While the international community has worked hard to curb business corruption, many countries still face endemic bribery problems, particularly among large emerging economies, a new report shows.
When conducting business abroad, many companies in some of the world’s largest economies regularly bribe public officials to gain favorable contracts, circumvent regulations, speed up administrative processes or obtain licenses. Bribery is most rampant in large emerging markets, which is especially troubling considering these countries’ rapid pace of expansion and rising level of influence on the global economy.
According to the latest Bribe Payers Index from Transparency International (TI), developed economies tend to run a considerably lower risk of business corruption than their emerging counterparts. TI rated Switzerland and the Netherlands as the countries least likely to experience corporate bribery, followed by Belgium, Germany, Japan, Australia, Canada, Singapore, the United Kingdom and the United States.
Meanwhile, companies from Russia are considered to have the highest likelihood of paying bribes abroad, followed by businesses in China, Mexico, Indonesia, the United Arab Emirates, Argentina, Saudi Arabia, Turkey, India and Taiwan.
TI is a non-governmental organization that monitors corporate and political corruption in international development. Its latest survey, based on responses from 3,000 executives worldwide, ranks 28 of the world’s leading economies — that cumulatively account for 80 percent of global trade and investment — on the extent to which their businesses are likely to commit bribery when working abroad.
The corruption findings from Russia and China are particularly worrisome, as these nations are two of the fastest expanding economies in the world, having invested a combined $120 billion overseas in 2010. This year the Russian and Chinese economies are expected to grow by 4.8 percent and 9.6 percent, respectively.
“China and Russian companies’ presence at the bottom of the list is concerning, considering their increasing importance to the global economy,” the Financial Times’ beyondbrics blog notes. “And it is telling that oil and gas and mining — sectors in which Russia and China are heavily involved — figure in the bottom five of Transparency’s most corrupt industries.”
Public works and construction tops the list of industries most likely to involve bribery.
“Contracts are usually large and construction projects are often unique and therefore difficult to benchmark for costs and time,” according to the TI report. “It is also a fragmented industry, often involving contractors and sub-contractors, which makes the tracing of payments and the diffusion of standards of practice more complex.”
The other industries in which bribery is most likely to occur are:
- Real estate, property, legal and business services;
- Oil and gas;
- Power generation and transmission;
- Pharmaceutical and health care;
- Heavy manufacturing; and
International anti-bribery activity has ramped up in recent years, with the U.S. spearheading prosecutions for record terms against violators of the Foreign Corrupt Practices Act and the U.K. introducing tough new anti-bribery legislation. Corruption is also being targeted in countries near the bottom of TI’s index.
“Even countries best known as sources and recipients of corrupt payments are trying to meet international standards, at least on paper,” the Economist explains. “Saudi Arabia has set up an anti-corruption agency. China, India and Indonesia have passed anti-bribery laws. So too has Russia, in what most observers think is an attempt to ensure membership of the World Trade Organisation (WTO) and support a pending application to join the Organisation for Economic Co-operation and Development (OECD), a Paris-based think-tank for advanced industrialised countries.”
Despite these efforts, there has been surprisingly little improvement in international bribery rates. TI noted relatively no change between the latest findings and the previous results from 2008, indicating that considerably more work is needed to curb business corruption.
“G20 governments must tackle foreign bribery as a matter of urgency. New legislation in G20 countries is an opportunity to provide a fairer, more open global economy that creates the conditions for sustainable recovery and the stability of future growth,” TI Chair Huguette Labelle said in an announcement of the findings. “Governments can press home the advances made by putting resources behind investigations and prosecutions of foreign bribery, so that there is a very real deterrent to unethical and illegal behavior.”
TI says the first step toward improving corporate ethics is to have government set a strong example by implementing rigorous anti-corruption policies in the public sector, as there is a strong correlation between government corruption at home and businesses’ behavior abroad.
Companies themselves must also set a high standard of corporate integrity through strong leadership and employee commitment to ethical culture. In addition, corporate policies, such as publicizing political donations or limiting the value of gifts, must be communicated to all stakeholders.
“Doing business within a comprehensive ethical framework is not only important to prevent foreign bribery and for companies to stay on the right side of the law, it is also good for business,” TI explains. “For example, a Europe-wide business survey found that two-thirds of respondents agreed that a company’s strong reputation for ethical behavior translates into a commercial advantage.”
Bribe Payers Index 2011
by Deborah Hardoon and Finn Heinrich
Transparency International, October 2011
Bric Companies: Exporting Bribery
by David Keohane
beyondbrics (The Financial Times), Nov. 2, 2011
Bribery: Supply Side
The Economist, Nov. 5, 2011
Companies from Emerging Giants China and Russia Most Likely to Bribe Abroad
Transparency International, Nov. 2, 2011