Managing Conflict of Interest - Organisation for Economic Co ...

Defining Conflict of Interest 27abuses, since they themselves were also indulging. Neither the parliamentnor the courts, or the press proved effective in stoppingthem either.Rent seeking and bribery have been associated with both theformation and the implementation of the rules and policies on avast scale. Major business interests (the oligarchs) effectively “captured”the state. And there is now a further sinister twist: the FederalService of Security (formerly the KGB) has effectively gained controlof some of Russia’s largest assets.The interdependence between big money and the political leadershiphas become endemic and has seriously undermined both theworking of the economy and the legitimacy of the state. The oligarchsdepend on the politicians for preferential treatment and havea major influence on policy; the politicians rely on the oligarchs forlarge financial rewards and for their political survival. Thus, conflict ofinterest in government remains rampant and largely unchecked.Russia finds itself in a vicious circle because the oligarchs (nowjoined by the FSB), having won control of the rules and of policies,strongly resist any attempts to reform, and the politicians resistreform because it would weaken their hold on power. The situationhas been aggravated, for the reasons explained earlier (by thefact that Russia has become flush with “resource rents”). Althoughthe WGI data show some improvement since the late 1990s, Russiaremains in the bottom quartile.People’s Republic of China 18There are some similarities between the People’s Republic ofChina (P.R. China) and Russia. Under Mao’s command economy,there were conflicts of interest and corruption at the top; and therewere “informal practices” lower down that were outside the formalrules. Following the movement toward a market economystarting in 1978, corruption also began to rise. The coexistence ofplanning with the free market (especially the coexistence of marketand controlled prices) offered huge opportunities for fraud; and18This section draws on He, Z. 2000. Corruption and Anti-Corruption inReform China. Communist and Post-Communist Studies 33 and Sun, Yan.2005. Corruption, Growth and Reform: The Chinese Enigma. Current History( September).ADB/OECD Anti-Corruption Initiative for Asia and the Pacific