Lee Kok Leong, our special correspondent, conducts a two-part interview with Mark Pyman, to pick the brains of an experienced global anti-corruption professional who has operated at the highest level of government.
Mark is the founder of CurbingCorruption.com, which provides practical help for public officials and politicians planning anti-corruption reforms.
He believes that action by public officials and politicians, working within their individual sectors, is the most sustainable route to reducing corruption.
From 2015 through 2017, he was one of three International Committee Members on the Afghanistan independent Anti-Corruption Monitoring and Evaluation Committee. From 2004 to 2015, he founded and then led the global Defence and Security programme at the NGO Transparency International.
Corporate Fair Trade Community (CFTC): Corruption and the shipping industry. What is your opinion on the current state of play?
Curbing Corruption (CC): I look at the global shipping industry with some astonishment. It operates largely below the media radar, yet it carries 90 percent of world trade and is fiercely competitive.
This may be bad news for shipping industry but in keeping commercial rates about as low as they can be, this has to be one of the better successes of the market economy.
One aspect of the global shipping industry that nonetheless seems to me to be remarkably behind the times is the inefficiency and corruption in the interactions between ships and ports.
This process in many countries is still beset with bureaucratic human interaction, paper-heavy, and plague by corruption of both the minor sort (bottles of whiskey and cartons of cigarettes) and the major sort (organised crime and control of the port by criminal enterprises).
Industry bodies such as the International Maritime Organisation (IMO) or the World Customs Organisation (WCO) seem to me to be less engaged on this topic than they could and should be.
In other industry sectors, the bodies responsible for the sector have made major efforts against corruption, such as by the international agencies, industry associations and specific anti-corruption task-forces.
The only notable effort that I know of in shipping is the Marine Anti-Corruption Network (MACN). This is a group of shipping companies and organisations collectively seeking to tackle low level corruption in ports: a laudable initiative, but small.
CFTC: We are seeing a lot of talk recently about the pace of technological advancement. What is your opinion of it?
CC: The challenge that seems to me to represent the biggest opportunities and the biggest competitive threats for shipping – both to the economics of the industry and to the opportunity to reduce corruption within it – is that of rapidly advancing technology.
You need look no further than Amazon to see how a powerful technological edge can give extraordinary global scale to the few successful players, and also destroy a previously well-established industry structure.
Corruption thrives when there is extensive paperwork, when there are multiple human interactions, when delay means high costs.
Rapid technological consolidation in shipping can lead not only to greater industry efficiency but also to these drivers of corruption being swept away.
CFTC: In order to defeat an enemy, we have to recognize it first. What are the different types of corruption?
CC: I think of five different types of corruption in shipping.
- corruption risks in ports, such as facilitation payments or illicit use of intermediary clearing agents
- corruption risks in customs, such as under-invoicing, facilitation payments to customs officers and the usual patronage and extortion problems
- corruption risks in chartering and procurement, such as bribery to secure contracts
- corruption in financing, such as illegal purchase of letters of credit
- ship to ship smuggling, such as of illicit fuel
CFTC: Now, it may seem obvious, but why is anti-corruption important for governments and shipping companies?
CC: Most governments are aware that corruption seriously damages economic growth.
The example of how Singapore, originally a poor, corrupt city-state, became such a successful trading nation from the 1950s onwards after squeezing corruption out of its system is probably the textbook example.
When governments aspire to be decent managers of their economy – which I know is not true of all governments – then squeezing corruption out of its port operations will make them both more effective for the economy and more attractive to shippers.
At the same time, host governments of countries in which major shipping companies are based increasingly want their companies to be well behaved.
For example, the exposure last year of Danske Bank’s massive corrupt money laundering through Estonia has proved a major embarrassment to the Danish government and its citizens.
On the other hand, the private sector is one of the key engines for human progress. Yes, they are of course driven by profit, but profit comes from efficiency and competence and corruption is usually one of the symptoms of inefficiency. It might help to get the transaction done, but it is also the signal that the process could be done a whole heap more effectively.
There is also a new aspect. Companies are increasingly attending to the values that drive employees, regulators and customers. Even large hedge fund managers, like Larry Spink of Black Rock, are pushing the companies they invest in to pay more attention to reputation and purpose.
CFTC: So, the million dollar question. What reform approaches can governments use?
CC: Governments can fix many types of corruption if they have the desire to do so. Because corruption involves several different parties it can rarely be solved by unilateral government action.
Instead, governments can bring together the main groups of people involved – usually government agencies, companies, workers and intermediaries – and push them to develop a collaborative solution together. There are thousands of examples of successful such efforts round the world.
The government’s part in such collaborative solutions might be start as the facilitator, but also may involve regulation, changing port procedures or changed funding, or expediting the changes.