How the G20 can make state-owned enterprises champions of integrity

How the G20 can make state-owned enterprises champions of integrity

For the first time in its presidency of the G20, Argentina is hosting country representatives from across the globe to address the best ways of curtailing corruption and promoting integrity in state-owned enterprises (SOEs).

Controlled by national governments, SOEs rank among the largest companies in the world, often serving as some of the biggest employers in their country. SOEs are central to the daily lives of citizens, providing critical goods and public services in sectors such as transport, utilities, telecommunications and health. When SOEs work inefficiently due to corruption and other malpractice, ordinary citizens feel the impact: trains are delayed, households go without power or water, and the sick are deprived of essential medical treatment.

SOEs are particularly vulnerable to corruption because of their closeness to politicians and public officials, and the scale of the resources, contracts and operations they control.

Examples from South Africa, India and Brazil

Further details have recently emerged of a scandal that involves three SOEs in two G20 countries, South Africa and India. The Johannesburg branch of India’s state-owned Bank of Baroda played a crucial role in moving hundreds of millions of dollars into offshore accounts originating from illegal deals involving taxpayer money. According to an investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and The Hindu, two state-owned South African companies provided the millions: electricity utility, Eskom, and railroad company, Transnet.

In Latin America in the last two years, corruption scandals involving SOEs have highlighted a devastating waste of taxpayer money through over-priced contracts and corruption-related fines. As part of Operation Car Wash, one of the world’s largest corruption scandals, employees of Petrobras, the Brazilian state oil company, took approximately US$788 million in bribes in return for construction contracts, and used public money to illegally fund political parties.

10 anti-corruption principles for SOEs

To tackle corruption at these high-risk companies, Transparency International recently developed 10 Anti-Corruption Principles for SOEs together with a multi-stakeholder group of SOEs, businesses and international organisations. The principles provide detailed guidance for anti-corruption best practice by SOEs and complement the Organisation for Economic Co-operation and Development’s Guidelines on Corporate Governance of SOEs.

Integrity and transparency are at the heart of these principles. As entities ultimately owned by citizens, SOEs have a higher responsibility to act ethically and set an example for other businesses.

Our recommendations

“SOEs are owned by the public, so they should be beacons of integrity and transparency. Unfortunately, this does not always seem to be the case,” said Delia Ferreira Rubio, chair of Transparency International. “Citizens deserve quality infrastructure and services. By demonstrating political will at the highest level and adopting these principles, G20 leaders have it in their power to make this happen.”

SOEs cannot tackle corruption alone. Fighting corruption takes a joint effort of governments, international organisations and civil society.

There are several ways that the G20 countries meeting in Buenos Aires can contribute to this fight:

  • Work with SOEs to apply the SOE principles.
  • Improve transparency of how the state directs and works with SOEs.
  • Encourage SOEs to act with integrity in every country they operate in, and encourage their partners to do so as well.
  • Require SOEs to maintain up-to-date, online, public registers of conflicts of interest.
  • Provide the public with secure channels for raising concerns about SOEs.

“G20 leaders run the risk of saying the right things but not putting those words into action. They have already adopted a number of anti-corruption principles, including on open data, integrity in public procurement and corporate ownership transparency in recent years. Putting them into action would dramatically help clean up SOEs and restore trust in government,” said Katja Bechtel, Transparency International’s head of business integrity.

SOEs continue to play an important role not only in their own countries, but also increasingly in countries far away from home. As they enter new markets in challenging environments, corruption risks for SOEs rise, and the need for transparency and integrity increases.


Download the 10 Anti-Corruption Principles for State-Owned Enterprises, an accompanying paper called State-Owned Enterprises: Beacons of Integrity? that makes the case for their use and a self-assessment tool for SOEs on anti-corruption practices. The tool is in a testing phase and Transparency International welcomes comments on its application to bip@transparency.org. You can also download an additional paper with key information and recommendations on SOEs.

Photo by Ant Rozetsky on Unsplash

For any press enquiries please contact press@transparency.org

Latest

Support Transparency International

La Justicia española debe investigar el lavado de imagen de Azerbaiyán en Europa

Tres políticos españoles —Pedro Agramunt, Agustín Conde Bajén y Jordi Xuclá— se encuentran entre los delegados ante la Asamblea Parlamentaria del Consejo de Europa (APCE) sobre los que pesan sospechas de haberse beneficiado con la maniobra del “Laundromat”.

Clean up Spain – Justice for Azerbaijan’s reputation laundering in Europe

In Azerbaijan, critical voices are routinely suppressed. Meanwhile in Europe, politicians suspected of helping whitewash Azerbaijan’s record on human rights enjoy impunity. Join our campaign to urge authorities in Spain to investigate.

Everything you need to know about the 18th International Anti-Corruption Conference (#18IACC)

The #18IACC will take place from 22-24 October in Copenhagen, Denmark under the theme Together for Development, Peace and Security: Now is the Time to Act. Get the latest info and updates here!

Risky business: Europe’s golden visa programmes

Are EU Member States accepting too much risk in their investor migration schemes?

Future Against Corruption Award 2018

TI is calling on young people across the globe to join the anti-corruption movement. People between the age of 18 and 35 are invited to submit a short video clip presenting their idea on new ways to fight corruption. Three finalists will be invited to Berlin during the International Anti-Corruption Day festivities to be awarded with the Future Against Corruption Award. Apply today!

The Azerbaijani Laundromat one year on: has justice been served?

In September last year, a massive leak of bank records from 2012 to 2014 showed that the ruling elite of Azerbaijan ran a $3 billion slush fund and an international money laundering scheme. One year on, has enough been done to hold those involved to account?

Right to information: knowledge is power

The right to information is vital for preventing corruption. When citizens can access key facts and data from governments, it is more difficult to hide abuses of power and other illegal activities - governments can be held accountable.

Social Media

Follow us on Social Media