There are many losers and few winners when companies bribe foreign public officials to win lucrative overseas contracts. In prioritising profits over principles, governments in most major exporting countries fail to prosecute companies flouting laws criminalising foreign bribery.
What is missing is active enforcement. Transparency International’s new report, Exporting Corruption, finds that only 11 major exporting countries – accounting for about a third of world exports – have active or moderate law enforcement against companies bribing abroad. in order to gain mining rights, contracts for major construction projects, purchases of planes and other deals.
Country by country, the report names the top offenders as well as the flaws in national legal systems that allow this crime to continue unchecked.
One of the most shocking examples exposed in recent years is the massive foreign bribery scheme carried out by the Brazilian construction conglomerate Odebrecht involving about US$788 million in bribes to government officials and political parties in at least 12 countries.
The cost of foreign bribery
Foreign bribery has huge negative consequences for the economies of the nations targeted. The deals are overpriced. Importantly, these deals do not yield real benefits. Limited resources are diverted to benefit a few individuals. In contrast, citizens are denied vital public services, such as access to clean water, safe roads or basic health services.
Around the world, competitors that offer better products lose out in an unfair marketplace. This triggers a race to the bottom, with some companies choosing to engage in bribery because others are doing it.
This is why the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention requires parties to criminalise bribery of foreign public officials. Also, it requires them to introduce related measures, such as investigating suspicious cases.
Therefore, its goal is to create a corruption-free level playing field for global trade.
The Exporting Corruption report rates the performance of 44 leading exporters, including 40 of the OECD Convention signatories.
For the first time, it rates four non-OECD Convention exporters: China, the world’s largest exporter, as well as Hong Kong, India and Singapore, accounting for about 18 per cent of world exports.
No enough progress
The good news is that eight countries accounting for 7.1 per cent of world exports have improved their performance since the last report in 2015.
Seven countries are now in the active enforcement category, compared with four in 2015. They are Germany, Israel, Italy, Norway, Switzerland, the United States and the United Kingdom.
The bad news is that there is still a long way to go.
Four countries, accounting for 6.7 per cent of world exports, have deteriorated in their performance. A total of 33 exporters, accounting for about 52 per cent of world exports, still have limited or little to no enforcement against foreign bribery.
That includes all four of the exporters not party to the Convention — China, Hong Kong, India and Singapore. All of the four get the lowest rating of little or no enforcement.
The results show that we are far from bringing enforcement against foreign bribery to a tipping point. Governments must scale up their foreign bribery enforcement. This means investigating allegations and pressing charges. Also, as well as courts convicting guilty individuals and companies, and imposing substantial sanctions where appropriate.
Recommendations by Transparency International
There is existing enforcement gap in China, Hong Kong, India and Singapore. By joining the OECD Convention, the four countries can close the gap.
Moreover, along with all other countries involved in global trade, they must stamp out foreign bribery with the necessary legislation and enforcement.
Transparency International also recommends that governments:
- address weaknesses in their legal frameworks and enforcement systems, including inadequate resources for cross-border enforcement
- ensure settlements of foreign bribery cases are reached transparently, accountably and through appropriate processes, with dissuasive and even-handed sanctions
- improve accountability and deterrence, by publishing up-to-date statistics and information on court cases
- assist cross-border investigations by sharing more information with other countries
In addition, the OECD Working Group on Bribery should make greater use of public announcements to name and shame countries that are not enforcing against foreign bribery, just as Transparency International is doing in this report.
It should also create a public database of enforcement data and case information, and conduct a cross-country study of information sharing performance across all parties.