Today’s Opinion: The downside of corruption

POSTED: 03/29/11 3:04 AM

Maplecroft is a British risk assessment firm that publishes a global risk portfolio. Governments, multinationals, United Nations agencies and non-governmental organizations use the services of this firm.

“Banks use our indices and in depth reports to screen and manage risk, corporations use our research to understand investment risk and supply chain managers use our tools for due diligence monitoring,.” The company states on its web site.

Maplecroft is therefore a force to be reckoned with. End up their wrong side, and your country is pretty much done for as the next hot location to attract international investors. We’ll get to that in a bit.

In the wake of the earthquake and subsequent tsunami that hit Japan and caused concerns about the safety of nuclear energy, Maplecroft also released a list of countries where people run the least risk to be hit by a natural disaster. And guess what: Aruba is firmly listed in this top ten as the seventh safest place in the world. That makes you think that nothing ever happens in Aruba, but we figure that the researchers somehow overlooked the fact that the island was hit heavy floods in the wake of Hurricane Ivan in September 2004, that damaged 700 homes. The total tab was counted in tens of millions of guilders.

This just illustrates that even expensive firms like Maplecroft are not always right. This is why we look a bit wearily at their country risk report about the Dominican Republic. Not because we don’t believe the report’s contents, but because there are so many similarities with St. Maarten.

Maplecroft is not giving the Dominican Republic a very positive report. It says that corruption remains pervasive in the country, citing “irregularities, bribery and other corrupt practices” as a particular risk for investors who have dealings with public administration agencies and officials. We only have to refer to the Blue Mall encounter with a high ranking civil servant of the sector ROB in, or to the fact that police officers sold their votes to Vice Prime Minister Theo Heyliger’s political party last year, to know that these things happen in the Friendly Country as well.

Maplecroft notes that in the Dominican Republic “the current administration is perceived to be permissive (if not complicit in) this environment.” That’s a cover-your-behind way of saying that corruption in the Dominican Republic takes place with the government’s permission and that the government even takes part in these activities. Note that Maplecroft uses the word perceived to close the door on litigation.

But the company is rather decisive when it states that companies “are exposed to high levels of corruption, both through their local supply chains and as they engage in government contacts.”

Why does all this sound so familiar? Ah, we know. To see whether similar forces have been at work in St. Maarten, one only has to read Joep Dohmen and Jos Verlaan’s “The construction Cesspit”, a tell-all publication about corruption in construction companies that also deals with St. Maarten. On page 227/228 of this enticing journey into the dark world of government bribes, Dohmen and Verlaan write that Silvio Matser (the brother of Prime Minister Sarah Wescot-Williams’s son in law Gary Matser) told Cees Lutgendorff, founder of a road construction company that worked in St. Maarten in 2002, that 10 percent of every project went to politicians or to their political parties.

The authors quote Wescot-Williams as saying that she never took money herself, but that her party (the Democratic Party) accepted donations. But she declined to give the authors access to the party’s administration about received donations.

It is then only a matter of time before Maplecroft will write a country risk report about the new country St. Maarten. Will that look a lot like the one for the Dominican Republic? Who knows?

But that a negative Maplecroft report is not likely to stimulate foreign investments seems a bit of a no-brainer. In the Dominican Republic, Maplecroft reports, “foreign investors face legal, reputational and financial risks if allegations of corruption emerge in relation to their dealings with officials or local partners and suppliers.”

That in turn will deliver countries with high corruption levels into the hands of investors who could not care less about their reputation.

In one field St. Maarten still has a leg up over the Dominican Republic and that is the justice system. While that systems is corrupt in the Dominican Republic (politicized, Maplecroft notes), the system in St. Maarten is still free of undue influence from local politicians. That at least will give investors some confidence that, if they run afoul of some corrupt civil servant, they have a decent justice system to fall back on.

Blue Mall investor Luis Gioia went through that process and everybody knows the result: the corrupt civil servant lost his job.

There is however one element that is even more important than the way the justice system deals with corruption and that is the way contracts are honored. In the Dominican Republic, the foreign investor apparently does not stand a chance. In St. Maarten he will get a fair hearing and a fair decision.

No matter what, the Maplecroft country risk reports are just another example to illustrate the importance of integrity in government. It’s not just about image or doing the right thing, it is also about dollars. And when it’s about dollars, it’s also about jobs.

Looking at it from this angle, people ought to realize that corrupt behavior benefits a few, and puts a lot of other locals at a huge disadvantage.

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