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Monday, 20 October 2008

Lobbying Vs Corruption

A new paper sheds light on the extent on the factors that shape lobbying and corruption, and the extent to which they are substitutes / complements of each other :

We find that the firms that are more likely to engage in lobbying are those that are older, larger, and foreign-owned, and tend to be in countries that are less politically unstable, more democratic, with more independent media, and more leadership alternations since 1989. We also find that the firms that are more likely to engage in lobbying are those located in federal states, with presidential systems and, within presidential systems, where the president has fewer (de jure and de facto) powers. Within parliamentary systems, lobbying is more effective where there are more constraints on the executive. We find that lobbying is also more effective where the electoral system features closed lists and has smaller district magnitude. Crucially, the significant determinants we find for corruption are the same but carry the exact opposite sign, with extremely few exceptions. On this basis, we claim that corruption and lobbying and substitutes in our sample. Further, we find confirmation that lobbying, seems to be a much more effective instrument for political influence than corruption. More surprisingly, we also find that lobbying is a much stronger explanatory factor of firm performance than corruption, and this even in poorer, less developed countries.

One of the interesting questions we face as a nation (and probably in this election) is the extent to which the supposed reduction in corruption during the Mwanawasa years (not fully supported by real evidence beyond a few high profile cases and public utterances), has simply been substituted by more lobbying from foreign dominated firms. There's certainly influence peddling going on in Zambia by many firms, according a recent paper from CDG , which has affected industrial competition and ultimately productivity. Add to that a previous blog on Foreign Ownership in Zambia that documents the heavy domination of foreign firms. Also add the recent evidence we have seen of a government failing to effectively implement a fiscal regime for the mining industry, in face of very strong arm twisting. The answer clear seems pretty.

2 comments:

  1. Can't help but think of the UK Conservative Party's George Osborne and the heat he's feeling over meeting a Russian oligarch over party 'donations'.

    But unlike Zambia, the UK has specific laws banning party donations from foreign nationals or businesses.

    Do you think such a law could be useful for Zambia?

    Among other things, it certainly would have prevented Taiwanese officials funding some presidential candidate in the 2006 elections in exchange for lobbying at the UN in a matter that hardly had anything to do with Zambia!

    ReplyDelete
  2. Zedian,

    I don’t think banning them is the problem.

    You just need to force transparent declarations. After all such contributions are a form of FDI / Aid. Is it not?

    If Taiwan gives Pf money, and Pf spend in Zambia, albeit to gain support for a Taiwan friendly policy, is it not new money into the economy?

    So I would say, let them give, but let us be transparent.

    ReplyDelete

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