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How some OECD governments do nothing to stop their companies financing grand corruption abroad

They account for approximately two-thirds of world exports, but are some OECD governments giving their companies a free leash to bribe abroad to win business?

In 1997 OECD countries appeared to recognise that their companies bribing foreign public officials was a problem and adopted the OECD Anti-Bribery Convention. But a law without enforcement serves as little deterrence. Almost 20 years later, as OECD ministers meet in Paris today to discuss how to crack down on foreign bribery, what’s actually been achieved?

Many OECD countries have done absolutely nothing. If you look at how countries have enforced the convention – by investigating and prosecuting companies suspected of bribing abroad – more than half have failed to prosecute a single foreign bribery case since they joined the convention.

As our assessment in 2015 showed, only Germany, Switzerland, the UK and United States are active in enforcing their commitments. Twenty countries have ‘Little or No Enforcement’, while nine countries are assessed as having only ‘Limited Enforcement’.

Such a record is shocking. Many multinational companies operate in countries with reputations for endemic corruption and grave human rights abuses. There is an acute risk that money from deals in such countries will be siphoned off to enrich the ruling elite and keep them in power. Meanwhile, the wider population will often continue to live in grinding poverty.

This isn’t a secret, yet many OECD governments continue to do little or nothing to ensure their companies are not paying off corrupt regimes for lucrative contracts. The following examples illustrate some of the risks and why all OECD governments need to step up:

Angola:

Angolan President José Eduardo dos Santos has been in power since 1979. His daughter Isabel is Africa’s youngest billionaire and worth an estimated US$3 billion from the national diamond and telecommunications business.

Meanwhile, 70 per cent of the population lives on US$2 a day or less. One in six children die before the age of five – that’s 150,000 a year – making it the deadliest place in the world to be a child.

The biggest investors in Angola come from China, France (limited enforcement of the OECD convention), the Netherlands (limited enforcement) and United States (active enforcement). To date, China and France have not reported any investigation or sanctioning of their companies doing business in Angola.

Algeria:

President Abdelaziz Bouteflika has been in office since 1999.

Oil and gas account for 98 per cent of exports and almost 60 per cent of government revenue. The Financial Times describes “the network of senior military and security officers for whom the ailing President Abdelaziz Bouteflika is a convenient figurehead” as being one of the reasons the country has been unable to diversify the economy. Foreign companies have been linked to corruption cases involving the state company Sonatrach, as well as to a highway construction scandal.

More than 50 per cent of the country's rural population live below the national poverty line. Unemployment remains particularly high in these areas.

The biggest investors include China, France (limited enforcement of the OECD convention), Spain (little or no enforcement) and United States (active enforcement). To date, with the exception of the United States, these countries have not reported any investigation or sanctioning of their companies doing business in Algeria.

Uzbekistan:

President Islam Karimov has been in power since 1990. According to the Organized Crime and Corruption Reporting Project, Gulnara Karimova, the daughter of President Karimov, has received more than US$1 billion worth of payments and ownership shares out of international telecom-related companies.

Uzbekistan is the fourth biggest exporter of cotton globally and the government uses one of the largest state-sponsored systems of forced labour to harvest it. According to Anti-Slavery: “all the profits [ca. US$1 billion] go to a small elite of the most powerful in the country, while most of the population remains impoverished.”

The biggest investors include China, Japan (little or no enforcement of the OECD Convention) and South Korea (limited enforcement). To date these countries have not reported any investigation or sanctioning of their companies doing business in Uzbekistan.

China:

China has the largest share in world exports for several years. China also has an international legal obligation to sanction its companies that bribe abroad to win business. The country criminalised foreign bribery on paper in 2011, but there have been no charges or convictions reported to date.

Several OECD countries seem to be reluctant to investigate and prosecute their companies until China does the same.

Recommendations:

  • Countries signatory to the OECD Anti-bribery Convention must actively enforce their commitments
  • Trade and investment in countries with poor corruption and human rights records should be subjected to heightened scrutiny to ensure that funds are not going to illicitly enrich ruling elites. If so, there should be enforcement by supply side authorities.
  • The OECD Working Group on Bribery should give urgent priority to addressing the demand side of bribery in line with the OECD’s 2009 Recommendation.
  • China should join OECD Anti-bribery Convention to support a more level playing field.

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