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Maplecroft releases new corruption risk briefings for Bulgaria, Poland and Ukraine

02/11/2011

The Corruption Risk Briefings for Bulgaria, Poland and Ukraine are the latest in a new series of reports launched by Maplecroft to help companies proactively assess and mitigate the risks of corruption throughout supply chains, operations and investments.

The series has been developed in response to the proliferation of extraterritorial anti-corruption legislation, such as the Foreign Corrupt Practices Act (FCPA) in the U.S. and the Bribery Act in the UK. This legislation increases the scrutiny of multinational companies when operating overseas, with potential legal consequences, for those that fail to act with integrity, including fines and imprisonment for company employees and directors.

Bulgaria

The delay in implementing a new Penal Code, which is the main repository of anti-corruption legislation, leaves legislation that is insufficiently clear and overly prescriptively applied. There are serious shortcomings in the professional competence and capacity of the judiciary, which is a significant risk to business. Low incomes – Bulgaria is the poorest EU state – and lack of opportunities indicate a high risk of corruption throughout levels of society, exacerbated by high profile incidents revealed to involve the highest state officials.

The Bulgarian government is struggling against institutionalised and widespread corruption linked with criminal activity. More than most other recent EU newcomers, Bulgaria suffers from a high level of organised crime which appears to permeate the upper echelons of the political establishment. Although the existing government of Boyko Borisvo, elected on an anti-corruption ticket, has purged officials and law enforcement, the government has faced corruption allegations of its own.

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Poland

Poland’s approach to corruption has vastly matured in recent years, driven by a strong civil society and a lively media, as well as the need to enter into compliance with EU regulatory norms and requirements. Despite the relatively robust legal framework, there is a widespread incidence and perception of corruption. Maplecroft ranks Poland as high risk on the Business Integrity and Corruption Index, scoring 4.87/10. The Central Anti-corruption Bureau (CBA) has estimated annual economic losses from corruption at over PLN18bn (US$6bn).

Conflict of interest among public officials and the excessive influence of political donations and lobbying remain key risks to business. Companies operating in Poland should establish clear and comprehensive compliance procedures so that employees and business associates are aware of the legal implications of seeking to exert undue influence over political decision-making. Recent cases have highlighted the presence of corruption in the mining, construction and electronics industries. Although the impact of corruption on economic growth and development in Poland has considerably diminished in recent years, problems related to corrupt practices continue to plague several aspects of business. The business activities at greatest risk from corruption are those requiring engagement with public officials.

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Ukraine

Corruption remains a significant obstacle to investment in Ukraine, because it creates considerable risks and burdens on business. President Viktor Yanukovych has so far failed to reduce levels of corruption which continues to pervade all spheres of economic activity. In Ukraine corruption is prevalent on a petty, grand and state capture level and the potential for investors to be implicated in corrupt practices remains a concern due to the associated legal and reputational risks.

Companies should exercise caution when engaged in public procurement and contracting processes, as the risk of complicity in corrupt activity is significant. Given the lack of transparency and opportunities to engage in corrupt acts, the extractives and the agribusiness sectors are noted as examples of high risk sectors. Companies should ensure they implement and strengthen integrity systems and conduct due diligence when venturing into operations in these industries.

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The Corruption Risk Briefing China is available to trial users. Register for trial access.

Corruption risk briefings are available for all countries and sectors. For more information and pricing details contact info@maplecroft.com or call
+44 (0)1225 420000.