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KENYA’S LOOMING RESOURCE CURSE: Dancing to Machiavelli’s drum

Fed a daily news diet of scandal and sensation, and the choreographed drama of minions arrested and driven off in sleek SUVs, the Kenyan public’s attention is daily diverted from the far more serious resource scams, planned and conducted by the men in the shadows. In Lamu and Turkana, the theft of billions of dollars is already underway. By MIRIAM ABRAHAM.

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KENYA’S LOOMING RESOURCE CURSE: Dancing to Machiavelli’s drum

The large hall was decorated with African art from the 54 Member States of the African Union. Singers and dancers from several African countries were entertaining dignitaries as they filled their plates with delicacies from the motherland. It was after all, Africa Day. The 25th day of May when we celebrate the formation of the Organization of African Unity (now African Union). And on the four screens around the large hall was the theme for this year: ‘Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation.’

What a thematic choice by the African Union, I thought to myself. I was struck by the choice of words especially beginning with the positive: ’winning’. But my optimism was short-lived as the representative of Nigeria was called up to the podium to give remarks as the “champion” of the anti-corruption theme. I quickly looked up the latest Transparency International Corruption Perception Index to see the success of President Buhari’s fight against corruption, only to find that Nigeria had slipped from its 2016 ranking by 12 places to rank No. 148 out of 180 countries surveyed in 2017. Why, I wondered, didn’t the organisers select champions from countries that have seen significant improvement in their index score such as Côte d’Ivoire and Senegal or Botswana that has continuously ranked top in Africa. But then again: This Is Africa.

At this rate, I was expecting the Kenyan representative to be the next in line as the co-champion, standing at 143rd ranking on the Index! We were, fortunately, spared that particular embarrassment. As I listened to each speaker glorify African unity and deliberately evading the theme of the day, I could not stop thinking of the contradictions of our continent. We often have big aspirations that we parade but never implement – “winning the fight against corruption” being very high up on the list.

These empty aspirations were eloquently mimed by President Uhuru Kenyatta during his address to the nation on Madaraka Day.  Like most Kenyans, I remained unmoved by his speech. Have we not seen this circus before? Did we not vet officials in the Judiciary and the Police before? Any lessons? Is this not just another game in elite self-preservation?

To be fair though, as a country, we have not outdone Saudi Arabia’s anti-corruption charade. Yet. We recall how late last year under the supervision of Crown Prince Mohammed bin Salman, hundreds of billionaires including over 50 from his own royal family were detained at the luxurious Ritz Carlton hotel, a gilded prison if ever there was one. There were claims of torture and abuse. The detainees reportedly signed off their wealth to the tune of billions in exchange for their release. In the meantime, the same Crown Prince allegedly splurged $500m to buy a yacht and a chateau outside Paris for $300m. It has been billed as the world’s most expensive home.

The charade by the Saudis has the feel of Kenya, albeit on a different scale. On 28 May, we watched as tens of high ranking officials were rounded up and escorted to court in top-of-the-range vehicles on charges of stealing money from the National Youth Service programme. It was a well- choreographed show; we have seen it before. Like the Saudis, we are fighting corruption for Machiavellian reasons. We all know too well the politics of our country. We hold “elections”; the coalition that “loses” cries foul. In order to govern in a polarized environment, the winning faction of the elite agrees to share the loot and, in the process, ditch a few people to give room to the new entrants. Statecraft. It is what “the men from the shadows” as John Githongo calls them in his article, One Week in March: Was the Handshake Triggered by the IMF?, engineer with the nod of the international community, so called, to maintain the status quo. To paraphrase from one of Niccolò Machiavelli’s works, one should not attempt to win by force what can be won by deception.

On 28 May, we watched as tens of high ranking officials were rounded up and escorted to court in top-of-the-range vehicles on charges of stealing money from the National Youth Service programme. It was a well- choreographed show…We are fighting corruption for Machiavellian reasons. We know all too well the politics of our country. We hold “elections”; the coalition that “loses” cries foul. In order to govern in a polarized environment, the winning faction agrees to share the loot and, in the process, ditch a few people to give room to the new entrants. Statecraft. It is what “the men from the shadows”…engineer with the nod of the international community.

One can see this art of deception playing out with the white elephants of Lamu county.  Amu Power Company, a consortium that includes the Chris Kirubi-affiliated Centum Investments, has been awarded the tender to build the Lamu Coal Power Plant. In addition to the grave environmental concerns raised by community activists in Lamu, the approved Ksh 200 billion (US$ 2 billion) project does not make financial sense.

In a detailed analysis by Tony Watima in the Business Daily, the project’s high fixed cost of Ksh 36.2 billion per year is raised by its capital-intensive nature. While this would have made sense if the project was meeting real demand, it turns out that the additional demand is fictitious, a product of the Jubilee government’s fantastical ambitions. While real demand will stand at 2,500 Mw by 2022, Jubilee set itself a target of securing installed capacity at 5,000 Mw. Between reality and fantasy lies the opportunity for mischief. Thus, in the case of the Amu project, Kenyans will be paying almost solely for idle capacity. It will mean that each consumer will see an increase in their bill by Ksh 600 every month that would go directly to the Amu investors.

Amu Power Company, a consortium that includes the Chris Kirubi-affiliated Centum Investments, has been awarded the tender to build the Lamu Coal Power Plant. In addition to the grave environmental concerns raised by community activists in Lamu, the approved Ksh 200 billion (US$ 2 billion) project does not make financial sense…Kenyans will be paying almost solely for idle capacity. It will mean that each consumer will see an increase in their bill by Ksh 600 every month that would go directly to the Amu investors.

Amu is billed as the most expensive fixed cost project among the power generators. An additional 1,000 Mw of power that is excess of demand – and therefore idle capacity. In other words, we are incurring US$ 2 billion in debt to finance a white elephant. These costs do not include the potential loss of income from the fishing activities of the local community, and tourism. They also do not include the known health impacts from coal burning, the most toxic and dangerous pollutant of all fossil fuels.

If the government is serious about “winning the fight against corruption” as this year’s African Union theme pledges, then it must begin by being transparent about the Lamu Coal Power Plant. It must also be transparent about how it handles the export of crude oil from Turkana, lest we quickly join the millions of Africans for whom oil and minerals only yield the proverbial resource curse.

It must also address the systemic manifestations of corruption that begin from the budget preparation process. As a former senior official in a state institution, I witnessed first-hand how numbers are padded to inflate the actual requirements for any project. Requisitions of products that were in abundance in warehouses were made. Goods not needed at all were included in the budget. Consultancy fees, costs for transportation of goods and official travel were common lines that were padded with excess fat that would be “chopped” by officials, as my Nigerian friends would say.

The best lie detectors – probably also procured through corrupt means – cannot replace the dramatic shift in culture that is required in the genuine fight against corruption. Respect for professionalism, integrity, transparency and the rule of law are the fundamental cornerstones of a “corrupt free” Kenya. These are the same principles that this government, at its highest level, has frequently and gleefully violated. Targeting mid-level officials without touching the top-ranking thieves will only be scratching the surface. It will be classic Machiavellism. Or what Muthoni Wanyeki in her recent article eloquently called a ‘game of smoke and mirrors’.

The best lie detectors – probably also procured through corrupt means – cannot replace the dramatic shift in culture that is required in the genuine fight against corruption. Respect for professionalism, integrity, transparency and the rule of law are the fundamental cornerstones of a “corrupt free” Kenya. These are the same principles that this government, at its highest level, has frequently and gleefully violated.

If we as the tax payers fall for the deception, we will be cheering the smokescreen magicians. We will find ourselves questioning the #STOPTheseTHIEVES protesters, wonder why they are disrupting the supplications made at the recent Prayer Breakfast. And in a few weeks, just like we have done with the theft and electoral injustice at the IEBC, we will forget these scandals. Well, until the proceeds from the crude oil imports and the siphoning of money through the Lamu coal plant reach peak levels and “the men from the shadows”, the real rulers of the country, deliver baits on another NYS scandal that the media will gullibly headline, as the looting continues elsewhere and the elite entrench their political and financial positions.

As our African-American brethren say: Stay Woke!

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Ms. Abraham is a governance and institutional development expert.

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KENYA BUDGET 2018/19: It’s time for a taxpayers boycott

The Kenya Budget 2018 has drastic implications on national and regional stability, on the Kenyan economy and on Kenyan workers. Its projections contradict data shared in previous Economic Surveys; it makes patently false claims, for instance, about the decline in domestic credit, to justify doling out billions to already well-provisioned sectors, notably manufacturing. But more than anything else, it is quite simply a perfect script for more waste and theft. By L. MUTHONI WANYEKI

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KENYA BUDGET 2018/19: It’s time for a taxpayers boycott

It’s time for a taxpayer’s boycott in order to evaluate what is increasingly sapped out of us through tax and against what’s disgorged out of us through the theft and waste of our money. Let’s compare the facts, according to the government’s own Economic Survey 2018 and this week’s budget speech.

This year’s budget aims are meant to align with, and support the Jubilants’ so-called ‘Big Four Agenda’ – boosting manufacturing activities, enhancing food and nutrition security, achieving universal health coverage and supporting the construction of at least 500,000 affordable houses by 2022. Bear in mind, however, that the first Jubilant administration, through its Economic Transformation Plan, also had a focus on agriculture and manufacturing.

Last year, the real added value of agriculture shrunk by 3.5 percent to 1.6 percent. This was blamed (as usual) on the lack of rainfall. True, there were shocking decreases in production of key crops – coffee’s production dipping by 11.5 percent and tea’s by 7 percent with only horticultural production going up. But there was an overall increase in the value of marketed production of Ksh.28.6 billion for the agricultural sector. So why did the real added value shrink? What happened?

There’s no doubt that Kenya’s efforts to expand social protection are worthwhile. Reforming social insurance, for instance. Or expanding social assistance to vulnerable groups. But social protection is about risk mitigation – preventing the already precarious from tipping over into even more precarious. Social protection is not about growing jobs, enabling livelihoods and improving returns from employment. It’s also not about ensuring that the intent to improve access to quality social services translates into actual access to social services.

The real added value of manufacturing shrunk by 1.9 percent to 0.2 percent. This was blamed (also as usual on the extended electoral process, high production costs and competition). Note that credit extended to manufacturing actually increased – by Ksh 36 billion, no less. Yet there were shocking decreases in the levels of key manufactured products – except for maize and soda (!). What happened?

Regardless of what happened last year, to fix these sectors now, our Treasury proposes the following:

For the agricultural sector (amongst the usual pleas to move away from rain-fed agriculture and so on), to put about 700,000 acres under large-scale production by public-private partnerships (PPPs). No mention is made of where these additional acres are to come from – when land theft, fragmentation and scarcity is the source of so much national tension already. Maybe the President’s family intends to return the immense tracts of public land the founding President appropriated for himself?

For the manufacturing sector, contradictions abound. On the one hand, Kenya’s speedy accession to the African Continental Free Trade Area is praised. On the other hand, regional (and other) competition is being dealt with by ‘re-negotiations’ and ‘reviews’ of the sub-regional trade arrangements we are already committed to. Plus the rather cavalier raising of customs duties on anything we’re deemed capable of producing – to no less than 35 percent (!) on everything from iron and steel to paper, plywood, textiles and vegetable oils. This, we are informed, should raise us an additional Ksh.27.5 billion (not to mention the ire of our neighbours in the sub-region). Free trade is only good when it’s good for us, apparently.

Moving on to the financial sector: the Treasury had much to tell us about the supposedly negative effects of the interest rate cap. It has, we were told, made banks ‘shy away’ from would-be borrowers, who have also pushed depositors towards an expanded range of non-interest earning deposit accounts. It has also, we were told, slowed growth in credit afforded to the private sector.

Yet the Economic Survey for 2017 told us otherwise. As mentioned above, credit to the manufacturing sector grew last year – by Ksh.36 billion. Credit to the construction sector also grew last year – by Ksh.5.1 billion. Overall, domestic credit increased by 7.9 percent in 2017 – including an increase of credit to the private sector by 2.4 percent. And, despite interest rates remaining fairly steady, deposit rates went up as well!

 Credit to the manufacturing sector grew last year – by Ksh.36 billion. Credit to the construction sector also grew last year – by Ksh.5.1 billion. Overall, domestic credit increased by 7.9 percent in 2017 – including an increase of credit to the private sector by 2.4 percent. And, despite interest rates remaining fairly steady, deposit rates went up as well!

But no…the Treasury has decided this experiment in making banks less usurious must end. It will be seeking to repeal the now infamous Section 33B of the Banking (Amendment) Act. For those worried about small borrowers, especially for small and medium-size enterprises, have no fear. The new, combined Biashara Fund is here (which’ll combine the three special funds for SMES owned by women and the youth).

And, just so we’re clear that Treasury isn’t, in fact, on the side of usury, it will be seeking to institute a ‘Robin Hood’ tax – charging a 0.05 percent tax on all bank transfers of Ksh.500,000 or more to go towards public health. Which we might be happy about if they came from banks and not us (as individuals and businesses). And if Treasury wasn’t also increasing the (already outrageous) tax on all mobile money transfers by two percent to 12 percent. What the good Lord gives with one hand he’ll certainly take away with the other.

Oh, and in case we missed it, instead of the progressive income tax increase on high-earners we had expected, now everybody gets a tax increase. The Employment Act is to be amended to impose a housing tax on all of us – an additional 0.5 percent will be taken from every formal sector worker, matched by an additional 0.5 percent from the employer virtuously to go towards housing.

Our spending target is to come in at just under Ksh.2.56 trillion. The aim apparently being to reduce our deficit from 7.2 percent to 5.7 percent while keeping our debt to gross domestic product ratio just below 50 percent. This spend target is slightly under our spend for 2017 – which sat, at the end of the day, at just under Ksh.2.78 trillion. Not controlled for theft and waste obviously

Our spending target is to come in at just under Ksh.2.56 trillion. The aim apparently being to reduce our deficit from 7.2 percent to 5.7 percent while keeping our debt to gross domestic product ratio just below 50 percent. This expenditure target is slightly under our spending for 2017 – which sat, at the end of the day, at just under Ksh.2.78 trillion. Not controlled for theft and waste, obviously.

With regard to theft and waste, the Treasury announced a bunch of moves to make public procurement more to scale and transparent, with significant allocations to all criminal justice institutions now involved in the ‘multi-agency’ effort against theft and waste. But it’s hard not to be cynical given the absolute lack of attention apparently paid to improving efficiencies and prudence.

There’s no doubt that Kenya’s efforts to expand social protection are worthwhile. Reforming social insurance, for instance. Or expanding social assistance to vulnerable groups. But social protection is about risk mitigation – preventing the already precarious from tipping over into even more precarity. Social protection is not about growing jobs, enabling livelihoods and improving returns from employment. It’s also not about ensuring that the intent to improve access to quality social services translates into actual access to social services.

That translation has been utterly undermined by the breadth, depth, prevalence of the theft and waste of public money that prevails. Treasury needs to convince us that it’s taking that theft and waste seriously. Sorry, the measures announced just don’t cut it.

It’s time for a taxpayers boycott. Really. There’s no taxpayer who is not absolutely and completely embittered by what we have to contribute. Because what we contribute is going to theft and waste.

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KENYATTA’S WAR ON CORRUPTION: Words won’t cut it, the budget is the corruption

Corruption in Kenya isn’t about greedy procurement officers, fiddling civil servants, crooked businessmen, shady bankers, thieving politicians. These are merely creatures of an inherently corrupt political system. The current crisis was triggered by the capture of the public finance management system by what we call ‘cartels’. Now broke and in debt from all the looting, Treasury has officially turned against the people. By JOHN GITHONGO.

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KENYATTA’S WAR ON CORRUPTION: Words won’t cut it, the budget is the corruption

The three key issues Kenyans are talking about today when they survey the political scene are corruption; ‘the handshake’ between Raila Odinga and Uhuru Kenyatta; and, the fate of Deputy President William Ruto as he prepares for a run at the presidency in 2022. For his part, Mr. Kenyatta came out of the handshake in March with a renewed push against the theft and plunder that has characterised his regime thus far. He has issued strong statements against corruption; announced that procurement officers would be asked to step aside and vetted before resuming their positions. Previously he’d even announced that lie detector machines would be introduced into the public service to promote integrity. Most recently, he pronounced public officials (starting with himself) would be subjected to lifestyle audits and that all major public procurements would see their details published in the media including the names of the companies winning the tenders complete with their beneficial owners. All strong stuff especially coming on the back of a series of breathless exposés in the mainstream press of the looting of a range of government bodies, the National Youth Service (NYS) merely being the most egregious and colourful. The scandals have exasperated Kenyans.

Oddly though, all the bold pronouncements are yet to capture the public imagination. Indeed, Kenyans seem sceptical about the President’s anti-corruption crusade. This is partly because he has historically been big on talk and small on action where this particular vice is concerned. Secondly, there is suspicion regarding its timing. Why do now what you were unwilling to do between 2013 and 2017? Thirdly, there is the rather scattershot character of the anti-corruption initiatives announced. This has led some to observe that a series of tactical moves are being employed without a coherent strategy. For example, it is self-defeating to attempt a serious anti-corruption campaign in a society as open as Kenya’s while alienating the media and civil society at the same time. Public opinion is mobilised by civil society, civic society (the churches, professions etc) and the media – not by politicians no matter how well-meaning.

This is partly because Kenyatta has historically been big on talk and small on action where this particular vice is concerned…There is suspicion regarding the timing of the latest war on corruption. Why do now what you were unwilling to do between 2013 and 2017?

The broad scepticism that has greeted Kenyatta’s efforts thus far was best articulated by one of the country’s most experienced progressive politicians, Senator Jim Orengo of Ugenya, speaking before the Senate on May 31st. He warned that the real corruption in Kenya was happening at the highest levels but we Kenyans were afraid to call it out. He essentially asked the president and other top leaders to look around themselves and they would find that the real rot sits in cabinet with them: “In the inner sanctum of power there are people sitting there who should not be sitting there.”

The truth of the matter is that 50 percent of the fight against corruption is related to perceptions. Despite extraordinary efforts to manage the media, the current campaign is yet to capture the public imagination. Until it does Mr. Kenyatta is rolling a stone uphill watched by a disbelieving population. As I said, part of the problem is that it’s clear he doesn’t have a coherent strategy, which makes even simple efforts all the more difficult. Secondly, Kenyatta and his colleagues are victims of an even more serious strategic misinterpretation.

Corruption in Kenya isn’t about greedy procurement officers, fiddling civil servants, crooked businessmen, shady bankers, thieving politicians. These are creatures found in all societies. The issue at hand in the Kenyan context is that these players are born of a system of politics and governance that is itself inherently corrupt; one in which the thieves and those who facilitate them thrive. Indeed, if one were looking at where the next scandals will come from one doesn’t need an army of technicians with polygraph machines. This week the Cabinet Secretary for Finance presented to parliament a Ksh.2.5 Trillion (US$25 billion) budget. The thieving in Kenya starts right here. It is built into the budget. When the budget of the NYS shot up from US$50 million to US$250 million in Jubilee’s last term it was clear that this wasn’t a measure of the NYS’s absorptive capacity or a vast upgrading of this programme but the creation of what was literally a slush fund created to be stolen. This ‘theft-ready’ budget is a product of our politics. Last week the Auditor General, Edward Ouko, told Reuters that corruption across all levels of government threatens the integrity and basic functioning of the state. He said that the corruption was ‘coordinated at a high level’.

This week the Cabinet Secretary for Finance presented to parliament a Ksh.2.5 Trillion (US$25 billion) budget. The thieving in Kenya starts right here. It is built into the budget. When the budget of the NYS shot up from US$50 million to US$250 million in Jubilee’s last term it was clear that this wasn’t a measure of the NYS’s absorptive capacity or a vast upgrading of this programme, but the creation of what was literally a slush fund created to be stolen. This ‘theft-ready’ budget is a product of our politics.

It is time to accept that Kenya’s corruption crisis may in part be caused by the deliberate collapsing of our public finance management system – chunks of it are owned by what have come to be known as ‘cartels’. When this happens the challenge you face is not chasing bribe-soliciting cops on the beat but fixing a situation where the budget itself is the corruption. There are generally three types of corruption: petty corruption that is often extortion by public officials for small considerations to overlook minor infractions or expedite the delivery of services already paid for in your taxes. Grand corruption that typically involves senior officials conspiring with private sector players to skim off public works projects of one kind or the other. There is a third type of ‘corruption’ that I call looting or economic delinquency on the part of the elite. In this type of thieving the pretence of a project to skim off is set aside as elites raid public coffers with impunity and pocket billions. This causes the kind of macroeconomic effects we are seeing in Kenya as our foreign debt soars on account of the looting of a small elite.

It is time to accept that Kenya’s corruption crisis may in part be caused by the deliberate collapsing of our public finance management system – chunks of it are owned by what have come to be known as ‘cartels’. When this happens the challenge you face is not chasing bribe-soliciting cops on the beat but fixing a situation where the budget itself is the corruption.

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In 1998 the fight against corruption, which had been a global advocacy campaign since the early 1990s by organisations like Transparency International, entered the mainstream of the global development agenda. There was no development programme in any developing country that didn’t have an anti-corruption aspect; that didn’t say something about transparency, accountability, basic freedoms etc. Even the World Bank whose legal department had previously blocked its officials from mentioning ‘corruption’ broke with tradition and joined the bandwagon. Previously corruption was described as project ‘leakages’ and ‘slippages’.

What had actually happened is that with the fall of the Berlin wall the opening up of political space meant that corruption, bribery and other forms of skulduggery that had been essential to governance during the Cold War found themselves being reported in newly free media, by a public free to associate and speak their minds. Between 1998 and 2008 a series of corruption scandals shook governments across the world. From Kenya to Germany, Peru, South Korea etc. In Latin America alone between 1998 and 2008, 11 governments fell due to corruption scandals that morphed into political crises of one sort or the other. By the start of this century anti-corruption researchers such as the respected Chilean economist Dani Kauffmann (now of the Natural Resource Governance Institute), argued to Moises Naim in Foreign Policy that with regard to the fight against corruption “Much was done, but not much was accomplished. What we are doing is not working.”

Indeed, corruption was increasingly blamed for all societal ills. More recently we’ve seen corruption scandals cause political shakeups in India, Mexico, Brazil, Bulgaria, Thailand, Guatemala, South Koreas etc. In Kenya we face a crisis in the health and education sectors; we are unable to create jobs for a majority of our youth. Unsurprisingly, corruption is the easiest to blame for what are sometimes failures caused by incompetence, a lack of capacity and the inability of the ruling elite to define the national interest separate from their own commercial interests.

Between 1998 and 2008 a series of corruption scandals shook governments across the world. From Kenya to Germany, Peru, South Korea etc. In Latin America alone between 1998 and 2008, 11 governments fell due to corruption scandals that morphed into political crises of one sort of the other. By the start of this century anti-corruption researchers…argued…that with regard to the fight against corruption: “Much was done, but not much was accomplished. What we are doing is not working”.

In Kenya, a serious effort to delineate personal interests from national ones would go a long way to dealing with our corruption problem. Conflict of interest was entrenched in our public service by the infamous Ndegwa Commission report of 1972 and we’ve been paying for it ever since. Most recently it is the poor who are paying most for it. The budget this week saw a cash-strapped regime under the gun of the IMF increase taxes on basic commodities in part to pay for the cynical profligacy of the elite since 2013. Ironically, Kenya’s constitution has created a legal infrastructure that should make the kind of economic delinquency and looting that’s in evidence impossible. But breathing life into a constitution requires political will that still seems to be lacking. In the meantime anti-corruption campaigns will be embarked on full of drama, gimmicks, speeches and technical fixes to problems that have much to do with the fact that our elites refuse to let governance institutions work, as they should. As a result, they are struggling to engineer the public sympathy and support essential to make the changes that need to happen.

Research by Juliet A. Attelah

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DEMOCRACY, DICTATORSHIP AND DEVELOPMENT: Lessons from Malaysia and Singapore

South East Asia’s Tiger economies have long triggered questions about why and how Kenya was left behind in the post-colonial maendeleo race. Instructively, it is the Tigers’ own ‘left-behind’ stories that may be illuminating – and none more so than the rivalry between Malaysia and Singapore. It is a cautionary tale with many familiar themes: tribalism and corruption, dictatorship and democracy. By DAVID NDII.

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DEMOCRACY, DICTATORSHIP AND DEVELOPMENT: Lessons from Malaysia and Singapore

Three weeks ago, police raided the residencies of Malaysia’s immediate past Prime Minister, Najib Razak and seized US$ 28.6 million in cash and, among other things, 37 bags stuffed with jewellery and 294 boxes containing designer handbags. The authorities say that it will take time to ascertain the value given the size of the haul, but going by former first lady Rosmah Mansor’s known tastes – she is derisively nicknamed “bag lady”— we could be talking upwards of US$ 10m worth of handbags alone. Her favorite Hermés Birkin tote bags come with price tags ranging from US$10,000 to north of US$ 300,000. The exposé gives us a preview of what we can expect when our mansions give up their Eurobond secrets.

Razak lost the election to an anti-corruption coalition fronted by his 92-year old predecessor and mentor, Mahathir Mohammed, ending 61 years of Barisan National coalition government. At the heart of the political drama is 1MDB, a sovereign bond heist similar to our Eurobond mystery that I have written about in the past.

1MDB is a special purpose investment vehicle set up and controlled by Razak in 2009 to attract private investment for infrastructure projects around Kuala Lumpur. Far from attracting investment, it went on a borrowing binge, chalking up US$ 12 billion in debt in a couple of years, including US$6.5 billion of international bond issues. More than US$ 4 billion was stolen and laundered in the world’s leading financial centres, including Singapore, Switzerland and the USA.

The evidence led straight to Razak, his family and cronies including a smoking gun— US$680m traced to his personal bank account. In an effort to suppress the scandal, Razak fired his deputy, replaced the attorney general and central bank governor with his lackeys, clamped down on the media and internet, whipped up ethnic nationalism, put a top secret lid on the investigation and got himself cleared by his new compliant attorney general.

1MDB is a special purpose investment vehicle set up and controlled by Razak in 2009 to attract private investment for infrastructure projects around Kuala Lumpur. Far from attracting investment, it went on a borrowing binge, chalking up US$ 12 billion in debt in a couple of years, including US$6.5 billion of international bond issues. More than US$ 4 billion was stolen and laundered in the world’s leading financial centres, including Singapore, Switzerland and the USA.

It did not work.

Foreign authorities which had initially steered clear were forced to open investigations as complicity of investment banks in their jurisdictions became impossible to ignore. Goldman Sachs came under scrutiny for charging an incredible nine percent of the bond value as transaction fees, more than 10 times the market rate. Goldman Sachs was a big benefactor of both Obama and the Hillary Clinton campaign.

Money laundered in the US included financing of the Hollywood blockbuster, Wolf of Wall Street, starring Leonardo di Caprio, a luxury yacht, a Picasso and a US$27m diamond necklace. When they finally moved, the US authorities refused to name Razak in the indictments referring only to “Malaysian Official 1”. Malaysia, and Razak personally have been strong US allies in the anti-terror campaign.

Malaysia is one of those Asia’s tiger economies that, as we say, left us behind. What we often don’t realize is that the Asian Tigers have their own leaving-each-other-behind stories, none as dramatic and instructive as that of sister nations Malaysia and Singapore.

On attaining self-rule from the British in 1957 Singapore’s founding fathers championed political union with sister British colonies in the Malay peninsula— just as was mooted between Kenya, Uganda and Tanzania. Malaysia was resource rich with large oil and gas reserves, other mineral resources, and well-developed plantation agriculture. Singapore was a resource poor city-state with only a port in a strategic location. Singapore’s leaders, led by Lee Kwan Yew, saw unification as the best way to secure Singapore’s security and prosperity.

Singapore’s overtures culminated in political federation in 1963. It was a fractious marriage from day one. Two years later, Singapore was bundled out of the federation. In his memoir, Lee Kwan Yew writes about this as a most traumatic experience. Reading between the lines, the rejection and the political vulnerability it precipitated, motivated Singapore’s leaders’ drive to succeed.

On attaining self-rule from the British in 1957 Singapore’s founding fathers championed political union with sister British colonies in the Malay peninsula— just as was mooted between Kenya, Uganda and Tanzania. Malaysia was resource rich with large oil and gas reserves, other mineral resources, and well-developed plantation agriculture. Singapore was a resource poor city-state with only a port in a strategic location. Singapore’s leaders, led by Lee Kwan Yew, saw unification as the best way to secure Singapore’s security and prosperity.

Half a century on Singaporeans enjoy one of the highest standards of living in the world with the ninth highest average income (US$52,000), the wealthiest Asian country with an average income one third higher than Japan (US$38,000), close to double that of South Korea (US$28,000) and five times that of Malaysia (US$10,000). Today, one of Malaysia’s vexing economic challenges is brain drain as its techies and professionals cross over to Singapore for lower level but better paying jobs. Malaysians cannot help but ask themselves how Singapore left them behind.

In popular discourse, the view that democracy is a luxury that poor countries cannot afford, that what we need are progressive autocrats has considerable following. Singapore’s Lee Kwan Yew and Malaysia’s Mahatir Mohammed are both held up as pin-up benevolent dictators. If benevolent dictatorship is the holy grail of economic transformation then how is it that resource poor Singapore ends up five times wealthier than better endowed Malaysia? Malaysia and Singapore’s divergent economic paths can be summed up in two very familiar words: tribalism and corruption.

The rocky marriage began with Malaysia adopting Islam as the state religion, despite the protestation of the significant non-Muslim minorities. Malaysia’s leaders adopted socio-economic policy that privileged natives (the “bumiputura”, or sons of the soil) over the immigrant, predominantly Chinese and Indian population. The Chinese (23 percent) and Indians (seven percent) minorities make up 30 percent of Malaysians. Singapore is the opposite, majority Chinese with Malays (15 percent) and Indians (7.5 percent). As with our Africanization and South Africa’s Black Economic Empowerment (BEE) policies, the affirmative action lent itself to unjust enrichment by the state elite. Once they were bundled out of the union, Singapore’s political leadership set their country on the opposite course— adopting equality, inclusivity and meritocracy as its foundational values.

Mancur Olson observes in Democracy, Dictatorship and Development, the paper that featured in my last column, that while “poor countries can grow extraordinarily rapidly when they have strong dictators who happen to have unusually good economic policies, such growth lasts only for the ruling span of one or two dictators.”

Lee Kwan Yew was Prime Minister of Singapore for 31 years (from independence in 1959 to 1990, and he continued as 1st Senior Minister of Singapore for another 14 (1990-2004) and as Senior Mentor Minister of Singapore, a post created for him for another seven (2004 – 11). Thus Singapore had the good fortune of having the leadership and counsel of an exceptional leader for 59 years—his constituents for 60. He led the Peoples Action Party (PAP), which he co-founded, to eight successive election victories. He was no academic slouch, having graduated from the London School of Economics and from Cambridge with a “double first” law degree.

Dr. Mahathir Mohamad (doctor as in physician) was Malaysia’s Prime Minister for two decades from 1983 to 2003. Although he is more closely associated with Malaysia’s economic rise than anyone else, Malaysia’s rise was well underway when he assumed office. The economic miracle did not survive him. During the first decade of his tenure, Mahathir implemented economic plan he inherited. During the second one, he launched his Vision 2020, which aimed to propel Malaysia to a high income country through mega-projects. His flagship Silicon Valley copy paste Multimedia Super Corridor did not fly.

Mahatir’s more enduring legacy is deepening authoritarianism. He pushed through constitutional changes that centralised power, undermined the monarchy, and weakened the judiciary. He also mismanaged his succession, following the acrimonious fallout with his long term deputy and heir apparent, Anwar Ibrahim. While not personally corrupt, he promoted crony capitalism. His protege Razak repurposed the authoritarianism for corruption.

History has been unusually kind to Mahathir Mohamad. He now gets a second bite at the cherry. Perhaps the greatest irony of his comeback is that after all he did to undermine it, it is through democracy that he has succeeded in his second run for the premiership. And much of the credit for the survival of democracy in Malaysia goes to his erstwhile heir-turned-nemesis, Anwar Ibrahim. Indeed, Anwar Ibrahim, who has been in jail, is the de facto leader of the political movement that has propelled Mahathir to power. One of his campaign pledges, on which he has delivered, was to secure Ibrahim’s pardon. Although he has apologized, and he will in all likelihood be succeeded by him, Ibrahim’s political persecution is one blot on his legacy that he will find difficult to erase.

It has helped that Malaysia is a parliamentary system. Had the dictatorial power that Mahathir amassed been in a presidential system, bringing Razak down would have been considerably harder. In presidential South Korea, it took weeks of massive demonstrations to bring down President Park Geun-hye. Closer to home, it took the army to remove Mugabe after close to two decades of rigging himself back in power in presidential Zimbabwe, while parliamentary South Africa has now ousted two presidents in its 24-year post-apartheid history.

The benevolent dictatorship school of development posits benevolent dictatorship and democracy as mutually exclusive. But what we see in both Singapore and Malaysia is progressive autocrats and working electoral democracies. Lee Kwan Yew did not change the constitution and elevate himself to an imperial president like Jomo Kenyatta, who never once faced an opponent in an electoral contest.

Lee Kwan Yew developed Singapore politically and economically. In 1998 he proposed the Group Representation Constituency (GRC), a kind of multimember constituency to protect the minorities participation in parliament. In GRC people are elected as a group that must include individuals from the minority groups. We could easily solve the one-third gender rule problem with something similar. I have advocated adoption of a modified proportional representation at the county level (the parliamentary seats in a county would be pooled and allocated to parties based on popular vote).

The benevolent dictatorship school of development posits benevolent dictatorship and democracy as mutually exclusive. But what we see in both Singapore and Malaysia is progressive autocrats and working electoral democracies. Lee Kwan Yew did not change the constitution and elevate himself to an imperial president like Jomo Kenyatta, who never once faced an opponent in an electoral contest.

And the spirit of inclusive politics lives on. Singapore has recently elected its first woman president. Halima Yacob is Malay, Muslim, and only the second Malay president after the country’s first president, Yusof Bin Ishak, who died 47 years ago. Two years ago the constitution was amended again to ensure that minorities ascend to the presidency. Specifically, it provides that the presidential election will be reserved for a racial group if a member of that racial group has not held the presidency for five consecutive terms. This is how Halima Yacob became president. This is another political innovation that we could adopt to make the presidency inclusive. It is worth noting that the president is responsible for the group representation constituencies. The president’s other functions include control of the country’s financial reserves, and oversight of the anti-corruption agency.

African leaders are fond of benchmarking pilgrimages to East Asia. Some even claim to be inspired by Lee Kwan Yew – how so, one wonders. Lee Kwan Yew left office with no personal wealth to speak of. He did not own a single business. Those claiming to be so inspired by him are as rich as kings. They see political power as entitlement to wealth. Given their materialistic obsession, they only see hardware. They can hardly be expected to see the political software that drives the economic success they wish to copy. They see bullet trains, they want. They see Cyberjaya (a failure), they want.

And the spirit of inclusive politics lives on. Singapore has recently elected its first woman president. Halima Yacob is Malay, Muslim, and only the second Malay president after the country’s first president, Yusof Bin Ishak, who died 47 years ago. Two years ago the constitution was amended again to ensure that minorities ascend to the presidency. Specifically, it provides that the presidential election will be reserved for a racial group if a member of that racial group has not held the presidency for five consecutive terms. This is how Halima Yacob became president. This is another political innovation that we could adopt to make the presidency inclusive.

As Olson observes in the paper referred to earlier, “dictatorships are by their very nature susceptible to succession crises and uncertainty about the future”. Nothing illustrates this better than the anxiety, political intrigue and foreboding that gripped Kenya in the mid-1970s as Jomo Kenyatta’s death became an inevitability. By maintaining a parliamentary democracy, however dominant their political parties/coalitions were, both Lee Kwan Yew and Mahathir Mohammed ensured that they did not subject their countries to the political and economic costs that this uncertainty portends.

Far from resolving the transfer of power problem, our multiparty politics, and presidentialism in particular, has aggravated it. Until we solve this one, those benchmarking trips to East Asia will continue to bring home bridges to nowhere.

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