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Russian, Chinese Companies 'Most Likely' To Offer Bribes

Transparency International's new report says none of the countries surveyed is "wholly clean of bribery."
In a new report, the anticorruption group Transparency International (TI) says bribing public officials when doing business abroad is a regular occurrence.

According to a survey of 3,000 business executives from developed and developing countries, companies from Russia are seen as most likely to do that.

On November 2, the Berlin-based group released its 2011 "Bribe Payers Index," which ranks 28 leading international and regional exporting countries by the likelihood of their firms to bribe abroad.

Russia ranked 28th, scoring worse than China, Mexico, and India.

According to Robin Hodess, TI's group director for research and knowledge, the fact that China and Russia are at the bottom of the index is a major worry.

"Of course it's a concern, because the economy in both countries has been growing dramatically as has the level of investment coming from both," she said. "In terms of their economic power abroad, it's really matching their political power."

The report itself says: "Given the increasing global presence of businesses from these countries, bribery and corruption are likely to have a substantial impact on the societies in which they operate and on the ability of companies to compete fairly in these markets."

It pointed out that foreign-direct-investment (FDI) flows alone amounted to $120 billion in 2010 for both countries, more than five times the value of FDI outflows from Brazil and India combined.

Dutch, Swiss, Belgians, Germans, and Japanese companies get the top scores.

But TI says not one of the 28 countries surveyed is perceived as "wholly clean of bribery" and few have made a major improvement since the last bribery index in 2008.

Criminalizing Foreign Bribery

Leaders of the Group of 20 leading economies (G20) are set to discuss progress on an anticorruption action plan at a summit in Cannes, France, starting on November 3.

The report of the working group monitoring the action plan will recognize steps taken by China, Russia, Indonesia, and India in criminalizing foreign bribery.

Transparency International Chairwoman Huguette Labelle
Transparency International Chairwoman Huguette Labelle
TI Chairwoman Huguette Labelle welcomed the report and called for swift implementation of the further anticorruption measures that the plan calls for.

Labelle said new legislation in G20 countries was "an opportunity to provide a fairer, more open global economy that creates the conditions for sustainable recovery and the stability of future growth."

Legislation passed in Russia in May 2011 criminalizes foreign bribery with monetary sanctions for companies and individuals who bribe foreign public officials.

Elena Panfilova, director of TI Russia's anticorruption research and initiative center, said the new Russian legislation was a hopeful sign but she emphasized that there were "no islands of integrity in Russian public and business life."

Russia was ranked joint 154th of 178 countries in Transparency's 2010 index of public-sector corruption.

"It's very important to set the right standards as Russia has now done," TI's Hodess said. "But what it needs to be backed with is political commitment, investment in the kinds of resources that are needed for investigation and really for enforcing the rules."

Hodess added that it was also ncessary "to make sure that the [Russian] business community understands that it needs to operate based on highest-level international standards in terms of its behavior both at home, but particularly abroad."

Hodess is also calling for the swift implementation of further anticorruption measures that the G20 is planning to espouse.

According to her, not enough has been done since an Organizatiuon for Economic Cooperation and Development convention -- with the unwieldy title "On Combating Bribery of Foreign Public Officials in International Business Transactions" -- came into force in 1999.

"There's been some time for this legislation to be translated into national legislation, but in fact, there hasn't been enough enforcement," Hodess said.

"There are exceptions: The U.S. has been fairly active in recent years in terms of investigating and prosecuting foreign bribery; Germany has also increased [activity]. But for many, many countries, there's really not been sufficient activity."

According to Brian Whisler of the Washington office of the Baker & McKenzie law firm, there have been more than 380 enforcement actions under the U.S. Foreign Corrupt Practices Act (FCPA) in the so-called BRIC countries of Brazil, Russia, India, and China in recent years.

Whisler told the "Financial Times" that 150 companies were the object of open investigations into potential FCPA violations.

Corruption Among Private Firms

The TI report quotes international business leaders as reporting the widespread practice of companies paying bribes to public officials in order to win public tenders, avoid regulation, speed up government processes, or influence policy.

But according to the survey, the likelihood of bribes being paid from one private firm to another "is almost as high as bribery of public officials across all sectors."

TI says this suggests that corruption is not only a concern for the public sector, but for the business sector as well, carrying major reputational and financial risks for the companies involved.

"Companies that fail to prevent bribery in their supply chains run the risk of being prosecuted for the actions of employees and business partners," TI Chairwoman Labelle noted.

Hodess believes new British legislation making bribery between firms an offense, including any company incorporated overseas or carrying out business in Britain, "sets a new global standard" that should be widely imitated.

According to the legislation, bribes given anywhere in the world by companies with British business interests are subject to the British legal system, regardless of the citizenship of the person who committed an act of corruption.

Individuals can face up to 10 years in prison and an unlimited fine, while companies can also face unlimited fines.

'A Real Impact On Human Lives'

The "Bribe Payers Index" also looked at the likelihood of firms in 19 specific sectors to engage in bribery and exert undue influence on governments. Agriculture was considered the least bribe-prone, while public works and construction companies scored lowest in the survey.

TI stresses that corruption in these later sectors often compromised safety in public buildings, "which, as witnessed by the many deaths from earthquakes in highly corrupt countries, has a very real impact on human lives."

The mining, oil, and gas sectors, in which Russia is most active, were also very prone to bribery, the report says, adding that they are "characterized by high-value investment and significant government interaction and regulation, both of which provide opportunities and incentives for corruption."

The report says bribery can be "disguised through offering clients gifts and corporate hospitality that are inappropriate in value."

with agency reports

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