Robert Hanlon has spent the last six years researching the common ground between most sectors and corruption in the institutional side of some of Asia’s emerging economies.
A post-doctoral research fellow at UBC’s Institute of Asian Research, Hanlon wrote his PhD dissertation on bribery in Cambodia, Thailand and China.
His findings, as they relate to Canadian businesses looking to enter these regions, are that “the issue of corruption, especially from the private-sector perspective, is that if you’re going into emerging economies you have to assume all officials that you are dealing with are corrupt and you have to use that as a baseline when you enter a market,” said Hanlon.
His research and findings were collated from 60 interviews with informants from various industries, including senior managers from the private sector, non-governmental organizations, international organizations and government officials in Hong Kong, Bangkok and Phnom Penh.
Generally speaking, in terms of corruption and comparatively across the board Hanlon said that counter to what he was hoping to find, there is little incentive to not engage in bribery.
He recalled speaking to the executive director of a chamber of commerce in Thailand who said, “If you are going to Thailand to work, you have to be prepared to pay bribes or become less competitive.”
Furthermore, corruption is perceived as a tax, an additional business expense that companies are willing to take a risk on, as fines are relatively low.
Hanlon mentioned the case of Niko Resources Ltd., a Calgary-based oil and gas company that pled guilty in June to charges of bribery in Bangladesh.
The plea followed a six-year investigation by the intern ational anti-corruption unit of the RCMP that found Niko’s Bangladeshi subsidiary in violation of Canada’s Corruption of Foreign Public Officials Act by providing improper benefits to induce an official to influence the acts or decisions of a foreign state.
Hanlon noted that the punishment was not that severe as there was no jail time, and the $9.5 million fine was small percentage of the company’s overall revenue.
“There is a payoff even if you are caught and businesses are well aware of this,” Hanlon said. “It’s a risk you almost have to take.”
However, Victor Tsao, an associate at Farris Vaughan Wills & Murphy, who advises Vancouver companies going to Asia to set up businesses, believes that while prevalent across much of Asia, corruption is being increasingly addressed and frowned upon.
“With globalization and increased transactions things are getting better. [At the end of the day] it will cost you more if you bribe someone. All Canadian business should keep in mind whether it’s worth it,” said Tsao.
In regard to advising his clients, Tsao said there are certain procedures a company can take to ensure it avoids heading down a slippery slope while in Asia.
He advises companies take a top-down approach and name an authoritative person internally to take charge and be responsible for anti-corruption efforts within the company.
He recommends setting up a compliance office, defining roles, preparing training materials and most importantly undertaking a regular auditing of books and of conducts and reporting any potential violations.
“When you go to a country the business culture is different so you have to be sensitive to that culture but not fall into traps of corruption. With clear procedures of what you can and cannot do when it comes to providing cash or material benefits then you have to have a clear line where you say that is a line that cannot be crossed,” said Tsao.
Failure to comply can have far-reaching implications on a company according to Hanlon.
There are organizational implications whereby you can have a strong company in Vancouver, but the local subsidiary or branch functions in a way far removed from the original vision of the company.
These significant moral and morale issues can affect the long-term growth of companies.
Also, when businesses are engaged in corruption, they are perpetuating a system that’s dependent on bribes to get simple things done. So a company may demand intellectual property protection in these countries, but the courts are corrupt, so there is a paradox of feeding into a system that won’t in turn protect their brands.
“The risk is greater for larger companies with more exposure, and small to medium-sized enterprises aren’t being as closely scrutinized,” Hanlon said. “At the end of day, though everyone knows corruption is an issue, they are not talking about it, but it impacts every business working there.”