Bribery blocks the potential of emerging economies

Last month the FT wrote about the countries that will be driving global economic growth in the years ahead.

any company still concentrating its efforts in established economies really is living in the past.”

But companies trying to prepare for a future world of opportunities offered by new markets must be ready to face new challenges. One of them is corruption.

The FT article listed the 10 fastest growing countries in 2013. According to Transparency International’s Global Corruption Barometer 2013, a business seeking to set up in one of these countries might face some serious corruption problems.

The survey, which asked 114,000 people in 107 countries about their experience of corruption, covered seven of the countries that made the FT’s top 10 growth leaders list.

One-third of the people surveyed in these seven countries who came into contact with public services reported paying bribes. These public services, such as tax and customs authorities and land registries are critical to setting up shop in a new market.

Seven of the world’s 10 fastest growing countries are covered by the Global Corruption Barometer 2013. Here is how many people reported paying bribes to four public services.

For a company getting a new business hooked up to the power grid, buying land to build a shop or factory, getting a permit for a particular activity or getting goods through customs, there is a risk that bribes will be demanded to secure or speed up the process.

Bribes: only part of the price of corruption

The fastest-growing countries in the graph above have clocked GDP growth rates from 32 per cent (South Sudan) to eight per cent (Mozambique). Business opportunities abound.

These growth spurts are most likely driven by strong demand for natural resources (all but one of these fastest growing countries are defined as resource rich by the IMF).

This means the growth might be rather short-lived if corruption goes unchecked for very much longer. Worryingly, in only two of these countries (Sierra Leone and South Sudan) do more than a third of citizens rate their government’s anti-corruption efforts effective.

Corruption will make it progressively difficult to turn the gains of short-term growth into long term benefits.

Companies paying bribes risk more than the price of the bribe. If caught, they face reputational damage, lost investors, and undermining a level playing field for business. The Global Corruption Barometer also warns that half of consumers are willing to pay more to buy from a corruption-free company.

Companies paying bribes, therefore, trade short-term gain for long-term instability.

The chance of getting caught is rising. Legal action against companies that engage in bribery can be taken not only at the local, but also at the international level. Forty countries are committed to enforcing anti-bribery laws that reach beyond their borders under the OECD anti-bribery convention. Enforcement of these rules is more robust and comprehensive than ever – more than 300 investigations are ongoing in 24 countries around the world.

Corruption: four ways to be prepared

For more than a decade now, Transparency International has provided a six step approach for companies to help them manage their corruption risk.

The Business Principles for Countering Bribery advises companies to:

  • Adopt a robust and comprehensive anti-corruption programme prohibiting all forms of bribery
  • Ensure that such programme applies to their representatives and agents
  • Continuously monitor the programme
  • Publicly report on key corruption-relevant indicators, including their anti-corruption programme, organisational transparency and key financial data on a country by country basis.

Emerging economies and multi-national companies need each other: business and investment are the drivers of growth. Business has great power to play a positive role in emerging markets, if they operate cleanly. The challenge is to get it right in these emerging markets, to benefit people as well as economic growth.

Carousel image: Creative commons, Flickr / Gwenaël Piaser

 

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Robin Hodess

About Robin Hodess

Robin Hodess is Advocacy and Research Group Director at Transparency International.

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5 Responses to Bribery blocks the potential of emerging economies

  1. Dan Brown 9 July 2013 at 5:22 pm #

    My experience is that countries such as the UK and US are far more corrupt than than your charts suggests. Instead of just asking random people if they have paid a bribe why not go off real data? How many corruption scandals have hit the UK and US in recent times?
    The US using their tax system for political oppression, how corrupt is that?
    Illegally spying on all and sundry, not corrupt?
    Arbitrarily using drones and killing hundreds of innocents and even US citizens without evidence or trail – is that corrupt?
    Torturing people and making it lawful, corrupt?
    Forcing full body searches and scans without just cause or reasonable grounds, is that okay?
    Being proven to lie habitually as the Government on very serious issues such as Benghazi, is lying corrupt?
    How about arming known terrorist groups with the intention of overthrowing legitimate governments like Syria?
    How about Libya and Iraq?
    The list is endless and that is all just recently.

    Just because corruption is institutionalised and not necessarily manifest through the working man paying a bribe doesn’t make it any less corrupt, in fact it makes it worse – its called tyranny.
    Then there is the whole area of law, if law if not just and applied equally then that is the worse kind of corruption.
    For example the US has the highest prison population in the world because it is so corrupt and many people go to prison on minor drug offences simply because those prisons are private and profit from prisoners who are forced into labour but there are many such examples.

    I think what really puts how inaccurate a representation this list is and why it should not be taken at all seriously into perspective is the fact that Spain is presented as virtually corruption free yet there is currently a massive corruption scandal ongoing involving many politicians and even the Prime minister and it isn’t as if there haven’t been many more high profile corruption cases involving government in Spain.

    I would go as far to say that this corruption index is so misleading that its only purpose could be as a piece of disinformation.

    How about some real transparency?
    Let’s talk about how corrupt institutions such as the UN and EU are along with the IMF and World banks. Let’s talk about how unelected technocrats are being undemocratically put into office in European nations. Let’s talk about why it is that virtually every financial institution connected with these organisations is run by insiders and virtually all come from Goldman Sachs then let’s talk about how corrupt Goldman Sachs and the US federal reserve are.
    Hey let’s talk about Agenda 21, how mass immigration has been planned for decades, how by coincidence the indigenous people of Europe are a dying race and fertility rates have fallen off a cliff. Let’s ask why that is never reported.

    Mass immigration is there to destroy not only the homogeneity of nations but it is direct assault on their sovereignty and this is from their own mouths. The people of Europe are being phased out (killed off) and the educated middle classes are being systematically replaced by those dependant on the state, the workforce replaced by cheap immigrant workers and industry replaced by false economy.
    A very reasonable and lawful case can be made to implicate Sarkozy, Blair, Bush and Obama in treasonous acts and certainly Blair and Bush should be up for war crimes for their illegal and premeditated invasion of Iraq.

    The fact that some people will find these words to be radical when they are a simple statement of fact backed by reports that have been in the news and/or verified by released official documents simply illustrates just how corrupt and decadent our society has become which has allowed such cancer to fester and grow.

    You want transparency people?
    Then educate yourselves and do not rely on organisations that are often funded by those who have a vested interest in particular outcomes.

  2. JCTeller 9 July 2013 at 7:25 pm #

    @Dan,

    Your arguments are specious at best and incoherent at worst.

    The most recent study focused on people paying bribes on a regular, daily basis. As someone who’s travelled throughout the US and Europe extensively, I assure you that I have never been asked by every second civil servant, policeman, or local government official for a bribe to obtain a driver’s license, get a housing permit, or pay my taxes.

    If the statistics are to be believed and are extrapolatable, it would indicate that India is most certainly the most corrupt place on the planet. Based on a corruption factor of plus 50%, that means that approximately 600 MILLION people participate in bribery on a regular basis. That far outstrips the limited number of corrupt individuals in the West and in the Americas.

  3. Snehal Manjrekar 20 July 2013 at 12:08 pm #

    NTransparency International must release a new index primarily focusing on the global arms trading. A lot of rich nations like the US, UK, France, Russia, Israel and Sweden fuels n promotes corruption in developing countries that are the end users of the weapons and military products. In most cases arms companies duly shielded by their respective governments pay bribes in the form of commissions amounting to millions of dollars to the government officials of the developing countries. Interestingly the deals are classified so as to ensure the controversial nature of the financial transactions is taken off the expenditure books of the government authorities. History is replete of such murky deals where the supposedly exponents of fairness and transparency – the developed countries have sponsored and structured astonishingly corrupt deals. For instance, curious readers could read about one such highly corrupt arms deal – Al-Yamamah, between the highighly civilized United Kingdom and oil powerhouse Saudi Arabia.

    Apart from arms deals an index measuring the corruptive practices of the wall street banks and hedge funds would be useful. Often corruption is perceived as an inseperable part of a developing country’s identity, however, this line of thought is nothing but an erroneous stereotype. Any culture that favors in-grouping, greed, and profit-making instincts becomes a natural breeding ground for corruption. Unsurprisingly, what I mentioned is not relevant only to developing countries.

  4. Tiarra Haynes 3 February 2014 at 9:35 pm #

    You bring up very valid points, I agree with you.

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