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Bribery is a wide spread economic crime

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Published: Mon, 5 Dec 2016

Bribery, a form of influencing people by owing gifts or money in order to do a job which is beyond their job description can be also stated as extortion. Enormous growth in International Business has made many countries developed and excavated poverty, but has also seeded bribery in each and every sector (Sanyal and Guvenli 2009). Bribery or corruption starts because of poorly paid jobs, Workers or staffs of a firm have an illicit relation with the stake holders of the company in order to make money. In International trade bribery plays a major role, in taking up major contracts and in setting up off shore business. Bribery within its limits can be allowed to get hold of international market segments that in turn leads to a greater benefit for both the company and its stake holders. Bribery beyond its horizons has a greater inclination to the downfall of a country’s economic, political and employability stature. To fasten up the pace of development and growth of a country, in these days is easily possible through bribing (Blackburn and Sarmah 2006). But this necessary evil should always be kept in check. Many countries have failed to keep them in check. Today it is necessary for every growing nation to learn from these nations who have lost their track. Some of the countries have taken vigilant steps to put down this bribing activity within their boundaries.

The Bribery is a wide spread economic crime in the developing world. Companies that are mainly concerned with the cost benefit analysis make more bribes. A research done by World Bank recognizes that bribery or corruption occurs because of weak accountability of the public institutions, poor civil society, lower educational qualifications, and worse economic policies (Ksenia 2008).

Bureaucratic corruption comes with the corruption in international financial market. Companies that work overseas have to make tackling gifts and attractive price in order to keep up the peers in corporate world, by this they are lead into a goodwill wave in their business. In this bureaucratic corruption the bribes are given to the officials of any organization to do a job beyond their usual routine. A survey done in the year 2000 has proved that one out of ten senior managers is ready to break laws. And another survey in the year 1997 showed that 3600 firms in 69 countries are responsible for the corruption spread in that area and for its negative effects happened. (David Ng 2006)

In bribery the report from Transparency International (TI) have shown that the bribery in Business segment is about 53 percent in the year 2009, and the major countries affected are Canada, Denmark, Hong Kong, Iceland, Luxembourg, Singapore etc. According to Bribe Payers Index the countries are shown in given table.(Riano and Hodess et. al 2009)

Rank

Country/

Territory

BPI

2008 Score

Respondents

Standard Deviation

Confidence

Interval 95%

Lower Bound

Upper Bound

1

Belgium

8.8

252

2.00

8.5

9.0

1

Canada

8.8

264

1.80

8.5

9.0

3

Netherlands

8.7

255

1.98

8.4

8.9

3

Switzerland

8.7

256

1.98

8.4

8.9

5

Germany

8.6

513

2.14

8.4

8.8

5

United Kingdom

8.6

506

2.10

8.4

8.7

5

Japan

8.6

316

2.11

8.3

8.8

8

Australia

8.5

240

2.23

8.2

8.7

9

France

8.1

462

2.48

7.9

8.3

9

Singapore

8.1

243

2.60

7.8

8.4

9

United States

8.1

718

2.43

7.9

8.3

12

Spain

7.9

355

2.49

7.6

8.1

13

Hong Kong

7.6

288

2.67

7.3

7.9

14

South Africa

7.5

177

2.78

7.1

8.0

14

South Korea

7.5

231

2.79

7.1

7.8

14

Taiwan

7.5

287

2.76

7.1

7.8

17

Italy

7.4

421

2.89

7.1

7.7

17

Brazil

7.4

225

2.78

7.0

7.7

19

India

6.8

257

3.31

6.4

7.3

20

Mexico

6.6

123

2.97

6.1

7.2

21

China

6.5

634

3.35

6.2

6.8

22

Russia

5.9

114

3.66

5.2

6.6

Fig: 1 Bribe Payer Index 2008

Source: http://transparency.org/news_room/latest_news/press_releases/2008/bpi_2008_en

The BPI of the year 2008 shows that Belgium and Canada takes up the top position in the list with BPI score of 8.8. World Bank states that corruption “is the single greatest obstacle to economic and social development” (Blackburn and Sarmah 2006).

The International anti bribery conventions is not stopping the Multinational corporations in bribing the government officials in the developing countries. Especially the areas like defence and arms, hospital segments etc. It can also be said as the bureaucratic corruption may not be bad for the business people, this way of bribing helps the individuals having an incentive to compete with the privilege of becoming bureaucrats. Corruption or bribery will make corporate governance deploy, it is said that as corruption gets increased the regulatory oversight gets weak and there will be the worst corporate governance. Corruption in business deals enhances the development of free and fair trade and economic development. Now a days the Cross border transaction increases in number which connects societies with different customs and practices. The Multinational firms which launch in to a new market wins the contracts by bribing at high prices by this the business of the multinational firm gets heated up and moves in a profitable scale. Whereas the domestic market firms which were not able to afford to the high bribe ends in negative scale of business. The multinational firms are highly concerned about the public works construction and defence sectors. They also engage in business like oil, gas, real estate, power generations and telecommunication sectors.

The subsidiary companies of the international firms are most likely to be involved in bribery. Government policies are also negatively affected like low quality of goods, slow work of environmental policies. Funds used for education and health are also bribed.

There are two types of bribes whitemail bribes and lubrication, bribing an official of an organization to perform an illegal or uneconomic act is referred to whitemail bribery. Bribe which is given to a government official in order to expedite any government approval or legal transaction is called as lubrication.

In international trade the level of bribery can taken in two different forms such as Demand side, Supply bribery. The demand side bribery is called as the recipient of bribe and the supply side refers to payer of the bribe. Liberalization also has a greater impact over the bureaucratic corruption, since the bureaucrats value vary this raises the demand of bribe, this situation is called as “benefit effect” and it is counteracted by an increase in “cost effect”. This two effects leads to a non-monotonic relation between liberalization and corruption (Bose and pandey 2009).

Effects of bribery are widespread on business and economy, it is stated that companies pay bribes since it is cheaper than spending money in research works. Many bribes are done by many companies for taking over the market segments. The attempt to earn income through an illegal mean result in advantage of both parties, the giver gains a profit by getting the order and the bribe receiver earns money or gift, but this process is only for a short period. Inflation will be the result of bribery in the international trade, the Import goods of the country increases and results in trade deficit. This pressure makes the value of the currency to come down, which makes the country more in debt and higher in inflation. As a result of higher inflation the government officials asks for higher bribe and thus the inflation and bribery cycle continues.

As a result of high debt the country borrows money from IMF and the World Bank. Even though the World Bank knows that the government has nothing to do with money for the internal economic conditions, if the money is lent for the development of internal economic condition its stolen or wasted for bribing for government officials.

Bribery also hurts International trading countries; it also serves as a trade barrier and acts as an unofficial tariff on export.

Bribery also prevents open market system and restricts the benefits of trade agreements, with this there will be a negotiation for liberalization among the public officials with the fear of losing the control. The Economic effect of bribery or corruption reduces the economic growth of the country and this leads in decrease of foreign direct investment. World Bank estimates that the widespread corruption can reduce the country’s economic growth as well as reduce the inward investment because the investors have the fear of losing the investment in the corrupt countries. A recent survey shows that there is 60 percent chance of losing investment in Egypt and Syria, and an 80 percent in Algeria, Jordan, Morocco and Turkey (Shahabuddin 2002).

The United Nations World report states that about 15 percentages of all firms in the industrialized nations bribe in order to retain their contracts, 60 percent were found in Soviet Union countries and 40 percent in Asia (Shahabuddin 2002).

Many countries have started enforcing a ban on this evil bribery, which has resulted in continuous progress in past six years. These countries now represent more than worlds export actions. Out of thirty six countries seven countries are active in evading bribery, and 9 countries partially active. The rest twenty countries are dominant or with little effect. The countries and level of activity can be given as

Category

Percentage of world trade

Countries

Active Enforcement ( 7 )

30%

Denmark, Germany, Italy, Norway, Switzerland, United Kingdom, United States

Moderate Enforcement ( 9 )

21%

Argentina, Belgium, Finland, France, Japan, Korea (South), Netherlands, Spain, Sweden

Little or No Enforcement ( 20)

15%

Australia, Austria, Brazil, Bulgaria, Canada, Chile, Czech Republic, Estonia, Greece, Hungary, Ireland, Israel, Mexico, New Zealand, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Turkey

Fig : 2

There are few societies which are strong in evading the bribery such as the transparency International organizations.

It is highly distinctive that bribery takes the lead role in all business investments thats being carried on in today’s business world. With the census it is clearly evident that 53 percent of the business investment involves bribery. Bribery as divided by itself is seen as whitemail and lubrication. Bribery as Lubrication is acceptable to a certain limit but whitemail is never bearable. As the former just increases the pace of a work being done which mostly in turn could have a positive effect on a countries growth but the latter has always a negative effect on the countries growth and in turn spoils the ethic in the business world. Bribery as a whole has a positive inclination for an organisation to enhance its market and trade profit. This in turn leads to greater profit for the organisation and in turn to its stake holders to easily get into the global market and attain maximum profit. Even if this activity is profitable, its quiet obvious for any spectating investor to get note of the prevailing situation and recede from investing. “When somewhere someone does something wrong somewhere someone is affected”. This is the perfect effect of bribery at any level. An individual’s bribery has a significant effect on the inflation of the nation. This force everyone within responsible positions to fall into the bribing pit which obliviously shows that bribery leads to a circle without ends


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