A/CONF. 187/9 16. In the context of international trade, corrupti conflict of interest, extortion, nepotism, tribalism articular in the form of bribery--serves as a ba to fraud and corruption. It is the most dangerous type of corruption and the one that causes the most serious As aresult, a corrupt environment may present global damage to the country or countries involved. In developing countries, such corruption may undermine their capital. Those investors most likely to make a economic development through a number of related long-term contribution to development may therefore factors: the misuse or waste of international aid be discouraged, while those who seek quick profits unfinished development projects, discovery and through dubious ventures may instead be encouraged replacement of corrupt politicians, leading to political This in turn increases the harmful effects of corruption instability; and living standards remaining below the on the global economy, which have been mounting It country s potentia has been shown that countries suffering from pervasive 21. Industrialized countries, in particular, have been freed corruption invest less and achieve lower economic with systemic corruption at the highest level of growth. A country with widespread corruption is government. An environment in which long-term rule likely to achieve aggregate investment levels of almost by one political party and a system made up of a few 5 per cent less than a country relatively free of social and political groups that share power over corruption and to lose about half a percentage point of decades is conducive to the establishment of networks gross domestic product growth per year. Such personal networks hide behind consensual 18. Corruption in both the public sector and the private agreements, justified by political, social, ethnic and sector. regardless of the level at which it occurs, can eligious arguments, so that it is difficult for the publ eopardize free trade, distort competitiveness and to become aware of them These links are often undermine the stability upon which the free market discovered inadvertently, allowing them only then to be system is based. 2 Companies may resort to bribery prosecuted. Unfortunately, since individuals or small a means of bypassing existing trade barriers or parts of the network are generally identified, the reducing national tariffs and expediting international prosecution is, in most cases, unable to identify or trade. Such action, however, undermines the position eliminate the entire network of the State, reducing government revenue and 22. As public awareness increases of the immediate violating important environmental and safety negative effects of high-level corruption on day-to-day standards, among other things fe, tolerance of the problem will be reduced. Media 19. Widespread corruption jeopardizes the credibility of reports can be very effective in bringing corruption Governments and their institutions. As a result. a scandals to the attention of society. The perception that negative culture arises in which priority is given to a scandal exists and the motivation to have the individual success and short-term achievement participants brought to justice are the first signs of Systemic corruption also weakens the effectiveness of citizens'empowerment and willingness to confront the punishment tools: it is hard to punish one person severely when so many others are likely to be equally is likely to grow and infiltrate hent, organized crime C. Corruption in public administration and the guilty. Within such an environ high levels of public administration. In the worst scenario, public order may criminal justice system break down. as occurred in Albania in March 1997 or there may be civil war 23. Public administration officers, as the authority licences, permissions, permits and other authorizations, are both potential targets for corrupters, B. Top-level corruption as well as instigators of corrupt practices. Within the olice, opportunities are even greater, since that 20. Top-level corruption is often controlled by hidden institution not only enforces the laws but also has the networks and represents the sum of various levels and power to deprive individuals of their freedom, througl types ofirregular behaviour, including abuse of power he use of legitimate force, and to carry out nvestigations into criminal conduct that may lead to
A/CONF.187/9 6 16. In the context of international trade, corruption—in particular in the form of bribery—serves as a barrier to trade and investment. 17. As a result, a corrupt environment may present global investors with a poor environment in which to place their capital. Those investors most likely to make a long-term contribution to development may therefore be discouraged, while those who seek quick profits through dubious ventures may instead be encouraged.9 This in turn increases the harmful effects of corruption on the global economy, which have been mounting. It has been shown that countries suffering from pervasive corruption invest less and achieve lower economic growth.10 A country with widespread corruption is likely to achieve aggregate investment levels of almost 5 per cent less than a country relatively free of corruption and to lose about half a percentage point of gross domestic product growth per year.11 18. Corruption in both the public sector and the private sector, regardless of the level at which it occurs, can jeopardize free trade, distort competitiveness and undermine the stability upon which the free market system is based.12 Companies may resort to bribery as a means of bypassing existing trade barriers or reducing national tariffs and expediting international trade. Such action, however, undermines the position of the State, reducing government revenue and violating important environmental and safety standards, among other things. 19. Widespread corruption jeopardizes the credibility of Governments and their institutions. As a result, a negative culture arises in which priority is given to individual success and short-term achievement. Systemic corruption also weakens the effectiveness of punishment tools: it is hard to punish one person severely when so many others are likely to be equally guilty.7 Within such an environment, organized crime is likely to grow and infiltrate high levels of public administration. In the worst scenario, public order may break down, as occurred in Albania in March 1997,13 or there may be civil war. B. Top-level corruption 20. Top-level corruption is often controlled by hidden networks and represents the sum of various levels and types of irregular behaviour, including abuse of power, conflict of interest, extortion, nepotism, tribalism, fraud and corruption. It is the most dangerous type of corruption and the one that causes the most serious damage to the country or countries involved. In developing countries, such corruption may undermine economic development through a number of related factors: the misuse or waste of international aid; unfinished development projects; discovery and replacement of corrupt politicians, leading to political instability; and living standards remaining below the country’s potential. 21. Industrialized countries, in particular, have been freed with systemic corruption at the highest level of government. An environment in which long-term rule by one political party and a system made up of a few social and political groups that share power over decades is conducive to the establishment of networks. Such personal networks hide behind consensual agreements, justified by political, social, ethnic and religious arguments, so that it is difficult for the public to become aware of them. These links are often discovered inadvertently, allowing them only then to be prosecuted. Unfortunately, since individuals or small parts of the network are generally identified, the prosecution is, in most cases, unable to identify or eliminate the entire network. 22. As public awareness increases of the immediate negative effects of high-level corruption on day-to-day life, tolerance of the problem will be reduced. Media reports can be very effective in bringing corruption scandals to the attention of society. The perception that a scandal exists and the motivation to have the participants brought to justice are the first signs of citizens’ empowerment and willingness to confront the phenomenon. C. Corruption in public administration and the criminal justice system 23. Public administration officers, as the authority issuing licences, permissions, permits and other official authorizations, are both potential targets for corrupters, as well as instigators of corrupt practices. Within the police, opportunities are even greater, since that institution not only enforces the laws but also has the power to deprive individuals of their freedom, through the use of legitimate force, and to carry out investigations into criminal conduct that may lead to
A/CONF. 187/9 appears that, in particular in a number of developing Business Transactions Iic Officials in International severe sanctioning and/or economic penalties. It Bribery of Foreign Pu countries and countries with economies in transition, 26. Business activities involving corruption and bribery further efforts are needed in order to improve the social status and salaries of public officials, thus are not al ways wilful acts on the part of criminal organizations. It may be difficult for establishments to making them less vulnerable to the lures of bribery In Uganda, of the 18,4 12 households surveyed in refuse to pay bribes. Organizations with a strong ethical corporate culture may be able to resist the cent re ported having paid bribes to the police and 50 per cent to the courts. While the temptation and large multinational corporations may be median bribe paid to the police was 20,000 Uganda able to afford to lose contracts in order to avoid situations involving bribes. Such decisions, however shillings(20 United States dollars)the median bribe paid to the courts was U Sh 50,000($50) may be more difficult for smaller businesses whose survival may depend upon securing a particular 24. Reforms are also needed to facilitate and make more contract. According to Laufer, 97 per cent of all transparent both the decision-making process and convictions in United States federal courts involved interaction with citizens. It is difficult to deal with companies with less than 50 employees. This, however corruption when there is a lack of confidence between may reflect the fact that small businesses are being the citizenry and public administration. Such a targeted or that it is easier to obtain a conviction in situation will be exacerbated if discretionary power cases involving smaller businesses with limited over public and/or private affairs is concentrated resources and skill mainly in the political regime or the financial-political 27. Another problem faced by businesses are transactions administrations that still maintain a philosophy of power over citizens rather than a service to citizens in grey areas where corruption is less obvious. These Initiatives must therefore be undertaken that not only are areas where activities such as the issuance of commission payments, signature bonuses, facilitation reform the organization of public administration but payments and donations to humanitarian causes all also modify the political culture as it relates to economic instability and market culture begin as legitimate practices, but somewhere in the process turn into corrupt practices or activities. The question for many businesses is how to decide what D. Corruption in the private sector 28. When examining issues of corruption addressed 25. Businesses may either be the perpetrator of corrup- bribery as well as the penal laws in various countries, various international conventions on corruption and tion by offering bribes to public officials to secure contractor they may be the victim, being it becomes clear that there are no good subjective or for bribes by public officials or other businesses from objective measures of corporate compliance. whom they can obtain licences, contracts, protection or assurances. Corruption may be confined entirel definition of corruption, which has resulted in the within the business world, occurring between enactment of more comprehensive national legislative companies may extend into th of acts or penal laws to cover activities not addressed in government or public officials. In either case, the international treaties 21 corrupt environment tends to favour domestic business. In addition to lacking sufficient local market E. The link to organized crime knowledge, foreign firms may also be liable in their own country if they are prohibited from offering bribes 29. Situations in which legitimate businesses are reduced by their national foreign bribery legislation or if their to paying bribes or witness legitimate practices Governments have ratified international agreements transformed into criminal behaviour were examined in such as the Organisation for Economic Cooperation the preceding section. The situation is completely and Development(OECD) Convention on Combating different where organized crime is involved in illicit activities
A/CONF.187/9 7 severe sanctioning and/or economic penalties.14 It appears that, in particular in a number of developing countries and countries with economies in transition, further efforts are needed in order to improve the social status and salaries of public officials, thus making them less vulnerable to the lures of bribery. In Uganda, of the 18,412 households surveyed in 1998, 63 per cent reported having paid bribes to the police and 50 per cent to the courts. While the median bribe paid to the police was 20,000 Uganda shillings15 (20 United States dollars) the median bribe paid to the courts was U Sh 50,000 ($50).8 24. Reforms are also needed to facilitate and make more transparent both the decision-making process and interaction with citizens. It is difficult to deal with corruption when there is a lack of confidence between the citizenry and public administration. Such a situation will be exacerbated if discretionary power over public and/or private affairs is concentrated mainly in the political regime or the financial-political administrations that still maintain a philosophy of power over citizens rather than a service to citizens.16 Initiatives must therefore be undertaken that not only reform the organization of public administration but also modify the political culture as it relates to economic instability and market culture. D. Corruption in the private sector 25. Businesses may either be the perpetrator of corruption by offering bribes to public officials to secure contracts17 or they may be the victim, being solicited for bribes by public officials or other businesses from whom they can obtain licences, contracts, protection or assurances. Corruption may be confined entirely within the business world, occurring between companies,18 or it may extend into the arena of government or public officials. In either case, the corrupt environment tends to favour domestic companies familiar with the local way of doing business. In addition to lacking sufficient local market knowledge, foreign firms may also be liable in their own country if they are prohibited from offering bribes by their national foreign bribery legislation or if their Governments have ratified international agreements such as the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. 26. Business activities involving corruption and bribery are not always wilful acts on the part of criminal organizations. It may be difficult for establishments to refuse to pay bribes. Organizations with a strong ethical corporate culture may be able to resist the temptation and large multinational corporations may be able to afford to lose contracts in order to avoid situations involving bribes. Such decisions, however, may be more difficult for smaller businesses whose survival may depend upon securing a particular contract. According to Laufer,19 97 per cent of all convictions in United States federal courts involved companies with less than 50 employees. This, however, may reflect the fact that small businesses are being targeted or that it is easier to obtain a conviction in cases involving smaller businesses with limited resources and skills. 27. Another problem faced by businesses are transactions in grey areas where corruption is less obvious. These are areas where activities such as the issuance of commission payments, signature bonuses, facilitation payments and donations to humanitarian causes all begin as legitimate practices, but somewhere in the process turn into corrupt practices or activities. The question for many businesses is how to decide what actually constitutes a bribe.20 28. When examining issues of corruption addressed in various international conventions on corruption and bribery as well as the penal laws in various countries, it becomes clear that there are no good subjective or objective measures of corporate compliance.19 Furthermore, many such agreements focus on a narrow definition of corruption, which has resulted in the enactment of more comprehensive national legislative acts or penal laws to cover activities not addressed in international treaties.21 E. The link to organized crime 29. Situations in which legitimate businesses are reduced to paying bribes or witness legitimate practices transformed into criminal behaviour were examined in the preceding section. The situation is completely different where organized crime is involved in illicit activities