the above reasons for Africa's plight and what follows is no watering down of this at all - there does come a time when responsibility must be taken from within the boundaries of Africa for the continued suffering of its people. Recently Obama in his speech in Ghana and Hilary Clinton as she made her tour of Africa as US Secretary of State urged the leaders to clean up the mess. Certainly it is easy for us to proselytize from the outside. Is it true that corruption is now a significant factor in Africa's current economic plight?

YES Africa has been raped and pillaged by other countries and suffered through dis-empowering aid efforts and continual disadvantage from unequal bargaining power in international trade negotiations BUT is that 100% of the story? Is there a level of culpability which the post colonial African leaders must have for the continued plight of Africa? Is it true that African Leadership seems attracted to positions of power not to serve but to enrich themselves? Is the African Leadership truly blind or ignorant to the effects of their actions on their impoverished constituency? This is the rhetoric now because the statistics are revealing that corruption does play a part in diverting the wealth of the countries' resources into the hands of a few to the detriment of the many. How big a part it plays when one takes all the factors into play? That is a question to be addressed. The future of the children of Africa will depend on the response of its leaders to the present crisis.

In this series Corruption & Africa, I propose to take one Sub Saharan African country at a time in no particular order and analyse (i) their political, regulatory and economic systems and (ii) the actions of their leaders to determine the extent to which corruption can be said to be a significant part of the answer to the question : why Sub Saharan Africa remains so impoverished? Many writers have traversed this road and we will be citing some of their work as references along the way. This is the LMG Window to Corruption and Africa. If this is a topic that interests you and you want to learn more I look forward to you taking this journey with me. If you have done some research in this area already, even better! Feel free to drop a line, statistic, story, factoid or point of view which will assist us as we build this work.