Corruption in International Business

• 1. CORRUPTION IN INTERNATIONALBUSINESS Presented by: Ankit Yadav MSC BUSINESS[pic 1] & Management
• 2. AIMSThis presentation focuses on following areas:′ What is corruption?′ The Growth of Corruption;′ Corruption Perceptions Index (1995 – 2010);′ Causes of Corruption;′ ECONOMIC[pic 2]effects of Corruption;′ Remedies to combat Corruption;′ Case Studies;′ Recommendations and;′ Conclusions. 2
• 3. WHAT IS CORRUPTION?Corruption has been defined in many different ways, eachlacking in some aspect:′ The abuse of public power for private benefit. (Source: World BANK[pic 3], 1999)′ The agreement to pay a financial inducement to a public official for securing favour of some description in return. (Serious Fraud Office, 2010)′ Transparency international defines corruption as the abuse of entrusted power for private gain. (Transparency International, 2010)CORRUPTION = PUBLIC POWER + PRIVATE GAIN + ABUSE 3 - ACOOUNTABILITY
• 4. TYPES OF CORRUPTION′ TRADING[pic 4] in influence;′ Rent Seeking (Bribery);′ Nepotism (Found More in Developing Countries);′ Electoral Fraud;′ Kickbacks;′ Unholy Alliances and;′ Involvement in Organised Crime. 4
• 5. THE GROWTH OF CORRUPTION′ In recent years, and especially in the decade of 1990s, the phenomenon broadly referred to as corruption has attracted a great deal of attention. (Source: Johnston, 1997)′ In countries developed and developing, large or small, market oriented or otherwise, because of accusations of corruption, governments have fallen and prominent politicians have lost their positions. (Source: IMF, 1998)′ However, the degree of attention currently paid to corruption is unprecedented and nothing short of extraordinary. For example, in its end-of-year editorial on December 31st 1995, The Financial Times characterised 1995 as the year of corruption. The following two years could have EARNED[pic 5] the same title. 5 (Source: Tanzi, 1998)
• 6. LOWEST CORRUPTION COUNTRIES (1995)9.89.6 9.559.4 9.32 9.269.2 9.12 9 8.87 8.87 8.88.8 8.76 8.69 8.618.68.48.2 8 New Denmark Singapore Finland Canada Sweden Australia Switzerland Netherlands Norway Zealand 6 (Source: Transparency International,1995)
• 7. LOWEST CORRUPTION COUNTRIES (2010)9.4 9.3 9.3 9.3 9.2 9.29.2 9 8.9 8.88.8 8.7 8.7 8.68.68.48.2 Denmark New Zeland Singapore Finland Sweden Canada Netherlands Australia Switzerland Norway 7 (Source: Transparency International, 2010)
• 8. HIGHEST CORRUPTION COUNTRIES (1995)3.5 3.18 2.99 3 2.79 2.78 2.77 2.7 2.662.5 2.25 2.16 2 1.941.5 10.5 0 Mexico Italy Thailand India Philipieness Brazil Venezuela Pakistan China Indonesia 8 (Source: Transparency International,1995)
• 9. HIGHEST CORRUPTION COUNTRIES (2010) 2 1.9 1.81.8 1.7 1.6 1.6 1.61.6 1.5 1.4 1.41.41.2 1.1 10.80.60.40.2 0 9 (Source: Transparency International, 2010)
• 10. CAUSES OF CORRUPTION′ Regulations & Authorisation;′ Taxation;′ Spending Decisions;′ Market pressure on MNC’s to make profits;′ FINANCING[pic 6] of Parties.′ Quality of Bureaucracy;′ Level of public sector wages (Ratio of Developed and Undeveloped Countries);′ Penalty systems;′ Moral Hazard;′ Transparency of rules, laws and processes and;′ Examples by leadership. 10 (Source: IMF, 1998)
• 11. ECONOMIC[pic 7] EFFECTS OF CORRUPTION (1)Corruption has a number of adverse consequences:′ Exploitation of public system by entrepreneurs (increasing prices of products);′ Productivity drain provided by lucrative opportunities of rent seeking rather productive work;′ Monopolistic practices are encouraged, which hinders free market TRADE[pic 8], thus reduces competition and limits the choice for consumers; (Source: IIE, 1998) 11
• 12. ECONOMIC EFFECTS OF CORRUPTION (2)′ Corruption may also bring about loss of tax revenue when it takes the form of tax evasion or the improper use of discretionary tax exemptions;′ Creates distrust and loss of integrity in the system;′ The allocation of public procurement contracts through a corrupt system may lead to inferior public infrastructure and services and;′ Undermines economic and democratic developments. (Source: IIE, 1998) 12
• 13. INDUSTRY’S OFTEN INVOLVED IN CORRUPTION′ Oil and Gas;′ Mining;′ Defence;′ Telecommunications;′ Transport Sectors and;′ Infrastructure and Property Development. 13
• 14. REMEDIES TO COMBAT CORRUPTIONGetting to work following bodies in unisom:′ Serious Fraud Investigation Office (Enforcer);′ Transparency International (Adviser);′ The World BANK[pic 9](Adviser)′ OCED (Enforcer);′ UN (Enforcer) and;′ These are not the only bodies, there are other enforcement and advisory bodies that deal with corruption. COMBATING CORRUPTION = ADVISERS + ENFORCERS + LOCAL AUTHORITIES + COMPLIANCE BY INTERNATIONAL COMPANIES 14
• 15. OECD CONVENTION ON CORRUPTION (1)In 1997, the member states of the OECD adopted the OECDconvention on combating bribery of foreign public officials ininternational BUSINESS[pic 10]transactions. Following are the articles ofOECD convention:′ The offence of bribery of foreign officials;′ Responsibility of legal persons;′ Sanctions;′ Jurisdiction;′ Enforcement;′ Statute of Limitations;′ Money laundering; (Source: Transparency International, 2010) 15
• 16. OECD CONVENTION ON CORRUPTION (2)′ Responsible Authorities;′ Monitoring and follow-up;′ Signature and Accession;′ Entry into force;′ Amendment;′ Withdrawal;′ ACCOUNTING[pic 11]and;′ Extradition. (Source: Transparency International, 2010) 16
• 17. CASE STUDIES′ 2G Spectrum Scam in India;′ Bofors AB Howitzer Pay – Off Scandal in India;′ Rio Tinto;′ BAE Systems;′ Panalpina Logistics and;′ British American Tobacco. 17
• 18. RECOMMENDATIONS′ Governments should assign responsibility for foreign bribery cases to specialised staffs with adequate resources.′ The OECD ministerial group should encourage China, India and Russia to join OECD convention. To achieve a level playing field all major exporters should play by the same rules.′ To keep pace with changes in forms of corruption, increasing attention needs to be devoted to combating indirect forms of bribery such as the use of intermediaries, subsidiaries, contractual and joint venture partners.′ The OECD ministerial working group should also, as soon as possible, begin to address unresolved issues and political loop-holes in the OECD convention and national implementing legislation, including bribe payments to political parties, lack ofCORPORATE[pic 12] criminal liability, inadequate statutes of limitations, and private to private corruption. 18 (Source: Transparency International, 2010)
• 19. CONCLUSIONS′ Recommendations from advisory bodies have been enforced by the organisations like OECD and UN;′ According to CPI index the highest corruption countries have shifted from South America, Asia and some parts of Europe to Africa and Middle East and;′ The notion of emerging markets and opportunities in (BRIC) countries helps in breeding the corruption in international business. 19
• 20. QUESTIONS & ANSWERS SESSION 20
• 21. REFERENCES (1)′ BBC News. (2004). Shell Admits Fuelling Corruption In Nigeria. Available: http://news.bbc.co.uk/1/hi/3796375.stm. Last ACCESSED[pic 13] 10 March 2011.′ BS Reporter. (2010). Most of 2G Licences Given in 2008 Were Illegal. Available: http://www.business-standard.com/2gscam/news/most2g-licences-given-in-2008-were- illegal-cag/411374/. Last ACCESSED[pic 14] 10 March 2011.′ Indo - Asian News Service. (2011). Timeline of Bofors Scandal. Available: http://www.ndtv.com/article/india/timeline-of-bofors-scandal-76775. Last ACCESSED[pic 15] 12 March 2011.′ Johnston, Michael. (1997). Public Officials, Private Interests, and Sustainable Democracy: When Politics and Corruption Meet. Institute for International ECONOMICS[pic 16]. 0 (0), p - 61 - 82.′ Mauro, P. (1998). The Effects of Corruption on Growth, Investment and Government Expenditure: A Cross Country Analysis. Institute for International Economics. 0 (0), p 86 - 87.′ SFO, UK. (2010). Bribery and Corruption. Available: http://www.sfo.gov.uk/bribery-- corruption/bribery--corruption.aspx. Last ACCESSED[pic 17] 15 March 2011.′ Tanzi, V. (1998). Corruption Around the World: Causes, Consequences, Scope and Cures. International Monetary Fund - Fiscal Affairs Department. 0 (0), p 3 - 22. 21
• 22. REFERENCES (2)′ Tanzi, V. (1998). Corruption Around The World. IMF Staff Papers. 0 (0), p - 560.′ The World BANK[pic 18]. (1999). Introduction to Corruption. Available: http://info.worldbank.org/etools/docs/library/35970/mod03.pdf. Last accessed 16 March 2011.′ Transparency International. (2009). Progress Report 2009. OCED Anti-Bribery Convention. 0 (0), p 6 - 56.′ Transparency International. (1995). Corruption Perception Index - 1995. Available: http://www.transparency.org/policy_research/surveys_indices/cpi/previous_cpi/cpi1995.p df. Last accessed 12 March 2011.′ Transparency International. (2010). Corruption Perception Index - 2010. Available: http://www.transparency.org/policy_research/surveys_indices/cpi/2010. Last accessed 12 March 2011.′ Wisenthal, J. (2009). Rio Tinto Accused of Massive Fraud and Spy Claims in China. Available: http://www.businessinsider.com/rio-tinto-accused-of-massive-fraud-and- espionage-in-china-2009-8. Last accessed 10 March 2011. 22

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• . Corruption
• 2. Corruptionν Andini Nurul Prasetyaniν Irnu Suryohadiν Winda Eko Aji XI IPA 3
• 3. corruption
• 4. What is corruption?ν Corruption is wrongdoing on the part of an authority or powerful party through means that are illegitimate, immoral, or incompatible with ethical standards. Corruption often from patronage and is associated with bribery.
• 5. What are the types of corruption?ν Petty corruptionν State capture The following are the most common forms of corruption, as described in the United Nation Anti- corruption Toolkit:ϖ Briberyϖ Embezzlement, theft and fraudϖ Extortionϖ Abuse of discretionϖ Favouritism, nepotism and clientelismϖ Conduct creating or exploiting conflicting interestsϖ Improper political contributions
• 6. What are the common characteristics of corruption?ν 1.Gap between group and individual interestν 2. Two or more parties since one can hardly be corrupt with one’s own selfν 3. Consenting adults that have a common understandingν 4. Benefit furtheranceν 5. Existence of power that could be grabbed, usurped, entrusted or otherwise availableν 6. Misuseof the power that often drives a wedge between intended and stated POSITIONS[pic 19], for unintended benefits
• 7. Has globalization increased the risk of corruption? Globalization has increased the risk ofcorruption but has also increased theopportunities to curb it
• 8. What role can the media play in tackling corruption? The media can serve many important functions, not just exposing corruption but also sustaining an OPEN[pic 20] and transparent flow of information and fostering a climate of opinion that is increasingly intolerant of corruption
• 9. What should governments do tomake anti-corruption agencies effective? An important factor is where the anti-corruptionagency (ACA) or KPK is located in government; if itreports to the office of the prime minister, forexample, it can be used as a weapon against politicalopponents. Ideally the KPK should be a completelyindependent body.
• 10. There are a number of common options from the Reports seven-point agenda which can make anti-corruption agencies more effective:ν Join with international effortsν Establish benchmarks of qualityν Strengthen the civil serviceν Encourage codes of conduct in the private sectorν Establish the right to informationν Exploit new TECHNOLOGY[pic 21]ν Support citizen action
• 11. Impact Of Corruption- Hinders social and ECONOMIC[pic 22] development andincreases poverty by diverting domestic and foreigninvestment away from where it are most needed;- Weakens education and health systems, deprivingpeople of the basic building blocks of a decent life;- Undermines democracy by distorting electoralprocesses and undermining government institutions,which can lead to political instability;- Exacerbates inequality and injustice by pervertingthe rule of law and punishing victims of crimethrough corrupt rulings
• 12. How to remove corruption laws fixing ACCOUNTABILITY[pic 23] and encouragingtransparency combined with efficient judiciaryand free press provide ideal atmosphere totackle the menace of corruption.
• 13. Conclutionν Coruption, as we know is the criminal thing that do by a person in a certain capacity especially with negative connotation, they do the illegal thing to make a benefit for them self.ν We can difference coruption into 2 calsses. First is Petty corruption, its a kind of coruption where did by some people in a little capacity, they do a little coruption, but they do that many times. The other cases of coruption is State capture refers to a situation in which private interest has effectively taken over certain state functions, a type of corruption generally less understood by the public or by the media.
• 14. Conclutionν So, coruption is an illegal thing that we couldn’t do, because, with out coruption we can be a good generetion for our country. And then we can make our country clear from coruption and make our country better.

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