Corruption is one of the greatest obstacles to the growth of the global economy, according to the G20 Anti-Corruption Working Group, which met February 25- 26 in Moscow. The sentiment is echoed throughout the world as countries realize the links between corrupt practices and economic development.
Even Russia, which holds the G20 presidency for 2013, is taking an anti-corruption stand. Allegations of graft surrounding the 2014 Winter Olympics in Sochi, Russia are part of the impetus. Current estimates indicate it will be more than three times as expensive as original estimates. Some Russians, including former deputy prime minister Boris Nemtsov, say the financial fraud is costing billions of dollars.
Corruption and Economic Growth
When the G20 Anti-Corruption Working Group met, it explored the ways in which anti-corruption policies support economic growth, and implementation of the anti-corruption plan approved last year in Mexico. The plan’s key points combat bribery, improve international information sharing, enhance public-private partnerships and increase transparency and accountability. The UN Convention Against Corruption has been ratified by 18 of the G20 nations. Germany and Japan are holdouts
Removing corruption from the privatization process, an endeavor Russia recently renewed, is one tool to attract financial and intellectual capital and improve corporate governance. The nation earlier reported plans to mandate International Financial Reporting Standards and General Accepted Accounting Principles for all state and private companies in Russia.
Confronting a Global Epidemic
Corruption is a global epidemic, even among the G20 nations – 11 of which scored less than 50 percent on Transparency International’s Corruption Perception Index 2012. In addition, 56 per cent of their own citizens who were surveyed said corruption has increased in their country during the past three years.
Globally, the nations within Africa, Asia and most of Latin America (save Chile and Uruguay) scored near the bottom of the chart. Russia, for example, scored 28/100 and ranked 133rd. China scored 39 and is ranked at 80, below Brazil but above India. The United States scored 73 and is ranked as the 17th least corrupt nation, slipping slightly from the 16th spot in 2001. The Scandinavian countries and New Zealand claimed the number 1 through 4 slots.
Governments are beginning to give more than lip-service to tackling corruption, and businesses must recognize the shifts. They also must recognize the fine points. For example, the U.S. Foreign Corrupt Practices Act allowed facilitation payments to expedite services. The UK’s Anti-Bribery Law does not. Importantly, it affects all companies that do businesses in the British Commonwealth. As more companies enact their own anti-corruption legislation, such differences will become common.
There can be a fine line between the perception of corruption and standard business practices. At what point, for example, is entertainment considered excessive? The distinctions may be confusing.
China’s prominent anti-corruption campaign highlights the practice of using public funds for elaborate banquets just before the Chinese New Year. According to the Beijing News, the campaign may merely make corrupt practices more secretive, while the People’s Daily warned in January that “corruption will ruin the party and ruin the country.” The G20 Working Group expects to present its training course at the G20 summit in September.
The Working Group continues to address legal issues regarding failure to disclose information. "There are mechanisms of anti-corruption cooperation in place, but they are not operating smoothly enough," Ksenia Yudaeva said in a press release. "Major delays in information exchange hinder anti-corruption investigations."
By the G20 meeting in September, the Working Group plans to have completed the third monitoring report detailing implementation of the G20 Anti Corruption Action Plan, aG20 Anti-Corruption Training Courseand recommendations for proper conduct related to major international events.