Without a strong compliance program, many smaller Russian firms could be locked out of lucrative contracts with big multinationals.
By Henry Nelson
In countries with weak rule of law, anti-corruption efforts suffer from a collective action problem: because bribery and corruption are endemic and occur frequently, individual small business owners hesitate to reform because they fear that doing so will reduce their competitiveness.
If a small or medium-sized enterpise (SME) begins to eschew bribery, it might be incapable of securing contracts that require paying a bribe, for example. The threat of short-term loss of business is serious for SMEs and can deter companies from pursuing anti-corruption compliance.
Furthermore, the collective action problem effects the general business environment. Without a strong, coordinated voice on the importance of compliance, corruption continues to be seen as “business as usual” and the consensus continues to be that bribery is a necessary component of conducting business.
This collective action problem is pervasive and continues to pose issues for CIPE and its many global partners. It is difficult to implement reforms when SMEs fear that the reforms will hurt their business.
Earlier this month, CIPE’s Washington office hosted a delegation of CIPE Russia officers and regional CIPE partners for a discussion on value-chain anti-corruption efforts in Russia. The discussion yielded plenty of interesting information on CIPE Russia’s plan to work with regional Russian chambers of commerce in order to educate local SMEs about international anti-corruption laws like the U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act.
This article originally appeared on the Thomson Reuters TrustLaw Governance blog.
Thailand lifted its state of emergency, and the February 2 elections have been annulled. Encouragingly, the leaders of the government and the opposition are signaling – albeit tentatively and obliquely – a willingness to negotiate an end to the country’s ongoing political crisis. But even if Thailand can extricate itself from its latest political quagmire, the next crisis is probably not far off if the underlying problems are not addressed.
More than any other issue, corruption has served to delegitimize successive governments in the eyes of competing segments of Thai society. In 2006, the military ousted an elected government and in 2008, the Supreme Court disbanded an elected government; in both cases, the stated justification was corruption. Likewise, allegations of corruption are among the paramount drivers of the anti-government protests taking place in Bangkok today, just as they were in the color-coordinated protests of recent years.
And this frustration with corruption is not limited to corruption in electoral processes or campaign fraud. Corruption is a daily phenomenon for many citizens and businesses, and people are fed up with it.
By Iryna Fedets
In Kyiv and in other cities across Ukraine, small and medium-sized businesses were a driving force in the recent protests that resulted in the ouster of former President Viktor Yanukovich and the formation of a new Cabinet of Ministers. Entrepreneurs personally participated in the pro-European Union movement, both on the streets and in financing the demonstrations and providing food and medical supplies.
According to a poll conducted in early February 2014, business owners made up about 17 percent of the protesters, although business owners only make up 4 percent of Ukraine’s overall population. Following the 2008 recession, the former government imposed changes in the regulatory and tax structure that increased corruption and raised the burdens on small business, which helped draw them to the streets.
By Shrey Goyal, 2013 CIPE Blog Competition Winner. Read the other winning blogs here.
A few months ago, the Global Corruption Barometer 2013 by Transparency International (TI) told us that 47 percent of Indians think corruption is a serious problem in our public sector, and 68 percent feel the government is ineffective against it, with most corruption perceived to exist in political parties (86 percent), police (75 percent) and parliament/legislature (65 percent). It is evident that most Indians are perturbed by the presence of corrupt practices thriving in all nooks and crannies of the public machinery.
Not only is corruption rampant in India, it’s also remarkably visible and lacking in subtlety. In fact, for most Indians, corruption has always been a way of life. To think about it, I ended up paying a bribe no less than four times last week alone, and had to disperse massive amounts in cash to bureaucrats and their peons a couple of years ago just to make sure that my new business registration does not get stuck indefinitely for no discernible reason. And I am hardly alone: A 2005 study by TI found that more than 62 percent of Indians had a first-hand experience of paying bribes or influence peddling to get jobs done in public offices successfully.
According to some estimates, India has lost a staggering $462 billion in illicit financial flows since gaining independence in 1947, and the economic burden of corruption in the last decade is estimated at INR 1,555 thousand crore ($250 billion).
In this 2011 file photo, a billboard is shown on the Rue Belliard in the European district of Brussels THOMSON REUTERS FOUNDATION/Maria Sanchez-Marin
This post originally appeared on the Thomson Reuters TrustLaw blog.
The European Union (EU) is taking a hard look at corruption in its midst, having recently published its first-ever corruption monitoring report. The results are striking: the estimated cost of corruption in the EU’s 28 member states equals €120 billion, a figure nearing the EU’s annual budget.
A sense of corruption problems in Europe has been pervasive in the news. In Spain, Princess Cristina and her husband have been embroiled in a case centered on the alleged embezzlement of €6 million in public funds. In the Czech Republic, Prime Minister Petr Necas resigned after a scandal involving illegal surveillance andgraft. He has been recently charged with bribery for offering state posts to former opposition members in return for them leaving office. In Italy, former premier Silvio Berlusconi is back in court (again) on charges of giving a €3million bribe to an opposition politician to switch sides. And the Romanian Parliament voted to exempt top politicians from corruption liability.
Faced with a corrupt judicial system, what strategies do Russian businesses employ to resolve business disputes? Lately, less murder and more litigation.
Faced with multinational firms who are liable under U.S. and U.K. laws for their Russian partners’ corrupt practices, how do Russian businesses gain access to international partners? Start putting in place anti-corruption compliance programs.
Those were some of the answers that came from experts from Russia and the U.S. had some answers at a recent panel discussion co-hosted by CIPE and the Kennan Institute, “Corruption and Business in Russian: National Problem, Regional Solutions.” Jordan Gans-Morse, an assistant professor of political science at Northwestern University, presented the results of his innovative research on how non-oligarchic firms are surviving in an atmosphere of endemic corruption. Against this backdrop, CIPE Moscow Program Officer Natalya L. Titova, joined by CIPE partners from St. Petersburg, Chelyabinsk, and Kaliningrad, spoke about a CIPE program in Russia that is helping regional businesses to meet international anti-corruption standards in order to join global value chains.
To improve local governance in Afghanistan, CIPE conducts training seminars for the Provincial Councils in Afghanistan on democratic governance and market economics, including topics like advocacy, corruption, and the informal economy. Using the knowledge gained from the seminars, many of the Provincial Councils have taken on issues affecting their communities.
CIPE recently discussed the efforts of the Kunar Provincial Council with Chairperson Haji Mia Hassan. After discussing corruption issues with local government officials, the Kunar Provincial Council filed corruption cases against several officials with the prosecutor’s office, including the director of the Customs Department and the Director of Haj and Endowments.