Bribery and corruption

Rich should set the example on bribery


by Angel Gurria, Secretary-General of the OECD

This article appeared in the Financial Times dated 12 September 2006

If governments are serious about development, it’s time they got serious about corruption. Corruption harms people, economies and the environment. It discourages investment and reduces trust in government. A bribe to win a contract can lead to losses running into hundreds of millions of dollars in a poor country due to de-railed development programmes and inappropriate investment decisions.

Fighting corruption concerns both developed countries, home to many multinational companies that may be tempted to pay bribes to get contracts, and developing countries, whose officials may be tempted to accept bribes. Corruption distorts markets and creates unfair trading conditions. It prevents companies from competing for business on a “level playing field” where contract decisions are based on product quality and delivery capacity, rather than on who pays the biggest bribe. It undermines people’s ability to earn an honest living.

We know why corruption happens. We know the conditions – lack of political accountability and market transparency, bureaucratic complexity – in which it thrives. We know, too, what can be done to fight it: strengthening transparency and democratic structures, streamlining regulation.  Well-drafted legislation is essential. But it’s no use having laws if they aren’t backed up by action.

The OECD plays a central role, at the interface between governments, business and the development community. Its member countries are among the world’s leading aid donors and democracies. They are home to companies that account for the bulk of world trade and cross-border investment. The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, in force since 1999, is a binding treaty to which all 30 OECD countries and six non-OECD countries – Argentina, Brazil, Bulgaria, Chile, Estonia and Slovenia - have signed up. By translating its principles into law, they have outlawed bribes to officials in foreign countries by companies under their jurisdiction.

Under the Convention, regular in-depth reviews monitor what individual countries are doing – or in some cases failing to do – to live up to their commitments. Other OECD work addresses areas from conflict of interest in the public sector to the activities of multinational enterprises where corruption may pose a threat.  Amazingly, only five out of 30 OECD countries – the U.S., Canada, the U.K., Poland and Hungary – have legislation requiring lobbyists to provide information on their contacts with members of parliament and government officials in connection with lobbying activities. That’s an indication of how far we still have to go to win hearts and minds in fighting corruption. 
Until recently, companies in many OECD countries were able to charge bribes paid to foreign officials in order to get business as tax-deductible expenses. That’s no longer the case, thanks to the OECD Convention. But in many parts of the world corruption is still an accepted feature, and cultural and social traditions die hard. Companies continue to face pressures to pay bribes or risk losing business. As emerging market exporters like China and India expand into increasingly sophisticated markets, pressures for corruption will become harder to contain unless more countries can be drawn into a network of international co-operation and share responsibility for a healthy and open international market place.

The OECD works with a range of partners. They include the United Nations, through agencies like the United Nations Development Program and the United Nations Office for Drugs and Crime, and bodies such as the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank and the Inter American Development Bank, as well as regional groupings and individual countries. Frequently, the OECD serves as leader, initiating projects and carrying them through to fruition. 
We provide intellectual input, analysing the reasons for corruption and providing objective information on the ways in which it occurs. We propose ways of preventing corruption, for example by changing the way public administrations are organised and revising approval procedures for major projects. And we monitor, or help others to monitor, what governments and companies are doing to live up to their commitments.

Efforts to fight corruption, nonetheless, are only as powerful as the signatories wish to make them. Recent OECD monitoring has shown some signatory countries still falling short of the standards set by the OECD Anti-Bribery Convention. Major players like China, India and Russia haven’t joined it and so are not yet bound by its provisions. And bribery by foreign multinationals is only one part of a bigger corruption picture in both developing countries and in the developed world.

What needs to be done? First of all, the developed countries must put their money where their mouth is. A unique feature of the OECD’s Anti-Bribery Convention is the regular checks on participating countries carried out by the other parties to the Convention. These cost money to conduct, but they are worth every penny if they can stop bribe payments whose eventual cost can be immeasurably higher. 
Secondly, developed countries need to pay more attention to coordination between branches of government so that all relevant people know what’s afoot. They also need to do more to publicize their efforts externally, to convince business people, financiers and others that the fight against corruption is getting serious. 

Thirdly, developing countries must introduce or tighten up legislation that makes bribery a criminal offence. Corruption is always two-sided, with a bribe-giver and a bribe-taker. We can only fight corruption effectively by tackling both sides.

All 36 signatories to the OECD Convention now have laws against corruption, a major achievement. But many still have some way to go in implementing them. In the fight against corruption, the developed countries must lead by example. OECD countries aren’t just aid donors. They are also “donors” of good practice.

It is urgent, for everyone’s good, that living conditions in the world’s poorest countries be brought up to acceptable standards in such areas as food supply, sanitation, health, education and the like. But it is also urgent, in a globalised economy, for all players to be able to compete on a level playing field, without some being unfairly favoured and others unfairly constrained. One of the pre-conditions is to stamp out corruption.