News

New analysis provides corruption insights for China and an in-depth assessment of country risks in Ecuador

03/08/2011

China

The Corruption Risk Briefing on China analyses the extent to which corruption is a common feature of the country’s political economy and the risk that it might compromise a company’s ability to comply with new legislation at home.

Corruption remains prevalent and a key risk to investors in China, largely as a result of the inadequate enforcement of anti-corruption laws. The risk to business is greatest when engaged with public officials, particularly at the regional and local level where transparency and supervision is most lacking. Despite regulations providing for transparent and equal tendering, corruption is rife in public procurement and contracting. Facilitation payments are also commonly expected by officials to carry out administrative services for businesses, including in the payment of taxes and customs duty.

The government has acknowledged that widespread corruption risks compromising China’s goal of economic development. A key legal development came in February 2011 with the passing of a new offence of commercial bribery of a foreign official. The amendment to Article 164 of China’s Criminal Law prohibits bribery of a foreign public official or official of an international public organisation for the purpose of obtaining an unfair commercial benefit. This is an important development in Chinese anti-corruption efforts as it demonstrates intent to meet the international standards set by the UN Convention against Corruption and to prevent Chinese companies from contributing to corruption overseas.

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Ecuador

Maplecroft's in-depth Country Risk Report on Ecuador offers high-level analysis and illustrative subnational maps of the governance framework, the regulatory and business environment, political violence, human rights, the environment and climate change, plus an economic overview.

The regulatory environment in Ecuador can be complex and burdensome. Weaknesses in the regulatory environment have contributed to poor enforcement of contracts, which in turn has compromised the stability of the investment environment. President Correa’s agenda of terminating Bilateral Investment Treaties further raises concerns over the protection extended to foreign investors. The regulatory environment is also prone to periods of instability that affects key industries. Extensive due diligence is advised for foreign companies entering into partnership with government entities which have, on occasion, failed to honour contracts. This risk is of particular concern for mining companies.

Ecuador rates as ‘extreme risk’ in Maplecroft’s Corruption and Transparency Index with a score of 2.50/10 (where lower scores indicate higher risk). Local authorities may demand bribes in exchange for issuing necessary permits, while a lack of judicial effectiveness and transparency hinders efforts to crackdown on corrupt practices. Sufficient political will to adequately address corruption appears lacking. Businesses face a high risk from complicity in corruption through association with corrupt individuals in both public and private sector bodies. The risk posed by corruption at the local level is of particular concern for extractive companies, given the high levels of engagement required with regulatory authorities during licensing procedures.

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

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