Previously, the private sector believed that corruption exists because the government officials are corrupt and did not consider itself as encouraging corruption. Over the years, the private sector has been established as an equal participant in corruption transaction, and efforts to limit its ability and vulnerability to engage in corruption are therefore, equally and urgently needed. In our mainstream corruption debate, demand-side often draws the attention while supply-side is hardly a matter of public concern. Though the activism against corruption in post-1990 period scaled up new heights in terms of awareness, capacity building and empowerment, yet there has not been much advocacy to address the supply side of corruption. For instance, Prevention of Corruption Ordinance of Hong Kong and many other countries have legislations to penalize even the bribers.
Addition of an anti-corruption Principle to the United Nations Global Compact at the summit in 2004, endorsed by 1,700 members, underscores the increasing importance of the private sector in a global fight against corruption. The principle urges businesses or companies to work against corruption in all its forms, including extortion and bribery. Nepal as a party to the UN Global Compact and the UN Convention against Corruption (UNCAC) requires framing laws to prosecute corruption in and by the private sector. But there has not been any remarkable progress, not even the ratification of the UNCAC in seven years.
Over the years, the private sector has been established as an equal participant in corruption transaction. However, in our mainstream corruption debate, demand-side often draws the attention while supply-side is hardly a matter of public concern.
IMPERATIVE INTERVENTIONS
Corruption is a central and a growing challenge for businesses and society— from informal vendors in the least developed countries (LDCs) to multinational companies in the industrialized ones—for citizens, communities and countries, all over the world. Corruption in private sector directly impedes development and makes a few people rich at the cost of many. Lack of a coherent policy and an in-built system to prevent corruption within the corporate sector can distort the national economy and limit the growth of the private sector eventually.
The Global Corruption Report (GCR)—2009 mentions that the bank loan defaulting in Nepal exceeded Rs 40 billion, representing 30 percent of all credit flows into the country. Nepal’s Credit Information Bureau still carries a name list of 2,144 bank defaulters. Willful bank defaulting is just a tip of the iceberg to indicate increasing vulnerability of the private sector to scandalous corruption as much as the public sector. But the corruption scandals in private sector have failed to draw the attention of the Commission for the Investigation of Abuse of Authority (CIAA). The existing laws such as Corruption Elimination Act 2002 and the CIAA Act (Second Amendment) 2002 have mandated this constitutional anti-graft commission only to investigate and prosecute public post holders on corruption charges.
As corruption takes place at the interface of the public and private sector, bringing one into the legal net and leaving out the other has made our anti-corruption fight one-sided. We have seen many corporate corruption scandals over the years. But, a few of them have come under the judicial scanner. Dhamija, Chase Air, LC scandals and most recently Unity scam are some of the most notorious corruption swindles in or by the corporate sector. And in most of these cases, supply-side is hardly or inadequately penalized for the offence due to lack of a concrete policy. Taking into account the rapidly changing forms of corruption, we need to address the corruption in and by the private sector as seriously as in the public sector by widening the legal mandate of the CIAA.
Existing anti-graft legislations exclude the private sector corruption. They are limited to the improper activities or abuse of office or use of office for private gain by the public post holders. The CIAA is mandated only to investigate ‘improper activities’ and corruption incurred by the public post holders. The mandate further allows the CIAA to act as a recommendatory body in cases where it deems necessary to make improvements in the functioning of any public office. But many other countries such as India, Singapore, Malaysia and territory like Hong Kong have legally mandated their anti-graft bodies to investigate and prosecute perpetrators of corruption in all spheres including the private sector.
Our tendency has been that corruption scandals within the private sector are most often referred to as fraud or something unworthy of investigation. Private sector as an intermediary of the state, in a deregulated governance system, is delivering various types of public services to the people. Therefore, corporate corruption has now become an issue of great public concern warranting legal oversight and prosecution. Private sector playing a role of supply-side and often as a lucrative domain for corruption as much like the public sector desperately needs various preventative and curative measures to institutionalize transparency and accountability for better corporate governance.
Corruption has become so rampant that we now need to review the existing laws to prosecute even the bribers and the corporate corruption. Nepal is no exception to this phenomenon as majority of the anti-corruption interventions worldwide have focused on the demand-side only. Though the supply-side doesn’t adequately figure in anti-corruption discourse, it has now been imperative to address this almost ignored dimension by mainstreaming it in governance policies and laws. Dealing with corruption through a two-pronged approach—supply-side and demand-side is now more urgent than ever given its magnitude and its adverse effects on economy, development and democratic system at large.
As the CIAA and National Vigilance Center are regulatory government agencies, probing corruption in private sector, doesn’t directly fall under their jurisdictions. As a matter of exigency, supply-side should also be taken as seriously as the demand-side and extend the investigation outreach to corrupt practices even in the private sector. Anti-corruption reforms by its nature should move beyond advocacy and policymaking, as proper and fair implementation of laws and regulations warrant focused attention. It is a reality in many countries like Nepal where ‘policy intentions’ have differed from ‘policy outcomes’, and the seemingly effective measures to reduce corruption have miserably failed to yield the expected results. Such policy gap should be addressed if corruption is to be reduced by bringing the private sector into the periphery of legal investigation.
COSTLY REPERCUSSIONS
There have been colossal repercussions of the corporate corruption globally. The GCR-2009 states that more than 283 private international cartels that came to light between 1990 and 2005 caused direct economic losses to consumers through overcharges totalling some 300 billion US dollars. Direct economic losses due to overcharges by international cartel activities alone could match or even exceed the total volume of development aid given to the developing countries.
In a survey of more than 2,700 business executives in 26 countries, nearly two in five respondents said they were asked for bribes when dealing with the public institutions. Half of them estimated that corruption raised project costs by at least 10 percent, in some cases by more than 25 percent. One in every five respondents claimed to have lost a business opportunity because of the higher bribes paid by a competitor.
In developing and transition countries alone, corrupt politicians and government officials receive bribes totaling between 20-40 billion US dollars annually—the equivalent of some 20 to 40 percent of official development assistance given to poorer countries worldwide. The private sector continues to play a very exposed role as supplier of corrupt payments to civil servants, members of the government and political parties.
The report mentions that the scale and rapid growth of lobbying raises serious concerns worldwide. In Brussels, an estimated 2,500 lobbying organisations with 15,000 lobbyists vie for influence in EU policy-making. In the United States, lobbying expenditures by companies have risen sharply and, at the state level, lobbying expenditures average 200,000 dollars per legislator, while five lobbyists vie for the attention of each lawmaker.
pbhattarai2001@yahoo.com
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