draining development.pdf - Khazar University

492 Draining Development?through technical assistance. The other reason is that TPM is the resultof corrupt dealings, whereby, for example, the original contract governingthe transaction has involved bribes to government officials. TheTPM is easily detected, but is allowed by the contract. There are manydetected instances of this sort of problem (Global Witness 2006; Greenpeace2008). We are therefore taken back again to the conundrum; caneffective domestic restrictions on IFF be developed without tackling theunderlying corruption?Perhaps the actions initiated by rich nations can provide the missingelement because transfer pricing involves two nations (or, at least, twojurisdictions given that so many of the secrecy jurisdictions are dependencies).10 Even more than the other controls of IFFs, transfer pricinginvolves highly technical accounting issues that are difficult for nonexpertsto assess.Illegal MarketsChapter 5 on Colombia by Francisco E. Thoumi and Marcela Anzolapoints to a fundamental problem in the current view of how illicit marketscontribute to illicit flows. Consider illegal drugs, the most well studiedand probably largest of the global criminal markets. 11 The main flowis of drugs (particularly opiates and cocaine) from producer and transitcountries, which are mostly in the developing world, to rich consumingcountries that account for most of the expenditures, though not necessarilymost of the quantities consumed. 12 The reverse flow is of fundsfrom consumers in rich countries to the traffickers, who are predominantlyin the source countries. Indeed, it is an oddity of the drug marketthat, in contrast to legal markets, the dominant earners in the internationaltrade have come from poorer countries. Pablo Escobar (Colombia),Arellano Félix (Mexico), and Khun Sa (Myanmar) were all prominentfigures who made massive fortunes from the international drugtrade; if there are comparably rich European and U.S. traffickers inrecent decades, they have managed to keep their identities concealed.At first impression, this suggests that illegal drugs would generate illicitinflows to developing nations. It is often claimed that opium and heroinadd one-third or more to the measured GDP of Afghanistan (UNODC2009). Most of this comes not from the production of opium, but from