For business, bribery is a threat that needs to be actively managed, like fraud or embezzlement. Corruption adds up to 10% to the total cost of doing business globally, and up to 25% of the cost of procurement contracts in developing countries.
Doing business in corrupt markets has been found to add costs equivalent to a 20% tax on business. In 2010 and 2008, roughly a fifth of surveyed executives reported that they had been asked to pay a bribe, with a similar proportion reporting that they had lost business to a competitor who paid bribes.
Social costs invariably come hand in hand with costs to business–detrimental effects to employment, health, education and a wasteful depletion of natural resources.
The UK Bribery Act, which came into force on 1 July, is an important step in Britain’s efforts to combat bribery. The Act will equip the UK courts with some of the most robust anti-bribery legislation in the world. The Act consolidates and brings up to date previous legislation and introduces two new general offences of giving bribes or receiving bribes: an offence of bribery of foreign public officials for business reasons, and an offence relating to commercial organisations which fail to prevent bribery committed on their behalf.
Taking a robust stance on bribery will not just tackle the scourge, but it will act as a spur to business. Robust action against bribery will strengthen free market forces. It will fuel competition and will ensure consumers and the public get a fairer, better deal. Prices come down, services improve and business grows. But most of all a tough stance against bribery will attract business and investment rather than deter it.
Business agrees with us. They too would like to see the scourge of bribery removed from business transactions. They will also want to see fair play by everyone and a level playing field for all. All the leading businesses and business organisations in the UK have made clear they want to see an end to this problem.
This is not just a problem for the West or the leading economies in the world. Bribery does even more damage to developing countries that can least afford it. Developing countries face enough of a struggle to build economies, create proper tax systems, provide public services like health and education, and stimulate growth. Bribery adds costs, cheats the system and steals money. It traps people and countries in poverty.
I call on other countries to look hard at their own laws and regulations on bribery and to take tough action against it. The more that join with us to fight this scourge the quicker we will beat it. Many countries already have tough laws on bribery but there is no doubt more can be done to make them stronger and also enforce them fully.
The OECD has led international efforts to tackle bribery across the world and should be commended for their efforts thus far. The UN Convention against Corruption is another important international agreement in the fight to build stronger economies and societies. There are many other organisations such as the G20 joining in the effort to tackle this problem and the UK is keen to work with them all. I firmly believe that the UK Bribery Act will do more to support business and our trade with the world. But the UK cannot succeed alone. Only by global action, only through determined leadership, and only through government action in OECD countries and elsewhere and through the support of business will we make possible the prosperous future we all want to see.
Ernst & Young (2008), 10th global fraud survey. Visit www.ey.com
Grant Thornton (2010), Decision time: The UK Bribery Act and the changing face of business, Anti-Corruption Survey 2010.
Data also come from various World Bank and UN reports.
See also www.oecd.org/corruption
©OECD Observer No 285, Q2 2011