International Expansion Blog

Corruption’s Big 3: North Korea, Somalia and Afghanistan

By Saul Howerton, Global Chief of Staff, Advisory Services

Corruption is one of the stickier issues organizations must navigate when expanding into new countries — especially for American and European firms, which are bound by strict rules requiring them to maintain integrity everywhere they operate.

JP Morgan, for one, has allegedly stumbled in China, where U.S. officials are investigating its hiring of the sons and daughters of officials at state-run enterprises with which the bank hoped to do business.

The case illustrates one of the potential pitfalls of operating in China, where many forms of corruption remain widespread. But it gets much worse than China, which ranked in the middle of the pack in Transparency International’s Corruption Perceptions Index for 2013 (Most of the cleanest countries were in western Europe, and the U.S. tied with Uruguay for 19th least corrupt).

How much worse? China tied Greece with a score of 40 points out of 100 for integrity. At the bottom of the ranking, tied for 175th place, sit North Korea, Somalia and Afghanistan. They each scored an 8. If this were a test, they’d get an F minus.

So how corrupt are the most corrupt countries of 2013?

1. Afghanistan—  Afghan President Hamid Karzai’s brother, Ahmed Wali Karzai was a warlord who ran Kandahar and was widely believed to have rigged elections, laundered  money and profited from the opium trade (This didn’t stop the CIA from paying him with bags full of cash for a “variety of services”). He operated with total impunity until his 2011 assassination, which apparently did little to alleviate the country’s broader corruption problem.

2. Somalia— Somalia hasn’t had a fully functioning government for 20 years. In 2010, the creation of an Anti-Corruption Commission fueled hopes of improvement. But in 2012, a UN report found that a staggering 70 percent of foreign aid given to the country failed to ever show up in government coffers.

3. North Korea— North Korea is in a whole other league when it comes to corruption. The country is so oppressive and opaque that while we know it’s corrupt, it’s hard to know a whole lot more. When Supreme Leader Kim Jong-un executed his uncle in December, he cited, among other transgressions, bribery and diversion of state funds by the former top official. If the charges are true, they’re a sign of deep-seated corruption. And if the charges were cooked up to justify the killing, that’s another sign of deep-seated corruption. Either way, the ruling family and high officials live lavishly while the population starves.

Cleanly operating abroad can certainly be a challenge, and in the Big 3—  an even greater obstacle to overcome.

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