On Wednesday the world celebrated the International Anti-Corruption Day, designated in 2003 by the United Nations (UN) General Assembly when it adopted the UN Convention against Corruption. Recognizing the importance of fighting corruption in that way was a major step in a growing global effort to remove the taboo around addressing corruption in the international discourse on development. Indeed, the new expectation of governments and businesses alike is to face corruption head on everywhere it cripples democracies and markets.
This year’s theme for the International Anti-Corruption Day is breaking the corruption chain. CIPE’s work with private sector organizations in countries around the world reflects precisely that objective. In many environments where corruption has become entrenched, is very hard for an individual or a company to stand up against abuses such as bribery or extortion. Furthermore, it is hard for businesses to make a credible commitment to integrity without sufficient knowledge on how to build proper management systems to prevent corruption in daily operations. These limitations can be overcome through better anti-corruption compliance and collective action. These private sector-led approaches have the power to break corruption chains and make a real difference.
Earlier this year my colleague Frank Brown and I presented CIPE’s experiences from Russia, Kenya, Ukraine, and Thailand at the Society of Corporate Compliance and Ethics Institute in Las Vegas. To celebrate the International Anti-Corruption Day, we captured key takeaways from our presentation in CIPE’s latest Economic Reform Feature Service article:
Article at a glance:
- Corruption is primarily an institutional issue and combating it requires proactively preventing corrupt practices through supply- and demand-side reforms.
- Collective action and anti-corruption compliance are practical approaches that reform-minded businesses can use to build a critical mass of companies committed to operating with integrity.
Companies in emerging markets can greatly benefit from improving their anti-corruption practices, which makes them more attractive business partners in global value chains.
Read the whole article here.
Anna Kompanek is Director for Multiregional Programs at CIPE.
The world — including global financial centers — needs to come together to fight kleptocracy. (Photo: Wikimedia Commons)
Corruption is often thought of as an individual problem where a corrupt official abuses his or her government position for personal gain. But what happens when an entire government, or the ruling class of an entire country, is engaged in corruption? When corruption becomes systematic and institutionalized, the damage is much greater – and the tools to fight it increasingly require international cooperation.
Two weeks ago the World Movement for Democracy held its eighth international conference in Seoul, Korea. Discussions of the corrosive effect corruption have on democratic renewal abounded throughout the conference. However, a discussion on kleptocracy chaired by the National Endowment for Democracy’s Carl Gershman brought out the enormous scale of illicit cash flows from kleptocratic governments, and the direct influence they can have on enabling authoritarian push-back was made clear. Presenters on the panel highlighted the need for both international coordination on efforts to improve investigation, journalism, and the tracking of money flows, and also support for in-country efforts to strengthen local watchdogs and activists.
From the CIPE perspective, we offered a strategy based on the old adage “follow the money”: to contend with and reduce capital flows from illicit gains we need to understand how such funds are siphoned off, how they move around the world, and what institutional responses we can promote to slow and stop them. Kleptocrats often use a mixture of state and private institutions to steal money, and then establish complex networks of shell companies and other fronts to launder funds. They then use global financial institutions to move “clean” money into markets where it can be securely invested. A comprehensive strategy is needed to combat this complex crime at all levels.
Corruption has been a major roadblock to a meaningful and sustaining democracy in Thailand. According to CIPE Asia Regional Director John Morrell, “corruption was the stated justification for the military’s ousting of an elected government in 2006 and the Supreme Court’s sacking of another elected government in 2008.” In Transparency International’s 2014 Corruption Perception Index, Thailand was ranked 85th out of 175 countries.
To address this corruption issue in Thailand within the local context, CIPE partnered with Thai Institute of Directors (IOD) and launched a Collective Action Against Corruption initiative in 2010. This project is unique in that CIPE and IOD aim to combating the supply side corruption in the private sector through a coalition of member companies, established in this initiative, which vowed to adhere to the highest standards of corporate governance, compliance, and anti-bribery protocols.
Did you know that public procurement — goods and services bought by governments — accounts for around one-fifth of global GDP? Or that in most high-income economies public procurement takes up a third of total public spending, and in developing countries even more – about half?
These figures represent a significant share of national wealth. If channeled properly, public procurement provides indispensable benefits to a society, such as infrastructure, hospitals, and schools. Yet, if squandered, public procurement can set back the economy and contribute to massive corruption. In fact, the Organisation for Economic Co-Operation and Development (OECD) estimates that corruption drains 20-25 percent of procurement budgets globally, which amounts to staggering $2 trillion per year.
The World Bank’s recent report, Benchmarking Public Procurement 2016, goes beyond the aggregate numbers to compare data on regulatory environments that affect the ability of companies to do business with the government in an open and transparent way.
This post originally appeared on the SCCE Compliance & Ethics blog.
I was truly honored to attend this year’s Compliance and Ethics Institute (CEI) in Las Vegas, and to present with my colleague Frank Brown, CIPE’s experience with motivating mid-sized businesses in emerging markets to launch compliance programs. Our session was one of the opening ones scheduled at 9am on Sunday morning (did I mention we were in Vegas?) so it was abundantly clear to us that everyone who attended was truly dedicated to the cause!
As we’ve heard throughout the event, emerging markets pose many compliance risks, especially in the area of anti-corruption. Local enforcement may be lax and bribery remains common in business transactions. What is more, under laws such as the U.S. Foreign Corrupt Practices Act or the UK Bribery Act, it is not just the behavior of a company’s own employees but also the conduct of it suppliers, agents, and other business partners that’s of concern.
The World Economic Forum lists a weakening judiciary as one of the issues holding back economic reform in Pakistan. (Photo: Pakistan Today)
In Pakistan, the process of economic reforms has been painfully slow – a fact underlined by stalled or slipping progress on several international indices. On the World Bank’s 2015 Doing Business, Pakistan fell from 107th out of 185 countries to 128th. The World Economic Forum’s Global Competitiveness Index brought Pakistan down to 129th in 2014-15 from 124th in 2012-13. And the Fraser’s Institute report kept Pakistan at 124th out of 167 countries — the same spot it earned in 2013.
The World Economic Forum published its Global Competitiveness report this week, showing similarly weak progress. Three large South Asia Countries were ranked – India at 55th, Bangladesh at 107th and Pakistan at 126th. As compared to the last report, India jumped 16 places, Bangladesh by 5 and Pakistan slipped by one.
“If a company’s goal is to stay in business for a long time, why take the shortcut and pay bribes, which can damage the company in the long term?” asked Sammy Hamzah, president of Indonesian Petroleum Association, at the launch event of CIPE and International Business Links (IBL)’s new Anti-Corruption Compliance guidebook for mid-sized companies in Indonesia’s oil and gas industry.
“When a company commits a corrupt behavior, it takes on average 20 to 30 years to bring back the company’s credibility.”
Corruption is a major problem in Indonesia. According to a Gallup poll, more than 8 in 10 Indonesians say that corruption is widespread throughout the nation’s government and businesses. The oil and gas sector is particularly susceptible to corruption because of the multiple steps in the procurement and licensing processes, as well as the sheer amount of the money involved.
That’s why CIPE and IBL produced the guide. It’s intended to help mid-sized companies looking to become suppliers of local or international oil and gas companies to understand the business case for anti-corruption compliance and instruct them on how to create an internal compliance system.