Brookings: Topics - Corruption

Can Egypt’s Transition and Economy Be Saved?

Hafez Ghanem — Wed, 01 May 2013 12:19:00 -0400

The Egyptian economy is unlikely to collapse suddenly. However, in the absence of a serious macroeconomic stabilization program it will continue to deteriorate gradually, with low growth and increasing unemployment and inflation. Even corruption appears to be on the rise. The Egyptian people are also feeling the pinch in terms of higher prices and shortages of some imported necessities. If this continues, the transition to democracy could be jeopardized. On the other hand, politics in Egypt is so polarized that it is difficult to see how serious economic reforms could be implemented without first reaching compromises on some thorny political issues. Perhaps the recent agreement on a coalition government in Italy could serve as a model for Egyptian politicians.

There are signs that the democratic transition is in danger. Loud grumblings can be heard all over Egypt. There is even nostalgia for autocratic rule and some are calling for a return of the military. According to the Pew Center’s “Global Attitudes Project” more than 70 percent of Egyptians are unhappy with the way the economy is moving, 33 percent feel that a strong leader is needed to solve the country’s problems, and 49 percent believe that a strong economy is more important than a good democracy. The number of people disillusioned with the revolution is likely to increase as the economy weakens further.

In addition to freedom and dignity, the young people who started the Egyptian revolution on January 25, 2011 were demanding better living conditions and greater social justice. Their demands are far from being met as economic growth has declined and unemployment has risen (figure 1). Industrial growth which was at a healthy 5-7 percent a year before the revolution has fallen to about 1 percent, and the official unemployment rate rose from 9 to 12.5 percent. About 95 percent of the unemployed are youth with at least a secondary education. Nearly three-quarters of those who are lucky enough to find jobs end up working in the informal sector where wages range between $2.60-3.70 per day.

The Egyptian government’s fiscal policy has not been conducive to growth and employment generation. Figure 1 shows that the government deficit rose from about 8 percent of GDP in 2010 to nearly 11 percent in 2011. It could exceed 12 percent of GDP in 2013. The increasing deficits have been financed almost entirely domestically, and the public domestic debt rose from some 60 percent of GDP in 2010 to 70 percent in 2012. At some point in 2012, the Egyptian government was paying 16 percent interest on its short-term domestic debt. That is, the government has been sucking liquidity from the domestic financial system and crowding out the private sector; discouraging investment, growth and employment creation.

Surprisingly, corruption seems to have increased after the revolution. Ending corruption has been a key demand of the revolutionaries, and the country witnessed more than 6,000 corruption investigations and several high profile incriminations since February 2011. Investigations and police action send a political signal, but they do not constitute an effective anti-corruption program. In 2010, Egypt was ranked 98th on Transparency International’s Corruption Perception Index. Its ranking deteriorated to 112th in 2011 and 118th in 2012. Data for 2011 from the Worldwide Governance Indicators (WGI) also shows deterioration in corruption control. The WGI 2012 data is not yet available.

Falling tourism and foreign direct investment, together with increasing capital flight, led to a decline in foreign reserves from more than $35 billion in 2010 (covering 7 months of imports) to less than $15 billion in 2012, which covers less than three months of imports (figure 2). As a result foreign exchange has become scarce and the Egyptian pound started depreciating rapidly. It has depreciated against the US dollar by about 15 percent in the past three months. Moreover, a black market in foreign exchange has emerged. In addition, Egypt’s credit rating suffered a setback as Moody’s downgraded Egypt’s debt to “caa”, which means it is of poor standing and entails very high risk.

Imports are becoming more expensive and increasingly difficult to procure. Egypt is highly dependent on the imports of many necessities, including food and fuel. The Egyptian pound’s depreciation means that domestic prices for imports are rising; which affects millions of poor and middle class families. Scarcities of some imported goods (e.g. diesel fuel) are appearing as foreign exchange is increasingly difficult to obtain, and foreign banks are wary of providing credit to Egyptian importers. Some businessmen complain that it now takes more than six weeks to open a letter of credit, while it only took three days before the revolution.

It’s clear that Egypt is facing an economic crisis, and needs to implement credible reforms to stabilize the economy, control corruption, and lay the foundations for inclusive growth. Such reforms would normally include a reduction in the fiscal deficit to bring the domestic debt under control and a further depreciation of the Egyptian pound to encourage exports and tourism. The Egyptian government is negotiating with the IMF to obtain support for such a stabilization program. IMF support is desirable because it would open the doors for increased assistance from other bilateral and multilateral donors, and thus help ease the pain of stabilization.

But macroeconomic stabilization requires implementing unpopular measures such as reducing subsidies and raising taxes. The government, which is already facing stiff opposition and unrest, is, understandably, reluctant to adopt such measures. It has so far been able to postpone difficult decisions by getting exceptional financial support from regional allies. However, this has not been enough to turn the economy around.

The Egyptian government appears to be in a no-win situation. Implementing reforms could lead to greater unrest and political instability and jeopardize the democratization process. On the other hand, doing nothing will imply a deepening economic crisis and more hardship. This will also lead to unrest and instability, and ultimately jeopardize the transition process.

How then can Egypt’s transition be saved? A national consensus needs to be reached and the reforms have to be broadly owned and accepted. The opposition (which itself is divided between liberals, Nasserists and Salafists) will have to buy into the economic reform program. This is unlikely to occur unless a consensus is also reached on outstanding political issues (e.g. election law, revision of the constitution, reform of the judiciary, etc.). Both government and opposition will have to make compromises. But do they have the required level of political maturity to do that?

Authors

Hafez Ghanem

Image Source: © Asmaa Waguih / Reuters

Era of Big Oil Secrecy is Over

Daniel Kaufmann — Wed, 24 Apr 2013 15:49:00 -0400

Earlier this month, the European Union (EU) took a decisive step towards transparency: It agreed to mandate publicly-listed European companies as well as large private firms to disclose their payments to governments for oil, gas and mining projects. This transparency is crucial in the fight for better governance of resource-rich countries. It will empower citizens with information about the amount of money their governments receive, helping them to monitor how this money is ultimately used and to deter corruption.

Opacity has long ties with corruption, and both are detrimental to growth. Our research shows that countries that control corruption and improve governance can triple their incomes per capita in the long term - a 300% dividend. As seen in the figure, this good governance dividend also applies to countries rich in natural resources.

The benefits of transparency dwarf the cost of disclosure. Today about 40 percent of the 1.7 billion people in resource-rich countries live in poverty, making less than $2 a day. Such poverty in the midst of immense resource wealth is due to low standards of governance and transparency, a critical issue for which oil and mining companies are also responsible.

The EU rules are part of the international community’s response to the opacity challenge, and are modeled after U.S. rules the Securities and Exchange Commission (SEC) released last August to implement the Cardin-Lugar amendment of the 2010 Dodd-Frank Act.

This move towards mandatory disclosure in two of the world’s largest capital markets signals what European Commissioner Michel Barnier has called a “new era of transparency.”

BIG OIL BATTLES NEW RULES

The emergence of this new global standard, however, does not mean the campaign for revenue transparency is over. While the transparency train has clearly left the station, not everyone is on board. Major multinational oil companies have been trying to water down these requirements on both sides of the Atlantic. These companies have put their reputations in jeopardy by backing the American Petroleum Institute (API) in its lawsuit against the SEC to stop implementation of the U.S. rules. Now that the EU has joined the drive for disclosure, Big Oil faces a major problem in its assault on transparency.

The new EU disclosure deal undercuts a number of API’s arguments. API’s inflated estimates of compliance costs are now increasingly irrelevant, as major cross-listed companies, like Shell and BP, will have to comply with EU rules regardless of the lawsuit’s outcome. API’s claims that the SEC acted arbitrarily by adopting the U.S. rules - already questionable given that Congress mandated the rules and the SEC conducted an exhaustive public comment process during its rulemaking - are also undermined by the EU’s agreement to adopt very similar measures. The EU legislation will, in fact, encompass more than the U.S. rules as it covers large, privately held companies (and the timber sector), in addition to publicly listed companies.

And API’s argument that the rules cause competitive harm is even less compelling since the EU will apply analogous rules to companies under its jurisdiction, helping to level the playing field. Together, the U.S. and EU regulations will cover capital-markets listed companies, accounting for nearly 70 percent of the market capitalisation of extractive industry firms on the world’s most significant stock exchanges.

SECRECY DAMAGING REPUTATIONS

By continuing to support API’s lawsuit, companies are incurring significant costs defending opacity, not only pecuniary, but reputational as well. The public is becoming increasingly aware of their fight against transparency. While a few companies are taking some steps away from secrecy - Norway’s Statoil disavowed support for the API lawsuit - they are still the exception.

Shell, for instance, faced setbacks when Alan Detheridge, one of its former executives, openly criticized the company’s efforts to block U.S. and EU transparency, and the Dutch government pledged its support for strong EU rules consistent with U.S. law. The company has now started to change its tune, claiming it has supported mandatory reporting requirements all along - an assertion The Economist wryly noted contradicts Shell’s membership in API and refusal to disavow support for the U.S. lawsuit.

Oil companies should draw lessons from Shell’s mishaps, seizing the moment to actually “walk the talk” on transparency. Instead of litigating against transparency, companies should focus on complying with the U.S. and EU rules and enlist their lawyers to prepare for new reporting. Companies covered by the U.S. and EU rules should also join the global transparency movement to ensure these disclosure standards apply to all relevant companies. Obtaining a G8 commitment to mandatory disclosure at this year’s Summit would bring key countries like Canada into the fold. An effort to enact similar legislation in additional markets, including Australia and emerging Asian and South American economies, should follow.

The U.S.-EU legislative consensus on a global standard of transparency is a watershed moment for improving the governance of natural resources worldwide. Big Oil should not stand in the way. To restore their credibility and support good governance and development around the world, oil companies should publicly state their intent to comply with the new disclosure standards and urge API to drop its lawsuit.

Authors

Daniel Kaufmann

Publication: Reuters/TrustLaw

Image Source: © Beawiharta Beawiharta / Reuters

Still Knee-Deep In Poppy: The Evolution of Counter-Narcotics Policies in Afghanistan

Vanda Felbab-Brown — Tue, 26 Mar 2013 10:20:00 -0400

Editor’s note: The following excerpt introduces a book chapter produced by Vanda Felbab-Brown for the German Council on Foreign Relations (DGAP) volume, Partners for Stability, published in March 2013. In this chapter, Dr. Felbab-Brown explains how international and domestic counternarcotics efforts in Afghanistan cannot be successful without first achieving substantial security improvements and good governance within the country.

Perhaps nowhere in the world have a country and the international community faced such a strong illicit drug economy as in Afghanistan. In 2007 and 2008, the economy reached levels unprecedented in the world at least since World War II. But neither opium poppy cultivation nor heroin production is a new, post-2001 phenomenon: each robustly existed during the Taliban era and before. Although opium production has declined in Afghanistan since 2008, the decrease has largely been driven by the saturation of the global drug market and by poppy crop disease, rather than being the outcome of the policies of the international community and the Afghan government.

Narcotics production and counter-narcotics policies in Afghanistan are of critical importance not only for drug control, but also for the security, reconstruction, and rule-of-law efforts in Afghanistan. Unfortunately, many of the counter-narcotics policies adopted during most of the 2000s not only failed to reduce the size and scope of the illicit economy in Afghanistan, but also had serious counterproductive effects on the other objectives of peace, state-building, and economic reconstruction. In a courageous break with a previous counterproductive policy, the Obama administration wisely decided in 2009 to scale back poppy eradication in Afghanistan, but it has struggled to implement its new strategy effectively. Although it backed away from centrally-led eradication, Afghan governor-led eradication persists. The interdiction policy adopted by ISAF at times approximates eradication in its negative effects on farmers’ well-being and their receptivity to Taliban mobilization, and rural development policies have failed to address structural drivers of poppy cultivation. Moreover, despite the surge in U. S. military forces adopted in December 2009 and important improvements in security in Afghanistan’s south, the 129,469 U. S. and ISAF forces deployed as of May 2012 have not stabilized other parts of Afghanistan, such as the east. The Taliban and related insurgencies have not been robustly defeated even in the south, and they maintain an important foothold in Afghanistan’s north as well. As U. S. and ISAF troops are preparing to depart Afghanistan by 2014, they are handing over an on-going war to Afghan security forces. Although both Russia and the United States have supported counter-narcotics policies in Central Asia, such as interdiction training, these efforts have achieved little systematic effect on either reducing illicit flows, the strength of organized crime, and corruption in the region or encouraging regional cooperation.

Authors

Vanda Felbab-Brown

Publication: German Council on Foreign Relations

Image Source: © Goran Tomasevic / Reuters

Indonesia Field Report IV: Wildlife Trafficking, Illegal Fishing, and Lessons from Anti-Piracy Efforts

Vanda Felbab-Brown — Tue, 26 Mar 2013 00:00:00 -0400

The Cruel Wildlife Market

Hundreds of cages with birds, lizards, bats, and mammals were stacked upon one another, with tens or sometimes even hundreds of specimens crammed into one cage. Several dozen white-eyes (a bird genus) were squeezed into a cage appropriate for one canary. At least a hundred bats were stuffed into another container. In a cage atop this stack, more than fifty green agama dragon lizards, some dead, with their bodies rotting amidst those still alive, were desperately competing on the ceiling of their container for a little of bit space. Two baby civets, on sale for 400,000 Indonesia rupiah each (about USD 40) were shoved into an adjacent box. Like the rest of the unfortunate animals – squirrels, chipmunks, black-naped orioles, drongos, leafbirds, shamas, mynas, partridges, and the highly-prized and highly-threatened lories – the civets had no water and no protection from the full blast of the hot Indonesian sun. Many of the animals would die in this (in)famous Yogyakarta bird market before they were sold to new owners.

Meanwhile, however, the Yogyakarta bird market, like other wildlife markets in Indonesia and East Asia, serves as a perfect incubator for diseases that can mutate and jump among species, such as avian influenza and SARS. Such zoogenic diseases could potentially set off a catastrophic pandemic killing millions of people. The spread of the viruses to domestic animals and people is exacerbated by the trade in roosters for cock-fights, also on sale in the market amidst the wild-caught birds and animals. Even the animals sold before they die in the hands of their traders often do not survive as household pets – typically the fate of species such as woodpeckers, eagles, and owls.

The inhumane treatment of the animals in the many wildlife markets I visited during my research across the Indonesian archipelago was as heart-wrenching as the devastation this unmitigated trade in wild birds and other animals wreaks upon Indonesia’s ecosystems. Orange-headed thrushes and white-crested laughing thrushes, available in cages to eager buyers, are now exceedingly rare in the remnants of Indonesia’s forests, for example.

To reduce the consternation and criticism of international tourists, Yogyakarta’s wildlife market was moved more out of sight – away from its previous location next the frequently visited old royal palace. Nevertheless, enterprising Indonesian young men on motorcycles still bring Western tourists to the market’s new location. A young German woman, with a Lonely Planet Indonesia guidebook tucked in her purse, was eagerly taking photos of the cages, her very short shorts and tanktop as much an affront to Indonesia’s cultural sensitivities in this conservative Muslim city as the appalling conditions of the traded animals are to Westerners. An emblematic introduction to the fusion and confusion of conflicting values in this modernizing yet tradition-bound country?

Hunters and Buyers

In the Indonesian Market

Indonesian buyers and sellers rarely exhibit any qualms about the ecological impacts of the trade and the conditions of the animals. Wildlife trade, particularly in birds, is deeply entrenched in Java’s culture. A Javanese proverb states that every man should have a house, a horse (these days often interpreted as a car, or at least a motorcycle), a wife, a kris (a traditional dagger), and a bird. Because of this strongly-held tradition, at least one third of Javanese households keeps birds, I was told by representatives of a joint international-Indonesian environmental NGO, whom I interviewed on the condition of anonymity. Indeed, strolling through middle-class neighborhoods of Javanese towns reveals house after house with several cages of prinias, bulbuls, orioles, laughing thrushes. Eerily, however, there are precious few birds in the Javanese countryside, most having been caught by traders.

The bird trade is so culturally-ingrained that only some environmental NGOs operating in Indonesia dare oppose it. “Our current priority is to preserve and try to rehabilitate the devastated Indonesian ecosystems. The bird trade is just too difficult; too culturally sensitive. Attempting to stop it could get us shut down or hamper our other operations, such as trying to restore at least a tiny sliver of Indonesia’s lowlands forests. The Indonesian police are not interested in the bird trade anyway. We count ourselves lucky when we get law enforcement action against endangered mammals,” one of the NGO representatives told me after I repeatedly assured him that I would not identify either him or the NGO.

But even in this tradition-oriented society, tastes in the wildlife market do evolve. Unfortunately, in Indonesia and East Asia, wildlife tastes have been changing all too often toward a more expanded and voracious appetite for wild animals and wildlife products. One of the latest fads in Indonesia is keeping lizards; and young middle- and upper-class Indonesian men on the make now prefer them to birds.

Still, rare and highly-endangered birds, such as lories from Papua, or the Bali starling, continue to be highly desirable and can cost hundreds or thousands of dollars. A summer 2012 biological survey revealed that only 31 Bali starlings were left in the Bali Barat National Park, a conservationist involved in the survey told me. Then in July 2012, poachers coated a few trees with glue and captured six of the starlings in the park, eliminating one fifth of the population in the wild. A release of captive-bred birds is planned to boost the population of the species whose survival hangs on a thread as thin as the fishing nets that poachers also use to catch the birds. But without better law enforcement in the park and against buyers throughout the archipelago, and without a dramatic decline in the desirability of the Bali starlings by Javanese bird owners, will the released birds have any chance?

Some of the poachers are desperately poor. In the Moluccas or Papua, they are sometimes paid as little as a bowl of noodles for a day’s hunting, or a pack of cigarettes for a rare bird. But that pack of cigarettes can be enough to extirpate an endangered species. And traders can be shockingly frivolous in how many individual birds or animals they are willing to have killed for the survival of a few that would bring high profits on the international market. Ambonese hunters, mostly very poor, will be paid five dollars for a caught black-capped lori. In order to smuggle out the protected endangered and highly-desired species, traders will then shove the small birds into plastic bottles tied together, throw them into the sea, and fish them out miles away from the island and any possible law enforcement action. With the surviving birds fetching up to thousands of dollars, even a 95% loss of the captured birds (many would suffocate in the plastic bottles) will generate handsome profits. For a fistful of dollars, a species can be rapidly wiped out.

Keeping birds and consuming products from wild animals has a long history in Indonesia. The Dayak communities in Kalimantan, for example, have hunted hornbills for their feathers for centuries. In northern Sulawesi, the Christian community has had a strong taste for bushmeat, with anything that can be hunted often being highly craved for dinner (and very pricey in the Langowan and Tomohon bushmeat markets). One of the greatest delicacies—its consumption being a symbol of status and affluence -- is the black crested macaque, a primate endemic to Sulawesi. Over the past three to four decades, the species has been experiencing an 80% decline. Although deforestation in Sulawesi has eliminated much of the macaques’ habitat, hunting these days actually poses a far greater threat to the species. In addition to its highly-prized meat, its fur is used in traditional dancing to signify bravery; and its skulls decorate masks and costumes.

Protecting the threatened primate has become an environmental priority for conservationists in northern Sulawesi. In an inspired move, an NGO tried to reduce some of the hunting pressures on the macaques by producing artificial skulls looking identical to the real ones, so the replicas would be used for traditional costumes. Another NGO that is currently leading the effort to save the macaques near the Tangkoko Reserve – the Selamatkan Yaki project – has emphasized environmental education to explain to consumers that if they do not reduce the hunting to sustainable levels, all the macaques will be gone and there will be no more pricy meat or and no more fun of hunting the primates, a factor which many hunters identified as an important motivation. (Many of the wildlife traders I interviewed across the archipelago about the critical depletion of the species they were selling and the negative impact on their business if the animals were extirpated in the wild were shockingly unaware and indifferent. They would insist that the birds and animals would always be in the forest and dismiss my suggestions that the species could die out and their trade collapse.) As part of its environmental education and demand-reduction effort, the Selamatkan Yaki project has also tried to involve the local Christian church in the campaign for environmental conservation, as well as to get influential community leaders to declare that the macaque meat, unlike pork, is not crucial for celebrations. But these demand reduction efforts, as imperative as they are, are also very painstaking and slow-going. And for many species, the time is running out at a rapid pace.

In the Booming International Market for Wildlife

The portent of extinction has become all the more threatening as the volume of animals hunted for the local traditional markets is nowadays vastly surpassed by the volume of animals hunted for the booming international market. These international profits often dwarf those in the traditional trade, and international wildlife trading and trafficking are expanding at an exponential rate as a consequence. Many of the hottest wildlife markets are located in China and in East Asia.

Keenly embraced by East Asia’s increasingly affluent middle and upper classes, Traditional Chinese Medicine (TCM) concoctions promising extraordinary curative powers, enhanced longevity, and increased sexual prowess are more popular than ever. So is the consumption of exotic bushmeat. These international wildlife-demand markets have resulted in extraordinary numbers of animals being hunted, sometimes in the millions of specimen per year. The toll on genera such as pangolins, seahorses, turtles, or civets has been huge.[1] Just over a decade ago, for example, Malayan box turtles, then widespread across Indonesia, as well as two endemic Sulawesi land tortoises, fell victim to the Traditional Chinese Medicine craze. So that they would be eventually shredded in blenders into TCM jelly and paste, villagers in Sulawesi would collect them everywhere and sell them for 5000 Indonesian rupiahs (about half a U.S. dollar) per turtle or tortoise. According to a biologist from the Pacific Institute in northern Sulawesi, a subsequent three-month field research project in the area in 2007 found only 2 specimens of what used to be several plentiful species, including some found nowhere else. The turtles and tortoises were literally eaten off the island.

One of the newer fads in the Traditional Chinese Medicine market I encountered during my research in Kalimantan was for hornbill tusks. In Kalimantan, the bills and tusks would fetch 2 million Indonesian rupiahs (roughly USD 200), making the beautiful and enigmatic hornbills a new favorite of local Kalimantan hunters. In the demand markets of China, Singapore, Macau, and Hong Kong, the tusks would bring far more. The presence of well-heeled Chinese coal and timber companies in Kalimantan facilitated the trade, and the companies were often already paying off the Indonesian police, military, navy, and coast guard. Even without extensive bribes, stopping the trade in the tusks would be of far lower priority for Indonesian law enforcement agencies than interdicting artisanal illegal mining, for example, which the big mining companies have an interest in stopping and can financially motivate the law enforcement agencies to take action against.

Policy Responses

Reducing Demand for Wild Animals through Captive Breeding

Sometimes, a legal market in captivity-bred animals can greatly reduce pressures on the natural ecosystems and species. The prohibitions and restrictions on importing wild birds into the United States and European Union, coupled with a legal supply of desirable birds, such as parrots, from captive stocks, greatly reduced poaching for those markets. This legal supply of birds certified to have been bred in captivity have had a palpable impact in Indonesia too, where the bird trade to Europe and the United States dramatically declined, despite the fact that the trade had a centuries-old history, being established essentially at the time when Europeans first arrived in the Moluccas and Papua and saw the local exotic birds.

However, according to the environmental NGOs and conservation biologists I interviewed in Indonesia, bird-breeding facilities in Indonesia itself have not produced similarly positive conservation outcomes, and often serve merely as mechanisms for laundering birds caught in the wild. For a bribe, Indonesian officials often hand out fake licenses for such supposedly captive-breeding programs and the birds. For example, since selling wild-caught lories is illegal, traders often claim that they are captive-bred and produce fake documents to launder the birds.

Alternative Livelihoods for Hunters and Illegal Fishermen

These days hardly all hunters are desperately poor individuals. Nonetheless, even organized crime groups specializing in poaching frequently hire local people living on the edge or inside the forest as trackers, guides, and even shooters. In Indonesia, they can be very destitute individuals struggling to eek out a living and support their families, like those in the Moluccas, who will hunt endangered birds for a bowl of noodles a day. Providing them with an alternative means of livelihood is not only important from the perspective of human rights and human security, but also frequently critical for the success of conservation policies.

Occasionally, alternative livelihoods programs to reduce poaching have scored successes. On the Indonesian island of Seram, for example, twenty poachers of rare parrots were converted (through the work of Profauna, one of Indonesia’s NGOs most determined to fight against the illegal wildlife trade) into rescue-center staff and wildlife guides for tourists. As a result of this alternative livelihoods effort, poaching dramatically fell off. But the success depended on a steady flow of eco-tourists whom the newly-converted poachers could guide. For that, an international counterpart to the conservation effort helped recruit birdwatchers in the United States to travel to Seram. When that international supply of eco-tourists fell off, the income from wildlife guiding for the former poachers declined and the pressure to resume illegal hunting to generate livelihoods intensified once more.

The Seram story is a micro-example of the conditions on which successful alternative livelihoods depend. If poor poachers have an assured income from other sources, they are often willing to abandon the illegal hunting, even though poaching often brings more money. But their income from other sources needs to be steady and assured. The problem with many ecotourism alternative livelihoods efforts is that the income fluctuates greatly and tends to be sporadic and seasonal. Often, for an area to draw a sufficient number of ecotourists to generate income, it needs to contain large mammals that can fairly easily be seen by tourists. Thus, eastern Africa’s savannahs tend to attract many more tourists than rainforest areas.

Moreover, success in bringing an alternative income to potential poachers depends also on the number of potential poachers. It is one thing to employ twenty hunters (like in the Seram example) and quite another thing to bring employment to several thousand people who may reside in or near an ecologically-sensitive area and can become poachers (as well as illegal loggers). The number of jobs generated by ecotourism is often far lower than the existing local needs for employment and the number of illegal poachers, illegal loggers, and pastoralists who encroach on forests. Moreover, whether such ecotourism takes the pressure off poaching is also dependent on whether eco-lodges and ecotourism companies capture the vast majority of profits or whether local communities do in fact get a sufficient cut from the profits.

Note that the above discussion has not taken into consideration whether or not the influx of humans through high-impact ecotourism generates even greater environmental damage than the previous hunting and more profoundly disturbs the entire ecosystem, rather than just particular species.

Income generated by non-ecotourism alternative livelihoods efforts, such as converting hunters into producers of ethnic crafts or honey and other renewable wildlife products, rarely does better than ecotourism alternative livelihoods. Mostly, such alternative economies generate incomes too paltry and sporadic to be attractive to local communities to sufficiently wean them off poaching. Success of such efforts mostly tends to be lower than even the infrequent success in converting illicit crop farmers to farmers of legal crops. In the case of wildlife poaching, legal agricultural production can sometimes reduce hunting – though once again, the question is whether the required land conversion and deforestation will ultimately devastate the entire ecosystem even more. Just as in the case of alternative livelihoods for illicit drugs, success is predicated on well-enforced property rights, the availability of microcredit, good infrastructure, and other structural factors. Crucially, it also depends on well-established value-added chains and assured markets, neither of which are developed easily in remote areas where forests or biodiversity-rich savannahs still exist. Thus on Indonesia’s Flores island, one of the sensitive land and marine areas, there may well be first-rate avocados, but because of a lack of infrastructure and value-added chains, farmers often feed them to pigs instead of exporting them. Flores’s four kinds of mangoes could well be successfully sold in many international markets, but those markets have not yet been developed. And if one day they are, it is critical that they do not generate new deforestation to clear the way for the mango trees, compounding the pressures on already devastated natural forests of the island.

In the Komodo National Park area, for example, inducing local people to switch from dynamite-fishing that decimates the area’s biodiversity-rich marine ecosystems to carving wood crafts for tourists has met with some successes. However, the former fishermen got used to taking wood from the park’s mangroves, replacing one negative ecosystem impact with another. Persuading them to use jackfruit timber instead has become the new imperative. Similarly, seaweed farming in the Komodo area and around Sulawesi has become a popular alternative to fishing, and one that currently has a thriving international market. But careful assessments as to whether the seaweed farming – and of what particular seaweed species and through what precise methods - is fully compatible with coral conservation have yet to be made.

Scuba diving tourism is thriving in the area, bringing with it a variety of positive spillovers for the local economy, such as new restaurants, lodges, and markets. But it is mostly concentrated in Labuan Bajo, not benefiting all parts of Flores equally and many not at all. Moreover, most hotels and dive companies are not owned by local people, with much of the profit leaving for Jakarta or abroad. And only very few of the dive masters are local people.

Improved Law Enforcement

Without alternative livelihoods in place or the ability to change the structure of incentives for the many types of actors who participate in the illegal wildlife trade – as well as without reducing demand for wildlife products -- law enforcement is rarely a sufficient answer. But it is a critical and inescapable component of such efforts.

In Indonesia, enforcement of wildlife regulations has a long way to go. The problem starts with the laws themselves. With few exceptions, such as in the case of kingfisher species which are not allowed to be hunted, Indonesian law does not prohibit the killing and trapping of wild animals in general, only those protected by the Convention on International Trade in Endangered Species (CITES). Unsustainable legal hunting, often poorly monitored to assess its true environmental impact, thus devastates species in Indonesia, with Indonesia’s law enforcement agencies having no interest or means to counter it. Even for wildlife protected by CITES, the Indonesian law sets as the maximum penalty five-year imprisonment or a ten thousand dollar fine. But poachers and wildlife traffickers rarely face law enforcement action, frequently bribing their way out of punishment in Indonesia’s notoriously corrupt courts. If they are sent prison at all, it is usually for a few weeks at most.

Nonetheless, improvements in Indonesia’s wildlife protection enforcement are under way. Many new commitments, efforts, training, and better practices are stimulated by ASEAN’s Wildlife Enforcement Network (ASEAN-WEN) and its international government and NGO partners. The United States government is actively supporting those efforts; and INTERPOL has also elevated wildlife trafficking on its list of priorities. In turn, the importance of acting against wildlife trafficking has also risen for Indonesian law enforcement agencies, though it still retains a much lower priority than drug trafficking, for example, and hence rewards (such as promotion in rank) are not come easily earned for interdiction of wildlife trafficking. Such increased law enforcement efforts are very important and welcome. Setting quotas for the minimum of wildlife cases Indonesian law enforcement officers must catch is hardly the optimal law enforcement approach but, arguably, it shows at least an increased awareness of the issue.

Yet as is the case with law enforcement against all kinds of illicit trade, sometimes increased law enforcement only makes the markets more hidden. Certainly in Indonesia, sales of more politically and legally-sensitive species, such as monkeys, that are either sold outright illegally or whose trapping generates strong criticism from environmental NGOs, has been driven from public view. Nonetheless, behind closed doors, these species are usually available in many of the country’s big wildlife trading places. When in the huge Jatinegara wildlife market in Jakarta, where supposedly any animal, no matter how endangered and enigmatic can be bought, I tried to pull out my camera, I was met with a great deal of hostility and protests from local sellers and was essentially chased out of the market. One representative of an Indonesian environmental NGO, speaking on condition of anonymity, told me that tiger parts, rhino horns, or alive orangutans and Komodo dragons can all still be obtained in the Jatinegra market and from Indonesia’s other wildlife traders. Illegal pet shops in Jakarta boast that they can deliver any species within a week – and often the transaction is made over the internet.

Nonetheless, there have been some genuine successes in Indonesia’s law enforcement. In Bali, for example, the enforcement of the ban on catching sea turtles has been greatly strengthened. Used in traditional Balinese ceremonies, turtles had been caught at a rate many times surpassing the 1000 specimen catch per year allowed under local regulations. In 1999, 27,000 turtles, for example, were slaughtered. Profauna encouraged zero-catch quotas and pushed for greater law enforcement by the police and other law enforcement agencies, such as the Forestry Ministry. The fact that police units on Bali have a reputation for being less corrupt than elsewhere in Indonesia, and with greater international presence to help in the monitoring, the police confiscation of turtles increased significantly and the illegal catching decreased by 80 percent since.

The intensification of law enforcement interdiction in Indonesia has been critically enabled by the increase in animal rescue shelters. In the past, the Indonesian police often used the small number of available animal shelters as an excuse for not undertaking interdiction raids, claiming that they could not care for the rescued animals. Indeed, according to a very impressive young female Muslim veterinarian in Bali who has supervised some of the rescue shelters, about 95 percent of animals confiscated in wildlife markets or private collections are too sick and damaged to be returned to the wild. With few releases possible, because they might introduce new diseases that could devastate the wild populations, most of the recovered animals will have to be treated at the shelters for the rest of their lives or euthanized. Unfortunately, rehabilitation shelters in Indonesia have depended almost exclusively on foreign funding. Several important international donors have been disappointed with Indonesia’s performance in cracking down on the wildlife trade and have not renewed their donor commitments, leaving some of the shelters struggling to operate.

Challenges in Cracking Down on Illegal Fishing

To some extent, improvements have also been registered in Indonesia’s efforts to combat illegal domestic fishing in protected areas. The Komodo National Park provides an example. Fifteen years ago, dynamite and sodium-cyanide fishing, both extremely destructive to the marine ecosystem, were prevalent and perpetrated by local communities around the park and by fishermen from the eastern parts of Flores as well as other islands, such as Sulawesi and Sumbawa, as already mentioned above. When confronted by local communities trying to prevent the destructive fishing, fishermen from the eastern part of Flores and surrounding islands would often admit that the reason they were coming to fish in the Komodo National Park was the lack of fish available in their home areas, where local stocks were depleted as a result of the destructive fishing.

Pressure from international NGOs and intergovernmental agencies, such as UNESCO, on law enforcement agencies operating in and around the Komodo National Park stimulated better law enforcement action and diminished the dangerous illegal fishing practices. The fact that the Komodo National Park, including its extraordinary marine ecosystem, obtained high international visibility, and hence international pressure for protection, critically helped.

Surprisingly, because the issue can be construed as one of national security and certainly of national sovereignty, Indonesia has been far less capable of cracking down on illegal fishing by foreign fishing fleets, including Chinese, Taiwanese, Japanese, and Philippine, that invade its waters. Some of the Indonesian fishermen I interviewed about international illegal fishing in their waters maintained that they were afraid to confront the foreign fleets because the foreign fishing ships were presumed to be armed. They believed that the presence of guns on the fishing ships also deterred action by Indonesia’s coast guard. Some of the fear can perhaps now be offset by the creation of a community patrol “coastal watch” effort run by the Ministry of Fisheries, for which the U.S. government has installed a communications technology that allows the fishermen to report the presence of illegal fishermen in real time and thus enables a heftier law enforcement response.

Most of the interviewed fishermen, however, believed that the lack of robust law enforcement action had to do with large amounts of corruption money sloshing around in the international fishing industry which could easily buy off Indonesia’s naval and coast guard patrols. Church and NGO activists in Labuan Bajo, Flores, for example, recounted how they suspected that local police and navy officials were involved in the smuggling of the endangered Napoleon wrasse (also known as humphead wrasse), the trade in which is prohibited by several countries and whose possession in Indonesia requires special permits from the government. Nonetheless, the species is highly sought after in Taiwan, China, and other East Asian markets. Repeated tipoffs to local Labuan Bajo police and navy units regarding the illegal catching and smuggling of the wrasse fell on deaf ears, with the law enforcement agencies demanding proof from the activists before they would take any kind of law enforcement action against the identified smugglers. The activists thus invited local media to the port where the wrasse smuggling was taking place, and “by accident” spilled one of the boxes transporting the smuggled wrasses, forcing the police to acknowledge in front of flashing cameras that illegal fishing was taking place there. Nonetheless, a visit to the Chinese market in Labuan Bajo in October 2012 revealed Napoleon wrasse on sale. The trade in other exotic fishes, even if not necessarily protected species (CITES only prohibited the trade in some sharks and manta rays in March 2013), was thriving there. Local buyers were eagerly haggling with fishermen over lips from parrotfish, manta ray parts, and sharks fins.

Lessons from Indonesian Anti-Piracy Efforts for More Robust Law Enforcement Action against Illegal Fishing and Wildlife Trafficking

The anti-piracy efforts in the Strait of Malacca and around Indonesia can provide insight into the factors which can stimulate better law enforcement action by Indonesia. Before the frequency of maritime piracy spiked around the Horn of Africa and West Africa, pirate attacks on ships at sea in Strait of Malacca amounted to almost half of the world’s piracy incidents. Out of the more than 250 yearly attacks in the Strait and around Indonesia during the first half of the 2000 decade, the majority originated in Indonesia.[2] Indonesia’s archipelago provided many safe-haven opportunities for pirates, while law enforcement action against them both on land, such as on the Riau islands, and at sea was sporadic and limited at best.

As the frequency of pirate attacks kept growing, it came to present a threat to Singapore’s economy – critically dependent on the safety of its seaborne commerce and accessibility of its port, with more than 50,000 vessels carrying 40% of world’s trade passing through the Strait yearly. Backed by the United States, Singapore pressured Indonesia to take more robust action against the pirates and delivered a variety of financial incentives-- delivering technologies, patrol assets, and ultimately paying for much of the anti-piracy effort Indonesia mounted. Anti-piracy intelligence sharing among Singapore, Indonesia, and Malaysia, previously inhibited by traditional rivalries, also increased, even though many of the proposed “joint” patrols among the three navies really amounted only to “coordinated” patrols. In the latter part of the 2000 decade, piracy in the Strait fell off by about three-fourths – even though the actual number of interdiction operations on the seas remained very small. Just the greater deployment of patrolling assets and importantly actions by Indonesia against the pirates on land created a robust deterrent effect.

The fact that Singapore mounted strong pressure on Indonesia is not surprising. Nor is it surprising that ultimately Singapore had to back up the pressure by extending various modes of assistance to stimulate greater law enforcement action against the pirates. What is more interesting is that in the case of maritime piracy, unlike in the case of its many other large-scale illicit economies, such as illegal logging and mining, Indonesia was able to overcome the corruption that has long plagued its law enforcement apparatus and undermined the interdiction and deterrence efforts. In other words, it was pressure from Singapore, underwritten by material assistance from that city-state, that stimulated Indonesia’s resolve to go after the pirates. But what accounts for Indonesia’s improved capacity to carry out the law enforcement effort?

To a great extent, the answer appears to lie in the low profits and un-institutionalized form of corruption surrounding maritime piracy in the area. Unlike in the case of piracy off the Somalia coast, the profits from piracy around Indonesia were fairly low, with attacks often amounting more to robberies on the seas and in ports, rather than to long-term hostage and cargo seizure with ransom payouts in the millions of dollars. (Indeed, the “pirate” attacks around the Indonesian archipelago that have taken place over the past three to four years remained mostly thefts and robberies when ships are anchored in Indonesia’s ports.) Consequently, the bribes from piracy paid to either Indonesian coast guard or navy officials or to local government officials on land in areas that the pirates used as safe-havens were not very large, nowhere on the scale of the bribes paid by illegal logging or mining companies. Nor have the Indonesian law-enforcement agencies become addicted to the piracy bribes for their institutional budgets, unlike in the case of bribes and problematic profits from natural-resource extraction on which Indonesia’s military and law enforcement agencies have come to depend for sustaining their operating budgets.[3] The political costs Jakarta had to absorb to make law enforcement agencies act against the pirates and the muscle it had to exercise to corral local officials into compliance were far lower with respect to piracy than the political costs would be for Jakarta to enforce compliance with resource-extraction regulations. The number of political and institutional actors with a vested interest in perpetuating piracy (because of the rent payouts it generated) was also much smaller than in illegal logging and mining, and the management problem for Jakarta therefore also much simpler. The resolution of secessionist militancy in Sumatra’s Aceh region, after the 2005 peace deal, is sometimes also put forward as a factor enabling the more robust law enforcement action against the pirates.[4] But there are limitations as to how far this explanation carries, given that most of the pirate attacks did not originate from Aceh and the area was not a prime safe-haven area for the pirates. (The fact that many of the former Free Aceh Movement combatants continue to be unemployed and economically-frustrated could easily make them an easy recruitment pool for pirate businessmen. Other illicit economies, such as marijuana cultivation, have in fact been thriving in the region.)

For combatting wildlife trafficking and illegal logging in Indonesia, the anti-piracy story has two implications. On the positive side, in the case of wildlife trafficking, the vast majority of the conservation actors and Indonesian government officials I interviewed agreed that corruption surrounding wildlife trafficking was not institutionalized. Nor was it believed to generate large off-budget income for the law enforcement institutions, like logging and mining. Tackling individualized corruption, as difficult as it is, is still far simpler than weaning entire institutions of illicit budgets.

On the negative side, the bribery profits from illegal fishing for Indonesia’s law enforcement agencies are considerably higher than those from piracy. For some agencies, such as the coast guard and the navy, the bribes may well constitute corruption payoffs akin to that from mining and logging that go beyond individual bribes. That is bad news for developing more robust law enforcement action.

The barriers to international cooperation against illegal fishing are also far higher than against piracy. Major fishing offenders such as China, Taiwan, Thailand, and Vietnam would have to take on their domestic fishing industries -- a high-cost political action they have not been willing to mount, just as Indonesia has not been able to effectively take on its logging industry, for example. Vietnam and Indonesia have announced joint anti-illegal fishing patrols, but whether these will amount to more than window dressing by Vietnam yet remains to be seen.

Beefed up law enforcement action against wildlife trafficking and illegal fishing is critical. Providing effective alternative livelihoods for poor hunters is a policy that enhances human rights and human security as well as greatly facilitates law enforcement. Unfortunately, alternative livelihoods efforts are rarely effective, with auspicious circumstances mostly lacking and structural problems difficult to overcome. Ultimately, there are great limits to what even much more effective law enforcement and much more effective alternative livelihoods can accomplish unless demand for wildlife products around the world, and particularly in East Asia, is rapidly reduced. So far, demand reduction efforts in the region for bushmeat and Traditional Chinese Medicine have registered thinner, even if somewhat improving, results than demand reduction efforts to reduce the consumption of illicit drugs. But time is running out for Indonesia’s magnificent biodiversity –both on land and in the sea.

[1] For details, see Vanda Felbab-Brown, “The Disappearing Act: The Illicit Trade in Wildlife in Asia,” Working Paper No. 6, The Brookings Institution, June 2011, http://www.brookings.edu/~/media/research/files/papers/2011/6/illegal%20wildlife%20trade%20felbabbrown/06_illegal_wildlife_trade_felbabbrown.

[2] “Piracy Down 3rd Year in Row: IMB report,” Journal of Commerce Online, January 23, 2007; and “Pirate attacks Up 14 Percent Worldwide in Jan-Sept Period, Maritime Watchdog Says,” Associated Press, October 16, 2007.

[3] See, for example, International Crisis Group, “Indonesia: Natural Resources and Law Enforcement,” Aseia Report No, 29, December 20, 2001, http://www.crisisgroup.org/~/media/Files/asia/south-east-asia/indonesia/Indonesia%20Natural%20Resources%20and%20Law%20Enforcement.pdf; and Vanda Felbab-Brown, “Indonesia Field Report III – The Orangutan’s Road: Illegal Logging and Mining in Indonesia,” The Brookings Institution, February 7, 2013, http://www.brookings.edu/research/reports/2013/02/07-indonesia-illegal-logging-mining-felbabbrown.

[4] Michael Shuman, “How to Defeat Pirates: Success in the Strait,” Time, April 22, 2009.

Authors

Vanda Felbab-Brown

Image Source: © Chaiwat Subprasom / Reuters

Countering Corruption: 2012 Conference Report from the World Forum on Governance

Stephen M. Davis, Thomas E. Mann and Norman J. Ornstein — Mon, 04 Mar 2013 00:00:00 -0500

EXECUTIVE SUMMARY

Reformers, businesspeople, investors and citizens alike are grappling with a common issue around the world: Good governance. How can each nation secure government that is honest and not corrupt, that serves the public interest and not special interests, and that aims to deliver practical solutions to today’s most pressing problems? How can corporations and institutional investors achieve good governance of their own, that protects and promotes long term value while complying with legal norms, ethical standards and customer expectations? What is the relationship between good corporate and democratic governance? Indeed, is either possible without the other?

In December 2012, Brookings convened the second World Forum on Governance, which has unique capacity to join thought leaders from the public and private sectors together. The objective was to identify means to leverage the collective power of capital, media, public policy and social organization behind the movement against global corruption.

Conference participants included a rich mix of leaders, experts and grassroots innovators from Latin America, Africa, the Middle East, Europe, North America, the corporate and investment worlds, traditional and new media and faith-based organizations. Delegates revisited the Ten Principles outlined in the Prague Declaration, which was formulated during the 2011 World Forum on Governance, reviewed reports on initiatives raised at the 2011 meeting, and discussed next steps to address governance and integrity.

Most importantly, breakout sessions trained attention on four policy action areas critical to the fight against corruption:

Crafting effective law, regulation and enforcement within and across borders;
Strengthening the business and investment case for managing corruption risk;
Linking a wider group of civil society organizations, including faith groups, behind the push for integrity in the public and private sectors; and
Enhancing the capacity of traditional and social media to serve as watchdogs against corruption.

One plenary session concentrated debate on the experience of financial institutions; a second addressed how the strengths and weaknesses of democracy affect corruption. By the end of the 2012 WFG, conference organizers gained enough feedback and useful ideas from the participants to decide upon an agenda of next steps. These policy action ideas are clustered around five themes. Organizers can steer follow-up on each to specific conference participants or relevant organizations; other actions can be taken forward by the Brookings Institution.

Establishing a framework for an investor road show, to bring the voice of capital directly to political leaders on the business value of fighting corruption.
Encouraging greater collaboration among policymakers around the world to incubate legislative and policy action to improve anti-corruption efforts.
Increasing the capacity for the media to report on and be educated about corruption and increasing accountability for media companies themselves.
Engaging with the faith community to identify a role for this critical voice in the fight against corruption.
Raising the profile of firms considered leaders in the field for business integrity, transparency, and corporate governance.

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Stephen M. Davis
Thomas E. Mann
Norman J. Ornstein

Focused Deterrence, Selective Targeting, Drug Trafficking and Organized Crime: Concepts and Practicalities

Vanda Felbab-Brown — Thu, 28 Feb 2013 00:00:00 -0500

Editor’s Note: The following report was first published by the International Drug Policy Consortium, as part of its ‘Modernizing Drug Law Enforcement Project,’ in February 2013.

Introduction

Extensive criminality and illicit economies generate multiple, at times intense, threats to states and societies – to their basic security and safety, and to their economic, justice, and environmental interests. High levels of criminality, particularly criminal violence, tend to eviscerate law enforcement capacities as well as the social capital and organizational capacity of civil society and its ability to resist organized crime. Especially in the context of acute state weakness where underdeveloped and weak state institutions are the norm, goals such as a complete suppression of organized crime may be unachievable. But even in countries with strong law enforcement institutions, law enforcement efforts to suppress the incidence of criminality, particularly of transactional crimes, such as drug trafficking (as opposed to predatory crimes, such as homicides) have at times not succeeded and have generated negative side effects and externalities, such as human rights and civil liberties violations and overcrowded prisons.

Zero-tolerance approaches to crime, popular around the world since the late 1980s, have often proven problematic. They have produced highly unequal outcomes and often greater police abusiveness. Particularly, in the context of weak law enforcement institutions and high criminality, zero-tolerance approaches have mostly failed to reduce crime, while generating new problems. Allocating resources to essentially repressive programs frequently takes place at the expense of investigative capacity. Critically, the lack of prioritization of crimes and criminal groups often diverts police focus from the most violent and serious offenses and most dangerous criminal groups.

Focused-deterrence strategies, selective targeting, and sequential interdiction efforts are being increasingly embraced as more promising law enforcement alternatives. They seek to minimize the most pernicious behavior of criminal groups, such as engaging in violence, or to maximize certain kinds of desirable behavior sometimes exhibited by criminals, such as eschewing engagement with terrorist groups. The focused-deterrence, selective targeting strategies also enable overwhelmed law enforcement institutions to overcome certain under resourcing problems. Especially, in the United States, such approaches have produced impressive results in reducing violence and other harms generated by organized crime groups and youth gangs. Such approaches have, however, encountered implementation difficulties elsewhere in the world.

This report first outlines the logic and problems of zero-tolerance and undifferentiated targeting in law enforcement policies. Second, it lays out the key theoretical concepts of law-enforcement strategies of focused-deterrence and selective targeting and reviews some of their applications, as in Operation Ceasefire in Boston in the 1990s and urban-policing operations in Rio de Janeiro during the 2000s decade. Third, the report analyses the implementation challenges selective targeting and focused-deterrence strategies have encountered, particularly outside of the United States. And finally, it discusses some key dilemmas in designing selective targeting and focused-deterrence strategies to fight crime.

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Vanda Felbab-Brown

Publication: International Drug Policy Consortium

Image Source: © STRINGER Mexico / Reuters

Crisis in Mali and North Africa: Past and Present

Thu, 21 Feb 2013 09:30:00 -0500

Event Information

February 21, 2013
9:30 AM - 10:30 AM EST

Room B338
Rayburn House Office Building

Washington, DC

On Thursday, February 21, the Africa Growth Initiative at Brookings (AGI) and the Congressional African Staff Association (CASA) hosted a briefing for congressional staffers on the current crisis in Mali and North Africa. Panelists included: Susanna Wing, associate professor of political science at Haverford College, and Nasser Weddady, director of civil rights outreach at the American Islamic Congress. AGI Director Mwangi S. Kimenyi moderated the briefing.

This event is part of the Africa Policy Dialogue on the Hill, a monthly congressional briefing hosted by AGI and CASA on topical issues relevant to Africa’s growth and security.

TRANSCRIPT

MR. DIAKABANA: So, good morning and welcome to the African Dialogue on the Hill. I’m Cedric Diakabana. I’m a staff member in the office of Senator Sheldon Whitehouse.

We will get an African perspective on Africa issues as well as those of outside experts. This is a monthly co-presentation by the Confessional African Staff Association, or CASA, and the African Growth Initiative of the Brookings Institution.

For those who know CASA, we’re a bipartisan, bicameral association of staff members who seek to educate our colleagues on today’s substantive Africa issues, on the continent or within the great African Diaspora through panel discussions, briefings and other events with decision-makers and officials involved in African policy.

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Participants

Panelists

Mwangi S. Kimenyi

Director, Africa Growth Initiative
Senior Fellow, Global Economy and Development

Cedric Diakabana

Nassar Weddady

Susanna Wing

Associate Professor of Political Science

Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime

Vanda Felbab-Brown — Tue, 19 Feb 2013 16:30:00 -0500

Mexico’s new president, Enrique Peña Nieto, has a tough year ahead of him. After six years of extraordinarily high homicide levels and gruesome brutality in Mexico, he has promised to prioritize social and economic issues and to refocus Mexico’s security policy on reducing violence. During its first months in office, his administration has eschewed talking about drug-related deaths or arrests. The Mexican public is exhausted by the bewildering intensity and violence of crime as well as by the state’s blunt assault on the drug trafficking groups. It expects the new president to deliver greater public safety, including from abuses committed by the Mexican military, which Mexico’s previous president, Felipe Calderón, deployed to the streets to tackle the drug cartels.

Seeking to bring violent crime down is the right priority for Mexico, and indeed, should be a key goal for law enforcement in any country. The United States should wholeheartedly support that objective in Mexico. But achieving violence reduction will not be easy, major questions remain about the outlines of the security strategy Peña Nieto has sketched, and some approaches to reducing violence would come with highly negative side-effects.

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Vanda Felbab-Brown

Image Source: © Tomas Bravo / Reuters

Indonesia Field Report III – The Orangutan’s Road: Illegal Logging and Mining in Indonesia

Vanda Felbab-Brown — Thu, 07 Feb 2013 00:00:00 -0500

Kutai’s Destruction

Like in a desolate Edward Hopper landscape, the orangutan was clinging to the one last tree that stood next to the river in Kutai National Park in eastern Kalimantan. The joy of seeing this magnificent primate was spoiled by his destroyed habitat. Under normal circumstances, the orangutan would never venture so far out from trees, but here he was in a beyond-degraded and marginal habitat, probably looking for food that he could no longer find inside the forest.

Although once a jewel of biodiversity in Indonesia, teeming with Sumatran rhinoceroses and bantengs (wild Asian cattle species), and long-portrayed as one of the greatest wilderness areas left on the Indonesian side of Borneo, much of Kutai today looks like a devastation zone. Kilometers deep into its boundaries, the park has been stripped of trees. Despite the fact that the park is nominally a protected area, the trees have been logged for their hardwoods as well as to cultivate palms. The park was also badly affected by extensive fires several years ago. The big dipterocarp trees that are the essence of a Southeast Asian rainforest and on which many animal species depend for survival – and the hardwood of which is unfortunately highly valuable – have been all but eliminated in vast tracks of the park. The one last standing dipterocarp a kilometer deep into the forest has become an attraction to show to tourists. As a result, and also because of hunting, few hornbills are left in much of the park: Over the days we spent there, we saw only three species of hornbills: wrinkled, rhinoceros, and Asian pied. Overall, despite hours and hours in the forest, we could saw few other species of birds and mammals, including those that should be common genera in this kind of habitat, such as bulbuls and broadbills. One of the most common bird species in the park, even as deep into the forest as that which several hours of hiking would bring us, seemed to be the blue-eared barbet, a typical forest-edge species whose prevalence well inside the forest indicated that the forest is destroyed and of marginal quality and resembles more a forest edge, rather than a high-quality lowland growth.

We cut the motor of our canoe to watch the orangutan male, but instead of birds and insects, we continued hearing engines and industrial noise from a major coal mine that churned on nonstop for 24 hours a day right on the edge of the forest. Quite possibly, the mine could actually lie at least partly inside what was once national park. Park boundaries in Indonesia are exceedingly easy to redraw to accommodate mining and logging interests and generate revenues for local officials. During interviews with artisanal loggers in villages inside and around Kutai and in other national parks throughout the archipelago, I was told that local government officials and park managers would occasionally clandestinely encourage or at least tacitly tolerate artisanal logging and mining for gold and coal. The initial opening up of the ecosystem and thereafter its degradation would then allow them to apply to national offices in Jakarta to have parts of the park redesignated as unprotected environmentally-degraded land so they could issue permits for industrial-scale logging and mining concessions or African oil palm plantations, which bring great revenues. As efforts to improve local resource management and governance have produced various rankings of how much revenue local officials raise and “invest” in local communities, few regencies (the local administrative unit in Indonesia equivalent to a county) have an incentive to be saddled with forest that cannot be exploited. Whether the Reducing Emissions from Deforestation and Forest Degradation (REDD+) schemes, discussed below, will succeed in altering the structure of incentives remains to be seen and depends as much on local political-economy structures and power distribution as on their technical and financial feasibility.

The river within which we had canoed was itself clogged by piles of tailings, and spots of gasoline and some industrial runoff floated on the surface with regularity. Two several-hours-long night trips revealed only two buffy fishing owls and three common sandpipers, while no kingfishers or mammals could be sighted. Ornithologist Keith Barnes who has studied birds throughout Africa and Asia commented that until our research trip to Kutai, he had not been on a river in Southeast Asia for more than one hour without seeing at least a squirrel: “There is something seriously wrong with this forest.” For one, vast tracks of the forest are gone, with empty grassland and brambles, and not even secondary forest growth, left in its wake. Indeed, lowland forests throughout Indonesia have been destroyed or are facing tremendous pressures from logging; and even highland forests, such as in Sumatra, Sulawesi, and Halmahera, are increasingly shaved off by logging companies that decide to stomach the logistical expenses of hauling away the timber from steep hills and mountains or by poor artisanal loggers and farmers who desire more land.

Deforestation in Indonesia Going Down?

During the 2000s decade and beyond, deforestation in Indonesia has slowed down, but that is partially because so much forest has already been cut down. Indonesia’s President Susilo Bambang Yudhoyono has won international accolades for promising to reduce greenhouse gas emissions in Indonesia 26% by 2020 through reducing deforestation (even while maintaining a 7% annual growth). Indonesia, one of the world’s largest carbon-emitters, may well come close to succeeding in that goal, but it will be to an important extent because much of its forests have already been commercially logged out, not because conservation efforts have become more robust and effective. Commercially-viable lowland forest in Sumatra is gone, pockets still remain in Kalimantan, and Papua is the hotspot of logging and chainsaw profits.

What is highly disturbing about Indonesia, however, is that the small slivers of forest that are left (often designated as protected areas) continue to be invaded by loggers, poachers, and miners – whether poor artisanal ones who operate illegally or official companies with formal licenses obtained through bribery. Because law enforcement continues to be exceedingly poor and many officers are on the take, even protected areas are far more degraded than similar protected areas elsewhere in Southeast Asia, such as Malaysia or Thailand. These countries too have logged out their forests, but what areas they set aside for conservation, even though small they might be, they tend to protect far better than Indonesia does. Moreover, many of the areas designated as protected in Indonesia, even national parks, are those that had already been commercially logged out and had their biodiversity degraded – the forests of Sulawesi provide a prime example. Setting logged forests aside and protecting them from new encroachment has the potential to greatly boost biodiversity; but whether once species that have become extinct or come close to extinction in a particular area can return and biodiversity be fully restored to its original richness (to that of a primary unlogged forest), no one knows. Many of the tree species and ecosystems they support take several hundred years to grow and reach maturity.

Indonesia’s Law Enforcement and Its Complicity in Illegal Economies and Other Regulatory Problems

Indonesia’s law enforcement and military forces are not only inadequate and under-resourced, they are also deeply complicit in various illicit economies, including illegal logging and mining. The corruption problem goes well beyond many individual officers being in on the take. During the Suharto era, Indonesia’s military had investments in large parts of Indonesia’s economy. Although it was forced to give up many of these past investments, it continues to rely on outside-the-budget revenues for large parts of its income. A decade ago, as much as a third of revenues for the military came off budget, and that dependence and problem has been poorly tackled since and has not fundamentally changed.[1]

Local police officials and military officers not only close their eyes to illegal resource extraction, they at times actively encourage it in order to promote their family businesses. Some representatives of the mill concessions I interviewed in eastern Kalimantan’s business hub Samarinda even claimed that local law enforcement officials would make them accept illegally cut timber for processing or the mills would face raids. “Look, realistically, we have few incentives to comply with regulation,” one of the logging company executives told me. “Getting all the permits and licenses takes a lot of time. You have to pay bribes to local officials and to those in Jakarta. And these days, bribes are complicated and unreliable. If we don’t pay bribes, it will take two years to get a license. And then what? The police or the military will hold up the logs on the river, sometimes for weeks on, until the timbers starts rotting. It’s far simpler just to pay off everyone right away.” He went on to bemoan how corruption used to be far simpler during the Suharto era, with a 10% standard rate for everything. “But these days, the military are angry that the police are getting a cut too, and they’re both jealous of who gets to be paid more. And yes, the coast guard and the navy make money off the coal exports.” Complicity and impunity debilitate regulatory policies. This is particularly so in a deeply corrupt system, such as Indonesia’s, where big violators often hold great political power, including sometimes by being members of Indonesia’s parliament or local administrations, rarely are arrested; and even then can bribe their way out of the law’s punishment.

Strategies to improve natural resource management and protect the environment in the face of seductive vast profits have been undermined in Indonesia not just by poor law enforcement, as key as that is. Efforts to develop effective and equitable regulatory frameworks have also been complicated by overlapping and competing bureaucracies, unclear regulations, poor local management and government capacity, and lack of clear land titles. Poor local administrative capacity and poor local law enforcement capacity are exacerbated by the fact that for a variety of reasons line ministry, law enforcement, and military officials are often rotated out of many postings and areas after a few months. Such short-term assignments guarantee that the officials are in a perpetual catch-up effort to learn local issues, or lead them to simply ignore local contexts. The short-term rotation system is based on the assumption that it limits how deeply involved in local corruption schemes the deployed officials can become. Instead, they often have an incentive to make as much money as fast as possible before they are sent to a less lucrative posting.

Community Ownership as the Solution?

To the extent that law enforcement raids do take place, whether to satisfy Jakarta or silence international criticism, they often target the poorest participants in the illegal economies, such as illegal miners and loggers. Their activities are hardly benevolent; rather, they have significant and highly negative effects on the environment. Overall, their impact may be less detrimental than in the case of large Indonesian or multinational companies, but they often significantly disturb and destroy fragile ecosystems, such as highland forests where commercial logging is unviable and which thus become some of the last strands of forest standing. But the reality also is that the basic livelihoods of artisanal loggers and miners can be profoundly dependent on these illicit economies, and their human security entwined with their participation in illegality. Lacking access to legal livelihoods, microcredit, and titles, they are also far less able to pay license fees and bribes, as well as having little capacity to bribe their way out of being arrested. The sentence of several months or even years in prison may deter some from further illegal logging. But some of the villagers whom I interviewed had been imprisoned for illegal logging and stated that they merely switched to poaching. They could not make ends meet legally and faced lesser sanctions for poaching than for illegal mining and logging. Among the variety of illicit economic activities surrounding resource extraction, Indonesia’s law enforcement frequently makes the most effort to crack down on artisanal illegal mining because large mining companies have an interest in keeping the artisanal loggers out of their way.[2]

Democratization and power decentralization in Indonesia were expected to better align the behavior of local officials with the interests of local communities, strengthening local communities’ rights and improving environmental protection. That promise has not often materialized for a variety of reasons: First, powerful interest groups and large businesses, often linked to local politicians, tend to be far more effective at lobbying than local civil society groups. Indeed, many of the NGOs working in the community rights or natural resource sectors I interviewed throughout Indonesia felt impotent; along with journalists, they would expose violations of laws and regulations, but no one would be punished and behavior would not change. Second, feeling they have poor choices and that most politicians are corrupt anyway, many voters are easily seduced by cheap handouts from politicians before elections. Rather than poorly- performing government officials being voted out of power, they are often reelected or arrange for their family members to be elected. Throughout Indonesia, resource-baron local dynasties have been emerging. Third, decentralization has greatly empowered local officials in Indonesia – in fact, often to the extent that they believe they can get away with a lot in violating edicts from Jakarta and disobeying the national government. Conflicting local and national regulations only further permit escaping desirable regulations.[3]

Furthermore, it is not always clear that local communities are fundamentally opposed to economic exploitation that destroys the local environment. Occasionally, they will resist and protect their land from logging or mining and even do so effectively – such as in the famous case of the Wehea Forest in Kalimantan. The level of social cohesion plays a critical role. In tightly-knit indigenous communities spiritually-linked to a forest, as in the Wehea case, the capacity to resist the lure of short-term profits can well be strong and effective resistance action can be organized. But many communities in Indonesia’s frontier areas such as Kalimantan are transmigrasi migrants. They do not have attachments to the area, they do not necessarily plan to stay there for the long term, they do not know their neighbors in the shack next door, and they often do not have land titles. They have moved to the logging and mining areas precisely to make money. They are in it for the quick buck, and their horizons tend to be very short, even shorter than the horizons of many local government officials. When I questioned the officials about the sustainability of their primary commodity exploitation-led growth, many would delightedly reply that they had coal supplies for twenty years – “a very long time.” And even communities with more established roots in an area but that are struggling with marginal livelihoods are easily tempted to sell their land to big companies for exploitation.

Many resource-extraction companies have also learned that they can get away with unsustainable strategies, not only politically and legally, but also economically. For many years, Indonesia’s timber and mill industry was eating its own tail, slashing the forests at a rate that was unsustainable while the industry was becoming more and more bloated. But instead of suffering the painful effects of having to downsize their operations as Indonesia’s forest shrank and the Indonesian national government became more interested in limiting deforestation (if only to get its hands on the REDD+ money), many companies were able to diversify or altogether switch into African oil palm cultivation or mining.

International Mechanisms to Foster Corporate Social Responsibility and Environmental Sustainability I: REDD+

The Reducing Emissions from Deforestation and Forest Degradation (REDD+) and, more broadly, approaches such as paying-for-ecosystem-services (PES) schemes are based on the idea that if the economic structure of incentives pushes toward environmental degradation because natural ecosystems are not economically valued, one can change the structure of incentives by pricing environmental services, such as carbon capture. These financial transfers pay for an undesirable – such as, environmentally-destructive – economic activity like logging or mining not to take place. Western governments who care about tropical forests not being destroyed or Western companies that need to offset their carbon emissions pay for forests elsewhere not to be cut down and carbon emissions thus not to be released. In the best of outcomes, such schemes will reduce carbon emissions and preserve forests and biodiversity. After several years of tough and protracted negotiations, Indonesia and Norway agreed in December 2012 on such a REDD+ scheme which pays for a protection area to be established abutting the Tanjung Puting National Park in Central Kalimantan, to create an important buffer zone around it. Investors in the Rimba Raya forest include Russia’s giant gas producer Gazprom and a large German financial institution Allianz. The project was originally supposed to start in 2010, but then stalled as the Indonesian government proposed to cut the amount of land devoted to the conservation area because an African oil palm plantation company had overlapping concessions that it was not interested in relinquishing.

REDD+ mechanisms were at the center of the stalled UN climate change negotiations in the latest November 2012 Doha round. And just like the overall climate change negotiations, they too are mired in international political disagreements. The procedure on which to base reference emission levels, i.e., the baseline from which the level of carbon emission that would take place in the absence of REDD+ is counted, is developed; but key emitters, such as Brazil, have refused to submit to international verification and monitoring procedures. In a country with deep corruption and pervasive regulation evasion such as Indonesia, credible external monitoring will be key for making REDD+ and other PES efforts effective.

A second major problem is that the lack of emissions reductions commitments from the United States, China, India, Canada, and Russia raises doubts about how and whether funding for REDD+ will be generated and at what levels. China and India are loath to commit to any emission reductions until the United States makes a move, and perhaps not even then. Nor has it been agreed as to how much of the burden and responsibility middle-income countries like Brazil and Indonesia need to share. Indonesian officials I interviewed often expressed a desire that the REDD+ is used to pay for law enforcement in the national parks and other protected areas, for example; but Indonesia is not so poor that it requires international payoffs to pay its park rangers better. Anyway, the problem often lies as much with actors outside the national park as with the rangers themselves.

And here lies one of the potential difficulties with REDD+. The payoff goes to either the national government or a local government. But surrounding the two and between the two, there are often complex webs of powerful vested economic actors. Even equitable and proportional transfers between the national government and local governments do not guarantee that local government officials will develop the muscle and wherewithal to resist corruption and coercion from powerful economic groups, particularly if those economic groups are the military and police, like in Indonesia. Nor will the money necessarily make its way into the hands of the artisanal loggers and miners. In other words, the domestic payoff transfer and internal distribution of the money and transferred resources will affect the REDD+ effectiveness as much as their international component.

Such problems with government compensation to local forest owners for preserving natural forests have been experienced even outside of the carbon schemes. If monitoring and law enforcement is poor and the local community places little intrinsic value on forest and biodiversity preservation, local communities will often collect the money and log anyway, or in other cases face invasion by logging companies from outside the community. Similarly, if payments are set too much below the value of logging the forest, even compensated owners can be tempted to participate in illegal logging while collecting no-cutting rents.[4] And making sure that the money reaches the forest-dependent communities and is not usurped by corrupt powerbrokers is often a challenge.

Another aspect of REDD+ that could have important effects is developing local capacities to better manage forests. But those better sustainable practices will once again run into local economic interests that either need to be bought via the REDD+ transfers or coerced by law enforcement to comply with regulations. What the REDD+ initiatives have already accomplished in Indonesia is to force officials in the Forestry Ministry – a notoriously corrupt institution which regards its task as making as much money out of forests as possible, rather than preserving forests and biodiversityn – to conduct much better assessments of existing forests and even publish that data. Previous self-monitoring and data collection on deforestation has been rather unreliable in Indonesia.

Critically, the price structure of the payoff schemes will be a significant determinant of their effectiveness not only for capturing carbon, but also of preserving the world’s biodiversity.[5] Surprisingly, a certain price structure could have a negative effect on the preservation of natural forests, and the failure to incorporate biodiversity considerations in forest management designs could be compounded by emerging carbon-for-forest payoff schemes. In some countries and under some circumstances, where there is strong government commitment, successful cooptation of key logging industry stakeholders, and effective law enforcement, such financial transfers can halt deforestation or even expand existing forest cover.[6] But for that to be likely, the compensation payments need to be far greater for preserving natural, and especially primary, forests than for capturing carbon by degraded forests or replanted forests or timber plantations. And these differentials – with by far the most compensation going for primary forests, smaller amounts for secondary forests, and the least for non-native monoculture plantations – need to be sufficiently great to steer government decisions toward keeping forests intact. Without such a price structure in place, with any tree accorded an equal or similar carbon-capture value, governments could be tempted to maximize profits by intensely logging their forests first and then signing up for carbon offsets for halting further deforestation, including from forests that are no longer viable for commercial logging or through biodiversity-poor reforestation and plantations. Even if the logged forest regenerates timber through replanting or natural recovery, it often cannot do so in a manner that will restore its original biodiversity. Without a far greater unit price for carbon captured by intact natural forests rather than by forest plantations and other reforested areas, the carbon schemes thus encourage the preservation of any forests – including monocultures – rather than native primary forests.[7]

International Mechanisms to Foster Corporate Social Responsibility and Environmental Sustainability II: Green and Other Certification

Since the 1990s, certification labeling of the legality and environmental sustainability of harvested timber or African palm oil or of the absence of conflict in the extraction of minerals has emerged as a key mechanism to suppress undesirable behavior associated with economies that cannot be fully prohibited. Certification is supposed to mitigate inherent harms and negative externalities, such as human rights violations, social strife and violent conflict, and environmental destruction. To combat illegal logging, timber certification is meant to designate that the logged and traded timber has been sourced and transported in a legal or environmentally-sound way and that illegal timber has not been mixed in with the legal timber. Ideally, such certification examines and approves the entire custody chain; the traded timber would be certified from the moment it is carefully, legally, and sustainably selected for cutting in the forest to the moment a customer buys a piece of furniture in a Western furniture store. Any gap in controls in the custody chain increases the chance that illegal timber enters the trade and is effectively laundered.

The Forest Stewardship Council (FSC, an independent, international NGO) certification, which tracks timber from forest to the shelf, is often considered the current gold standard of certification labels for timber. However, by the end of the 2000s, the FSC still certified only approximately 220 million acres, of which 110 million are in North America, while there are 10 billion acres of forested land on Earth.[8] Less than 2% of tropical timber was covered by FSC certification.[9] Getting certified is expensive, costing about U.S. $50,000 per concession, and customers are not always eager to absorb the higher costs.

Given the size of the trade and the complexity of certification – as wood changes many hands along trade routes and is processed into many, often minute pieces, over extensive periods of time – the reliability of the process is frequently problematic, with many opportunities for fake certificates, falsification, or timber laundering along the way. The more timber subject to certification, the more challenging it will be to maintain quality and reliable certification. When I asked a logging company representative in Samarinda about whether they were concerned about failing to obtain green certification and whether they altered their practice as a result of increasing desire for such certification in Western markets, he just laughed: “For us, it’s just another bribery item. We pay for the inspectors. And anyway, they go out for two days out of a year – how much can they see?”

Beyond the sheer volume and the previously discussed challenges of law enforcement intensity, fake documentation, and the amount of time it takes to check a sufficient amount of timber to discourage laundering and smuggling, certification schemes are also plagued by other problems: The most important one is that timber may be certified as legal, but may not be harvested sustainably and in an environmentally sensitive way. Some of the legality verification is very limited, confirming only that timber originated in a particular concession area and that the company had the necessary permits. Other legality certification can involve more rigorous evidence of compliance with harvesting regulations and other operational matters. [10] Even then sustainability may not necessarily be a part of the certification evaluation. Since most legislation mandating certification of wood and wood products, including the expanded U.S. Lacey Act and the European Union’s Timber Regulation due diligence requirements, centers on its legality, as opposed to its sustainability, suppliers have concentrated on precisely assuring timber’s legality but not necessarily sustainability. Moreover, getting a certification for sustainability takes considerably longer and is far more expensive than the legality certification.

Certification problems often start with forest management plans. Both the design and implementation of forest management are often pervaded by serious problems, even though the mere existence of such a plan can qualify the logged timber for certification. Not all forest management plans ensure sustainability and minimal environmental damage, including measures to protect biodiversity. Often forest engineers, large numbers of whom are required to design programs for all the logging operations, are incompetent and corrupt. Moreover, since natural forest regeneration often takes decades in the tropics, there is not any easy way at present to see whether the management programs are effective, and to correct policy if they are not. Thus certification does not always involve all three components: legality, timber sustainability, and biodiversity protection. Certificates are issued only for one or two components of desirable practices, with law enforcement officials and customers having no idea what exactly is being certified and whether the certified timber in fact reflects optimal practices.

In addition, consumer preferences and regulatory requirements for certified wood have given birth to some certification schemes of dubious quality. Many of these certification labels represent simple cases of “greenwashing,” i.e., illegal and unsustainable wood being certified as legal and sustainable. In other cases, major retailers – even in the United States and Western Europe where customers are overall greener and the regulatory oversight greater – have appropriated and advertized green labels, including that of FSC, without ever being certified.[11] At other times, timber and wood product suppliers have obtained FSC’s chain-of-custody certification indicating that they have adequate capacity to check their supply chains without actually handling any FSC certified timber.[12] Extensive unreliability of certification can whitewash consumer conscience and encourage greater, and undesirable, consumer demand. Large numbers of certification schemes also make law enforcement more difficult. Watching the watchdogs, or in this case certificate issuers, and establishing lists of reliable certifiers, is essential for certification to reduce illegal logging.

Critically compounding the limitations of certification is the fact that some of the most important and emerging markets, such as India and China, fundamentally do not care about corporate social responsibility or mitigating the multiple harms that various economic activities can generate. Mining company representatives I interviewed in Sulawesi, Kalimantan, and Sumatra all said how they love to sell coal to India. “The Indian companies just don’t care about anything,” the representative in Kalimantan opined. “Not any environmental issues, social conflict, nothing. It’s a pleasure dealing with them. They even don’t care about the quality of the coal. They just want more and more of it.” Clearly, to improve the effectiveness of certification, it is necessary to create certification inspectors who are fully independent and not paid by the business firms or governments seeking the particular legal, environmental, or social certification. It is also necessary to fundamentally change attitudes toward corporate social responsibility and environmental sustainability in emerging markets. Not surprisingly, many Asian companies and multinationals tend to behave better at home than abroad, like in Indonesia. Indonesian logging and mining companies are hardly, however, paragons of virtue.

While critical, a regulatory framework only partially determines the effectiveness of policies. Local institutional and cultural contexts matter a great deal and can facilitate or render ineffective regulatory frameworks. The overall level of corruption and the quality of law enforcement and rule of law matter as much as the regulatory design itself. And in Indonesia they have a long way to go to improve.

As we were leaving Kutai, we stopped at a roadside shack to take some photographs of the destroyed forest. A local Dayak woman was selling various wares. While trying to talk us into buying parts of animals her father killed in the park, such as hornbill feathers, she told us that she frequently sees orangutans cross the paved highway. On either side of the road, there was little forest left – just palms as far as the eye could see. It was not clear to us where the orangutans would be going or why: Perhaps there is so little food left in the forest that even here, in a national park, they are forced to eat the insides of the African oil palms, a foraging coping mechanism that frequently puts them in conflict with people and gets them killed. While I was looking at the road and the destroyed forest, a paraphrase of the famous line from Cormac McCarthy’s post-apocalyptical novel The Road ran though my head: Borrowed time and borrowed world and whose eyes with which to sorrow it?

[1] See, for example, International Crisis Group, “Indonesia: Natural Resources and Law Enforcement,” December 20, 2001, http://www.crisisgroup.org/~/media/Files/asia/south-east-asia/indonesia/Indonesia%20Natural%20Resources%20and%20Law%20Enforcement.pdf.

[2] See also Samuel Spiegel, “Governance Institutions, Resource Rights Regimes, and the Informal Mining Sector: Regulatory Complexities in Indonesia,” World Development, 40(1), 2012: 189-205; and Gavin Hilson, “What Is Wrong with the Global Support Facility for Small-scale Mining?” Progress in Development Studies, (7)3, 2007: 235-249.

[3] For how decentralization has become excessive and distortive, see International Crisis Group, “Indonesia: Defying the State,” August 30, 2012, http://www.crisisgroup.org/~/media/Files/asia/south-east-asia/indonesia/b138-indonesia-defying-the-state.pdf.

[4] For examples of such compensation policies and their shortcoming in particularly institutional and regulatory settings in China, see, for example, Forest Trends (2006): 20. For an effective, but expensive compensation scheme that increased the amount of land protected from certain kinds of environmentally-damaging land in Colorado, the United States, from just under 350,000 acres in 2000 to almost one million in 2005, see “Mountains for the Centuries,” The Economist, 382(8514): 35.

[5] For other challenges for effectively implementing REDD+, see Vanda Felbab-Brown, “Not as Easy as Falling off a Log: The Illegal Timber Trade in the Asia-Pacific Region and Possible Mitigation Strategies,” Brookings Foreign Policy Working Paper No. 5, Brookings Institution, March 2011, http://www.brookings.edu/~/media/research/files/papers/2011/3/illegal%20logging%20felbabbrown/03_illegal_logging_felbabbrown.

[6] See, for example, Raymond Gullison, Peter Frumhoff, Joseph G. Canadell, Christopher B. Field, Daniel C. Nepstad, Katharine Hayhoe, Roni Avissar, Lisa M. Curran, Pierre Friedlingstein, Chris D. Jones, and Carlos Nobres “Tropical Forests and Climate Policy,” Science, 316, 2007: 985-986; and William Laurence, “Can Carbon Trading Save Vanishing Forests?” Bioscience, 58, 2008: 286-287.

[7] For how carbon offsets support such undesirable behavior in Papua New Guinea, for example, see Colin Filer, Rodney J. Keenan, Bryant J. Allen and John R. Mcalpine, “Deforestation and forest degradation in Papua New Guinea,” Annals of Forest Science, 66 (8), December 2009: 813-25.

[8] Pervaze A. Sheikh, Illegal Logging: Background and Issues, Congressional Research Service, June 9, 2008: 5. Even the FSC is not infallible, as was revealed with respect to illegal and unsustainable timber from Laos the FSC nonetheless certified. See, for example, World Rainforest Movement, “Laos: FSC Certified Timber Is Illegal,” http://www.illegal-logging.info/item_single.php?it_id=1683&it=news; and Wright and Carlton.

[9] The Economist, September 25, 2010: 13.

[10] Sam Lawson and Larry McFaul, “Illegal Logging and Related Trade: Indicators of Global Response,” Chatham House, July 2010: 77.

[11] See, for example, Environmental Investigative Agency, Behind the Veneer: How Indonesia’s Last Rainforests Are Being Felled for Flooring, 2006, http://www.eia-international.org/cgi/reports/reports.cgi?t=template&a=117.

[12] Lawson and MacFaul: 75-76.

Authors

Vanda Felbab-Brown

Image Source: © Stringer Indonesia / Reuters

Indonesia Field Report II – Bali High, Rainforest Low: The Illicit Drug Trade in Indonesia

Vanda Felbab-Brown — Wed, 06 Feb 2013 14:00:00 -0500

Yet another Western tourist – this time a 56- year-old grandmother from Britain – has become the face of drug trafficking in Indonesia. Her death sentence for smuggling 10 pounds of cocaine worth of $2.5 million in her suitcase has riveted international media. Her story – that she was coerced to smuggle the drugs in order to protect her children and grandchildren whose safety was at stake – vaguely resembles the misfortunes of Bridget Jones from the movie Bridget Jones: The Edge of Reason. But so far, no miraculous Mark Darcy has landed to liberate her from prison and death row. Rather, human rights groups have criticized the British government for not doing enough to provide an adequate legal defense for Ms. Lindsay Sandiford. But as unfortunate as her story is, and even as it is but one in a long line of Western tourists dramatically apprehended and punished for drug trafficking in Southeast Asia, it is to a great extent a distraction from the drug trafficking problems and trends that Indonesia faces.

Like other countries in Southeast Asia, Indonesia has for decades applied extremely harsh penalties for drug trafficking and drug use. Like in Ms. Sandiford’s case, Indonesian law punishes drug smuggling with the death penalty, or at least a decades-long imprisonment. Merely getting caught smoking a joint can land one in jail for several years. As with elsewhere in Southeast Asia, such harsh penalties have done little to decrease drug trafficking in Indonesia.

In fact, both drug use and drug trafficking appear to have increased in the country. In 2011, Indonesia’s user population was estimated to be approximately 4.1 million, or 1.6 percent of Indonesia’s total population. In 2009, that user population was believed to be only 500,000.[1] If the estimates are equally correct – or more precisely make the same (under)estimation mistakes for both years – that would be an astounding eight-fold increase in three years. The expansion of Indonesia’s middle class, its growing purchasing power underpinned by the country’s economic boom fueled by its primary commodity exploitation and resulting GDP growth rates of over six percent, the stress of increasing inequality, and the democratization and political opening of the post-1998 era are all the kinds of triggers that can increase illicit drug consumption. Just like in China, Indonesians have been developing a taste for methamphetamines, ecstasy, heroin, and ketamine.

If the number of drug seizures, which can be signs of both greater drug flows and greater law enforcement effectiveness, are any indication, trafficking too seems to be increasing. Drug shipments intercepted at the Soekarno Hatta International Airport in Jakarta, arguably the most patrolled and monitored port of entry into the country, have risen from 16 in 2008 to 63 in 2010 and 52 in 2011.[2] With over 18,000 islands and a coastline of over 54 thousand kilometers, the Indonesian archipelago offers the perfect geography for smuggling, never mind how under-resourced and notoriously corrupt the Indonesian law enforcement apparatus is, and how weak and bribery-susceptible the justice system. Even with much less corruption in Indonesia – as critical and pivotal an achievement as that would be – and far greater resources devoted to counternarcotics enforcement, Indonesia would still be the trafficker’s paradise. Particularly since for several years now, prices of illicit drugs in Indonesia are believed to have remained higher than elsewhere in Southeast Asia.[3]

With the poor rule of law and the pervasive and deeply-ingrained corruption that exists in the country, Indonesia’s law enforcement and military officials, even more so than their counterparts elsewhere in the world, are perfectly positioned to dominate Indonesia’s drug trade. The dramatic court showcases of Western tourists smuggling drugs aside, examples of military and law enforcement complicity in drug trafficking abound. Rather laughably, officials at one of Indonesia’s high-security prisons, for example, have been caught cooking meth and supplying both the prison and the nearby city.[4] According to U.S. diplomatic cables released by Wikileaks, Indonesian military commanders in West Papua have participated in all manner of smuggling, including drug and timber trafficking across the border with Papua New Guinea.[5]

Importantly, however, Indonesia is no longer just a transit country for illicit drugs heading to Australia, China, and Japan, but is also increasingly a destination country. It is also a hot and rapidly expanding meth production center. Since cold medications containing pseudoephedrine are sold in Indonesia without prescription or any registration required, as they used to be in the United States until the early 2000s, cooking meth is easy. A major producer of methamphetamines itself, China supplies the pseudoephedrine both to Indonesia’s pharmaceutical industry and illicit market in a rather unregulated and unmonitored manner.

Ever more, the meth cooks in Indonesia are native, instead of the Dutch who would arrive in their former colony to produce the methamphetamines. Indeed, one of the most important developments in the Indonesian drug market is the growth of Indonesia’s domestic production capacity. The expansion of the synthetic drugs market and the domestication of production have potentially large transformative effects on Indonesia’s landscape of organized crime. Western tourists may well be those most visibly apprehended in Indonesia, but the formation of powerful Indonesian drug-trafficking groups can radically transform the structure and characteristics of the Indonesian criminal market. The emergence of far more powerful and vertically-integrated drug-trafficking groups could alter the market’s proclivity toward violence. So far, it has been a rather peaceful market. It could also change the relationship between the Indonesian state, military and law enforcement officials, and politicians on the one hand and Indonesia’s criminal gangs on the other – a complex web described in Indonesia Field Report I on urban gangs. With far greater profits at stake than in the previous drugs-for-tourists deals, a large meth market is also bound to attract the attention of powerful organized crime groups from other Southeast Asian countries and China, potentially triggering turf wars over the market and once again fundamentally altering the relationship between state and crime in Indonesia. Already, members of Malaysian drug syndicates attempting to smuggle drugs are caught with increasing frequency at Jakarta’s airport.[6]

Although the growing meth market is potentially radically transformative of Indonesia’s criminal market and is certainly highly lucrative, Indonesia is hardly a newcomer to the drug trade. Along with Cambodia, the Philippines, and India, Indonesia has long been a significant producer of cannabis. The Aceh region in Sumatra has been one of the primary cultivation areas, with the pot profits funding Acehnese secessionists and Indonesian jihadists as well as poor farmers.

Historically, various foreign as well as domestic political actors profited from the illicit and licit drug trade in Indonesia. Opium poppy used to be cultivated in Borneo and other islands of the archipelago during the 19^th century. At the turn of the 20^th century, the Dutch imported opium from British India, Persia, and Turkey and sold it in legal government-sponsored shops and smoking outfits as well as to pharmaceutical companies. The Japanese occupation forces taxed the opium-processing factories as did Sukarno’s pro-independence forces who took over the factories from the Japanese. After the end of World War II, the pro-independence parallel government smuggled out large quantities of illegal opium to Singapore to generate revenues to fight the Dutch.[7]

More surprisingly, coca, the quintessential Latin American drug-producing plant, also used to be cultivated in Indonesia. During the 1870s, a Javanese coca cultivar was developed with leaves containing about 1.5 percent cocaine, a much higher potency than the South American coca varieties had at that time. Foreign sales of coca leaves subsequently boomed, with over 1,000 tons of leaves exported to Amsterdam for processing into cocaine in 1912. By 1920, coca exports had increased to 1,600 tons, equivalent to 25 tons of cocaine and surpassing the level of cultivation in Peru and Bolivia during that period.[8] As attitudes toward cocaine use began to change during the 1930s and the European market shrank, Indonesia’s coca cultivation and exports dwindled. By 1935, coca leaf exports from Java fell to less than 10 percent of peak production, and after a few years coca cultivation in Indonesia rather precipitously stopped. The expansion of the global illicit trade in cocaine after the 1970s fueled a massive coca cultivation expansion in the Andes, yet Indonesia’s cultivation has not returned. But now, the illicit market in synthetic drugs has robustly taken off.

Of the various smugglers I was able to interview in Indonesia during my research there in the fall of 2012, none were as reticent as the drug smugglers. Those who organized illegal mining and logging bragged with pride about their capacity to bribe Indonesian authorities – see Indonesia Field Trip Report III on illegal logging and mining. Wildlife poachers and traffickers exhibited with glee, and without any remorse, the animals they slaughtered – see Indonesia Field Trip Report IV on wildlife trafficking. But those who supposedly could talk about local drug peddling and trafficking were tight-lipped, nervously looking over their shoulders and denying any knowledge. The differential penalties – very harsh for drug trafficking and minimal for illegal logging, mining, and wildlife trafficking – may not have reduced the intensity of illicit drug flows in Indonesia, but they have silenced the participants in the illegal drug trade. And yet one needs to wonder not only about the readiness of Indonesia’s law enforcement to cope with the potential growth and power of Indonesia drug trafficking groups, but also about its priorities. The illicit drug trade often generates the most international opprobrium; yet it is the illicit as well as licit destruction of Indonesia’s biodiversity that is most pressing and requires urgent attention from the Indonesian government and law enforcement. After all, the drug trade is in renewable, nondepletable resources -- unlike Indonesia’s forests and unique species that are being overexploited and are disappearing at breakneck speed. Once they are gone, there is no way of bringing them back. Meth will be cooked and consumed decades from now. The only question is who will control the meth market and what kind of political power the market will generate.

[1] United States Department of State Bureau for International Narcotics and Law Enforcement Affairs, International Narcotics Control strategy Report, March 2012, http://www.state.gov/documents/organization/187109.pdf: 262-266.

[2] Multa Fidus, “Malaysian Syndicates Dominate Drug Smuggling in RI,” Jakarta Post, 26 April 2012, http://www.thejakartapost.com/news/2012/04/26/malaysian-syndicates-dominate-drug-smuggling-country.html.

[3] Interview with counternarcotics officials, Jakarta, October 2012. Given Indonesia’s rather limited and varied efforts to collect systematic drug data as well as frequent short-term fluctuations in drug prices, such assessments need to be taken with a grain of salt.

[4] Wahyudi Soeriaatmadja, “Indonesian Drug Trafficking Busts Doubled in 4 Years,” Jakarta Globe, 4 April 2011, http://www.thejakartaglobe.com/home/indonesian-drug-trafficking-busts-doubled-in-4-years/433371.

[5] Philip Dorling and Nick McKenzie, ‘Indonesian Army Linked to Drugs,” Sydney Morning Herald, 23 December 2010, http://www.smh.com.au/technology/technology-news/indonesian-army-linked-to-drugs-20101222-195kx.html.

[6] Fidus.

[7] Bertil Lintner, Blood Brothers (New York: Palgrave Macmillan, 2002): 290.

[8] David Musto, “International Traffic in Coca through the Early 20th Century, Drug and Alcohol Dependence, 49(2), January 1, 1998: 145-156.

Authors

Vanda Felbab-Brown

Image Source: © Supri Supri / Reuters

South Sudan: Searching for a Credible Development Path

John Mukum Mbaku — Mon, 04 Feb 2013 15:14:00 -0500

Framing the issue

South Sudan’s independence from the Republic of Sudan on July 9, 2011 was met with joy, trepidation and many challenges. Despite the fact that South Sudan is endowed with significant amounts of natural resources, the country faces many obstacles. These include a population suffering from significantly high levels of poverty and deprivation; extremely low levels of human capital accumulation; food insecurity; poorly developed economic infrastructure; pervasive bureaucratic corruption; a failure to deal with various internal security problems, some of which arise from violent mobilization by groups that consider themselves marginalized by the government in Juba; and continued conflict with the Republic of Sudan, especially on border issues. Although today, February 4, marks the stated completion date of the withdrawal of South Sudanese forces along its border with Sudan, South Sudan has failed to remove its troops.

South Sudan’s independence provided the new country with many opportunities to improve human development. However, in order for the peoples of South Sudan to translate these opportunities into sustainable development, the new government must bring about genuine institutional reforms. At independence, citizens of the new country had hoped that Juba would provide the wherewithal for all of the country’s relevant stakeholder groups to build and adopt institutional arrangements capable of adequately constraining state custodians (i.e., civil servants and political elites) and preventing them from behaving with impunity. Unfortunately, the government is yet to undertake the necessary reconstruction and reconstitution of the anachronistic and dysfunctional state structures inherited from the Khartoum-based regime. South Sudan’s civil society, which is supposed to pressure the government to undertake the necessary institutional reforms, remains extremely weak and fragile and is currently unable to adequately serve this critical role. While a private media is gradually developing, it has not yet achieved the ability and independence to function as an effective check on government, as well as put pressure on the government to fully perform its constitutionally assigned functions.

The failure of South Sudanese citizens to engage in democratic institutional reforms to provide themselves with institutional arrangements that guarantee the rule of law has left the government unable to effectively manage ethnic and religious diversity, minimize corruption and public financial malfeasance, and provide the enabling environment for the creation of the wealth that can be used to fight poverty and enhance human development.

The failure of South Sudanese citizens to engage in democratic institutional reforms to provide themselves with institutional arrangements that guarantee the rule of law [1] has left the government unable to effectively manage ethnic and religious diversity, minimize corruption and public financial malfeasance, and provide the enabling environment for the creation of the wealth that can be used to fight poverty and enhance human development. One, of course, can argue that the type of institutional reforms being suggested can only be accomplished with time. While that may be true, it is still the case that South Sudan cannot progress without appropriate institutional arrangements.

At a recent forum on oil and gas management in East Africa, held in Kampala, Uganda and organized by Brookings’ Africa Growth Initiative in cooperation with partners in Africa—the Economic Policy Research Center (Uganda), Kenya Institute for Public Policy Research and Analysis (Kenya), and the Center for Strategic Analyses and Research (South Sudan)—participants considered “constructive engagement” between government and a country’s relevant stakeholders as the most important way to enhance efficient and equitable management of natural resources. However, for such engagement to be productive, all parties have to be fully informed and that requires, at the very least, that government operate in an open and transparent fashion. Such engagement is especially critical for South Sudan where continued distrust of the government by various groups has fueled violent and destructive mobilizations. Some of this ethnic-induced violence is responsible for the country’s inability to attract investment and place itself on the path to sustainable development.

Grand corruption: a manifestation of institutional failure

According to an article by David Smith, published in The Guardian on June 5, 2012, South Sudan President Salva Kiir sent a letter dated May 3, 2012 to “75 current and former senior government staff” accusing them of stealing as much as $4 billion from the national treasury. In the same letter, President Kiir demanded that the money be returned and reminded the officials of the sacrifices made by many South Sudanese during the struggle for independence. According to Smith’s article, Kiir had declared: “We fought for freedom, justice and equality,” unfortunately, “once we got to power, we forgot what we fought for and began to enrich ourselves at the expense of our people.” The president added that “[p]eople in South Sudan are suffering and yet some government officials simply care about themselves.” Economists have long recognized self-interest as an important motivator for the behavior of individuals, whether they are in economic or political markets. As argued by Brennan and Buchanan in The Reason of Rules: Constitutional Political Economy, “man’s natural proclivity is to pursue his own interests and that different persons’ interests almost invariably come into conflict.” Thus, each society must design and adopt rules or what Adam Smith (1887) calls “laws and institutions” that coordinate the activities of individuals and provide for the peaceful resolution of any conflict arising from socio-political interaction. Perhaps, more important, is the fact that these laws and institutions serve as constraints on the state and effectively minimize the ability of civil servants and politicians to engage in any form of opportunism (e.g., corruption and rent-seeking). One cannot depend on the capacity of individuals—specifically those who serve in government and have responsibility for managing public funds—to love and care for their fellow citizens as a mechanism to prevent corruption and public financial malfeasance and enhance efficient public financial management. As President Kiir has already discovered, appeals to nationalism and patriotism are not sufficient as incentives to prevent public officials from engaging in corruption and other extra-legal schemes to enrich themselves. On the other hand, openness and transparency in government operations and communications would have a greater impact on corruption than the appeals that are coming out of the presidency. Unfortunately, South Sudan authorities continue to follow a policy of opacity, supposedly for reasons of national security.

Resumption of oil production

Shortly after South Sudan gained independence, the new country suspended production in its rich oil fields because of disagreements with the Republic of Sudan over charges for using Sudanese pipelines to transport the oil to export markets. South Sudan and the Republic of Sudan signed an agreement on various post-secession issues, including the common border, security and economic relations, according to the United Nations News Center, on September 27, 2012. The Government of South Sudan subsequently announced that oil production would resume by year’s end. However, various problems continue to prevent both South Sudan and the Republic of Sudan from resuming oil production. First, the two countries have still not withdrawn their armed forces from the disputed border area, effectively preventing South Sudan from getting its oil to export markets. Second, while in September 2012, both countries had agreed to set up a demilitarized buffer zone around the oil fields located on the border, this has not yet been accomplished and the area remains heavily armed. Third, Khartoum continues to insist that it would not resume oil production until all security arrangements between the two countries are completed. Finally, Khartoum has accused Juba of providing support to the Sudan People’s Liberation Movement-North (SPLM-North), which had supported South Sudan during its fight for independence and which now controls part of Sudan’s side of the border. Many observers, including important players such as the President of Nigeria, Goodluck Jonathan, have stated that direct talks and cooperation between Juba and Khartoum are critical for the achievement of the peace necessary for the resumption of oil production and the promotion of economic growth and development. However, there is progress. In mid-January, Juba announced a withdrawal of its military forces from the border area and hoped to complete the process by today, February 4, 2013. Juba hoped that Khartoum would act similarly, allowing the buffer zone to be established and, should that happen, the way could be cleared for oil production to resume. Unfortunately, South Sudan has not even begun to withdraw.

Given the fact that oil revenues account for as much as 90 percent of public revenues for the Government of South Sudan, resumption of production should significantly increase the flow of revenues into the national treasury. This development would have significant implications for public financial management, an area that is traditionally ripe with opportunities for corruption and other forms of malfeasance. Unfortunately, the country’s present set of institutional arrangements is not capable of adequately constraining civil servants and politicians and preventing them from plundering oil royalties. In the short run, the government must fully implement and pay fidelity to the Extractive Industries Transparency Initiative. This will require the country to abandon opacity and, instead, follow a policy of openness and transparency in public financial management. Such an approach would significantly enhance the ability of the government to minimize the various forms of grand corruption, which are usually endemic to public sectors characterized by significant levels of secrecy. However, in the long run, the government must provide all relevant stakeholders with the facilities to engage in comprehensive institutional reforms to create governance institutions that guarantee the rule of law.

A new anti-corruption campaign?

The government of President Kiir has launched a new anti-corruption campaign, which has included a decree demanding that all public officials submit a declaration of assets to the country’s anti-corruption commission. One can immediately recognize two problems with this program: First, presidential decrees—an essentially top-down approach—are not the most effective way to deal with as pervasive a problem as corruption. Like many other problems that this young country faces, dealing effectively with corruption requires the adoption of a participatory and bottom-up approach to policy design and implementation—this is part of the constructive engagement that participants at the AGI-sponsored Kampala forum spoke of. Second, during the last several decades, many African countries have taken similar elite-driven, top-down approaches to corruption control, including asset declaration and the prohibition of public officials from engaging in entrepreneurial activities while in office, and none have worked. In fact, civil servants and political elites in these countries have been able to easily subvert these constraints, by, for example, placing their assets in the names of relatives and forming business enterprises in which they remain silent partners. With the advent of electronic funds transfer, it has become relatively easy for civil servants and politicians to place their ill-gotten gains outside the purview of the government. In fact, as President Kiir’s letter indicated, a lot of the money stolen from South Sudan’s national treasury has “been taken out of the country and deposited in foreign accounts,” as noted in the Smith article in The Guardian. It is generally believed in Juba that a lot of the stolen money either now resides in Kenyan financial institutions or has been used to purchase real property there. In any case, the money is out of the reach of South Sudan authorities and, unfortunately, Juba does not have the capacity to recover these badly-needed funds.

The challenge for 2013

South Sudan faces a lot of challenges in 2013. Despite the agreement signed between the two countries in September 2012, the border issue remains essentially unresolved. However, the decision by Juba to unilaterally withdraw its army from the border should improve opportunities for setting up the buffer zone, which is necessary for the resumption of oil production.

Minimizing destructive ethnic conflict, achieving food security, providing employment opportunities for restless urban youth, improving the country’s economic infrastructures, diversifying the economy and reducing its dependence on oil, and generally placing the country on the road to sustainable economic growth and development remain major problems. It is important, however, to emphasize that South Sudan will remain in its underdevelopment trap until such a time that it provides itself, through democratic (i.e., bottom-up, people-driven, participatory and inclusive) constitution-making, with institutional arrangements that guarantee the rule of law. For, without a set of laws and institutions that adequately constrains civil servants and politicians, the latter will continue to consider themselves above the law and behave with impunity. Hence, the most important challenge for the government of South Sudan in 2013 is the reconstruction and reconstitution of the post-colonial state through democratic constitution making to provide institutional arrangements that (i) adequately constrain the state (and hence, prevent its custodians—that is, civil servants and political elites—from engaging in the various forms of opportunism), (ii) provide effective mechanisms for the management of ethnic and religious diversity, (iii) create an enabling environment for entrepreneurial activities and the creation of wealth, and (iv) generally improve the country’s ability to participate in and benefit from the global economy.

Footnote

[1] While the “rule of law” is a complex concept, some of its important elements include “supremacy of law”—that is, all citizens are subject to the law, including those who serve in executive, legislative and judicial positions; judicial independence; openness and transparency in government operations; and protection of human rights. If, for example, there is a constitutional guarantee of the supremacy of law, then those who serve in government (e.g., civil servants and politicians) would find it difficult to act with impunity and engage in behaviors such as corruption and rent-seeking to enrich themselves.

References

Boswell, Alan, “American Expelled from South Sudan for Anti-corruption Work,” The Miami Herald, August 20, 2012, accessed on November 1, 2012, http://www.mcclatchydc.com/2012/08/20/162893/american-expelled-from-south-sudan.html.

Brennan, Geoffrey Brennan and James M. Buchanan, The Reason of Rules: Constitutional Political Economy, Cambridge, UK: Cambridge University Press, 1985, ix.

Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, London: T. Nelson and Sons, 1887, 40.

Authors

John Mukum Mbaku

Image Source: © Thomas Mukoya / Reuters

China in Revolution and War

Cheng Li — Thu, 17 Jan 2013 00:00:00 -0500

Several serious problems in China could trigger a major crisis, potentially igniting either a domestic revolution or foreign war. Cheng Li wrote this memorandum to President Obama as part of Big Bets and Black Swans: A Presidential Briefing Book.

What challenges does the Chinese Communist Party face?
What does the Chinese Politburo need to do about these challenges?
How can the United States prevent any Asian states from engaging in the use of force?

Download Memorandum (pdf) | Download the Presidential Briefing Book (pdf)

TO: President Obama

FROM: Cheng Li

China poses a major policy challenge to the United States largely because of the unpredictable trajectory of both its domestic transformation and foreign relations. While there has been much attention paid to China’s rapid economic rise and growing international clout, two other scenarios have been overlooked: domestic revolution and foreign war. There are many serious problems in China that could trigger a major crisis, including slowing economic growth, widespread social unrest, rampant official corruption, vicious elite infighting, and heightened Chinese nationalism in the wake of escalated tensions over territorial disputes with Japan and some Southeast Asian countries. This suggests that your administration should not easily dismiss the possibility that revolution or war might occur. Either event would be very disruptive, severely impairing global economic development and regional security in the Asia-Pacific; a combination of the two would constitute one of the most complicated foreign policy problems of your second term.

Recommendation:

The best way to prepare in advance for either likelihood is for this White House to cultivate a deeper relationship with Xi Jinping and his new leadership team, maximizing cooperation in various areas. In establishing a constructive relationship with the new Chinese leadership, the United States should be fully aware not only of the daunting challenges that Xi and the Chinese Communist Party (CCP) confront on both domestic and international fronts, but also the uncertain nature of Xi’s policy trajectory and of Chinese public opinion about the new Party boss.

There are two particularly undesirable outcomes. One is a situation in which the vast majority of the Chinese public becomes both anti-CCP leadership and anti-American. The other is a situation in which Xi derives his popularity from a strong endorsement of Chinese militarism.

To avert the first you should, while engaging with the Chinese leadership, more explicitly articulate to the Chinese people both the longstanding goodwill that the United States has towards China and America’s firm commitment to democracy, human rights, media freedom, and the rule of law, which the United States believes are fundamental to the long-term stability of any country.

To decrease the likelihood of the second — a conflict in the region that could involve the United States directly — you should more consistently exert American influence on U.S. allies or partners (including China) in the Asia-Pacific region to prevent the use of force by any party. Simultaneously, promoting military-to-military ties with the new PLA leadership should be a top priority.

Background:

China in Revolution: Anti-CCP, Anti-America

The scenario of abrupt bottom-up revolution occurring in China has recently generated much debate within that country. One of the most popular books in elite circles today is the Chinese translation of Alexis de Tocqueville’s 1856 classic The Old Regime and the Revolution. Senior leaders of the CCP (most noticeably Premier-designate Li Keqiang and new member of the Politburo Standing Committee Wang Qishan) were reported to have strongly recommended that officials read the book. In speeches given after becoming Party General Secretary, Xi warned that the Party could collapse if the leadership failed to seize the opportunity to reform and improve governance.

The fear and anxiety on the part of the CCP leadership seem well grounded given the daunting challenges the Party confronts:

• China’s GDP growth target of 7.5 percent for 2012 was the lowest since 1990 (in the aftermath of the Tiananmen incident). This downturn is not only the result of flagging exports in the wake of the Eurozone crisis, but also the country’s own political bottlenecks. This slowdown will, in turn, further reveal flaws in the Chinese authoritarian system and thus could become a trigger for political crises.

• Economic inequality is increasing substantially. The Gini coefficient rose to 0.47 in 2009 and then to 0.61 in 2010, far exceeding the 0.44 threshold generally thought to indicate potential for social destabilization.

• China’s official data reveal that there are roughly 180,000 mass protests annually, or about 500 incidents per day. According to the Chinese official media, these protests have become increasingly violent in recent years, especially in ethnic minority regions.

• Corruption is out of control. The latest report by Washington-based Global Financial Integrity (GFI) shows that cumulative illicit financial flows from China (primarily by corrupt officials) totaled a massive $3.8 trillion from 2000 to 2011.

These problems have generated even more public resentment due to the unprecedented predominance of “princelings” in power — leaders who come from families of high-ranking officials. Four of the seven Politburo Standing Committee members, including Xi Jinping, are princelings. Large numbers of prominent Party leaders and their families have used their political power to convert state assets into private wealth; this includes transfers to family relatives who live, work, or study in the United States and other Western countries. The dominance of princelings in the new leadership is not only undermining elite cohesion and the factional balance of power, but is also generating cynicism among the Chinese public regarding any promises on the part of the leadership to tackle corruption. Furthermore, it may add ammunition to the sensational accusation that the United States provides a haven for corrupt CCP officials.

China in War: The Rise of Chinese Militarism under Xi

From the Chinese perspective, the first scenario of domestic revolution could result from a failure of the Xi Jinping leadership to adopt effective political reforms to prevent crisis; the second scenario —that of China in war — may be considered one possible “successful” attempt by Xi to consolidate power. This does not necessarily mean that the Chinese leadership intends to distract domestic tensions with an international conflict; contemporary Chinese history shows that the practice of trying to distract the public from domestic problems by playing up foreign conflicts has often ended in regime change. Yet Xi may be cornered into taking a confrontational approach to foreign policy in order to deflect criticism of his own strong foreign connections.

You need to be alert for warning signs that might point in this direction, especially the increasing anti-American rhetoric in both the Chinese official media and in diplomatic channels. Xi can be quite assertive in his approach to the United States. This was evident during his visit to Mexico in 2009 when he criticized what he termed the “bored foreigners, with full stomachs, who have nothing better to do than point fingers at China.”

Even more importantly, your administration needs to pay attention to the emergence of militarism among some military officers, especially the princelings within the PLA. Chinese analysts have observed that these military princelings are interested in bolstering the military’s power in the upcoming Xi era. Such a move would have the potential to increase the risk of both military interference in domestic politics and military conflicts in foreign relations.

Conclusion:

It is not in U.S. interest to see China’s transition to a constitutional democracy proceed in a manner overwhelmingly destructive to China’s social stability or its peaceful relations with any of its neighboring countries, which would risk leading the United States into war. Clarifying to the Chinese public that the United States neither aims to contain China nor is oblivious to their national and historical sentiment would help reduce anxiety and possible hostility across the Pacific. Second, enhanced contact between U.S. and Chinese civilian and military policymakers can help us better understand the decision-making processes and domestic dynamics within China. It can also aid us in heading off a regional conflict. Finally, when done within a broader strategy with all U.S. allies and neighbors in the region, it could reassure China that the United States is not only firmly committed to its regional security framework in the Asia-Pacific, but also genuinely interested in finding a broadly acceptable solution to the various disputes.

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Authors

Cheng Li

Top Priorities for Africa in 2013

Wed, 09 Jan 2013 10:30:00 -0500

Event Information

January 9, 2013
10:30 AM - 12:00 PM EST

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

African countries start the new year with hope and optimism, as many continue to improve governance, deepen economic growth and advance democratic reforms. However, instability in the Democratic Republic of the Congo, rising extremism in Mali and Nigeria, and ongoing youth unemployment in much of the continent make the great expectations for Africa seem fragile at times.

On January 9, the Africa Growth Initiative at Brookings hosted a discussion with leading African experts on what the most pressing issues and challenges are for the continent in 2013. The panel included: Professor Jeffrey Sachs of Columbia University, who appeared via video conference; Laura Seay, assistant professor at Morehouse College; Steve Radelet, distinguished professor at Georgetown University; and Senior Fellow Mwangi Kimenyi, director of the Africa Growth Initiative at Brookings. Isha Sesay, anchor on CNN International, moderated the discussion.

The event follows the release of the new Foresight Africa report, a collection of short briefs on the major issues for Africa in 2013.

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Audio

Top Priorities for Africa in 2013

Key Perspectives on Africa’s Development in 2012

Mwangi S. Kimenyi — Tue, 08 Jan 2013 15:55:00 -0500

The Brookings Africa Growth Initiative 2013 Foresight Africa report highlights some of the key issues and events that are likely to impact on Africa’s development this year. As we look forward to the some of the key priorities for the continent in 2013, it is also appropriate look at the various themes and perspectives that dominated discussions on Africa’s development in 2012, many of which we can expect to remain priorities in 2013. Below are some of themes and my perspectives on how they will continue to be relevant this year:

Inclusive Growth

One of the most common themes in Africa’s development in 2012 was inclusive growth. Although most of the African countries have experienced decent growth rates for over a decade, the benefits of this growth have not been widely shared and have instead been concentrated among just a few members of the population. As a result, the continent has experienced increasing disparity of incomes and overall human development. Thus while the high growth rates have earned Africa praise, growth that is not shared by a larger proportion of the population has the potential to create political instability and it is ultimately also not sustainable. How to achieve inclusive growth will remain important in the future and the priority should be to implement workable strategies that have been identified in discussions and policy documents.

Regional Integration

Accelerating the pace of regional integration was another common theme at various policy forums and conferences on Africa and in several publications in 2012. The importance of regional integration to Africa’s development was highlighted at the African Heads of State Summit held early last year during which country leaders committed to accelerate the pace of continental integration with the goal of reaching a continental free trade area by 2013. Regional integration is key to achieving sustained growth in Africa especially through the facilitation of intra-Africa Trade. While there has been significant progress in removing trade barriers, much more needs to be done. The process of regional integration is at a tipping point and this is an issue demanding political will on the part of African leadership and also support from the international community. Probably the most daunting challenge to regional integration is Africa’s huge infrastructure deficit. Yet the infrastructure deficit is a great opportunity for international investors. For meaningful regional integration to be achieved in the continent, African leaders must seek to put in place modalities to attract infrastructure investment.

Youth and Jobs

Joblessness especially among the youth was yet another theme that featured prominently in discussions on African development. Today, Africa has the youngest population in the world and this could be either a blessing or a curse. Unfortunately, most of Africa’s youth population is low skilled and unemployed. Dealing with the issue of youth and jobs will remain a key challenge for Africa and must remain a top priority for African governments. This topic is appropriately covered in the Foresight Africa 2013 report.

Mobile Technologies

Another important theme in Africa’s development last year was on the application of mobile technologies to deal with various development problems and challenges. Mobile technologies have provided great opportunities for development in Africa over the last decade. Most important has been the adoption of mobile phone financial services as well as using mobiles to communicate information on various services, including health, market prices, etc. In some countries, the application of mobile technologies has revolutionized ways of doing business and has been responsible for a sizeable share of the gross national product. However, the success of the use of these technologies varies widely and many questions still remain. Mobile technologies provide great opportunities for African countries to leapfrog development and their development and application will continue to be critical in 2013 and beyond.

Governance of Natural Resources

Natural resources continue to dominate discussions on Africa’s development and much has been written about it. In 2012, several conferences and policy forums focused on the issue of natural resources and specifically on the governance of these resources. Unfortunately it is all too well known that natural resources in Africa have turned out to be more of a curse than a blessing. The most natural resource-endowed countries are also some of the poorest. They are also often characterized by high levels of civil conflict and corruption. In recent years, many African countries have discovered more and new resources especially natural gas and oil. This means that natural resources will continue to be very important to Africa’s development but only if appropriate institutions for their governance are in place.

Improving Service Delivery

Finally, a crucial theme for Africa’s development last year was in the efficient and effective delivery of services—education, health, water and sanitation. To an extent, the heightened interest in service delivery is motivated by the realization that most African countries are not on track to meet the Millennium Development Goals (MDGs). Even where there has been impressive performance such as in the case of primary school enrollments, the reality is that children are going to school but the quality of learning is very poor. For a long time, the problem of poor access to quality services was attributed to low resources devoted to the provision of these critical services. However, evidence shows that the poor quality of service delivery in Africa has less to do with resources and much more to the poor governance and weak accountability ; for example, often teachers and medical personnel do not show up for work and, when they do, they are not accountable if they do not perform well. In other cases, resources meant to provide the services never end up reaching the intended beneficiaries. Therefore, in order to meet the MDGs in 2015, a strong focus should be placed on the governance of delivering services and increasing accountability.

Authors

Mwangi S. Kimenyi

Putin's Artful Jurisprudence

William Partlett — Wed, 02 Jan 2013 00:00:00 -0500

At 8:00 P.M., Moscow time, on September 21, 1993, Russian president Boris Yeltsin read out an emergency decree on national television. Blaming Russian parliamentary leaders for ignoring the will of the Russian people, Yeltsin abolished the existing constitution and disbanded every legislative assembly in Russia. Russian parliamentary leaders immediately called an emergency session and removed Yeltsin for treason. They named his vice president, Alexander Rutskoi, acting president. The Russian Constitutional Court chairman, Valery Zorkin, then appeared before Parliament and reported that a majority of the court had found Yeltsin’s decree unconstitutional. Russia now had two presidents.

These two presidents eyed each other warily across a tense Moscow for more than a week. They issued competing laws and decrees to strengthen their respective positions. With the backing of the West and the Russian armed forces, Yeltsin quarantined the Russian Parliament in its building. The Parliament surrounded itself with armed supporters and called for a general strike. Fears of civil war spread as both sides sought to gain support and project political legitimacy. Amid this “war of laws,” legality broke down. Chairman Zorkin frantically sought to forge a compromise that would restore the political struggle to a legal plane.

Zorkin’s effort failed. After a series of armed street clashes, Yeltsin ordered the army to storm the Russian Parliament. A shocked Russian populace looked on as tanks took up positions across from Parliament. As tank shells slammed into the building, Rutskoi called Zorkin and asked him to alert the embassies. He went on: “They won’t let us out of here alive. Is the world community actually going to let them shoot the witnesses? There’ll have to be an investigation later, you know. They’re murderers! Do you understand me? You’re a believer, it will be on your head.”

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Authors

William Partlett

Publication: The National Interest

Ukraine: Digging in Deeper on Tymoshenko

Steven Pifer — Thu, 20 Dec 2012 00:00:00 -0500

Editor's Note: This article was originally published in Russian by the Korrespondent.

The Ukrainian government is using American lawyers to persuade the West of the legitimacy of the imprisonment of Yuliya Tymoshenko. This will turn out to be a losing game.

The Ukrainian Ministry of Justice’s release of an American law firm’s assessment of the trial of former Prime Minister Tymoshenko suggests the Ukrainian government will continue to argue to Europe and the United States that Tymoshenko is guilty and deserves to be in prison. Such a campaign will cost time, energy and money … and it almost certainly will fail. It will then be even more difficult for official Kyiv to find a face-saving way out of the hole it has dug itself into over Tymoshenko.

When one is in a hole, the first rule is to stop digging. But Kyiv instead may now be digging itself in deeper. The report by the American law firm Skadden Arps Slate Meagher & Flom, LLP, publicly released on December 13, paints an unflattering picture of the judicial process against Tymoshenko. Among other things, the firm’s lawyers express concern about Tymoshenko’s incarceration during her trial, the testimony of witnesses when she had no counsel present, and the court’s refusal to call certain defense witnesses. The Ministry of Justice nevertheless apparently welcomes the report’s conclusion that this was not, narrowly defined, a case of selective prosecution.

Tymoshenko was convicted in October 2011 on charges of abusing her office. Those charges stemmed from a contract for the purchase of gas that she concluded with Russia in January 2009.

To the extent that the contract had flaws, the West saw it as a political or commercial mistake, not a criminal matter. One could even say that Tymoshenko paid for this (and other political mistakes) in February 2010, when she lost the presidential election to Victor Yanukovych. Tymoshenko’s trial was widely viewed, both within and outside of Ukraine, as a judicial farce.

The American firm’s report has been received in the West with some skepticism, in part because it was commissioned by the Ministry of Justice and because of questions about who financed the American lawyers’ work. The U.S. Department of State’s spokesperson said: "By confining themselves to simply looking at the paper trial records and ignoring the larger political context in which the trial took place, our concern is that Skadden Arps lawyers were obviously not going to find political motivation if they weren't looking for it. The report also fails to consider the selective nature of the cases [against Tymoshenko and members of her government] …”

Even setting aside these questions, few, if any, in the West will be interested in debating the merits of the case now. They lack the knowledge of Ukrainian law. They will not have access to all the facts in the matter. And they will not hear counter-arguments by Tymoshenko’s defense. So how can they be expected to make any kind of reasonable judgment regarding the trial or the Skadden Arps report? If the Ukrainian government believes that it can now, in effect, succeed in changing the attitude toward the Tymoshenko case in Europe and in Washington, well, lots of luck with that. But that is a serious mistake.

Tymoshenko is not the saint that some of her defenders portray. But the Ukrainian government does not appear able to understand that, in the matter of the former prime minister, it lost the public relations battle long ago. Why? Because everyone saw a madcap effort by the Prosecutor General’s Office to find something—anything—as grounds on which to take Tymoshenko to court. First, there were assertions that she had abused her office by misusing funds that Ukraine received from Japan under the Kyoto Protocol. Then there were claims that she had abused her office by issuing resolutions regarding the purchase of ambulances. When these charges failed to stick, the Prosecutor General’s Office turned to charges regarding the gas contract. On this case, the Prosecutor General’s Office and Ministry of Justice have no credibility with Europe and the United States.

Kyiv will not manage to persuade the West of the legitimacy of its handling of Tymoshenko. If the Ukrainian government now pursues a campaign to try to do so, its relations with the West will remain stuck in a dead end: the European Union will not move forward with the association agreement, including the deep and comprehensive free trade arrangement; Yanukovych will find that he has even fewer meetings with senior Western leaders; and talk will grow in the U.S. Congress about possible sanctions on Ukraine.

Ultimately, official Kyiv will realize that its campaign has failed, after wasting money, energy and time. The government will then have to decide whether to seriously address the issues, such as Tymoshenko’s case, that have caused the downturn in its relations with the West over the past two years. Having dug even deeper into the hole, it will then likely be even more difficult for Kyiv to extract itself, especially without losing face.

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Authors

Steven Pifer

Publication: Korrespondent

Discordant Development and Insecurity in Africa

Richard Joseph — Wed, 19 Dec 2012 09:49:00 -0500

Editor's Note: This chapter is part of the 2013 Foresight Africa full report, which details the top priorities for Africa in the coming year. Read the full report here.

Richard Joseph explores how “discordant development”—deepening inequalities and rapid progress juxtaposed with group distress— is often one of the root causes of uncertainty, insecurity and violent conflict in Africa. For example, Mali and Ghana have experienced similar growth rates but Mali is sundered and in disarray, while Ghana has experienced both political and economic progress.

Joseph discusses the causes of discordant development and provides recommendations for how policymakers can begin tackling this problem in order to address broader issues of insecurity. Joseph contends that sustaining growth and avoiding discordant development require not only enlightened leaders but also robust democratic institutions and vigilant civil societies. He warns development officers and political leaders against viewing Africa solely through “polarizing lenses,” either screening out security challenges in growing economies or overlooking axes of growth in conflict-plagued societies.

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Authors

Richard Joseph

Transnational Organized Crime: Whither Antidrug Policy?

Vanda Felbab-Brown — Thu, 06 Dec 2012 00:00:00 -0500

Editor's note: In an interview with Ania Calderón of the Journal of International Affairs (Vol. 66, No. 1, Fall/Winter 2012 page 169) Vanda Felbab-Brown analyzes the unprecedented pace at which the illicit drug trade is expanding.

Journal of International Affairs: Given that transnational organized crime and insurgency are correlated, though not always, and not everywhere, in your perspective, what are the causes of the relationships when these two do combine?

Vanda Felbab-Brown: In the case of drug trafficking, for example, there are many parts of the world where illicit economies include this type of organized crime. In arguably every single country of the world, there is some aspect of the drug trade; many of them consume, but they usually also generate some level of trafficking as well. Some areas are very big production centers while others are not, but today there is some level of consumption in almost every country, even if it is very small. Production seems to be more concentrated than consumption. Comparatively, there are far fewer places where you have some level of militancy, and usually the two emerge quite separately and independently from each other.

Insurgents rarely start the drug trade. More often than not, what happens is that the drug trade exists in some robust fashion where there are similar types of underlying conditions, such as poor governance, a lack of state presence, and a militant statute operating the area. Eventually, governments have to make decisions on how to react to the drug trade. Do they try to suppress it or, for ideological reasons, do they embrace it? Under some circumstances, do they transform it?

Some argue that participation in the illegal economy transforms the insurgents, in that they stop having political goals and become simply motivated by profit. This argument is often made about the Revolutionary Armed Forces of Colombia, or FARC, for example. I find it simplistic and often inaccurate. Insurgents shape the illicit economy as a result of their militant presence as well as militant patterns of behavior, including organizational capacity, tactics, strategies, and often their goals as well. I cannot think of a case where insurgents themselves are the illicit economy. They usually lack organizational capacity. Nonetheless, they develop what we call the technology of illegality, meaning that they develop the capacity and the network to participate in the drug trade, as well as the knowledge to switch to other illicit trades in which they can participate.

Journal: How would you explain the difference between countries with drug trafficking and violence—for example Mexico, Colombia, or other countries in Central America—and countries with drug trafficking and related violence—such as the United States, Spain, France, or even England?

Felbab-Brown: This is a very appropriate question and one that is often lost in the debate. When you hear the perspective from Latin American governments, and frequently Latin American scholars, they do not make the distinction, and they blame the fact that drug trade means that there is violence. That is not the case. One can take the yakuza in Japan for example. Their primary activity is not drug trafficking; it is essentially that of the mafia, mainly extortion and enforcement of contracts, as well as construction. Nonetheless, the yakuza is the primary distributor of the drug business structure in Japan, and it is an extraordinarily peaceful market. The same happens in the United States—there is a very peaceful market today unlike in the 1980s, especially in a place like Washington, D.C.

So many sectors determine the level of violence, but the critical one is the capacity of law enforcement, i.e., capacity in terms of numbers. But equally critical is capacity in terms of the ability to develop strategies appropriate to the threat that they are facing. To put it less abstractly, it is the capacity of law enforcement to deter certain types of behavior so as to shape the behavior of criminals. I often say that we have to distinguish the key activities of law enforcement with respect to transactional crimes as opposed to predatory crimes. Transactional crimes are something like trafficking, and predatory crimes are something like murder or robbery.

The purpose of law enforcement, with respect to transactional crimes, is to make sure that they have “good” criminals. What does it mean to have good criminals? Essentially, three things: one, that criminals who are participating in the transactional crimes are not too violent. In other words, you want to have the kind of traffickers that you have in the United States. Often these are the same groups that operate in Mexico, but when they are arrested, they do not react by shooting at the policemen; they react instead by extending their hands to allow for the handcuffs to be placed on them, because they understand the consequences of being a major challenge to the state of law enforcement, and that it is not tolerated. So my first criterion of a good criminal is one who is not too violent. There is always a degree of violence in most criminal life. In drug trafficking, you have violence that is inescapable for a variety of reasons, but there are nonetheless great differences in whether you have five murders per one hundred thousand or one hundred murders per one hundred thousand.

A second criterion of a good criminal is one who does not have much capacity to be corrupt. What does that mean? Well, criminals will always be able to bribe border patrol, or customs officers, or even policemen, but they should not have the capacity to buy entire police precincts or entire cities. Preventing this does not necessarily take place through state actions against the criminals—although those can send deterrence messages as well—but through governments’ own auditing mechanisms of their institutions. So this is more about playing defense by securing institutions rather than playing offense with respect to the criminal.

Finally, my third criterion for a good criminal is one who does not provide as many services to society, i.e., a criminal on whom society does not depend for shared economic advancement, justice delivery, distributive resolution mechanisms, or for the provision of security. Once again, this is something that you do not necessarily condition the criminal to do or not do. The state needs to out-compete the criminal by being the provider of these public goods or services.

Now, how does all of this trigger violence? A critical factor is the capacity of law enforcement. It is not inherent that illegal economies, including the drug trade, are violent. There is great variation. But there are other factors apart from the quality of law enforcement, such as the central balances of power within the criminal market. Are there few groups that have developed a balance of power and defined territories, or many small groups that constitute a slim market of mom-and-pop types of enterprises that do not have the capacity to trigger or generate any violence? Or is there a power imbalance in the system, where the decision of one group within the criminal market can pull the entire system into something that interferes with the capacity of law enforcement and that also operates independently of law enforcement?

There are other factors at play, like the age of the managers, also called capos. There is quite a bit of evidence that the younger the capos, the more violent the market. Most of the time, the people who are killers tend to be very young, usually in their twenties and sometimes much younger than that. In the late 1990s, Hong Kong and Macau were trying hard to hide the major escalation of violence between the Chinese tong and the triads (both are terms for Chinese crime syndicates). The reaction by the police chief in Macau was somewhat humorous and absurd, but at the same time not completely so. In an effort to assure people, especially tourists coming to Macau, that they did not need to be afraid of all the gang violence, he claimed that Macau had “professional killers who don’t miss their targets,” and who never kill innocent bystanders. In Mexico today, you have very much the opposite, such as a boy being hired to kill ten people in the hope of getting among them the intended victim. This is very different from when someone pays $400,000, for example, to hire a professional hit man to kill one person. It is a very different market that has a lot to do with internal management and the agent capacity of the criminal manager, as well as the capacity of the law enforcement.

There is a debate about the extent to which guns influence violence levels. Many people say that the more guns, the more violence. I tend to have a more nuanced and certainly more of an outside view on that. I believe there is very strong evidence that weapons cargo influences street level violence—for example, the escalation of street disputes among boys into an armed encounter, such as a dispute over a girlfriend, or a dispute in a pub. There is very strong evidence that controlling weapons reduces these kinds of killings. I do not think there is robust evidence at all that strategic violence among criminal groups is triggered by the prevalence of weapons. They almost always have weapons, and they almost always have access to weapons.

Journal: Could you give a few examples of the role of the state in increasing the scale of transnational organized crime, even though it may be unintended, and what policies or programs have been successful in diminishing or even controlling it?

Felbab-Brown: Actually, it is not always unintended that the state scales up or intensifies organized crime—sometimes it is very much intended. In some countries, the state is quite indistinguishable from organized crime. They are popularly called mafia states. In other cases, you have inadvertent consequences. In Mexico, the way President Calderón chose to confront the drug trafficking groups greatly intensified the violence. His administration inherited a law enforcement that had collapsed after decades of tolerance or so-called management of organized crime. He also chose a tactic that greatly intensified the violence: exerting an assertive message. Often, policy interventions can have other unintended consequences in shaping organized crime in a way that might not necessarily be good. There are many common policies, such as standing up for strife in the communities of a country, which is a double-edged sword. Specialized interdiction units often have a history of becoming sophisticated coup forces. You can have other policy interventions, such as eradication, that identifies insurgency or shifts drugs to even more problematic areas.

On the positive side, I think the United States is an example of mass progress in fighting organized crime. In the twenties, thirties, forties, and fifties, many police departments were too corrupt to control organized crime groups. In the seventies and the eighties, there was a major cleaning up of these departments. Some of it had to do with law enforcement and some had to do with taxes, which resulted in a demographic shift, moving minorities, including the Italians, out of the ghetto and toward living in a more diversified manner within the larger population. The absence of their concentration shifted the power of organized crime, which had earlier mobilized and controlled neighborhoods.

Italy is another success story. I would say it is far less complete than the United States and far more challenging, but nonetheless the power of the mafia and the tolerance of the mafia were very much challenged. There are also organized crime groups that do not get much attention, such as in India, which are very powerful, but not very violent. And then you have Latin America as the outlier, not just by the presence of organized crime but because of the violence levels generated by the organized crime groups. Only parts of Saharan Africa are on par with violence in Latin America, and their organized crime tends to be shaped very differently.

Journal: You mentioned in your book, Shooting Up, that governments need to think about which illicit transaction in the economy will replace the one they have eliminated. What should be the role of the government in controlling one over the other, and specifically how should this be addressed on an international scale in a globalized economy?

Felbab-Brown: This is a very controversial question. Most of the time governments tend to fight illicit economies and not think about what will replace them. Policies are often premised on the erroneous idea that simply suppressing a particular part of the illicit economy will mean that legality will emerge. Frequently that does not happen, especially when large segments of the population cannot participate in the legal economy and are dependent on illegality for their survival. In those cases in particular, the propensity towards shifting to other forms of illegality is very high. On the other hand, if you have a finite supply of traffickers and a large segment of the population that does not depend on illegality, then it is quite possible that suppression alone will be sufficient, and no replacement economy will arise. In the case of global networks that have large societal dependence and participation in illegality, it is almost impossible to make sure that if you suppress one illicit economy, another one will not emerge.

So it mostly depends on the setting. There are some illicit economies that need to be the priority when it comes to suppression—smuggling nuclear materials, for example. This is an economy that is rather minimal in scale but nonetheless the consequences could potentially be so exorbitant that suppressing it needs to be a priority. The priority, in my view, should be to think about which illicit economy is the most dangerous and poses the greatest harm, and to focus on methods to minimize that economy.

But there are some tough questions in this area. Is it preferable to suppress the drug trade, even if the resulting outcome means more intensive illicit logging, for example? I would make the argument that since the drug trade will continue somewhere else, it is far better to focus on preserving trees than on minimizing drug flows. For biodiversity and global warming reasons, timber and log life are depletable resources and under some circumstances are not renewable, whereas the drug trade isn’t. So, for me, paying predominant attention to the drug trade is the wrong locus of priority. Again this is a minority view and most governments—for normative reasons and due to the drug enforcement regimes built by the United States over the last fifty years—still place emphasis on the drug trade as opposed to other adverse economies. I often make the argument that the drug trade is not the most harmful; there are other illicit economies that pose greater harm. So governments have to prioritize, as well as choose the means to manage and suppress the illicit economies.

Journal: You have talked elsewhere about the political capital of illegal economies. Could you explain what you mean by this?

Felbab-Brown: The political capital of illicit economies refers to the legitimacy that participation in these markets has solidified. Basically, it is how the society perceives criminals or militants that sponsor the illicit economy. Do they see them as Robin Hood heroes? Or do they see them as devout antagonists? This has to do with how much society is willing to cooperate with the state and law enforcement in suppressing the illicit economy.

In Shooting Up, I mentioned that there are four factors that define the sponsorship that illicit economies give to criminals. And the reason that they give any legitimacy in the first place is that they are clever enough to use both the profits and the management of the illicit economy to provide public goods to their communities, such as security. That might sound paradoxical, but often both criminals and militants, although they are the sources of insecurity in the first place, are also providers of certain liberties. These groups are vicious and brutal and impose great restraints on the behavior of the individual, but at the same time, they may also suppress murders, robberies, and punish rapes. They are providers of public order. Criminals and militants also provide dispute-resolution mechanisms so one might even argue that they are providers of justice. In places where they are the only providers of order, this gives them political capital.

To determine whether a society sees criminals as legitimate or antagonists, we look simply at the state of the overall economy in the country. Essentially, is the country rich or poor? Do many people depend on the illegal economy for their livelihood or not? Is it the United States or is it Bolivia? If the only way you can make a living is to cultivate coca in Bolivia, most people will believe that cultivation of coca might be illegal but it is not illegitimate. So sponsoring the cultivation of coca will have created political capital. In a place like the United States, where very few people depend on the illegal economy for survival, most of society thinks people in ghettos who fail the drug test or who cultivate marijuana or coca are criminals, and they should be punished.

The second factor is very much related to the first factor: What is the character of the illicit economy? Is it labor intensive? So when we take something like nuclear smuggling, it is something that is done by very few individuals. The smuggling methods are limited to people that you could usually count on the fingers of one hand, so it doesn’t provide a livelihood to many people at all. If you have a country where the only illegal economy that is present is nuclear smuggling, it would not have wide political capital, because it cannot employ many people, and the population will not profit from it.

The third factor is whether there are abusive traffickers present. To manage an illegal economy—that is how you obtain organized crime—you usually need someone who acts as a facilitator of the business plan. You have criminal groups, such as the Sicilian mafia, which can have managers with very widespread acceptance within society. So if an outside militant group tries to take over an illicit economy, they won’t be accepted because the traffickers who behave like a state, and often are more benevolent and reliable than the state, have already captured the political capital. On the other hand, you can have traffickers who are extremely abusive and very unpredictable and may compete with another actor to gain political capital, say traffickers in Afghanistan in the 1990s. They were very predatory and did not deliver services or public goods to society. So when a new group came in, took over the illicit economy, and used the proceeds to build mosques and clinics and set up rules and redistribution mechanisms, they gained political capital.

The final factor is the response of the state to the illicit economy, which might vary from suppression, to laissez faire, to legalization. For simplistic purposes, if you have a very poor economy, where a large number of people depend on the illegal economy for basic survival, the more the state tries to suppress the illegal economy, the more it hurts large numbers of people. As a result, more people dislike the state and more political capital goes to sponsor the illicit economy. On the other hand, if the state does not suppress it, their political capital might be greatly undermined.

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Authors

Vanda Felbab-Brown

Publication: Journal of International Affairs

Rethinking the Fight Against Corruption

Daniel Kaufmann — Thu, 29 Nov 2012 09:31:00 -0500

Fighting corruption requires a new understanding of how the global problem has evolved, for it is bigger and broader than petty bribery or crooked deals in developing countries. Merely adopting a new anti-corruption law, creating another commission, or launching another 'campaign' will not get the job done. We can no longer fight corruption by simply fighting corruption alone.

Corruption is a symptom of a larger disease -- the failure of institutions and governance, resulting in poor management of revenues and resources and an absence of delivery of public goods and services. We must think beyond anti-corruption rhetoric and traditional tactics. We need to be more strategic and rigorous, identifying and addressing corruption's underlying causes and examining the weaknesses in key institutions and government policies and practices. We have to focus our efforts on the broader context of governance and accountability. Only then can we see the many other shapes and forms corruption can take and address this epidemic.

Of its many guises, legal corruption is a particularly pernicious one that gets insufficient attention. Legal corruption refers to efforts by companies and individuals to shape law or policies to their advantage, often done quasi-legally, via campaign finance, lobbying or exchange of favors to politicians, regulators and other government officials. It is dealings between venal politicians and powerful financial and industrial executives. In its more extreme form, legal corruption can lead to control of entire states, through the phenomenon dubbed 'state capture,' and result in enormous losses for societies.

In many developing countries, legal and illegal corruption coexists, and it has become commonplace for multinational oil and mining companies to collude with elite politicians to deprive citizens of the benefits of their natural resources. Nigeria lost $35 billion over the last 10 years through corruption and mismanagement of its oil industry. The evidence suggests -- and the people of these developing countries attest -- growth cannot sustain where corruption thrives.

The reach of legal corruption, however, is not limited to countries with weak governments. It has also enabled Wall Street investment banks to unduly influence financial oversight institutions, bringing the U.S. and the global economy to the brink four years ago, and in recent months allowed collusion between U.K. and possibly U.S. banks to fix the global interest rate for their benefit.

This kind of corruption is a complex, multidimensional problem that needs to be confronted at every level. If we, as an international community, are going to get at its core, we need to recognize that improving governmental institutions is key. Good governance only starts with elections and higher levels of transparency. Elections cannot be effective unless they are free, fair and clean, and complemented by real freedom of expression. Transparency with impunity will not bring forth justice or make governments accountable. Broader governance reforms require serious progress in rule of law to make any real, lasting impact. Equally important is a free press. While we have seen progress towards democracy in many parts of the world, roughly two-thirds does not have a fully free media and, in some countries, the movement is backwards.

As crucial is the management of the world's natural resources. Today, 700 million people, in about 60 countries, live in poverty though they sit atop billions of dollars in oil, gas and minerals. Such abject poverty in the midst of abundance is a call for action. The overwhelming majority of these citizens live in poorly governed countries -- those that rate low in corruption control, transparency and accountability. The governance of these resources and the wealth they generate will make or break the development of these nations, and the social, economic, political and security implications will be far and wide.

The future of these resource-rich countries no longer rests mainly on foreign aid but on the extent and effective use of the country's own resources and how they use them. For that to occur, a focused and concrete approach to improve governance and accountability is critical. Reshaping the fight against corruption into a smarter strategy that integrates the challenge of improving governance and institutions in both the public and private sphere is the way forward.

Authors

Daniel Kaufmann

Publication: The Huffington Post