Wednesday, July 16, 2008

“Brown Envelope” Culture

I just read this term in an article about the poor state of corporate governance in the countries of the Gulf Cooperation Council (GCC). “Brown envelope” refers to cash kick-backs (bribes) that are usually handed out in brown envelopes. Corruption is reported to be across the board, especially in the construction industry given the large-scale projects that are taking place there. Moreover, the article points out that the Middle East is especially prone to this culture given that it is a predominantly cash-based economy. According to a recent report poor corporate governance in the GCC is estimated to cost the region close to $300 billion a year.

Speaking of corruption, economist Paulo Mauro of the IMF wrote an interesting and informative paper on the causes and consequences of corruption. A lot of what Mauro argues could be applied to our economy.  Other work on corruption points out to an interesting fact that shows that sometimes corruption has a favorable effect of increasing the levels of efficiency in an economy!

P.S.  Brown envelope....some "people" love you!

No comments: