Graft battle begins at home

PUBLISHED : Sunday, 31 January, 1999, 12:00am
UPDATED : Sunday, 31 January, 1999, 12:00am
 

JUST how squeaky clean can you be? Take Denmark, which scores top marks in the corruption perceptions index compiled by Transparency International (TI). While the country might give the appearance of saintliness at home, this does not necessarily translate into good behaviour abroad.


Peter Rooke, a board member of TI, an international non-governmental organisation dedicated to fighting corruption, said a poll of Danish businessmen overseas revealed 74 per cent had paid bribes to win contracts.


The problem is widespread and significant, accounting for up to 30 per cent of a project's cost, Mr Rooke says.


The World Bank estimates US$80 billion is paid across borders in bribes each year - a figure most observers believe to be understated.


'There is a growing recognition that along with cleaning up corruption in a domestic context, you need to get businesses to behave better overseas,' Mr Rooke said.


The OECD convention to combat bribery of foreign public officials aimed to stamp out this behaviour.


Enery Quinones, the lawyer heading the OECD's anti-bribery unit, said: 'As the OECD is a major exporter of investment and trade . . . we decided to do what we could do, which is to tackle the supply side.' The signatory states to the convention, which include the 15 members of the European Union, the United States, Canada, Japan, South Korea and Singapore, account for about 90 per cent of cross-border investment flows. Any crackdown on corruption by those countries will see the supply of bribes dry up.


But what will the convention mean in practice? The only direct experience with this type of legislation comes from the United States' Foreign Corrupt Practices Act.


Washington has been a prime mover behind the OECD convention, having long complained that its own legislation put its companies at a competitive disadvantage when dealing with rivals from other countries.


A US lawyer with experience of working in South Korea said the legislation was widely feared.


'For example, in Korea it is customary to give cash gifts at a wedding. Enforcement is so strict among many US companies that we had to worry whether this was an infringement,' he said.


Under the act, US citizens are liable, regardless of whether they are domiciled abroad or working for a foreign company.


Even where a US company has no direct control, it is obliged to try to see that the purposes of the act are met, John Grobowski, a partner at law firm Baker & McKenzie in Hong Kong, says.


The convention will have little immediate impact on Hong Kong managers, but that will not be the case for expatriates based here, even though the SAR is not a signatory.


An extreme example: it is conceivable under the terms of the treaty that an Australian businessman who has lived in Hong Kong (a non-signatory) for 20 years and works for a South African company (another non-signatory) could find himself a fugitive both at home or in any signatory country were he to offer a bribe to an official in Indonesia (yet another non-signatory).


This type of extra-territorial jurisdiction is alien to many countries, a factor that Mrs Quinones said presented some obstacles in negotiations.


That it was possible to bridge the gap between the different legal systems was, in itself, quite an achievement, even though this meant building a high degree of flexibility into the interpretation of the convention.


'The implementation of the treaty depends heavily on the domestic laws put in place by signatory states. In one way you could say that's the weakness of the convention, it might also be a strength,' Mr Grobowski said.


'If it didn't allow for this it would probably have met a lot of opposition. They're trying to do things a step at a time.' Mrs Quinones said the campaign against corruption would be a process of continued monitoring, including peer group reviews, to ensure that signatories were complying with their obligations.


She also expected further action to tighten and extend the legal framework once the initial stage of review was completed. She said this was a gradual process that required member states to proceed at a mutually acceptable pace, a view that found support among the business community in Hong Kong.


'What sometimes begins as an international movement that lacks teeth evolves over time into something more formidable,' Richard Weismann, a spokesman for the American Chamber of Commerce, said.


'The bribery issue is one where international attitudes are going to evolve. It is the future, it's just a question about how long.' Despite the existence of stringent legislation, corrupt practices were still widespread among American companies, one mainland-based US executive said.


'It exists at every level in the States it's just less direct,' he said. 'It comes in the form of perks, say, golfing trips, as opposed to China where you just give cash.


'In the US you can buy politicians with hunting trips to South America or golf club memberships.'

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Graft battle begins at home

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