Magazine article International Trade Forum

Firms Gang Up against Bribes: Companies and Multilateral Organizations Are Moving against Corruption in Business Life, Bolstering National Efforts to Stamp out Bribery

Magazine article International Trade Forum

Firms Gang Up against Bribes: Companies and Multilateral Organizations Are Moving against Corruption in Business Life, Bolstering National Efforts to Stamp out Bribery

Article excerpt

Corruption, declares the World Bank, is "the single greatest obstacle to economic and social development". President Lucio Gutierrez of Ecuador agrees. "Corruption steals wealth from our own people," he says. "Corruption steals jobs. Corruption steals money for health care. People lose trust in their government and obviously they also lose trust in democracy."

However, Augusto Lopez-Claros, Chief Economist and Director of the Global Competitiveness Programme of the World Economic Forum, remembers hearing that for many years, institutions such as the World Bank and International Monetary Fund (IMP) did not allow staffers to mention the word "corruption" in official papers. From the early 1990s, the IMP, the World Bank and regional development banks, along with key international institutions such as the Paris-based Organisation for Economic Co-operation and Development (OECD), have broadened the development debate to include such politically sensitive issues as the fight against corruption, the quality of governments and the effective use of development aid. ITC, too, encourages transparency in procurement to help small exporters compete for international contracts (see box on page 19).

Hitting the poor

"The harmful effects of corruption are especially severe on the poor," the World Bank observes in the official documents launching its anti-corruption initiative. The poor "are hardest hit by economic decline, are most reliant on tire provision of public services, and are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges."

Since 1997 the World Bank Institute (WBI) has launched a series of programmes against corruption, including bribery and abuses within its own contracting system. For businesses, it issues an anti-corruption kit. It trains journalists in how to campaign against fraud and similar criminal activity in public life. "In the territory of the former Soviet Union alone, more than 200 journalists have been killed in the line of work as they investigated stories on corrupt officials or criminal gangs," reports the WBI's web site on corruption ( publicsector/anticorrupt/index.cfm).

In two years the Bank declared mis-procurement on about 40 contracts with a total contract value of US$ 40 million, it now keeps a public list of firms that have been barred from competing for contracts because of misconduct. The WBI points out that the Bank awards some 45,000 contracts a year worth US$ 45-50 billion.

Reversing tradition

"We estimate that corruption is a US$1 trillion industry around the world," reports Daniel Kaufmann, Director of Global Governance at the World Bank Institute. The WBI puts the cost of bribes as equivalent to a 20% tax. But Kaufmann also reports a "sea change" (a fundamental transformation) in the way businesses look at bribery. It is no longer seen as simply part of the cost of doing business.

Corporate social responsibility

One indication of the changing attitudes came in an announcement at the end of January by leading engineering and construction firms. The industry does not have a high reputation for honesty as a contractor across the world. But some 19 international companies, earning US$ 70 billion a year, have now committed themselves to "zero tolerance" for bribery, as reported Alan L. Boeckmann, Chairman and Chief Executive Officer of the Fluor Corporation, at an interactive session on corruption at the World Economic Forum's Annual Meeting in Davos.

Jermyn Brooks, Member of the Board of Directors, Transparency International (TI), Germany, commented that the initiative has reversed the standard approach. The traditional view is that businesses are the victims of corrupt officials who seek bribes and special deals in return for favours. But for each receiver there is a giver, he insisted. The question facing international firms is: "Isn't it about time that the corporate sector took a leadership role in fighting corruption? …

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