Wednesday, May 25, 2011

Corruption: Rich Nations Urged to Strengthen Fight Against Corruption

TI Chair Huguette Labelle | Credit:

By Eva Weiler

IDN-InDepth NewsReport

BERLIN (IDN) - Profound suffering caused by rampant corruption in tandem with missing democracy is known to be an eminent cause of Arab uprisings. But corruption is not confined to the realm of authoritarian regimes. It is very much ingrained in democratically ruled countries too, which as a new report reveals, are failing to enforce effective measures against bribery in its multiple forms.

The anti-corruption organisation Transparency International (TI) discloses in a new report that 2010 did not witness any improvement in the enforcement of the OECD Anti-Bribery Convention. TI warns that this could signal a dangerous loss of momentum in the fight against corruption.

TI head Huguette Labelle has, therefore, called on top government leaders of the Paris-based OECD (Organisation for Economic Cooperation and Development) to take action to pressure lagging member states to reinvigorate enforcement of OECD's landmark Convention.

The convention, signed in 1999, marked a significant step. The signatory states committed to holding their companies to account for their behaviour abroad. Until then, bribing abroad to win contracts had been a tax deductible expense in at least 14 OECD countries. Twelve years on, "progress with implementation of the OECD Anti-Bribery Convention is in danger of grinding to a halt."

The TI has monitored for seven years, how well governments live up to their promises and enforce the OECD convention. "This year’s progress report, for the first time, shows no improvement in enforcement, with the same countries in the same enforcement categories as in last year’s report."

The TI 'Progress Report on Enforcement of the OECD Convention', covering 37 countries, shows that there are still only seven countries -- Denmark, Germany, Italy, Norway, Switzerland, UK and United States -- with active enforcement. Enforcement in nine countries -- Argentina, Belgium, Finland, France, Japan, South Korea, Netherlands, Spain and Sweden -- was rather moderate.

Countries, numbering 21, have done little or no enforcement; these are: Australia, Austria, Brazil, Bulgaria, Canada, Chile, Czech Republic, Estonia, Greece, Hungary, Ireland, Israel, Luxembourg, Mexico, New Zealand, Poland, Portugal, Slovak Republic, Slovenia, South Africa and Turkey.

TI’s findings are consistent with the OECD's own review, which reported that only five parties to the convention sanctioned individuals or companies in the past year.

"Only where there is active enforcement is there sufficient deterrence against foreign bribery," said Labelle. "The collective commitment to stamp out foreign bribery made by all OECD parties is undermined when a large number of countries have inadequate enforcement."

She added: "Without consistent enforcement one of the success stories of the OECD's past decade will start to unravel. Failure to enforce the convention will allow corruption to flourish, which means that resources will be diverted from the poor and that honest companies will lose out."

Adequate enforcement requires renewed political commitment by government leaders in the lagging countries. Where political will is lacking, OECD's country reviews have not been enough to achieve active enforcement. TI therefore calls for exerting pressure at the highest political level."

In particular, governments with lagging enforcement should promptly prepare plans for strengthening enforcement and a timetable for such action.

Also: The Secretary-General and the Chairman of the OECD Working Group on Bribery should meet with top leaders of governments with lagging enforcement to review plans and timetable for strengthening enforcement.

The TI says that a full review of the status of foreign bribery enforcement should take place at the May 2012 ministerial meeting.

It adds: The Working Group on Bribery should publish a list of governments with lagging enforcement. This would make clear that a higher level of due diligence is needed to do business with companies based in these countries.

The significance of rooting out corruption is underscored by the fact that the scale of bribery problem remains enormous.

Bribery can add up to 25 per cent to total costs in government procurement, according to TI. The World Bank says that the cost of corruption is US$1 trillion a year, and that corrupt money associated with bribes received by public officials in developing and transition countries is between US $20 billion and US $40 billion per year.

The TI rightly points out that the enormous scale of bribery makes clear why high-level government action to strengthen enforcement is necessary.

The report also showcases Nigeria because of the large number of cases and investigations in multiple jurisdictions involving foreign bribery allegations in that country. The resulting settlements have involved more than US$ 1.7 billion in fines and disgorgement.

The TI points out that bribing to win business is a short-term strategy. Companies only win contracts as long as they can continue to pay the largest bribe, rather than competing on merit. In a 2008 Ernst and Young survey of more than 1,000 executives, almost one in five claimed to have lost business due to a competitor paying bribes.