Tag Archives: thailand

Overcoming the Collective Action Problem: How to Encourage Businesses to Fight Against Corruption

Without a strong compliance program, many smaller Russian firms could be locked out of lucrative contracts with big multinationals.

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.

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Corruption Allegations Roil Thailand — Again

thailand rally

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.

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The Advantage of Targeted Anti-Corruption Measures

Port_of_Kaliningrad

Thanks to its Special Economic Zone status, many foreign companies assemble cars and electronics in the Kaliningrad region for the broader Russian market. But corruption remains a major barrier.

At public events on corruption, no matter how sophisticated the participants and no matter how narrow the subject, the discussion invariably seems to wander off topic. Often the audience members want to speak about a high-profile case like the suburban Washington, DC, politician’s wife who stuffed $79,000 into her undergarments when federal agents came knocking. Sometimes, speakers wander off into digressions on how one nation or another is inherently corrupt because of cultural and historical factors. Frequently, attendees simply conflate different kinds of corruption – petty, political, commercial – into in insoluble morass.

This was the case at a recent CIPE-supported event held in November in Kazan, Russia. One of the 70 participants began to derail a technical discussion of Russian legislation with a series of questions about recent arrests of regional political leaders on bribery charges. Some of the audience perked up. Others looked uncomfortable, not expecting this at a conference on how to boost investment by improving firm-level compliance with anti-corruption laws.

Igor Belikov, the event’s moderator and head of the Russian Institute of Directors, deftly reined in the discussion and with a bit of humor brought it back to the subject at hand – how mid-sized firms can reap the benefits of globalization by putting in place anti-corruption compliance programs that give the firms better access to multi-national companies’ global value chains.

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Business Fights Corruption in Thailand

 

Dr. Pakdee Pothisiri, Commissioner of Thailand's National Anti-Corruption Commission, at an IOD event in Bangkok. (Photo: CIPE)

Dr. Pakdee Pothisiri, Commissioner of Thailand’s National Anti-Corruption Commission, at an IOD event in Bangkok. (Photo: CIPE)

Corruption is one of the world’s most pervasive and vexing problems, costing the global economy hundreds of billions of dollars each year and stalling economic growth in many developing countries. Though most anti-corruption efforts focus on government-driven solutions in Thailand, the private sector, with CIPE’s assistance, has taken the lead in stamping out corrupt practices.

Writing in the Bangkok Post, CIPE Program Officer John Morrell describes how this unique program took shape, and why private companies have taken such an interest in what is usually regarded as a problem for the government.

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Business Shows Clear Commitment to Fighting Corruption in Thailand

thailand-iod-participants

Participants at the January IOD training included senior officers from some of the largest local and multinational companies in Thailand.

In late January, more than 30 senior officers from 17 major Thai and multinational corporations attended an intensive anti-corruption training program led by the Thai Institute of Directors (IOD). This pilot two-day training course is the latest groundbreaking step in the Collective Action against Corruption campaign, now in its third year, being led by CIPE and IOD.

With technical and financial assistance from CIPE, IOD has assembled a still-expanding coalition of companies and business associations committed to fighting corruption in Thailand. To join this coalition, a company signs IOD’s Collective Action against Corruption Declaration which lays out tangible and specific steps that a company must take to proactively reduce corruption-related risks on the part of its employees, managers, and vendors. But signing this document is no mere photo-op, because to remain a member of this coalition, a company must submit to an external evaluation to verify whether or not it is actually doing what it has promised to do.

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Private Sector Fight Against Corruption in Thailand Gains Momentum

UK Foreign Secretary William Hague with IOD Chairwoman Khunying Jada in Bangkok

When the Thai military overthrew an elected government in 2006, and when the Supreme Court disbanded another elected government in 2008, corruption was the principal stated justification. Public perceptions and allegations of corruption can undermine government in Thailand to such an extent that democratically elected governments often lack public legitimacy in the eyes of competing (and color coordinated) segments of Thai society, who came out in droves to protest in red or yellow shirts depending on their political affiliation.

So the resounding victory of Yingluck Shinawatra in Thailand’s 2011 parliamentary elections – which marked just the second time since 1932 that a single party gained control of parliament – should not be perceived as a triumph of democracy in the country. Indeed, the only other time that a single party controlled parliament was in 2005 when Yingluck’s brother Thaksin Shinawatra won by an even larger electoral margin. Less than one year later, he was deposed in a military coup. Clearly, the situation in Thailand demonstrates that the consolidation of democratic principles and practices in a country requires more than just the ability to vote, and corruption is among the paramount obstacles to be overcome.

With the long-term goal of reducing corruption and promoting transparency in the Thai marketplace, CIPE launched a project in July 2010 with the Thai Institute of Directors (IOD) to cultivate private sector support for national anti-corruption initiatives. Since then, CIPE and IOD have designed a collective action strategy for reducing corruption in Thailand, assembled a still-expanding coalition of companies and business associations committed to that strategy, and developed a series of training programs and certification processes that ensure that coalition companies are actually doing what they pledge to do on anti-corruption.

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Thai Banks Join Anti-Corruption Effort

IOD and Thai Banks Join Hands in the Fight Against Corruption (Photo: The Post Today).

On March 27, nine commercial banks jointly signed the Anti-Corruption Declaration of the Thai Institute of Directors (IOD). This Declaration lays out tangible and specific steps that a company must take to combat corruption on the part of its employees, managers and vendors, and is the unifying document of IOD’s Collective Action Against Corruption campaign.

With CIPE support and technical assistance, IOD has built a private sector coalition of Thailand’s largest businesses and most influential business associations united in their commitment to tackle the supply side of corruption. These nine banks are the latest to join this coalition, and they now take rank with Thai and multinational firms such as PTT, Thai Airways, Siam Cement, the Shin Corporation, Toshiba Thailand, Pfizer Thailand, and Siemens Thailand.

One of the business associations in IOD’s anti-corruption coalition is the Thai Bankers’ Association (TBA), and all nine of the banks that joined on Tuesday are TBA members. There are now 15 Thai banks in IOD’s coalition, representing the full membership of the TBA.

Speaking of the significance of this event, IOD President and CEO Bandid Nijathaworn said “this is a major step [in the fight against corruption] in that this is the first time that all of an association’s member companies are part of the coalition.” The Chairwoman of IOD, Khunying Jada Wattanasiritham, echoed these sentiments by explaining that this campaign is the paramount collective action initiative in Thailand today.

This event attracted considerable media attention, with the Nation – one of the country’s biggest English-language dailies – penning an article lauding the banks for their effort “to prevent and suppress graft.” But this was not a mere photo-op. To join IOD’s anti-corruption coalition, companies must make concrete promises, and concrete steps must be taken to fulfill these promises.

When a company or business association signs IOD’s Anti-Corruption Declaration, they pledge to implement strong anti-bribery policies and anti-corruption controls in their organization. They also pledge to send senior executives and compliance staff to IOD-led anti-corruption training programs. Perhaps most significantly, coalition members must submit to an external verification to certify whether or not they’re actually doing what they promise to do. If they aren’t, they will be removed from the coalition.

This private sector coalition, the members of which all voluntarily stepped forward to take part, is having a tremendous impact onThailand’s fight against corruption. Because corruption distorts markets, denies citizens and businesses the benefits of free competition, and retards economic development, reducing corruption is among Thailand’s paramount development goals.

Moreover, in a country in which rampant corruption has directly and repeatedly contributed to the destabilization of the political process, this anti-corruption initiative of the Thai Institute of Directors is making invaluable contributions to Thailand’s democratic development as well.