Countries where politically connected businessmen prosper

On the election result day - May 16 - as BJP gained so did the stock price of Mukesh Ambani and Gautam Adani-led companies. 

According to a report in Mint ‘Mukesh Ambani, India’s richest man, added almost $1 billion to his wealth while Gautam Adani gained $600 million as early vote counting showed Narendra Modi’s opposition bloc may form a majority in parliament.’

Stock market punters probably felt that these companies may grow better due to their promoters’ proximity to Narendra Modi.

Indian is not a lone case where businessmen thrive due to their political connections. This is a global phenomenon and exists even in developed economies such as US and UK.

To find out countries where businesses can benefit from political connections, Economist magazine came up with a Crony-Capitalism Index. This index ranks countries where politically connected businessmen are most likely to prosper.

The magazine states that India has actually improved over the past few years. “Recent graft scandals and a slowing economy have hurt many of its financially leveraged and politically connected businessmen, while those active in technology, pharmaceuticals and consumer goods have prospered,” states the magazine.

Let’s take a look at such countries where businesses benefit most from crony capitalism.

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Germany

Rank: 23

Chances of getting benefits from politicians are really less in Germany. Big businesses in the country are driven on brand building and professionalism.

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South Korea

Rank: 22

The country fares better because the Economist considers South Korean companies to be more globalised; they ‘sell cars and electronics to the world’. The magazine at the same time mentions that there is a history of big corporates bribing politicians at home.

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Japan

Rank: 21

Just like South Korea, Japan’s big corporates sell cars and electronics globally. The businesses are generally more independent of political parties in Japan.

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France

Rank: 20

France’s big business functions more like Germany’s. Biggest businesses in the country are into retailing and high-end luxury products that do not require dependence on the government.

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China

Rank: 19

China appearing among bottom few countries may not sound convincing. And that’s why the Economist probably explains that though China has a ‘reputation for graft’, the reason for it scoring well is because most of the assets are owned by the government rather than private companies.

Also, China has seen billionaires that have created wealth from new-generation industries such as technology – for example, Jack Ma of Alibaba.

China has been rocked with issues of graft wherein politicians were found to own assets through their friends and families. But such data is not public.

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Poland

Rank: 18

Poland’s economy was more like Russia’s where state controls most businesses and assets. The country started liberalisation process in 1990s.

The economy has moved towards a market-oriented system. However, most of the large industries, such as mining, rail, sand steel, are still government owned reducing chances of graft.

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United States

Rank: 17

To cut down on politician-business nexus, United State lets corporations 'lobby' for new change that businesses want or new rules they seek.

Lobbying happens at every level of government, including federal, state, county, municipal, and even local governments.

The mechanism is a highly controversial phenomenon, often seen in a negative light by journalists and the American public.

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Thailand

Rank: 16

According to the Economist index, the crony capitalism is on a rise in the country. In 2007, the company was ranked 23rd.

Thailand is a newly industrialised country. Its economy is heavily export-dependent, with exports accounting for more than two-thirds of its gross domestic product (GDP), according to Wikipedia.

Tourism remains one of the biggest contributors to the economy, about 7 per cent, however service sector has been growing consistently and now contributes over 40 per cent to the country’s gross domestic product.

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Untied Kingdom

Rank: 15

The politics-business nexus has remained more of less stable in the UK. The country, however, has been rocked by its share of controversies.

In 2013, for example, Guardian reported that gas industry employee seconded draft of UK's energy policy.

The same paper also reported that a government minister, Nick Boles, privately assured the gambling company Ladbrokes that his new law prevent local authorities to stop the spread of betting shops.

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Turkey

Rank: 14

With growing privatisation in the country, Turkey has been breaking away from the crony capitalism thanks to the country's financial turmoil. Previously, it ranked eight in the Economist’s index.

Turkey is among the world's leading producers of agricultural products, textiles, ships and other transportation equipment. In recent years, Turkey had a rapidly growing private sector, yet the state still plays a major role in industry, banking, transport, and communications, according to Wikipedia.

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Brazil

Rank: 13

Brazil has the seventh largest economy by purchasing power parity and also by the nominal GDP. It’s economy is the largest of the Latin American nations and the second largest in the western hemisphere, according to Wold Bank.

Over 36 Brazilian companies are part of Forbes Global 2000 list - some them include Petrobras (oil and gas), Vale (mining), and Ambev (banking).

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South Africa

Rank: 12

Gold and diamond mining have been the main driving force behind the economy and development of South Africa.

It is one of the world's leading mining and mineral-processing countries.

The unemployment rate in South Africa, however,  is very high, at more than 25 per cent, and the economy is also grappling with high poverty.

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Argentina

Rank: 11

Argentina is Latin America’s third largest economy. The country is rich in natural resources and has an export-oriented agriculture sector and diversified industrial base.

The political-business nexus is high as private enterprises rely on government for allocation of the natural resources.

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Indonesia

Rank: 10

The country has seen a rise in political-business nexus. Indonesia’s rank went up from 18 in 2007 to the current 10th.

The country’s economy can be defined as market-driven. The government, however, still plays a significant role through ownership of state-owned enterprises (the central government owns 141 enterprises) and the administration of prices of a range of basic goods including fuel, rice, and electricity.

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India

Rank: 9

According to Economist magazine, India’s rank has improved over years. “Recent graft scandals and a slowing economy have hurt many of its financially leveraged and politically connected businessmen," says Economist. The country has, however, seen sectors such as technology, pharmaceuticals and consumer goods thrive.

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Taiwan

Rank: 8

Keeping up with the trend of worsening nexus between politicians and businesspersons; Taiwan has climbed two spots in the past several years. The country was ranked 10th in 2007.

Taiwan has a developed capitalist economy where most large government-owned banks and industrial firms have been privatised.

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Mexico

Rank: 7

Mexico’s is high up on the list because of one single billionaire - Carlos Slim. He controls the biggest firms in Mexico that are into fixed-line and mobile telephony, according to Economist.

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Philippines

Rank: 6

Philippines saw its scores rise because of the businessmen in real estate and natural resources have gained in the past years. In 2007, the country was ranked 9th.

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Singapore

Rank: 5

Singapore ranks high due to scarcity of land in the country, which is boosting real estate valuations. This has helped the billionaires to make fortunes in property deals.

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Ukraine

Rank: 4

The Ukraine consists of business oligarchs just like Russia; many of them embroiled in scandals. There have been scandals involving selling of government assets at significantly lower prices.

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Malaysia

Rank: 3

Business executives surveyed in the World Economic Forum's Global Competitiveness Report 2013-2014 reveal that unethical behaviours of companies constitute a disadvantage for doing business in Malaysia.

According to Wikipedia, Government contracts are sometimes awarded to well-connected companies, and the policies of awarding huge infrastructure projects to selected Bumiputera companies without open tender continue to exist.

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Russia

Rank: 2

Had there been no land scarcity in Hong Kong, Russia would have top the list of the. In fact, international newspapers are full of reports pointing out that corruption in business and even in daily lives of citizens is the only problem preventing the country from becoming an economic power house.

“The transition from communism saw political insiders grab natural resources in the 1990s, and its oligarchs became richer still as commodity prices soared,” says Economist.

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Hong Kong

Rank: 1

Hong Kong is packed with billionaires in crony industries. It faces the same problem as Singapore - scarcity of land that is leading to wider politician-businessperson nexus.

According to Economist, the country has been ‘lax on antitrust’.