Construction sector worst for corruption, report says

Out-Law News | 04 Nov 2011 | 11:05 am | 3 min. read

Officials and companies involved in public works contracts and construction are the most likely to engage in corrupt practices, according to a survey by a corruption watchdog.

Transparency International said that results from a survey of more than 3,000 global business executives from 28 major economies had identified the public works contracts and construction sector as being the most "bribery-prone" of the 19 industry areas it had asked the executives to rate.

The watchdog had asked the business representatives to score the different sectors relating to how often they thought firms bribed "low-level public officials", used "improper contributions" to influence "high-ranking politicians or political parties" and paid or received bribes from other private firms.

"Agriculture and light manufacturing are perceived to be the least bribery-prone sectors, followed by civilian aerospace and information technology. The public works contracts and construction sector ranks last, as it did in 2008," the watchdog said in its 2011 Bribe Payers Index report.(Click through for 32-page / 6.99MB PDF) 

Transparency International said the public works contracts and construction sector, along with other lowly scored industries such as oil and gas, provided "opportunities and incentives for corruption".

"Other sectors ranked in the bottom quarter of the table include utilities; real estate, property, legal and business services; oil and gas; and mining," the report said.

"These sectors are all characterised by high-value investment and significant Government interaction and regulation, both of which provide opportunities and incentives for corruption. These sectors are also particularly important from a development perspective, as they require decisions to be made with respect to the use and ownership of a country’s core resources and infrastructure," it said.

"These decisions have significant consequences for the well-being of future generations. With bribery seen as widespread in these sectors, countries working with foreign companies should be conscious of bribe paying and not tolerate unethical practices. In such instances, independent civil society organisations that monitor the deals between government and companies can play an important role in increasing transparency and accountability and reducing bribery and corruption risks," it said.

The business executives ranked the UK 8th best among the list of 28 countries when asked how often firms based in the individual countries engage in bribery in the country in which the executives were based, Transparency International's report said.

"The index shows that there is no country among the 28 major economies whose companies are perceived to be wholly clean and that do not engage in bribery," the report said.

"The Netherlands and Switzerland top the table with scores of 8.8, with Belgium, Germany and Japan following closely behind. Companies from these countries are seen as less likely to engage in bribery than the other countries ranked, but there is still room for improvement. At the bottom of the table, companies from China and Russia are perceived to be most likely to engage in bribery abroad. The business people surveyed perceived bribery by companies from these countries to be most widespread, resulting in scores for China and Russia which are substantially lower than the other surveyed countries," it said.

Transparency International said that it was "of particular concern" that China and Russia scored lowest in its survey.

"Given the increasing global presence of businesses from these countries, bribery and corruption are likely to have a substantial impact on the societies in which they operate and on the ability of companies to compete fairly in these markets," the group said.

Transparency International issued several recommendations to companies and Governments relating to tackling corruption. The group called on Governments to "strengthen" and "step up" their enforcement of existing anti-bribery laws and "require anti-bribery and anti-corruption standards of suppliers and contractors in public procurement, as well as loans and influencing bodies such as export credit agencies". Companies must improve their "enforcement, monitoring and reporting of corporate anti-corruption policies and procedures, and transparency commitments," it said.

In a statement Transparency International said that foreign bribery negatively affects "public well-being around the world".

"[Foreign bribery] distorts the fair awarding of contracts, reduces the quality of basic public services, limits opportunities to develop a competitive private sector and undermines trust in public institutions," the watchdog said.

"Engaging in bribery also creates instability for companies themselves and presents ever-growing reputational and financial risks. This is particularly relevant in light of recent anti-bribery reforms in a number of key countries around the world, such as in China and the United Kingdom," it said.

New UK bribery laws came into force in July. Under the Bribery Act companies can be found responsible for bribery carried out by its employees without its knowledge or consent. The Act also introduced the offence of bribing a foreign public official, even if that person has demanded a bribe.

UK companies and partnerships can be found to be breaking the law no matter where alleged acts of bribery take place. Foreign companies which operate in the UK could also face prosecution regardless of where the alleged bribery has taken place, unless the suspect activities are permitted locally. 

The Act also makes it an offence for businesses to fail to prevent bribery by people working for or on behalf of a business. Companies can escape liability if they show that they have 'adequate procedures' designed to prevent bribery in place. 

Under section two of the Act it is an offence if a person requests, agrees to receive, or accepts an advantage, financial or otherwise, with the intention that they or someone else perform a "relevant function or activity" improperly. The maximum penalty for individuals found guilty of bribery under the Act is 10 years' imprisonment and an unlimited fine.