Global Policy Forum

By Peter Eigen

When OECD member countries signed a convention in 1997 outlawing bribery by multinational companies of officials abroad, it was regarded as a milestone in the global fight against corruption. But five years later the convention is in crisis. It has produced no prosecutions and, worse still, a serious budget shortfall is stalling a review of its lackluster enforcement.

When the Organization for Economic Cooperation and Development holds a special session Nov. 14, it must address the urgent need to correct this shortfall in the 2003 budget for monitoring the convention.

Only a level playing field - a world in which honest companies know that bribery doesn't pay and that unscrupulous competitors will be punished - will bring about a lasting change in the behavior of international business. And without peer-group monitoring by other countries, it will be impossible to create a level playing field. Governments will hold back from initiating prosecutions for fear of putting their companies at a disadvantage.

Since the convention came into effect in February 1999, the 35 signatory countries have enacted laws making illegal the bribery of foreign public officials. But apart from U.S. cases brought under the 1977 Foreign Corrupt Practices Act, we are still waiting for the first fine or prison sentence.

Between them, the signatory countries account for more than 90 percent of foreign direct investment worldwide, so enforcement would be a breakthrough in cleaning up business in the developing world. Moreover, it is long overdue. From the Elf affair in France to Bofors in India, corruption has sullied business and politics at the highest levels.

Corruption distorts economic decision-making, as kickbacks prevail over quality, particularly in tenders and privatizations. The effects linger for years, not only because a culture of corruption becomes the norm among public officials, but also because wasteful mismanagement diverts resources needed for education, housing and health care into the pockets of corrupt elites. In short, corruption costs lives.

The problem was brought into stark focus last week when a Canadian engineering consultancy was convicted by the High Court in Lesotho on two counts of corruption involving $431,000. This first case is expected to be appealed, but it concerns just one of 14 Western companies facing charges for bribing a government official to win contracts in the Lesotho Highlands Water Project, an $8 billion scheme to build dams to supply water to South Africa.

The significance of the case lies in the fact that a court in a developing country has for the first time convicted an international company for paying bribes rather than just prosecuting a local official for taking bribes.

As Monyane Molekeki, Lesotho's natural resources minister, aptly puts it: "It takes two to tango." But if the developed world cannot bring to justice multinationals that bribe abroad, it is hard to sustain the argument that leaders of developing countries should heed the hectoring of the International Monetary Fund, the World Bank and donor governments about "good governance" and fighting corruption.

The OECD convention is simply not being taken seriously enough by many companies. To turn this situation around Transparency International, a nongovernmental organization that fights corruption, is developing, together with companies including BP, Shell, Tata and General Electric, a set of business principles for countering bribery.

In a Transparency International survey of senior managers in emerging market economies, conducted by Gallup International between December 2001 and March 2002, only one in five respondents knew something about the convention. These are the managers at the front line where bribery takes place.

These results are damning evidence that OECD governments have failed to make businesses understand the new legislation. It is essential that governments ensure that the law is put into effect. But above all, they must provide the finances to ensure that enforcement is monitored by peer review. Unless those who bribe know that they will be prosecuted, the convention will have been an embarrassing failure.

* The writer, chairman of Transparency International, contributed this comment to the International Herald Tribune.

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