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Corruption risks for foreign business highlighted by new Maplecroft briefings for Argentina, Australia, Ghana, Peru and S Africa

16/11/2011

Stringent legislation has increased the responsibility of multinational companies to act with integrity when operating overseas. Maplecroft’s Corruption Risk Briefings review the extent to which corruption is a common feature of a country’s political economy and the risk that it might compromise a company’s ability to comply with new legislation at home. The briefings also provide guidance on how business might employ comprehensive internal compliance policies and procedures as a means of mitigating the risks of operating in a corrupt environment, with no level playing field.

Argentina

The implementation of criminal penalties for corruption as established in law has been hampered due to a lack of political will. Other issues seen as hampering anti-corruption efforts include high levels of public bureaucracy and an inefficient judiciary. Accusations of irregular contract procurement, undue influence, and illicit enrichment surface regularly in the media and affect high public officials and companies. As a result corruption remains a significant risk for business operating in the country. The briefing identifies the extractives and construction industries as particularly high risk sectors.

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Australia

Australia’s commitment to upholding the rule of law means that foreign investors can be assured of operating in a legal environment which stands amongst the highest levels of fairness, transparency and rigorous judicial process. The comprehensive legal framework means that any company found to have engaged in corruption risks a stern legal backlash. Companies operating in the extractive industry, with significant operations in Australia and in more volatile and less regulated markets, should exercise particular caution. Under Australian legislation, companies based in Australia or with significant operations in the country can be held to account for their involvement in corrupt practices overseas.

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Ghana

Corruption in the private sector is considered to have decreased in recent years owing to government efforts that were implemented to combat the problem and attract foreign investment. However, corruption still remains a significant risk to business in Ghana. Recurrent corruption on a smaller scale, particular within the tax and customs systems, remains an issue. A significant concern should be the use of facilitation payments to overcome bureaucratic inefficiencies, particularly for UK-listed companies since passage of the Bribery Act, which criminalises facilitation payments. Extractives, construction and forestry and agriculture are identified as high risk sectors.

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Peru

Corruption is perceived as a systemic problem in Peru, prevalent throughout all sectors of society. It remains a leading constraint on the business environment and economic development. The underlying causes of corruption range from poor enforcement of anti-corruption legislation due to weak institutions, and a lack of awareness of the measures designed to eradicate corruption in the public sphere. The propensity of public officials at both the national and local levels of government to engage in corrupt practices leaves business exposed, with the subsequent risk of legal action and reputational damage. The extractives sector is considered particularly high risk, owing to the prevalence of corruption and its importance to the Peruvian economy.

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South Africa

South Africa has a relatively well-developed legal framework for the prevention of corruption at both a national, provincial and local level. However, inconsistent implementation and inadequate resources means that corruption remains a risk to business. The business activities at greatest risk from corruption are those requiring engagement with public officials, such as public procurement. Collusion between competitors in advance of bidding and payment of kickbacks to awarding public bodies are common practice. The use of bribes to public officials in order to win public tenders, avoid regulation, or speed up government processes when doing business abroad is prevalent among South African companies. Extractives, in particular mining, and fisheries are identified as high risk sectors.

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For more information contact info@maplecroft.com or call +44 (0)1225 420000.

Corruption risk briefings are available for all countries and sectors. Register for trial access to see examples.