beyondbrics

Emerging market companies are perceived as more likely to be involved in bribery than developed world groups! While this is hardly a shock it is a reminder that the issue is growing in importance as the big EM countries, headed by the Brics, increase their global economic impact.

A report by Transparency International, an anti-corruption group, found Chinese and Russian companies are perceived to be the most corrupt of the world’s corporates while their Indian and Brazilian rivals can afford to feel a little smug, having done rather better in TI’s rankings.

In preparing a Bribe Payers Index, TI asked 3,000 executives worldwide about their views on the extent to which companies from 28 of the world’s leading economies engage in bribery when doing business abroad. The 28 countries were selected based on FDI flows, the value of exports and regional significance – and all of the G20 were included, in the study published on Tuesday.

China and Russian companies’ presence at the bottom of the list is concerning, considering their increasing importance to the global economy. And it is telling that oil and gas, and mining – sectors in which Russia and China are heavily involved – figure in the bottom five of Transparency’s most corrupt industries.

Unfortunately, for those more honourable firms within EM countries, the perceived likelihood of companies from a given country to bribe abroad is strongly related to perceptions of corruption in the public sector of in their home country.

TI says that if governments do not take responsibility for graft, the companies within their borders will not only be operating in an environment where bribery is prevalent, but will also be tainted by association when operating abroad.

TI is optimistic about China’s anti-corruption intent. Earlier this year, China passed an amendment which made it a criminal offence for Chinese companies and nationals to bribe foreign government officials.

Individuals can now face a prison term of up to 10 years, while companies may receive fines, and managers directly responsible for an offence may also be incarcerated for up to 10 years.

Previously, China’s anti-corruption laws had no extra-territorial element; it was a criminal offence to bribe Chinese government officials but not others – not very inspiring considering China’s enormous overseas investment programmes.

TI is not so upbeat about Russia despite legislation passed in May criminalising foreign bribery by companies and individuals of foreign public officials.

Elena Panfilova, Director of TI Russia, said:

The position of Russian business in the 2011 Bribe Payers Index is not of any surprise since Russia in general is still struggling to find the proper way to confront systemic corruption. It would be strange to expect business to do better than public office does.

Unfortunately, as far as the spread of corruption is concerned, there are no islands of integrity in Russian public and business life. But there is hope that the strict enforcement of new national anti-corruption legislation and compliance with international commitments will help to change this situation in the coming years.

This is TI’s fifth Bribe Payers Index and the organisation notes that there has been no improvement in perceptions of the frequency of foreign bribery since the last report was published in 2008.

Related reading:
Special Report: Indian corruption, FT
What the eurozone crisis might mean for emerging markets, beyondbrics