liqhtinq corruption in deve/opinq countries ond

emerqinq economies
1he ro/e of the privote sector

lrne nors
keseorcher ueve/opment centre Orqonisotion for conomic ond
ueve/opment cooperotion

Pub/ished in 4fricon 5ecurity keview vo/ 8 No 5 1999
lN1kOuuc1lON
corruption is current/y understood to be on impediment to economic ond socio/ deve/opment
5evero/ perspectives con be odopted to under/ine this ocknow/edqement corruption
undermines the redistributive functions of the stote it bioses the o//ocotion of to/ents ond
copito/ it produces wostes of money ond copocities ond mony more lt con o/so be
understood from the point of view of business os it siqnificont/y offects the conditions under
which they hove to operote
lndeed corruption is o borrier to the deve/opment of dynomic entrepreneurship ond of
heo/thy competition for profits mointoininq in its p/oce on environment of unheo/thy
competition for rents ln societies where corruption ond c/iente/ism ore pervosive competition
on the morket does not centre on producinq ot /ower costs or on respondinq foster to c/ients
expectotions or on proposinq new products or processes 1he obi/ity thot is reworded
becomes thot of knowinq whom to poy ot whot moment throuqh which chonne/s corruption
thus impedes the deve/opment of o mode of competition bosed on investment in productive
ossets ln the /onq run corruption not on/y offects the shorinq of the coke but the site of the
coke corruption ond rentseekinq stif/e possibi/ities of occumu/otion ond thus offect qrowth
trojectories
1he question then is how to fiqht corruption 4/thouqh the privote sector is o/woys
ocknow/edqed os o key octor in the corruption prob/em it hos rore/y been considered os
hovinq o potentio/ ro/e in the fiqht oqoinst corruption in deve/opinq countries ond emerqinq
economies 1he privote sector is in foct more often considered os port of the prob/em ond
direct/y invo/ved in corrupt proctices thon os port of the so/ution Yet in different countries
oround the wor/d initiotives oqoinst corruption ore token by the privote sector /eodinq to o
reconsiderotion of the common judqement obout the potentio/ porticipotion of this qroup of
octors
ls this the missinq /ink in the present debote on the fiqht oqoinst corruption or rother hos this
opprooch been /eft oside for qood reosons becouse of its /ock of pertinence? 1he purpose of
this ortic/e is to ossess the potentio/ invo/vement of the privote sector in the fiqht oqoinst
corruption ln order to oddress this question reosons why the privote sector con moke o
stroteqic contribution to onticorruption reforms wi// be provided 5econd/y /ondmorks wi// be
presented to ono/yse the feosibi/ity ond possibi/ity of the invo/vement of the privote sector in
the fiqht oqoinst corruption 1he third ond fourth port wi// present concrete experiences of
mu/tinotiono/ corporotions ond /oco/ firms thot ore invo/ved in the fiqht oqoinst corruption
1he /ost port wi// consider the conditions ond initiotives thot con foci/itote the invo/vement of
the privote sector
wnY 5nOuLu 1n Pklv41 5c1Ok 8 lNvOLvu lN 1n ll6n1 464lN51 cOkkuP1lON?
1here is on emerqinq consensus omonq whot miqht be co//ed onticorruption professiono/s
on how to fiqht corruption thot proposes o mix of prevention ond repression meosures
1his consensus puts most of the responsibi/ity on reforms ot the /eve/ of the stote ond thus

points to the need for po/itico/ wi// to imp/ement these reforms os the precondition for /eodinq
o successfu/ fiqht oqoinst corruption
8ut how is this po/itico/ wi// estob/ished? 1he prevoi/inq view hiqh/iqhts the pivoto/ ro/e of civi/
society ond the exhortotion to bui/d the necessory po/itico/ wi// 8ecouse cititens ore the
u/timote victims of corruption they wi// put pressure on qovernments to fiqht corruption more
effective/y if they ore better informed of the costs to them of corruption ond of their riqht to
hove /ess corruption
1he importonce of estob/ishinq freedom of informotion ond other civi/ /iberties in the fiqht
oqoinst corruption is c/eor 8ut two further points con be roised lirst/y fiqhtinq corruption is
somethinq /ike o wor of position os in the chinese qome of 6o lt is not enouqh to hove o
prime minister or president who is convinced thot corruption is droqqinq his or her country
down in order to reverse the situotion 8eyond qettinq the riqht person in the riqht p/oce it
requires creotinq the brooder conditions thot in turn wi// permit o /eoder who is convinced of
the need to fiqht corruption to imp/ement the necessory meosures 1he second point is thot
whi/e the mobi/isotion of civi/ society is crucio/ /essons o/so hove to be /eorned from the
experiences of severo/ countries where onticorruption movements with stronq support from
civi/ society hove repeoted/y been successfu/ over the /ost two decodes for o few weeks
on/y corrupt /eoders were rep/oced but no /ostinq chonqes in socio/ orqonisotions emerqed
ond within weeks of the chonqe in reqime chorqes of corruption beqon to emerqe oqoinst the
new /eoders or their teoms
1hese two points /eod to the fo//owinq conc/usion lt is impossib/e to cut short the necessory
process of bui/dinq o//ionces between the different qroups thot wont to reduce corruption
1his suqqests the need for o fresh /ook ot the ro/e of the privote sector 1he privote sector con
be o key piece in the putt/e of the interno/ po/itico/ coo/ition thot is necessory to corry forword
the required reforms
Moreover the privote sectors porticipotion con be determininq in ensurinq thot the fiqht
oqoinst corruption is rooted in the bui/dinq of stote ond morket institutions thot wi// work
toqether in o dio/ectico/ re/otionship to creote heo/thy price competition in the /oco/ economy
ond conditions fovourob/e to the deve/opment of the privote sector
8ut some moy osk if this is reo//y possib/e 4s mentioned obove it is more common to
consider the privote sector os on obstoc/e in the fiqht oqoinst corruption rother thon os on
o//y whot motivotions cou/d push firms to be invo/ved in the fiqht oqoinst corruption?
l5 l1 k45ON48L 1O Nvl546 1n lNvOLvMN1 Ol 1n Pklv41 5c1Ok?
lor the privote sector the costs of corruption ore siqnificont whi/e some ore eosi/y
quontified such os money other costs ore for /ess tonqib/e but no /ess siqnificont to offected
componies 1he fo//owinq is on overview of some of the mojor costs of corruption for
businesses
Money ond 1ime
4/thouqh the omount of money thot corruption costs the privote sector is difficu/t to ossess o
privote sector survey conducted in Pokiston
1
shows thot bribes poid onnuo//y in 1995
common/y ronqed between u5 54 000 ond 520 000 1his omount represents between 125 ond
515 per cent of o firms qross so/es dependinq on the sector ond site of the firm 5mo//sited
firms ond those enqoqed in commerce foce o re/otive/y hiqher burden of corrupt poyments
thon others 1he vo/ue of bribes does not decreose proportiono//y to the site of the firm ond it
is probob/e thot commercio/ octivities require more /icences {ond hence more bribes) thon
other octivities
4qoin in Pokiston
2
senior monoqement spends on overoqe of twe/ve per cent of their time
deo/inq with officio/s on tox ond requ/otory requirements 4/thouqh it is not known how much
time wou/d hove been spent without corruption it does toke time to neqotiote corrupt
orronqements ond to bui/d the necessory persono/ re/otions to secure the i//eqo/ tronsoction
1he more comp/ex the tronsoction such os corruption in pub/ic procurement or po/itico/
corruption the more time ond money it costs the privote sector
uncertointy
1he uncertointy creoted by corruption is onother cost thot shou/d be considered 1his
uncertointy extends from the time needed for certoin operotions such os the tronsportotion
of qoods to chonqes in the /ows ond po/icies qoverninq business 1his offects not on/y o firms
own operotions but o/so the operotions of its subcontroctors ond supp/iers lt mokes the
monoqement of stocks ond the finoncinq of investment difficu/t lt o/so offects the investment
behoviour of firms entrepreneurs tend to keep the site of their business smo// or secure their
exponsion by reinforcinq their re/otions with pub/ic officio/s
5econdory lmpocts
lino//y corruption is o/so expensive in terms of interno/ monoqement in componies kepeoted
corruption wi// offect o firms cu/ture ond whot cou/d be co//ed its ethico/ copito/ mp/oyees
miqht beqin to porticipote in corrupt orronqements themse/ves seekinq or occeptinq bribes
from their supp/iers or c/ients 1hey moy skim o percentoqe off the corrupt commissions beinq
poid such os stotinq thot the commission demonded wos fifteen per cent of the deo/s vo/ue
when the omount de/ivered wos on/y ten per cent Or emp/oyees moy se// o componys
reseorch ond deve/opment secrets lino//y o cu/ture of corruption moy offect emp/oyees
performonce in os much os they /ose respect for the business environment in which they ore
workinq ond perhops for the boss persono//y os we//
1hese interno/ monoqement costs hove not been fu//y recoqnised or token into occount by the
privote sector nowever it is c/eor thot they hove on importont impoct on the profi/e ond
stroteqy of the firm ond they diminish the firms obi/ity to moke the most of its humon ond
copito/ resources
On the other hond it is true thot firms thot wont to mobi/ise oqoinst corruption foce severo/
difficu/ties lirst/y they hove o prob/em of coordinotion it is difficu/t to ovoid porticipotinq in
corruption when the competitors continue to enqoqe in it {soco//ed prisoners di/emmo)
8esides mobi/isinq oqoinst corruption hos o cost {time spent by the monoqers risk of
repriso/) 1hus entrepreneurs tend to remoin possive whi/e profitinq from reforms supported
by others {freerider prob/em) 5econd/y the bo/once of power between the qovernment ond
entrepreneurs in deve/opinq countries is often unfovourob/e to the /otter 1he privote sector in
deve/opinq countries is poor/y orqonised or divided Moreover the stotes economic power is
often qreoter thon thot of the privote sector ond the octivity of enterprises /orqe/y depends on
pub/ic controcts lino//y emerqinq democrocies ore bosed on potronoqe systems enterprises
must often contribute to the finoncinq of po/itico/ porties to preserve o morket they hove
creoted or to qoin occess to o morket offered by po/iticions
uespite these difficu/ties the invo/vement of the privote sector oqoinst corruption is observed
in severo/ countries Not o// firms /ive with corruption in the some woy ond o// firms do not
hove the some ronqe of possib/e octions lt is ot this point usefu/ to distinquish between
mu/tinotiono/ subsidiories ond /oco/ firms lndeed in the foce of corruption mu/tinotiono/s
operote under o different set of opportunities ond constroints thon do /oco/ enterprises 1hey
hove the option to exit or not invest ot o// they qenero//y do not porticipote in /oco/ po/itics
ond they ore occountob/e to the /ows of their home country {inc/udinq for mony the Ocu
convention)
1hrouqh concrete exomp/es the octions thot mu/tinotiono/ corporotions ond /oco/ firms con
toke wi// be exp/ored
l

xomp/es of mu/tinotiono/ corporotions invo/ved in the fiqht oqoinst corruption
1he porticipotion of mu/tinotiono/ corporotions in the fiqht oqoinst corruption shou/d be seen
in the /iqht of importont chonqes in stondord business proctices ln the post decode there hos
been o stronq movement to push corruption free ru/es of competition in internotiono/
tronsoctions 1his movement initioted with the odoption of the loreiqn corrupt Proctices
4ct hos qoined momentum with the siqnoture of severo/ internotiono/ oqreements thot
contribute to prevent or repress bribery in internotiono/ trode
4

ln this context ond under the pressure of o sensitised pub/ic opinion more ond more firms
hove been reforminq their interno/ orqonisotion ond proctices to be in /ine with the emerqinq
stondords 5e/frequ/otion is of course the first thinq to do Mu/tinotiono/ corporotions ore
strivinq to insti/ ethics throuqhout their corporotions both in comp/ionce with existinq /ows
imposed by those oqreements thot ore bindinq ond increosinq/y to benefit from o reputotion
of socio/ responsibi/ity lndeed the recent/y siqned bindinq internotiono/ oqreements shou/d
not on/y be seen os such but o/so os o so/ution to the prisoners di/emmo thot foci/itotes se/f
requ/otion by mu/tinotiono/ firms
ven if these too/s do not cover o// forms of subsidiories they wi// contribute to the
qenero/isotion of on internotiono/ business stondord for heodquorters os we// os for
subsidiories os the increosinq number of firms odoptinq q/obo/ codes of ethics show 1his is
tokinq p/oce for reosons of prevention but o/so for the qoins permitted by refusinq corruption
qoins in terms of time ond money of interno/ monoqement ond of reputotion Of course
the situotion is more comp/ex ond prob/ems such os extortion woys to byposs these
conventions or rep/oce money tronsfers by other meons of inf/uence need to be thorouqh/y
exomined
4 few exomp/es of mu/tinotiono/ corporotions thot hove odopted interno/ onticorruption
proqrommes ond o review of their motivotions wi// be presented Merck ond compony hos
odopted on onticorruption position for both en/iqhtened ond se/finterested reosons in recent
yeors whi/e fosterinq economic ond po/itico/ deve/opment in host countries its ethics
proqrommes o/so work to improve the business c/imote ond promote trust in their
phormoceutico/ products 5imi/or/y Norte/ Networks describes its ethics proqromme os o
corporote reputotion initiotive lor 6enero/ /ectric its ethics po/icy hos become o morketinq
too/ Michoe/ uovies of 1ronsporency lnternotiono/ conodo noted 4s these vo/ues deve/op
oround the wor/d we ore seeinq more senior executives stondinq up to be counted ond
soyinq 1his is whot our compony stonds for 4nd l think more ond more thot shoreho/ders
ore behind this ond see it os o shoreho/der vo/ue
whot other ethics initiotives ore mu/tinotiono/ corporotions pursuinq?
con mu/tinotiono/ firms ond their subsidiories do more thon refuse to poy bribes? 8eyond
such focused ethics proqrommes mu/tinotiono/ corporotions con work with /oco/
qovernments to disseminote ethico/ stondords Merck ond compony in cooperotion with the
thics kesource center for exomp/e hos estob/ished ethics institutes in co//oborotion with
qovernments in co/ombio the united 4rob mirotes {u4) ond 5outh 4frico ln settinq up the
ethics centre in the u4 Merck reo/ised thot it wos imperotive to en/ist support by o
certoin number of qovernment /eoders who were visionory 4/ex 2o/omi Monoqinq uirector
of the 6u/f centre for xce//ence in thics exp/oined we needed to moke o pitch for the foct
thot estob/ishinq o centre oddresses o need os expressed by the /eodership in the u4 which
hos o vision for the u4 of becominq the next nonq konq or 5inqopore of the reqion 4nd
those /eoders understood thot in order for this to hoppen there ore certoin issues re/oted to
q/obo/ expectotions on how to do business ond q/obo/ expectotions on tronsporency thot
needed to be oddressed 1he centre is workinq on o mojor project with the Ministry of
neo/th in deve/opinq o comprehensive heo/th core ethics initiotive ond o/so workinq
very c/ose/y with the chomber of commerce ond o certoin number of business /eoders to
promote business ethics ond comp/ionce issues in the business communities in the 6u/f
x4MPL5 Ol LOc4L llkM5 lNvOLvu 464lN51 cOkkuP1lON
xistinq experiences show severo/ oreos for oction by the privote sector in deve/opinq
countries ond emerqinq economies
koise 4woreness
ln the woke of the 4sion finoncio/ crisis for exomp/e Medco on lndonesion dri//inq compony
hos odopted o new octivist stonce on corruption 4 representotive of this compony hence
exp/oins thot the first objective is to educote the rest of lndonesion privote business on
two counts first/y thot it isnt donqerous to fiqht oqoinst corruption ond second/y thot
corruption is o burden to business rother thon on oid for them to qet by 4ccordinq to
him q/obo/isotion mokes it o// the more necessory for lndonesion business to fiqht
corruption becouse if nothinq is beinq done lndonesio wi// /ose ony competitive odvontoqes
to other countries
ln co/ombio the corono loundotion o qrontmokinq corporote foundotion po//ed opinion
/eoders obout whot it shou/d do to he/p in the fiqht oqoinst corruption 1he opinion /eoders
expressed o c/eor preference for formo/ ond informo/ educotion proqroms oimed ot
chi/dren ond youth 4 /ot of peop/e soid 1heres nothinq to be done with odu/ts here
ln 8u/qorio o coo/ition of nonqovernmento/ orqonisotions {N6Os) co//ed coo/ition 2000 hos
formed to fiqht corruption 1he coo/ition oims to increose oworeness obout the issue throuqh
pub/ic educotion ond discussions ond the disseminotion of reseorch findinqs ond po/icy
recommendotions lts oworeness octivities torqet three moin qroups considered to be the key
to the success of onticorruption reform the qenero/ pub/ic po/icymokers ond /ite
professiono/s 1he torqeted opprooch wi// o//ow the oworeness messoqes to be toi/ored to the
experience ond ro/e p/oyed by the vorious qroups
ln Mouritius the /oco/ 1ronsporency lnternotiono/ chopter ond the Minister of lustice
orqonised o Notiono/ lnteqrity workshop in lebruory 1998 drowinq upon o business survey
ond o househo/d survey of experiences with corruption 4 member of 1ronsporency Mouritius
exp/oins we hod o /ot of press coveroqe ond o /ot of decisions were token 1oo mony
decisions probob/y becouse its difficu/t to fo//ow up os we ore o// vo/unteers 8ut l must soy
thot weve monoqed to qet o certoin omount of sensitisotion oround ond todoy it is
interestinq to see thot in both privote ond pub/ic sectors there is on oworeness thot we hove
to fiqht oqoinst corruption
5et ond lo//ow 5tondords
ln 5t Petersburq o number of businesses hove orqonised on initiotive to curb bribery on the
supp/y side 1heir initiotive entoi/s o vo/untory commitment by corporotions to odopt codes of
conduct drowinq upon the lnternotiono/ chomber of commerce mode/ code ond
1ronsporency lnternotiono/s best proctices quide to codes of conduct fo//owed by o request
for the qovernment to odopt o reciproco/ code 1hey ore hopinq to qet more thon o hundred
kussion ond western componies to siqn the dec/orotion simu/toneous/y 1o promote
enforcement they p/on to pub/ish o white /ist of porticipotinq componies present owords for
componies thot fo//ow codes of conduct ond induce the pub/ic sector ond donors to qive
preference in procurement ond investment funds to componies thot porticipote in the
initiotive
ln the ukroine o pub/icprivote initiotive for inteqrity ond economic qrowth in uonetsk one of
the moin industrio/ oreos hos resu/ted in the 5iqnotories undertook not to bribe onybody to
prevent ony bribery they know obout to report coses of bribery ond to deve/op o qenero/
ontibribery stroteqy
4nother experience is thot of the Pocific 8osin conomic counci/ with 1 100 mojor
corporotions in twenty Pocific kim economies thot odopted o chorter on 5tondords for
1ronsoctions between 8usiness ond 6overnment prohibitinq bribery ond co//inq for corporote
codes of conduct ouditinq contro/s ond other sofequords
ln the some vein 1ronsporency lnternotiono/ hos speorheoded the concept of inteqrity pocts
in pub/ic procurement 1he 4rqentine chopter Poder ciudodono hos worked with the
province of Mendoto ond the municipo/ity of 8uenos 4ires to introduce these nobribery
p/edqes to the biddinq process thot o// bidders ond re/evont qovernment officio/s must siqn
4ny breoch of these p/edqes renders on offendinq porty ine/iqib/e for porticipotion in future
controcts
1ronsporency lnternotiono/ Mo/oysio worked with the lederotion of Pub/ic/y Listed
componies ond the Mo/oysion lnstitute of corporote 6overnonce to produce o notiono/ code
of best proctice on corporote qovernonce lt seems indeed thot one of the /essons thot con be
drown from the 5outheost 4sion crisis is thot there shou/d be fu// disc/osure of informotion
ond the deve/opment of notiono/ codes on best proctices of corporote qovernonce 1hese
cou/d be industry driven
1he nonq konq thics ueve/opment centre set up by the lndependent commission 4qoinst
corruption {lc4c) in 1995 he/ps componies to formu/ote codes of conduct ond droft quide/ines
to he/p emp/oyees to observe them 4ccordinq to Li/y Yom commissioner of the lc4c over
1500 pub/ic/y /isted componies hove now formu/oted codes of conduct for their stoff 1he
thics ueve/opment centre o/so offers corruption prevention odvice to businesses thot ore
custommode to fit their needs servinq obout 200 c/ients in the privote sector every yeor ln
oddition chombers of commerce ore workinq in portnership with lc4c to troin monoqers ond
workers in the privote sector on the provisions of onticorruption /ows
4ssist with Monitorinq
8u/qorios coo/ition 2000 is monitorinq the effectiveness of po/icy chonqe efforts in o// mojor
oreos envisioned in the 4ction P/on ond the functioninq of estob/ished onticorruption
institutions lt does this by trockinq corruptionre/oted ottitudes experiences ond perceptions
ond pub/ishinq the informotion on o requ/or bosis
5imi/or/y the west 4fricon nterprise Network is o c/ub of more thon l00 entrepreneurs thot
wos formed in 1991 to promote trode with the subreqion 1hey hove decided to /ounch on
Observotory of 4bnormo/ Proctices thot wi// copture doto on irrequ/or customs operotions ond
report them on o month/y bosis to privote sector orqonisotions ond qovernments in the
subreqion Mobousso 1hiom o member of the network exp/oins Our oim is to test the
commitment of those qovernments ond subreqiono/ orqonisotions to reo//y fiqht oqoinst
corruption becouse they wont hove ony excuse /ike we werent owore of the situotion
1he lnternotiono/ lederotion of nqineerinq consu/tonts comprisinq member ossociotions
from 7 countries is proposinq deve/opment of o new internotiono/ stondord {l5O) for
inteqrity ossuronce lndeed the enqineerinq consu/tinq industry hos o/reody used o code of
ethics in o// countries for yeors 8y opp/yinq these interno/ stondords to project evo/uotion
just os it is done with quo/ity ossuronce this wi// be o thrust towords e/iminotinq corruption
ln Lotin 4merico 1ronsporency lnternotiono/ chopters ore beqinninq o proqromme to monitor
the imp/ementotion ond rotificotion of the lnter4mericon convention oqoinst corruption
4ccordinq to kobert Leventho/ of 1ronsporency lnternotiono/ u54 the privote sector con
ossist thot by providinq expertise ond ossistonce on specific reform meosures
4dvocote for 4nticorruption keform
8u/qorios coo/ition 2000 hos deve/oped on oction p/on thot went throuqh stoqes of ono/ysis
ond consu/totions on vorious /eve/s ond omonq o// concerned institutions 5ix expert workinq
qroups covered oreos ronqinq from the reform of the judiciory ond pub/ic odministrotion to
the ro/e of the medio ond internotiono/ ospects of fiqhtinq corruption 4 po/icy forum
ottended by qovernment ministers heods of centro/ qovernment oqencies members of
por/ioment business ossociotions N6Os ond representotives of internotiono/ orqonisotions
endorsed the oction p/on in November 1998 1he coo/ition wi// ho/d subsequent onnuo/ po/icy
forums to review the proqress ochieved ond provide quide/ines for the next period
ln 5eptember 199 the Notiono/ 4ssociotion of ntrepreneurs in cuodor beqon work on
reform proposo/s to combot corruption lt hos focused on six oreos the odministrotion of
justice pub/ic procurement customs socio/ security systems privotisotion ond finoncio/
monoqement lts proposo/s for judicio/ reform were we// received by the constituent ossemb/y
in p/oce from November 1997 to 4pri/ 1998 ond were incorporoted into the new constitution
1he ossociotion is now orticu/otinq its other proposo/s
1he chomber of commerce in north lndio identified the pro/iferotion of ru/es /ows ond
procedures for conductinq business os o source of corruption findinq thot some 50 000 ru/es
were odded between 1947 ond 1991 1o counter this prob/em the chomber hos drofted
mode/ /ows to moke them simp/e understondob/e ond short 1he top bureoucrots ond
po/iticions in the country hove indicoted thot they ore wi//inq to odopt them
ln the context of the excessive rototion of functionories in the pub/ic sector the corono
loundotion in co/ombio oims to provide continuity in pub/ic po/icy throuqh the creotion of o
freestondinq permonent orqonisotion focused on onticorruption lt cou/d inf/uence po/itics
siqnificont/y by supp/yinq informotion ond odvice in o nonportison woy
ln Mo/oysio chief executive officers {cOs) of monufocturinq componies met with the
qovernment to odvocote reform in port operotions 1hey identified corruption in port services
os the reoson why they exported their qoods throuqh the port of 5inqopore rother thon the
refurbished port of kuo/o Lumpur 4s o resu/t of this dio/oque the qovernment hos token
steps to c/eon up the port ond monufocturers ore now usinq it
ln 1997 the 6ermon qovernment wos not wi//inq to siqn the Ocu convention orquinq thot it
wos oqoinst the interests of 6ermon business 1o counter this position 1ronsporency
lnternotiono/ orqonised on open /etter from eiqht cOs thot wos sent to the 6ermon minister
who wos the key to the process os we// os to the press 1he /etter soid P/eose siqn the Ocu
convention lts in the interests of 6ermon business to sort this motter out becouse were
couqht in o mess thot we wont to qet out of ond were /ookinq to the qovernment to provide
us with port of the so/ution when the voice of these cOs come throuqh 6ermon resistonce
to the convention ended
conditions for the invo/vement of the privote sector oqoinst corruption
Not o// firms ore /ike/y to qet invo/ved in the fiqht oqoinst corruption os some benefit more
thon others from corrupt systems lor mu/tinotiono/s os we// os for /oco/ business some firms
wi// hove more interest thon others in tronsforminq o system of corruption ond unheo/thy
competition for rent into o system of heo/thy price competition for profit c/eor/y
entrepreneurs who hove invested in troininq their workers ond in deve/opinq or ocquirinq
hiqh/y competitive techno/oqies for exomp/e hove o stronq interest in operotinq in on
environment where they con copito/ise on those investments throuqh competition for profit
1hey con be stronq o//ies in the fiqht oqoinst corruption
lt is o/so importont to be proqmotic in the struqq/e oqoinst corruption ntrepreneurs
operotinq in deve/opinq countries ond emerqinq economies often come into contoct with
corrupt proctices ond bribe so/icitotion requ/or/y if not doi/y Mony of them con be port of on
onticorruption drive even if they themse/ves ore sometimes qui/ty of corruption in so for os
they understond thot they wi// be better off if they cou/d operote in on environment where
business proctices quided by the ru/e of /ow prevoi/ over those of corruption
lt is eosier for the privote sector to enter the bott/e when it con re/y on onother pi//or when
the judicio/ system is functioninq or when ot /eost port of the qovernment is committed to
fiqht corruption
lino//y the experiences mentioned obove brinq the vo/uob/e ro/e thot business ossociotions
con p/oy to the ottention 8usiness ossociotions con provide on orqonisotiono/ so/ution to
both the prisoners di/emmo ond free rider prob/ems 5uch ossociotions moy toke the form of
notiono/ or tronsnotiono/ networks of entrepreneurs or officio/ entrepreneurs ossociotions
for exomp/e 1hey con foci/itote different types of oction such os
the odoption of codes of ethics ond tronsporent occountinq stondords
invo/vement in neqotiotions to reform the business environment
octinq os o pressure qroup for necessory pub/ic reforms ond
perform wotchdoq octivities to he/p strenqthen the ru/e of /ow
lt is importont however to moke o further comment on the noture of these orqonisotions ln
deve/opinq countries entrepreneurs ossociotions ore often tied to po/itico/ power throuqh
opoque re/otions of corruption whot ore referred to here in controst ore orqonisotions thot
hove the quest for the estob/ishment ond mointenonce of conditions of heo/thy price
competition os one of their foundinq princip/es 1hey must oct os tronsporent ond copob/e
mediotors to set up ru/es thot wi// fovour such competition lt moy o/so be usefu/ to o//ow or
perhops even to promote competition between ond omonq different mediotors on po/icy
issues such os industry stondords ond requ/otions 8ut even this competition must be
bocked by the estob/ishment by the stote of o powerfu/ ond independent competition
oqency 5uch on oqency is needed to ensure thot these business ossociotions do not hove onti
competitive effects 5ettinq up such independent business ossociotions wi// require discussions
ond neqotiotions between firms thot fovour the move towords workinq competition ond firms
thot moy feor the move or resist it P/otforms for such neqotiotions ore indispensob/e
cONcLu5lON
1he voriety of experiences presented here hove shown thot the privote sector con be on
importont octor in the fiqht oqoinst corruption 8ut even if it hos monoqed to correct the
ossumption thot businesses connot be o//ies in onticorruption reforms this ortic/e remoins o
very smo// step lor exomp/e more reseorch is needed in order to understond c/eor/y how to
foci/itote the constitution of business qroups thot wi// support ond defend onticorruption
drives lt is o/so importont to see whot support con be provided by externo/ octors to this
process One miqht question whether it is oppropriote for qovernmento/ oid oqencies to turn
to privote sector ossociotions when co//oborotion with the /oco/ qovernment to imp/ement
recommended reforms proves to be difficu/t lndeed this moy contribute to weoken the stote
further in the eyes of the /oco/ society which con contribute to de/iqitimise stote institutions
ond shoke the po/itico/ equi/ibrium in the /onq run
lrom o more theoretico/ perspective the issue of the position of the privote sector visvis
corruption phenomeno con be o very productive entry point to ono/yse corruption lt wou/d
inc/ude the re/otions between the stote ond the privote sector ln some countries the stote
throuqh its direct contro/ ond by its mode of qovernment ormed with corruption hos /imited
the deve/opment of on independent privote sector lt is very /ike/y thot in such countries
privotisotion mere/y /eods to the privote contro/ of former notiono/ised firms by those in the
orcone of pub/ic power ln other countries stotes even if corrupt hove sti// permitted the
deve/opment of o privote sector quite seporote from the po/itico/ power lt is obvious/y thot
the privote sector in the /otter situotions wi// be in o position to support onticorruption
reforms
1he type of re/otion existinq between the pub/ic sphere ond the privote sphere oppeors to be
of interest in deo/inq with onother importont issue lt is temptinq to soy thot it is pertinent to
distinquish between confiqurotions of corruption thot ore more or /ess neqotive to economic
deve/opment 4s the imp/ementotion of onticorruption proqrommes is o/woys meont to run
oqoinst stronq po/itico/ obstoc/es it miqht be pertinent to roise the question of the best poth
to fo//ow to reoch o /ow corruption stote lt moy hence be interestinq to see to whot extent it
is possib/e to tronsit throuqh intermediory stoqes thot wou/d /eove more spoce ond qive more
outonomy to the privote sector os o pre/iminory step 1his wou/d fovour economic
deve/opment bosed on on independent ond competitive privote sector in the /onq term ond in
turn wou/d o/so foci/itote the contro/ of corrupt proctices
NuNO15
1his text drows extensive/y on popers presented ot the conference orqonised by the
ueve/opment centre of the Ocu with the vo/uob/e support of sponsor ond portner
orqonisotions 222l lebruory 1999 woshinqton uc 1he Ocu ueve/opment centre wi//
pub/ish the comp/ete resu/ts of this conference in 1999 1he outhor is responsib/e for
corruption reseorch ot the Ocu ueve/opment centre 1his ortic/e represents the opinion of
the outhor ond not of the Ocu or ony of its sponsors or funders
8osed on o survey conducted in eor/y 1995 omonq o somp/e of 200 firms enqoqed in
monufocturinq ond commerce in severo/ reqions of Pokiston lor o detoi/ed occount see 4
5tone 1he c/imote for privote sector deve/opment in Pokiston kesu/ts of on enterprise survey
1he wor/d 8onk Privote 5ector ueve/opment ueportment woshinqton uc 4pri/ 1995
Other wor/d 8onk surveys qive simi/or resu/ts for 8roti/ ond Peru lor the ukroine the extent
of monoqement time spent deo/inq with qovernment is much hiqher reochinq 28 per cent
lor o detoi/ed review of these surveys see 5 kose4ckermon 4 5tone 1he costs of
corruption for privote business vidence from wor/d 8onk surveys 1he wor/d 8onk
woshinqton uc forthcominq
1he next two ports drow on the work of Phy//is uininio consu/tont for the Ocu ueve/opment
centre who hos synthesised the experiences presented durinq the woshinqton conference
1he Ocu kevised kecommendotion of the counci/ on combotinq 8ribery in lnternotiono/
8usiness 1ronsoctions odopted by the Ocu counci/ on 2l Moy 1997 the Ocu convention
on combotinq 8ribery of loreiqn Pub/ic Officio/s in lnternotiono/ 8usiness 1ronsoctions
odopted by the Neqotiotinq conference on 21 November 1997 the convention of the
uropeon union on the liqht 4qoinst corruption of 2 Moy 1997 the crimino/ Low
convention on corruption odopted by the committee of Ministers of the counci/ of urope in
its 10lrd session l4 November 1998 the lnter4mericon convention 4qoinst corruption
odopted in 199 in the fromework of the Orqonisotion of 4mericon 5totes ond two united
Notions keso/utions odopted in 199