Although the BRICS (Brazil, Russia, India, China and South Africa)
countries’ economy has developed a lot in the last few years, corruption is
still a huge problem and a recurring practice in these nations. So, international
companies which operate in these countries face the potential of corrupt
practices in their overseas operations, and corruption risk might compromise business.
The risk of facing extortion happens particularly in the public sector, where there
is more political inference and excess levels of bureaucracy.
According
to consulting group Maplecroft, in case of Brazil, corruption affects all areas of civil, public
and corporate life. “Although President Dilma Rousseff has indicated a
willingness to take a strong line against corruption, there are constraints in
the shape of unwieldy bureaucratic processes and poor prosecution rates, as
well as opposition within the political sphere”, says a study by the institution.
Companies face
corruption risk especially in areas related to public contracts, given the need
for close interaction with potentially corrupt government officials. “The
construction industry is noted as a particularly high risk sector (in Brazil)”,
says Maplecroft. “Risks in this area could be heightened amid major contracting
being conducted ahead of the 2014 World Cup and 2016 Olympics.”
The situation in not
different in Russia, and corruption is one of the most significant barriers for
business operations in the country. “The business activities at greatest risk
from corruption are those requiring engagement with public officials, such as
public procurement and the payment of tax or customs duties, where bureaucratic
inefficiencies may encourage facilitation payments to expedite official
functions”, says the study.
The oil and gas sectors
and the pharmaceutical sectors are noted as examples of high risk sectors in Russia.
“Despite regulation and policy clearly setting out anti-corruption targets in
Russia, implementation of the law is weak”, says Maplecroft. Yet the study recognizes
there has been continued articulation of the intention to pursue an
anti-corruption agenda. “However, the anticipated return of Prime Minister
Vladimir Putin to the Presidency in 2012 signals potentially two more terms of
political stagnation and continuing corruption.”
In India, companies might
face a complex and inconsistently enforced anti-corruption framework. According
to Maplecroft, there are numerous laws criminalizing corruption in its many
forms, but the weak capacity of the country’s anti-corruption agencies
undermines enforcement. “Recent corruption scandals have highlighted weaknesses
in the country’s legal framework, driving demands for legislative changes”,
says the consulting group. “In response to the recent scandals, scrutiny of
business deals is likely to increase. Construction, extractives, public
utilities, finance and healthcare are noted to be among the highest risk
sectors.”
To Maplecroft, although
the Indian government of Manmohan Singh has vowed to tackle corruption, the
seriousness of its efforts has been brought into question by a series of
corruption scandals which have surfaced over the past two years.
In China, corruption
remains prevalent and a key risk to investors as well. “The risk to business is
greatest when engaged with public officials at the regional and local level,
where transparency and supervision is most lacking”, says the study. “Despite
regulations providing for transparent and equal tendering, corruption is rife
in public procurement and contracting.”
According to Maplecroft,
facilitation payments are also commonly expected by officials to carry out
administrative services for businesses, including in the payment of taxes and
customs duty. “Construction, natural resource extraction, finance and healthcare
are highlighted as high risk sectors.”
To Maplecroft, the
Chinese government has acknowledged that widespread corruption risks
compromising China’s goal of economic development, and the prevalence of
corruption can undermine government institutions, increase inequality, fuel
social unrest and distort the economy. “This realization has dictated recent
efforts by the Chinese Communist Party to improve integrity in governance and
business”, says the study.
The study does not mention
corruption problems in South Africa.
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