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.
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.
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.