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Corruption in Asia: Pervasiveness and arbitrariness

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Abstract

How does one understand the differences and similarities of corruption among various Asian countries? We use a recent framework developed by Rodriguez, Uhlenbruck, and Eden (2005) to suggest that corruption has to be examined from two different dimensions: pervasiveness and arbitrariness. Using this framework, we ask why some Asian countries are able to achieve high levels of economic growth in the midst of high level corruption while other countries suffer from economic stagnation. We specifically suggest that more firms would bribe when pervasiveness is high, while fewer firms would bribe when arbitrariness is high. We also look into the implications on foreign direct investment.

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Notes

  1. The measurements of these two dimensions were obtained from the World Bank World Business Enterprise Survey (WBES). Following Campos et al. (1999) and Wei (1997), we measured the two dimensions of pervasiveness and arbitrariness. We dropped outliers in calculations.

  2. The study surveys 14,405 respondents across 20 main states, which covered 151 cities and 306 villages. Its focus is on petty corruption in 11 public services: police, judiciary, land administration, municipal services, governmental hospitals, electricity, income tax, water supply, school, PDS (ration card/supplies), and rural financial institutions.

  3. Anwar Ibrahim himself, having clashed with Mahathir, was subsequently imprisoned, which created further confusion among firms which had traditionally followed him (Business Week, 2001).

  4. Originally cited in Quah (1999).

  5. Neighboring countries such as Bangladesh and Sri Lanka report only 10 and 4% of punitive actions following corruption charges (Ahmad & Brookins, 2004).

  6. Thaksin, due to the launch of a coup against him, recently had to step down in 2006.

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Authors and Affiliations

  1. School of Management, The University of Texas at Dallas, Richardson, TX, 75088-0688, USA

    Seung-Hyun Lee & Kyeungrae Kenny Oh

Authors
  1. Seung-Hyun Lee
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  2. Kyeungrae Kenny Oh
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Corresponding author

Correspondence to Seung-Hyun Lee.

Additional information

We thank Mike Peng, Editor-in-Chief of the Asia Pacific Journal of Management, for his helpful comments. We also thank Yung Hua, Managing Editor, for editorial assistance. A portion of this work was presented at the 2006 Academy of International Business in Beijing and The University of Texas at Dallas. We appreciate the comments from David Deeds, Greg Dess, David Ford, Livia Markoczy, Mine Ozer, Jane Salk, and all conference and seminar participants.

Appendices

Appendix 1

Literature on corruption in Asia

Country

Studies

Context

Types of corruption

China

Gong (2002)

Governmental officials’ corruption

Collective corruption

Fisman and Wei (2004)

China’s imports from Hong Kong

Tax evasion

Hong Kong

Quah (1995)

Public and private sectors

Combating corruption

India

Bertrand et al. (2006)

Issuing drivers’ license

Bureaucrats’ red tape

Indonesia

Fisman (2001)

Suharto’s health

Political rents

Olken (2005a, b)

Subsidized rice

Bureaucratic corruption

Olken (2005a, b)

Villages road projects

Village-level corruption, kick-backs

Japan

Duggan and Levitt (2002)

Sumo wrestling

Collusion

Malaysia

Johnson and Mitton (2003)

Capital control, government subsidy

Cronyism, political connections

Khan (1998)

Patron–client networks

Political corruption

South Korea

Moran (1999)

Government-driven industrialization

Politician–Chaebol link

Khan (1998)

Patron–client networks

Political corruption

Chang (2003)

Chaebol’s intergroup transactions

Tunneling, Pyramid

Bae, Kang, and Lim (2002)

Mergers by business groups (chaebols)

Tunneling

Pakistan

Khwaja and Mian (2005)

Corporate lending

Political rents

The Philippines

Moran (1999)

Oligarchic dominance of state and business classes

Political economy of corruption

Singapore

Quah (1989, 1995, 1999, 2002)

Public and private sectors

Combating corruption

Appendix 2

Corruption, FDI inflows, and economic growth in Asia

Country

CPIa (1995–2002)

CPI changeb (1995–2002)

FDI inflowsc (1995–2004)

GDP growthd (1995–2004)

Bangladesh

1.3

−0.3

0.2

3.13

China

3.06

0.76

44.3

8.24

Hong Kong

7.59

0.78

18.2

2.27

India

2.78

−0.13

3.8

4.50

Indonesia

1.97

−0.3

0.6

1.74

Japan

6.59

0.11

5.7

1.01

Korea

4.29

−0.26

4.9

4.23

Malaysia

5.09

−0.67

3.5

2.84

Pakistan

2.23

0.2

0.7

1.29

The Philippines

2.98

0

1.3

2.08

Singapore

9.08

0.5

12.0

3.12

Thailand

3.14

0.43

3.3

2.29

Vietnam

2.57

−0.5

1.5

5.88

  1. aCPI: Ave. 1995–2002
  2. bCPI change: A non-parametric trend score (ψ) in 1995 to 2002 (Bjornskov & Paldam, 2005)
  3. cFDI inflows: Ave. 1995–2004 (US B$)
  4. dGDP growth: Ave. 1995–2004 (Annual Growth %)

Sources:

  • Corruption Perception Index (CPI) is based on the average of CPI from 1995 through 2002 conducted by Transparency International (TI)

  • Data for FDI inflows and GDP per capita Growth are from World Development Indicator (WDI database) by World Bank from 1995 through 2004.

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Lee, SH., Oh, K.K. Corruption in Asia: Pervasiveness and arbitrariness. Asia Pacific J Manage 24, 97–114 (2007). https://doi.org/10.1007/s10490-006-9027-y

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