In 2011, foreign direct investment in Sri Lanka reached US$ 1.07 billion. Renewed efforts are in place to attract US$ 1.75 billion in 2012. I have got no records as to how much has flown into the country so far. According to government sources, many of the expected investment will come from the proposed hotel development sector. The Central Bank Governor has said this clearly shows the confidence the international community and investors have in Sri Lanka.
Many investors who come to Sri Lanka expect to have a business friendly political and social culture. Recently, I met a German interior designer who works with a few hotel groups who are at present doing business in Sri Lanka. Our conversation veered from the natural beauty in the country, to how difficult it is to make things happen in Sri Lanka. His frustration is rested on nepotism, favouritism in the so-called professional working environment to everyone expecting something out of a business particularly when it comes to dealing with foreigners. I was not bold enough to literally ask him whether this has led him to engage in corrupt practices. But it was not difficult to assume about the existing culture, which perpetuates corruption.
I could not research into the steps taken by the Board of Investment (BOI) in Sri Lanka to deal with this situation or even to what extent this is a concern of theirs. But it is not uncommon to hear about corrupt practices that companies from the developed world engage in, when doing businesses mainly in the developing world.
Corruption in business
Recently, Wal-Mart de México (Walmex), a subsidiary of the retail giant Wal-Mart International, was alleged to have handed over at least US$ 24 million to Mayors and City Council members as part of a huge bribery campaign, to help the company expand. According to the New York Times, the newspaper, which first revealed the scandal, Wal-Mart has been engaging in such corrupt practices since 2003, which eventually brought huge profit margins for the company value of US$ 12 billon dollars.
Corruption in businesses has many facets. Companies engage in corruption to win contracts, to speed up bureaucracy, to avoid rules or to change them. Many think of direct bribery in these circumstances. However, it is common to see many indirect financial contributions to many who are influenced and are intended to influence procurement processes and policy makers.
The world trend is taking a different path. The anti-bribery convention – Organization for Economic Co-operation and Development (OECD) stipulates standards to prevent corruption happening in foreign direct investment. So far 39 countries with big economies have ratified the convention. This means, these 39 countries have agreed to investigate and prosecute businesses that use corrupt practices when conducting business abroad. In addition, many of these countries have introduced legal standards in their own jurisdiction to prevent companies of their own from engaging in corruption, when doing business overseas. Positive stories are now rolling out from these jurisdictions.
Business abroad
On 24 June 2011, Niko Resources Ltd., a Calgary-based oil and natural gas exploration company, pleaded guilty to one count of bribery under the Corruption of Foreign Public Officials Act (CFPOA) for bribing a Minister of Energy in Bangladesh in 2005. The company paid a CAN$ 9.5 million fine as part of the plea bargain. The RCMP’s case was based on alleged gifts to the Minister of Energy, who was responsible for assessing compensation to be paid by the company to a Bangladeshi village following an explosion at a Niko drilling site. The company allegedly provided the Minister with a Toyota Land Cruiser worth CAN $ 200,000 and a trip to Calgary to visit an Energy Exposition, with a stop-off in New York for his family. The company was notified in January 2009 that it was under formal investigation by the RCMP for the allegations, following the arrest of several Bangladeshi politicians and a Niko Resources executive by local authorities.
Following a two-year investigation initiated in May 2009 by the Australian Federal Police (AFP) and with cooperation from the UK Serious Fraud Office, in July 2011, the AFP arrested six former employees of the Australian banknote printing company Securency International Pty. Ltd., (Securency) and Note Printing Australia Ltd. (NPA), on bribery related charges. The companies were also charged with conspiracy to bribe foreign officials, based on allegations they had paid or offered bribes in Indonesia, Malaysia, Nepal and Vietnam to win businesses.
In February 2012, the World Bank Group announced the debarment, for three years, of Alstom subsidiaries Alstom Hydro France and Alstom Network Schweiz AG. This is related to allegations of attempted bribery of Zambian officials in 2002. The companies agreed to a settlement of US$ 9.5 million as part of its Negotiated Resolution Agreement, and the subsidiaries will also be prohibited from participating in bids of the African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development (EBRD) and the Inter-American Development Bank Group.
Now it is interesting to know the level of preparedness of Sri Lanka’s BOI to handle cases of corruption, and the procedures established to report on corrupt practices!
By Rukshana Nanayakkara – http://www.ceylontoday.lk