Corruption and Capacity Building in Developing Countries: The African/Asian Paradox

Abstract

There has been a rapid growth in Asia for the last few decades compared to other regions of the world. This has even pointed Asia as an example for other developing regions. However, it has not been very simple to understand why Asia has registered such economic growth, while as in Africa, it has faced a high level of corruption. The literature is full of empirical studies showing the detrimental effects of corruption on both investment and growth at the macro-level. Corruption is considered as a serious problem that can slow down economic development, deter foreign direct investments, reduce tax income and efficiency in business transactions, but also reduce the amount of funds available for government to provide important public services. In fact, the high level of corruption in Asian countries has not been able to impede their economic growth, while in some African countries, such high level of corruption has significantly affected the economic growth. While this paper tries to explain such a paradox, it provides an in-depth analysis of how corruption is a result of lack of capacity or weak capacity at various institutional levels in African countries. Most importantly the paper provides an array of capacity building initiatives that can help to significantly reduce the current level of corruption and attract foreign investments in emerging and developing countries.