Insights & Reports > Kroll Global Fraud Report

---

Juanita Riaño

---

Since the early nineties, when serious study of corruption began, much effort has gone into understanding and addressing the demand side of the problem – those who derive illicit wealth from entrusted power. Less emphasis has been placed, however, on the supply side – those who use irregular payments and undue influence to seek illegitimate advantages. In order to help close this gap, Transparency International (TI) created the Bribe Payers Index (BPI). The BPI survey has been repeated four times: in 1999, 2001, 2006, and most recently in 2008. The latest index ranks the world’s leading economies by the likelihood of national firms to bribe abroad – an assessment of corruption’s supply side. The BPI balances the findings of the TI Corruption Perceptions Index (CPI), which focuses on the perception of public sector bribery and which routinely shows developing countries performing poorly. By pointing out lapses in the conduct of companies from developed countries, it shows the urgent need for those combating fraud to focus on the responsibility of the private sector. It also demonstrates the need for better enforcement of conventions and monitoring of voluntary commitments to raise standards of corporate behavior.

The 2008 Bribe Payers Index

The latest index is based on two questions posed to 2,742 senior business executives from companies in 26 countries as part of TI’s larger 2008 Bribe Payers Survey.¹ These asked how likely it was for foreign firms from specific countries to use bribes when operating in the executive’s country; answers were restricted to those states with which companies respondents had experience in dealing. In short, executives provided informed perceptions of the sources of foreign bribery.

The 22 countries listed in the 2008 BPI accounted for three quarters of both exported goods and services and outflows of foreign direct investment in 2006. Table 1 shows for each an average score, on a scale of zero to ten, as well as information on the score’s precision. The higher the score, the lower is the likelihood of national companies engaging in bribery abroad. Thus according to the executives surveyed, companies from Belgium and Canada are the least likely to use bribes abroad, followed closely by those from the Netherlands and Switzerland. At the other end of the spectrum, respondents ranked Russian businesses as the most likely to do so.

Although the index shows some countries doing better than others, it also indicates that some companies headquartered in states seen by business executives as the best performers will still pay bribes.

Regional Variations

Views about the countries ranked in the 2008 BPI differ according to the location of the executives interviewed. In particular, four distinct regional groupings of opinion are discernible.²

• Africa and the Middle East (Egypt, Ghana, Morocco, Nigeria, Senegal, and South Africa): Executives from these states held that, when operating there, Dutch and Japanese companies are the least prone to engage in bribery. Indian companies fared the worst, although it is noteworthy that local businesspeople also believe South African companies are quite likely to pay bribes on the continent.
• Asia Pacific (India, Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, and South Korea): Respondents here considered German and Canadian companies the least likely to pay bribes when operating in the region. Chinese businesses were labeled the most likely offenders.
• Europe, Central Asia, and the United States (Czech Republic, France, Germany, Hungary, Poland, Russia, United States, and United Kingdom): For these respondents, Swiss and Belgian companies were the least likely to use bribery. Again, Chinese firms came in last. Italian businesses were also seen more often by these executives to be bribers than companies from many other European states.
• Latin America (Argentina, Brazil, Chile and Mexico): For executives here, Chinese companies were the most likely to engage in bribery locally, and German companies were the least prone to doing so.

Types of Bribery

The Bribe Payers Survey 2008 also analyzed how frequently companies from the 22 ranked countries used different types of bribery abroad, in particular: payments to high-ranking politicians or political parties; payments to low-level public officials to speed things up; and use of personal or familiar relationships to win public contracts.

The total volume of bribery in the results (Figure 1) agrees with the findings of the BPI 2008. Companies headquartered in the countries at the bottom of that index, however, exhibit different bribery patterns when operating abroad. For example:

• About half of the respondents reported that Russian companies often bribe high-level politicians and low-level public officials, but fewer considered it common for them to use personal and familiar relationships to win public contracts;
• Mexican companies – according to 38 percent of respondents – were likely to use personal and familiar relationships to win contracts, but only 32 percent thought that they would bribe senior politicians, political parties, or junior officials;
• 30 percent of respondents indicated that companies from India were likely to bribe low-level public officials to speed things up, a higher number than for the other two types of foreign bribery.

Moreover, even top BPI 2008 performers have some weaknesses:

• 16 percent of respondents thought Belgian companies ‘often’ or ‘almost always’ use familiar or personal relationships to win public contracts;
• One in ten respondents said that Canadian companies often use personal relationships to win work abroad;
• 7 percent of respondents reported that Dutch companies often engage in bribery of low-level foreign officials to speed things up;
• When asked about Swiss companies, 5 percent reported that they often bribe high-ranking politicians or political parties, and the same number said that they use personal relationships to obtain public contracts.

Conclusion

A glimpse of the supply side of corruption demonstrates a shared responsibility between companies operating abroad and their home governments. The 2008 BPI shows the relative success and failure of states to control corruption beyond their borders by domestic companies, but it also indicates how well or poorly companies ensure that their employees comply with the highest standards of business practice. Improvement requires commitment and action from both governments and companies. These can include adherence to existing international anti-corruption conventions at the country level, and inclusion of adequate codes of conduct at the corporate one.

1 The report, on which this article is based, is available at http://transparency.org/policy_research/surveys_indices/ bpi.
More information on TI’s surveys and indices is available at http://transparency.org/policy_research/ surveys_indices.

2 For each regional grouping, the scores of only those countries for which there were more than 70 observations were estimated.

---

Juanita Riaño is senior research coordinator at Transparency International, which she joined in February 2007. Previously, she worked for the World Bank Institute on anti-corruption and governance diagnostics, as well as on projects for the World Bank related to poverty, inequality, and local development.

---