Sucheta Dalal :Global corruption could threaten democratic systems
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » Column Topics » The Rediff columns » Global corruption could threaten democratic systems
                       Previous           Next

Global corruption could threaten democratic systems  

October 25, 2000

To people living in India, the findings of Transparency International's (TI) Bribe Payers Index are only a confirmation. It is no surprise that the richest nations with fairly clean records of domestic dealings are not at all averse to giving bribes for international contracts.

Or, to put it differently, rich countries are willing to turn a blind eye to bribe-giving by their corporations in order to secure business from some of the most corrupt nations in the world.

This does not surprise us. Sweden, a country which is considered squeaky clean by various corruption measurement yardsticks of TI, is known to many Indians as the home of Bofors - the howitzer gun manufacturer. It not only brought the Rajiv Gandhi government crashing down, but two decades later continues to sporadically hog media headlines.

It is the same with Germany. The quickly-supressed HDW submarine deal also ranks among the better-known scandals involving international contracts. The issue gets trickier when we discuss the United States of America. On the one hand, allegations of shady dealings caused the Enron power project in Maharashtra to be cancelled and later re-negotiated. Though nothing was ever proved, controversy continues to dog the project as it produces the most expensive power in the country and threatens to bankrupt the state electricity board.

On the other hand, Enron's officials, never tired of quoting the stringency of their Foreign Corrupt Practices Act, as the powerful deterrent which would prevent them from bribing Indian officials and politicians. Do countries which have established anti-corruption laws really avoid bribe-giving? Not necessarily, show the TI studies.

The Berlin headquartered Transparency International (TI), which is an international coalition against corruption, has specifically studied this phenomenon through its Bribe Payers' Index (BPI). It commissioned Gallup International Association to survey important business segments in 14 emerging market economies to study the perception regarding willingness to pay bribes by 20 leading exporting countries of the world.

The findings are revealing. Sweden is confirmed as the cleanest among nations and one this is least likely to pay bribes - the Indian experience shows that there may be some aberrations. Australia and Canada follow it while Austria, Switzerland and the Netherlands ranking fourth, fifth and sixth respectively. At the bottom of the list of 20 were predictably, China (19), South Korea (18), Taiwan (17), Italy (16) and Malaysia (15). The most interesting cases are the two countries jointly ranked number nine - Germany and the US.

The relative low ranking of the US seems to fly in the face of the strident claims by its corporate sector about the efficacy of its Foreign Corrupt Practices Act. Dr Michael H Wiehen, a board member of TI and chairman of its Munich chapter puts it - "No matter what the Americans say, the perception about their activities around the world is pretty awful." The same goes for Germany.

The Gallup survey did not stop at measuring the perception about willingness to bribe. It included a specific question on business practices other than, or, in addition to bribery which give special advantages to companies from a certain country. The idea was to study the overall competitive context in which illegal and unfair business deals occur. These include - diplomatic and political pressure from large countries particularly over dependent nations, commercial pressure in the form of dumping or pricing of goods, financial pressure by way of taxes, tariffs, customs barriers, linking aid to contracts and other favours and gifts.

The result was again no surprise.

The US was by far perceived as the country most likely to use influence (other than bribery) to get contracts for US companies. At a high 60 per cent on the perception scale, the US was seen as using twice as many "other" means to influence commercial decisions as France and Japan, which were ranked next to the US by the survey. To be fair, the US makes no bones about such tactics. Whether it is the President's visit to various countries or those of trade delegations, the US political establishment openly discusses and pushes specific project contracts - it is all in US national interest.

However when combined with the US's tremendous clout as the only remaining superpower in the world and the high perception of its willingness to bribe, the use of its influence paints a fairly unnerving picture.

Interestingly, the Chinese also rank high up on the scale of using other influence for business. Countries that never seem to misuse their influence for business interests are Switzerland, Austria, Sweden and the Netherlands in that order.

In the seven years of its existence Transparency International, which has forged a coalition of organisations in over 100 countries, has conducted several studies in order to force an open discussion on corruption and to "shift the position of international agencies from one of benign neglect to one of determined action". According to Peter Eigen, chairman of TI, the organisation operates on the basis that "corruption deters investment, distorts development and ultimately hurts those who can least fight back".

The important aspect of its work is that, unlike in the past where there was a perception that bribery does not sabotage economic development, TI's findings indicate to the contrary. In fact, the Gallup International 2000 Millennium Survey, which interviewed about 57,000 people in 60 of the most corrupt countries found that in countries such as Central and Eastern Europe, the disillusionment with corruption is so high that it threatens to wipe out the democratic gains of the last decade.

Needless to say, India ranks pretty low on TI's lists. Its Corruption Perceptions Index, for the Year 2000 ranks India 69th out of 90 countries. The previous survey ranked it 72nd (jointly with Columbia) among 99 countries. But the higher rank is slightly worse that the previous score of 2.9.

TI's efforts have led to most OECD countries slowly passing new laws or revising old ones to curb the bribing of foreign officials. It has also raised consciousness regarding corruption all over the world. Yet, in the seven years of its existence there is no reduction in global corruption, in fact 33 per cent of the people surveyed believe that it has increased. As opposed to 22 per cent who believed it had stayed the same and 25 per cent who thought it had decreased (20 per cent were undecided). Clearly it is going to be a long and tough battle to achieve even simple results.

-- Sucheta Dalal