International fraud in Mali and Senegal: institutional and resource-based perspectives

International Fraud -- the Case of Mali and Senegal

The growing forces of globalization and market liberalization have generated a wide series of effects upon all features of the everyday life. More importantly, these changes are obvious not only within the highly developed economies, but also in smaller and less prosperous countries. The African continent is generally a poor one, with a poor infrastructure, industry and overall economy. Characterized by decades of economic and political instability, the countries in this region find it difficult to overcome the impediments. One of these major challenges in their path to national well-being is fraud, which impacts international business.

The Institutional-Based View

Fraud is extremely common in African countries Senegal and Mali and this is often associated with the high levels of taxes. With large barriers impeding free international trade, the customs workers are highly tempted to allow shipments of commodities without the proper documentation in exchange for considerable bribes. With this in mind then, one can come to the conclusion that, through the issuing of their restrictive trade policies, the African authorities impede globalization, free trade and encourage fraud. Then, there is also the legislation referring to the processes of clearing the goods traded (Stasavage and Daubree, 1998). The regulations are often difficult to comply with, tempting once again fraud and bribery.

Another point to make within the institutional-based view of international fraud refers to the investments federal organizations make in science and technology. From this standpoint, Lawrence K. Altman and William J. Broad (2005) argue that federal institutions often misdirect their funds towards investments that will materialize in increased levels of fraud, rather than offer improved control and reduction solutions. These situations occur even more so in instances in which the governmental institutions reveal a direct interest. Altman and Broad explain this by quoting Dr. Smith, a former editor with the British Medical Journal; he argues: "Unfortunately, individual institutions have an enormous conflict of interest. It's a lot easier for such bodies, when examining an allegation of fraud on their own, to slide someone out of the organization or to suppress it altogether."

4. Impact on International Business Setting

The increased levels of fraud generate a series of chain reactions upon the business setting within Senegal and Mali. First of all, they reduce general trust in the economic and political systems. This then means that foreign investors are not attracted to the region and that developmental opportunities are reduced. This in turn materializes in the lack of new jobs. It means as such that the federal authorities are unable to cash in taxes from foreign investors conducting business operations within Senegal and Mali. Consequently, the large majority of the taxes will be imposed onto the national population. Despite the increased fiscal charges that generate populous dissatisfactions, the governments will still be unable to gather sufficient money to invest in the development of the public services, such as education, healthcare or infrastructure. More clearly, the direct effects of fraud are: "market allocation mechanisms are distorted; human and capital resources are diverted from productive activities; and the state and its institutions are undermined. Consequently, political stability and independent economic policy are endangered" (Stasavage and Daubree, 1998). All in all, at the ends of this chain sit fraud and poverty, leading as such to the conclusion that high levels of fraud lead to poverty.

5. Conclusions

The countries of the African continent have for years struggled with national and international challenges. Despite the major improvements that have been made, fraud operations are among the highest at a global level. Illicit trade operations generate negative effects upon local businesses as well as the counties' overall international position. The high levels of corruption are pegged to the still unstable political and economic climate in Mali and Senegal (Humphreys and Mohamed). This leads to the simple conclusion that international fraud, analyzed through the lenses of both institutions as well as resources, is only possible once political stability is achieved.

References:

Altman, L.K., Broad, W.J., Global Trend: More Science, More Fraud, December 20, 2005

Barney (1986) and Hunt (1990), Resource-Based View of the Firm

Humphreys, M., Mohamed, H.A., Understanding Civil War -- Senegal and Mali

Peng, M.W., Wang, D.Y., Jiang, Y., An Institution-Based View of International Business Strategy: A Focus on Emerging Economies, Journal of International Business Studies, 2008

Stasavage, D., Daubree, C., Determinants of Customs Fraud and Corruption: Evidence from Two African Countries, OECD, August 1998