by Michael R. Czinkota and Anna Astvatsatryan*
In November of this year, leaders of the Group of Twenty (G20) vowed to implement an anti-corruption action plan. Although the proposed strategies might improve the situation for G20 member states, using the same toolkit will not work in the developing world. One needs to take into account culture, traditions and historical circumstances, when crafting anti-corruption strategies for the developing world.
It has been more than a quarter century that industrialized countries began their anti-corruption crusade. International organizations and developed economies offer a standard toolkit of programs to fight corruption such as: changing education systems; enforcing legislation against domestic and foreign bribery, increasing transparency of the government, and combating money laundry. Every year, Transparency International produces the Corruption Perception Index (CPI). The latest report indicates that a one-generation effort dedicated to the reduction of corruption and bribery has, unfortunately, not led to major changes. Countries where bribes and corruption were acceptable twenty-five years ago have not shifted their positions in the ranking today. In these countries people still perceive bribery as a routine transaction. The top ten corrupt countries remain the same. These findings were based on the Global Corruption Barometer – a Transparency International survey that includes 114,000 people in 107 countries.
It is important to understand that countries with high levels of corruption are more likely to be governed by corrupt officials. Many businesses are either owned by government officials or their family members, or have other personal connections to the government.
According to a study at University of Texas, corrupt connections can negatively affect export capacity of a country. Major government connected companies in transition economies, are less likely to export, as they get more preferential treatment and artificial competitive advantage at home. In addition, these companies are used to the business practices specific to their home market and like to know all the major players. These biased conditions make them less competitive in the international trade; which therefore reduces their volume of exports.
High-level government corruption will also affect the outcomes of the majority of international projects. When in the early 2000’s, the Turkish Parliament investigated allegations of corruption of two former prime ministers, it looked like the beginning of a serious anti-corruption campaign. However, soon a decision of the Parliament cleared them of charges. This news raised eyebrows in the global community.
Some countries are not ready to participate in wide ranging anti-corruption actions and prefer to act on their own. China’s latest anti-corruption campaign has been criticized for being more of a weak attempt rather than а structured anti-corruption effort. The arrests of key members of the Communist Party have so far not been followed by deeper investigation. In addition, China raised a last-minute objection to the G20 anti-corruption plan by refusing to support the principles of transparency that would help fight against shell companies engaged in tax evasion and money-laundry. In 2014, China ranked 100th according to Transparency International, a drop of 20 places from last year.
In systems, where corruption is firmly established, it is oftentimes dangerous to be the whistleblower. For example, in the Czech Republic, 95% of citizens believe that corruption is prevalent at all levels of the government. However, there are no whistleblower protection laws, so many people are actually afraid of being persecuted for exposing cases of high-level corruption.
Culture and history can also represent big obstacles for fighting corruption. In India and Hungary, it is widely accepted to bribe a doctor or an official in order to skip the line and get better service. According to a study at the KOF Swiss Economic Institute in Zurich, in heavily regulated and burdensome entry markets, entrepreneurs often use bribes to facilitate the start of operations. Bribes are considered a greasing mechanism that helps accelerate business processes rather than do harm. De Jong and Bogmans of the University of Amsterdam found that in some countries, bribes are triggering imports, as they allow companies to bypass the waiting times and paperwork at customs. A study by Fisman and Miguel has found that diplomats from corrupt countries are usually getting more parking tickets, but are less likely to pay them. This is another illustration of how deeply rooted a cultural and historical mindset can be, and how it can manifest itself internationally.
Post-industrialized countries are still struggling with corruption and bribery within. In 2013, multiple organ transplant centers across Germany were placed under criminal investigation over allegations of wait list manipulation. This revelations of bribery and dishonesty staggered public trust towards the health care system. Can developed countries expect to defeat corruption worldwide, when they still have very serious bribery cases domestically?
When crafting strategies to defeat corruption both in developing countries and domestically, leading economies should focus more on culture, traditions and historical circumstances of each country. Building trust relationships between the businesses and individuals will create internal capacities to fight corruption, and develop understanding of the negative effects of corruption within developing economies.
Anna Astvatsatryan is a graduate student working on a degree in Communications. Her professional work is in the fields of marketing and international business.