World Economic Forum estimates corruption increases cost of doing business by

World economic forum estimates corruption increases

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World Economic Forum estimates corruption increases cost of doing business by 10% on average Siemens: penalties of US$ 1.6 billion in 2008; routinely engaged in bribery around the world. Macro level: corruption distorts market mechanisms, deters domestic and foreign investments, thus stifling growth and future business opportunities for all stakeholders. IMF research has shown that investment in corrupt countries is almost 5% less than in countries that are relatively corruption-free. Waste or inefficient use of public resources Investments not allocated to sectors which present the best value for money or where needs are highest, but to those that offer highest personal returns to corrupt politicians Some cases public funds simply siphoned from intended use and exploited for private enrichment Slows down bureaucratic processes, as inefficient bureaucracies offer more leverage for corrupt public officials: the longer the queue for a service, the higher the incentive for citizens to bribe to get what they want. Nepotism - in both private and public organisations - brings incompetent people into power, weakening performance and governance. Negative correlation between corruption and the quality of government investments, services and regulations. African Union (2002): 25% of the GDP of African states; US$150 billion, lost to corruption every year. The US Medicare and Medicaid estimate that 5% to 10% of their annual budget is wasted as a result of corruption. Corruption corrodes public trust, undermines the rule of law and ultimately delegitimize the state Undermines the rule of the people and thus the very foundation of democracy. Basic state services are not delivered to citizens → loses its credibility and legitimacy. May lead to political uprisings, citizens stand up against what they perceive to be the corrupt political and economic elites → Arab Springs; Occupy Wall Street EMERGING MARKETS Former developing economies that are experiencing substantial industrialisation, modernisation and remarkable economic growth Compared to advanced economies, emerging markets (EMs) characterised by: Lower average income levels, higher political, economic and legal risk levels, structural changes (e.g. modernisation of infrastructure, moving from dependence on agriculture to manufacturing), on-going economic development and reform efforts and less mature financial markets Compared to developed economies, risk levels tend to be higher in EMs Political instability, weak regulatory and financial environment, currency fluctuations, lack of transparency, dominance of state, Characteristic Advanced economies Developing economies Emerging markets Median age of citizens 38 years 24 years 32 years Major sector focus Services, branded products Agriculture, commodities Manufacturing, some services
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LISA YANG IBUS20002 Business in the Global Economy Economic and political freedom Free or mostly free Mostly repressed Mostly free or mostly not free Economic / political system
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  • '19
  • Developed country, LISA YANG

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