Chapter 9 Political Frictions in IB: Corruption, War and Terrorism

9.1 Corruption and terrorism in the global environment

9.1.1 Corruption

Definition

  • Facilitate payments to government officials to accelerate provision of standard service

  • Larger payments made to government officials responsible for selecting among tenders on public contracts

  • Large illegal payments made by firms to government leaders for privileged access to a market / resources

Corruption: Abuse of public power for private gain / Illicit payment to induce a decision-maker to give unfair advantage to the payer

  • 17 December 1997: Signature of the Convention
  • 15 February 1999: Entry into force of the Convention
  • 44 Signatories - all 37 OECD countries plus Argentina, Brazil, Bulgaria, Costa Rica, Peru, Russia and South Africa - have adopted this Convention.
Country indicator_name 2020 2019 2018 2017
Denmark Corruption (0=high; 100=low) 87 88 88 90
New Zealand Corruption (0=high; 100=low) 87 87 89 90
Finland Corruption (0=high; 100=low) 86 85 85 89
Singapore Corruption (0=high; 100=low) 85 85 84 84
Sweden Corruption (0=high; 100=low) 85 85 84 88
Switzerland Corruption (0=high; 100=low) 85 85 85 86
Norway Corruption (0=high; 100=low) 84 84 85 85
Netherlands Corruption (0=high; 100=low) 82 82 82 83
Germany Corruption (0=high; 100=low) 80 80 81 81
Luxembourg Corruption (0=high; 100=low) 80 81 82 81

From the entry into force of the OECD Anti-Bribery Convention on 15 February 1999 through 31 December 2019, the Parties to the Convention reported having:

  • convicted or sanctioned at least 651 natural and 230 legal persons for foreign bribery through criminal proceedings.

  • sanctioned at least 87 natural and 115 legal persons for foreign bribery through administrative or civil proceedings.

  • convicted or sanctioned at least 81 natural and 103 legal persons for related offences (e.g. false accounting, money laundering, tax evasion) through criminal proceedings.

  • sanctioned at least 73 natural and 179 legal persons for related offences (e.g. false accounting, money laundering, tax evasion) through administrative or civil proceedings.

Source: http://www.oecd.org/daf/anti-bribery/data-on-enforcement-of-the-anti-bribery-convention.htm

9.1.1.1 Canada: Leader in Corruption?

Of the more than 600 companies now listed as barred from doing business with the World Bank over corruption, 117 are Canadian, the most of any one country. And of those, 115 represent SNC-Lavalin and its subsidiaries…

Source: Armina Ligaya “Canada now dominates World Bank corruption list” Financial Post, September 18th 2013

9.1.1.2 Corruption Perceptions Index

9.1.1.3 Best Country 2019

Country indicator_name 2019
Denmark Corruption (0=high; 100=low) 88
New Zealand Corruption (0=high; 100=low) 87
Finland Corruption (0=high; 100=low) 85
Singapore Corruption (0=high; 100=low) 85
Sweden Corruption (0=high; 100=low) 85
Switzerland Corruption (0=high; 100=low) 85
Norway Corruption (0=high; 100=low) 84
Netherlands Corruption (0=high; 100=low) 82
Canada Corruption (0=high; 100=low) 81
Luxembourg Corruption (0=high; 100=low) 81

9.1.1.4 A Few Questions Raised

  • Impact of corruption on FDIs?

  • Effect of FDIs on corruption?

  • What role for NGOs, International Organizations (e.g., OECD, World Bank, etc.), and society?

  • What role for MNEs?

9.1.2 Case in Point: Siemens

“If we in the business community agree on certain things, if we help each other, if we engage in what I call a cartel of the good, then we will drive bad behaviour out of the industries where we operate.”

  • Peter Y. Solmssen from Siemens Corporation

“If a country is to be corruption free and become a nation of beautiful minds, I strongly feel there are three key societal members who can make a difference. They are the father, the mother and the teacher.”

  • A. P. J. Abdul Kalam President of India (2002-2007)

9.1.2.1 Partnering Against Corruption Initiative (PACI)

Source: https://www.weforum.org/communities/partnering-against-corruption-initiative

9.1.3 Terrorism

Source: https://www.visionofhumanity.org/resources/

A few statistics:

  • Deaths from Terrorism fall by 15% for fifth consecutive year to 13,800

  • The Islamic State of Iraq and the Levant (ISIL) core diminishes – first year where they caused less than 1,000 deaths since their inception

  • Far-right terrorism increases 250% in last five years- from low base

  • Deaths fall in the 4 countries with most deaths

  • ISIL centre of gravity shifts to sub-Saharan Africa – 7 of 10 largest increases in SSA

  • ISIL affiliates launch attacks in 27 countries

9.1.3.1 Impacts

9.1.3.2 Costs

9.1.3.3 Evolution

9.1.3.4 Global Terrorism Index

Rise of international terrorism and organized groups such as ISIS and Al-Qaeda…

9.1.3.5 Deaths From Terrorism

9.1.3.6 Countries with the Most Deaths

9.1.3.7 Numbers of Attacks

9.1.3.8 Attacks and Deaths per Region

9.1.3.9 Deaths by Category of Actor

9.1.3.10 Number of Countries with Deaths

9.1.3.11 Deaths per Year

9.1.3.12 Effects of Terrorism

  • Negative correlation between terrorism and FDI inflows for manufacturing, trade and repair, and construction sector

9.1.4 Corruption and Terrorism: Not the Only Issues

  • Rise of tensions between countries…

9.2 War and its Consequences

9.2.1 War and Localization Choices

  • Effect of violence on FDIs depends on the type of violence, the characteristics of the industry, and the level of internationalization of the firm

  • Negative correlation with investments except for natural resources

  • For other sectors: firms that are «less » international are more sensitive to armed conflicts

  • Other types of violence (terrorism, killings) don’t have an impact on localization choices

9.2.2 War and MNCs’ Responses

  • A typical firm’s response is to exit

  • The more experience in conflict zones, the more likely a firm will delay departure

  • Valuable resources can become source of vulnerabilities that prompt early withdrawal

9.2.3 War and its Consequences: The Refugee Crisis

9.2.3.1 The Refugee Crisis in Context

Displacement in the 21st century (2000-2014)

9.2.3.2 Major refugee-hosting countries (2019)





9.2.3.3 Major refugee-sourcing countries (2019)





9.2.3.4 The Refugee Crisis in Canada

9.2.3.5 The Refugee Crisis in Europe

9.2.3.5.1 Migrant and refugee fatalities since 2000

9.2.3.5.2 Number of tweets by date

9.2.3.5.3 Joy + surprise

9.2.3.5.4 Disgust + fear

9.2.3.5.5 Anger + sadness

9.2.3.6 Effect of Immigration on Countries

9.2.3.7 To Think About

If a country is to be corruption free and become a nation of beautiful minds, I strongly feel there are three key societal members who can make a difference. They are the father, the mother and the teacher). - A. P. J. Abdul Kalam President of India (2002-2007)

9.3 Tableau Challenge

Now, just to get you started a little bit, I’d like you to take a minute and go to the developer.nytimes.com website and play around a bit with their public data API. They’ve got a nice way to let you try the API so that you can actually see what kind of data you can collect from the New York Times through their public data API.