What's Left to Lose: the Cost of Corruption
World Bank President, Robert Zoellick defines corruption as "a cancer that steals from the poor, eats away at governance and moral fibre, and destroys trust" - particularly poignant while it is precisely a trust deficit that threatens to defer economic recovery indefinitely.
Furthermore, says the United Nations Development Programme1, corruption weakens national institutions, fosters inequitable social services, and leads to blatant injustice in the courts - not to mention causing widespread economic inefficiency. Predictably, those most adversely affected are also the poorest.
APEC's Anti-Corruption and Transparency Experts Task Force
While the economic crisis may have exposed the grim state of affairs, the facts are not new. APEC's Anti-Corruption and Transparency Experts Task Force has long recognised the potential to increase economic efficiency by identifying and addressing corruption.
In February this year, the Task Force sponsored a workshop on governance in public and private sectors and its impact on anti-corruption. Drawing representation from both spheres, this served as a forum in which to exchange best practices: to discover what works and what challenges remain to be addressed.
Almost every presenter confirmed: "tone at the top" establishes the ethic (or lack thereof) that reverberates throughout both corporate and national cultures.
A second dominant theme was that poor governance fosters corruption to the same degree that corruption corrodes governance structures and leads to weak states. That is, ultimately, poor governance leads to reduced capacity (or will) to sustain equitable economic growth, to fulfill basic human needs, and to protect citizens from violence, injustice and harm.
Invariably, good governance, anti-corruption and socio-economic health are inextricably correlated.
Negative impact of corruption on business and government
Price Waterhouse Cooper has explored corruption from the perspective of the private sector. Among respondents to the Confronting Corruption report, 63 percent of respondents have experienced some form of actual or attempted corruption and, as a result, 45 percent of global companies report having declined to enter a specific market or pursue a particular opportunity. In these cases, corruption - and no less the perceived threat of corruption - translates to lost revenue for both business and government.
"A company just has to get into a serious situation and not address it properly and their reputation can be irreparably harmed," says Alan Boeckmann, Fluor Corporation CEO.
According to World Bank and International Monetary Fund estimates, the cross-border flow of proceeds from corruption, criminal activities, and tax evasion accounts for about 3 - 5 percent of the world's GDP - as much as $3.61 trillion every year2.
This is damaging to any economy but is more acutely experienced in economies that may not have the resources to spare or that do not have the capacity to address such threats effectively.
Challenges particular to Asia
Some argue that the idea of good governance is obscured by the persity among Asian economies: population sizes, cultures and stages of development are not the least of factors affecting the possibility of establishing a common ethical code.
According to the National University of Singapore, Asian companies - particularly SMEs - are often highly dependent on a founder or controlling stakeholder. If that stakeholder behaves illegally or unethically, employees may feel helpless since removing him or her could lead to an uncomfortable atmosphere at best or even threaten the very survival of the company. Unable to change the situation, disproportionate emphasis is placed on competence - rather than conduct. The suggestion is that the end justifies the means and that "whatever works" is therefore acceptable, regardless of ethic.
"Once values are put on the shelf there is a blurring of lines and only shades of right and wrong," says Gerard Ee, Chairman of Singapore's largest charity, the National Kidney Foundation - an organisation whose reputation was itself scarred by internal scandal. "It is common to hear of people saying it is only a small lie or a half truth - well, a lie is a lie and a half truth is not the truth."
Such considerations raise a number of questions: Does good governance allow for cultural relativity? Is it important to distinguish between questions of ethics, questions of legality and questions of morality? Can a moral or ethical code be instilled through legal means alone?
Global situation provides impetus for regional collaboration
If such questions are not easily resolved, then perhaps - out of necessity - they may be addressed on a practical level. If good governance is inextricable from macro-economic stability then, at least when it comes to areas affecting business, economies literally must forge enough common principles to serve as a regional code of ethics if they are to survive the economic challenges immediately at hand.
According to the World Bank3, good governance is not only pro-poor, it is "also a priority for building a sound investment climate for growth, macroeconomic stability, rule of law, regulatory system, physical and financial infrastructure."
And while "tone at the top" is critical, the onus falls not entirely upon governments. Says Wayne Murdy, chairman of Newmont Mining and co-founder of the World Economic Forum Partnering Against Corruption Initiative: "You need the governments on one side because they provide the teeth." Yet, he continues, "It is very important that the private sector drive the initiatives because they know their business."
Indeed, the relationship between government and business is synergistic. While principles and legal frameworks must be established at national levels to bear real weight, it is in the workplace that they actually serve their purpose. According to Gerald Ee, "an individual will only discover whether he has the moral courage to do the right thing when he encounters the situation."
Current initiatives of the Anti-Corruption Task Force
While persity has strengthened APEC, it is in identifying commonalities that enables APEC to operate seamlessly and ever more effectively. Remarkably, the recent ACT workshop revealed similarities among both governance and business structures throughout the region.
In a concerted effort to address economic issues through anti-corruption activities, APEC members have embarked on a number of initiatives including: a Pathfinder Initiative to implement its Code of Conduct for Business; an assessment of members' approaches and cooperative arrangements; and a template for identifying areas for capacity building or complementary efforts.
To learn more about the Anti-Corruption Task Force, go to:
- Fighting Corruption to Improve Governance, UNDP, 1999
- Using the World Bank's 2007 global GDP estimate of $72.4 trillion
- World Development Report, 1997