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Uganda—a demand side response to corruption

Tom Fox | May 3, 2017

There are several rationales for the enactment and enforcement of anti-corruption legislation. These include protection of commercial business interests from extortion by corrupt government officials, as a part of the ongoing fight against terrorism and leveling the playing field for companies that play by the rules. But in the case of Uganda, another rationale is foreign government, where corruption was so rife, it was scaring away investors from putting money into the country.

Uganda’s finance minister Matia Kasaija said in a recent report that corruption is “a killer” when it comes to promoting investment. It is not too surprising with the country having a score of 25 on the 2016 Transparency International Corruption Perception Index and coming in at number 151 out of 176 countries listed. Part of the problem is Uganda’s byzantine licensing and registration requirements from everything to register to do business in the country to export your products out of the country. When you have such long processes, it is usually because many regulators have their collective hands out to help “move things along.”

While Uganda has other factors that reduce its attractiveness for investors—such as the enforcement of the rule of law in contracts and international IP protections, both of which contribute to its low TI-CPI score—it is primarily its reputation for corruption that hinders investment from coming into the country. One un-named government official noted, “Being greedy in the short term is not a recipe for long-term success.

The Foreign Corrupt Practices Act is universally recognized as a supply side response to bribery and corruption. When governments initiate a demand side response to the same invidious behavior, however, this marks a real change. For the government of Uganda to come to the realization that corruption is making life worse for its citizens and driving out foreign investment, it delineates a change in thinking. When you couple a supply side response with a demand side response, you will see real progress made in the global fight against bribery and corruption.