Asian firms lag in fighting corruption, survey finds

PUBLISHED : Friday, 27 September, 2013, 12:00am
UPDATED : Friday, 27 September, 2013, 12:12pm

Even as Beijing steps up its crackdown on corruption, companies in China and the rest of the Asia-Pacific region are inadequately prepared for the risk of corruption investigations, said Chris Fordham, a managing partner at Ernst & Young.

The recent investigations of companies including GlaxoSmithKline and China National Petroleum Corp demonstrated the increased level of enforcement in China, Fordham said. "The disconnect is, we are seeing greater enforcement by governments, yet companies are lagging behind. This is going to put companies at risk in Asia-Pacific."

An E&Y survey earlier this year found 40 per cent of the respondents had anti-bribery policies in place at their companies, compared with a global average of 81 per cent last year.

This year's survey polled 681 executives in China, Singapore, Australia, New Zealand, Indonesia, Vietnam, Malaysia and South Korea.

It found 48 per cent said their companies' anti-bribery policies were good in principle but not in practice. For example, 81 per cent said they were willing to use whistle-blowers to expose corruption, but only 32 per cent said their companies had an apparatus to support whistle-blowers.

In China, 19 per cent said fraud and bribery had increased due to difficult economic times and greater competition, while 34 per cent said their managements were likely to take short cuts in tough times. About 21 per cent said corruption was widespread, higher than the global average of 14 per cent.

Fordham said E&Y planned to increase its number of fraud investigators in Hong Kong and mainland China to 160 from 120 in six months.

In China, 35 per cent of the respondents said they believed the central government's investigations of bribery had had a substantial impact.

"The impact is felt on the ground. This is causing sleepless nights among compliance officers and chief financial officers not only in China but also in the Asia-Pacific," Fordham said.

"The Chinese government has been extremely vocal on the urgent need to fight corruption and we have seen a significant impact in the market. This is a watershed moment. The leadership is pushing reform because they see corruption as a major threat to the country's growth and prosperity," said John Auerbach, an E&Y fraud investigation partner.

E&Y found 4 per cent of the respondents in the survey "agreed or strongly agreed" that it was all right to offer cash payments to win business.

"It should be zero, because companies have a policy of zero tolerance towards bribery," said Torsten Duwenhorst, an E&Y partner.

Even in Singapore, which has a squeaky clean reputation, 59 per cent said their companies' anti-bribery policies were good in principle but did not work well in practice.