|
Asian Economy
Changing Ways
Corruption
Malaysian Economy
Maps
Propery and FIC
US & EU Economy
Last Update:
10 May, 2000
| |
The Edge
No more business as usual
Upping the ante in fight against corruption By Dorothy Teoh
|
The scenario is a familiar one. A large
corporation from a developed country that operates internationally offers a bribe in an
emerging market economy to win a contract.
No big deal, you say. After all, bribery payments made abroad have been an established
feature of international business for a long time. Such payments have even been
tax-deductible in several European countries.
But today, if you were a German firm, for instance, payments like these could land your
executives in jail in your home country for up to 10 years, and they could be extradited
to face charges in the host country. This “tremendous change” which has taken
place in the past year has come about under the OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions, says Peter Eigen,
chairman of Transparency Inter-
national (TI), in an interview with The Edge last month during his visit to Kuala Lumpur.
TI is the non-governmental organisation dedicated to increasing government accountability
and curbing both international and national corruption.
The Convention, which came into effect in February last year, makes it a crime to offer,
promise or give a bribe to a foreign public official in order to retain international
business deals. It also puts an end to tax deductibility for bribe payments made to
foreign officials. It commits 34 signatories, which include the world’s biggest
economies, to adopt common rules to punish companies and individuals who engage in bribery
transactions, and is expected to have a major impact in the global battle against
corruption.
But despite the growing climate of intolerance towards corruption in international
business, there will be no “quick fix” to the problem, says Eigen. He says in
the first place, it has taken some time for the signatories of the OECD Convention to
ratify it. “Even in those countries where it has been ratified, it will take some
time to implement the law in terms of changing their own legislation. We consider the
changes which have been made in Japan and the UK as insufficient and therefore, we are
pressing these two countries to improve their implementation. Plus, it will be some time
until the business community has adopted the new practice,” he says.
Ignorance of the Convention could be a barrier to its adoption. A survey conducted last
year by Gallup International for TI found that only five per cent of executives from major
foreign companies resident in emerging market countries were familiar with the Convention.
“In many countries, apparently the fact that the legal system has changed has not
been properly communicated to the business community. It is still possible that if you
talk to a German businessman in Moscow, Jakarta or Lagos that he will tell you that ‘In
this country, nothing can be done without corruption’... They don’t even know
that they are putting themselves at tremendous personal risk,” says Eigen.
But there are other risks aside from criminal prosecution. Eigen says corporations which
rely on bribes rather than on competitive strengths to secure contracts risk being
weakened, and having their reputations tarnished. While they may gain in the short term,
the cost to them in the medium term is very high, says Eigen. “They become captives
basically of a corrupt culture and they will be vulnerable to blackmail and pressure in
the future,” he adds. In this sense, he says, the private sector is not just the
villain but also the victim where corruption is concerned.
There is a price too in terms of a higher tax rate. A study by Shang-Jin Wei of Harvard
University showed that an increase in the corruption level from that of Singapore to that
of Mexico was equivalent to an approximately 21-percentage point increase in the marginal
tax rate on foreigners. Malaysians
abroad
While there are not many Malaysian companies which have gone global, the perception is
that Malaysian companies are no different from other transnationals operating in the
global marketplace when it comes to bribery. In the Bribe Payers Survey commissioned by TI
last year, Malaysian companies were seen as the fifth most likely to pay bribes to win or
retain business. The Bribe Payers Index was a pioneering effort to measure the supply side
of bribery. Many of the questions asked related to perceptions of bribe-paying in 14
emerging market economies by companies from the world’s 19 leading exporters. The 14
countries combined accounted for over 60 per cent of imports of all emerging market
economies.
The outcome, acknowledges Eigen, is “not very flattering for the Malaysian community”.
He does however say that “to what extent this is universal and can be said about all
Malaysian companies or whether it’s only a few companies that have given a bad name
to Malaysian exporters is very hard to say as our index is based on perceptions”.
If Malaysia were to sign, ratify and implement the OECD Convention, it would give a “tremendous
signal” to the international community and also to the local business community, he
says. The fact that Malaysia is both one of the world’s top exporters as well as
importers (it was No 19 in terms of exports and No 22 in terms of imports in 1998) makes
the conduct of Malaysia’s private sector “very important as a model for the rest
of the world”, says Eigen.
But he is optimistic about the overall picture for this country. Malaysia, he says, has a
number of positive elements in its fight against corruption, one of which is a relatively
strong public service. “In many countries, the main reason for corruption is that
civil servants are so poorly paid that they need bribes in order to survive. You do not
have that problem compared with many civil service situations in this region,” he
says.
The second is a political leadership “strongly committed” to fighting
corruption. “And you have an Anti-Corruption Agency which has about 600 employees and
this is something most countries can only dream of,” he adds. (However, the Malaysian
chapter of TI has pointed out that an independent ACA along the lines of the Independent
Commission Against Corruption in Hong Kong and New South Wales, Australia, would give a
big boost to the fight against corruption.)
Malaysia is also doing relatively well economically. “Poverty is at the same time the
result and the cause of corruption because if you have tremendous income differential in
society, it is very hard for low-income people to resist the temptation to share some of
the riches that they see the elite in the country dispose of,” says Eigen, who listed
two other positive elements — public anger against corruption and strong
anti-corruption legislation.
Malaysia has a lot going for it, says Eigen, and it can therefore achieve much better
results in terms of controlling corruption. But he is under no delusions as to how fast
this can happen.
“Even if you try to change the system in a large company, this cannot be done in one
day. You will have to introduce a code of conduct for your employees, [and] compliance
procedures to make sure that your own employees do not use corruption. We are expecting
that this will take five to 10 years before things really change,” he says. |
|
