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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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.
Corruption is a systemic problem that plagues many transitional countries across the world, rooted in weak rule of law and lack of private property rights. Not only does corruption erode trust in public institutions, such practices also hinder economic growth and weaken democratic governance.
The corruption challenge can be addressed by building responsive institutions that offer basic assurances of private property rights and ensure law and order. CIPE programs address the root causes of corruption through a multi-pronged approach. CIPE programs mobilize the private sector to raise anti-corruption standards and advocate for reforms; streamline regulations and reduce implementation gaps to limit opportunities for corruption; improve corporate governance to strengthen firm-level integrity; facilitate collective action to level the playing field and coordinate company efforts; and equip small and medium-sized enterprises to resist bribery and meet the requirements of global value chains.
Two recent case studies, described below, show these CIPE approaches in action.
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.
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.
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.