Podcast hosts Ken Jaques and Julie Johnson with John Morrell (center)
In this week’s podcast, CIPE’s Regional Director for Asia John Morrell discusses when he witnessed for the first time how lack of governance and corruption undermines democracy and how that experience shapes his work today. Morrell talks about business-led solutions to corruption challenges and a CIPE project underway in Thailand that is changing the business culture in that country. Morrell also discusses his early career experiences in the Philippines and a non-profit he founded there to support an orphanage for abandoned children.
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Photo: Citizen Digital
A recent report by Kenya’s Ethics and Anti-Corruption Commission (EACC) paints a rather grim picture of the extent of corruption in Kenya. In the top 10 counties by average bribe size, bribes range from KSH 80,000 (about $800 US) to about KSH 6,000 ($60 US) — in a country where the average monthly wage is just $76. Situations where bribes are most commonly solicited include obtaining basic services such as medical attention or a national identity card. Not surprisingly, Transparency International puts Kenya at 139th out of 168 countries in its latest corruption ranking.
Even a cursory review of Kenyan daily news coverage shows that corruption at all levels (from county to national) and in all its forms (from bribes to graft) is a major issue of concern for the country. Many commentators express frustration at the extent of the problem and the dearth of constructive solutions. Against that background, CIPE and its partner organization, the Kenya Association of Manufacturers (KAM), are working to help change Kenya’s corruption-tainted narrative and provide the private sector with tools to proactively build integrity into business operations.
To that end, CIPE, KAM, and Global Compact Network Kenya (GCNK), where KAM serves as the secretariat, created a joint training program for Kenyan companies on anti-corruption compliance. The training is based on CIPE’s Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets and was adapted to the unique needs and concerns of local businesses. As KAM’s Chairman Pradeep Paunrana put it, “You cannot clap with one hand, it takes two people to make a corrupt deal.” Through this initiative, Kenya’s private sector is taking responsibility for holding itself to a higher standard and disrupting the “supply side” of corruption.
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.