There are two widely-acknowledged dimensions of corruption - supply and demand side. Supply side is the private sector that gifts or bribes the government officials who, in turn, constitute the demand side or the receivers. Over the past two decades, our anti-corruption measures have targetted only the demand side either by limiting the government officials’ vulnerability to bribes or in-kind gifts through enactment of laws or by empowering the people through advocacy against demand-side corruption.
Although legal measures against the demand side of corruption are important in their own right, we have often ignored the role of the private sector as a supplier of corrupt payments and a vulnerable sector for corruption itself.
Demand side of corruption is referred to as a party or a group or an individual who is a recipient of the proceeds or kickbacks or demands extra illegal money. Similarly, supply side is understood as an individual offeror or an entity or a business firm or even a private sector paying bribes to influence lucrative contracts, business deals and supplies. Therefore, the challenge for us today is to overhaul our anti-corruption machinery, enabling it to fight corruption at varying levels in all sectors. If there is a mechanism to book even the bribe payers and investigate corruption in other areas hitherto outside the legal purview, it can definitely work as a deterrent against the ballooning corruption.
Supply side
Previously, the private sector believed that corruption existed because the government officials were corrupt and did not consider itself as encouraging corruption. Over the years, the private sector has been established as an equal participant in corruption transaction, and efforts to limit its ability and vulnerability to engage in corruption are, therefore, equally and urgently needed.
In our mainstream corruption debate, demand side often draws the attention while supply side is hardly a matter of public concern. Though the activism against corruption in the post-1990 period scaled new heights in terms of awareness, capacity building and empowerment, yet there has not been much advocacy to address the supply side of corruption. For instance, the Prevention of Corruption Ordinance of Hong Kong and many other countries have legislation to penalise even the bribers.
The addition of an anti-corruption Principle to the United Nations Global Compact at the summit in 2004, endorsed by 1,700 members, underscores the increasing importance of the private sector in the global fight against corruption. The principle urges businesses or companies to work against corruption in all its forms, including extortion and bribery. Nepal as a party to the UN Global Compact and the UN Convention against Corruption (UNCAC) requires framing laws to prosecute corruption in and by the private sector. But there has not been any remarkable progress like domesticating the UNCAC through designing new legal frameworks.
Private sector
Existing legislation excludes private sector corruption. They are limited to the improper activities or abuse of office or use of office for private gain by the public post holders. The CIAA is mandated only to investigate ‘improper activities’ and corruption committed by public post holders. The mandate further allows the CIAA to act as a recommendatory body in cases where it deems necessary to make improvements in the functioning of any public office. But other countries like Malaysia and Hong Kong have legally mandated their anti-graft bodies to investigate and prosecute perpetrators of corruption even within the private sector.
Corruption takes place at the interface of the public and private sector. Bringing one into the legal net and leaving out the other has made the anti-corruption fight in our country one-sided. The Global Corruption Report (GCR) - 2009 mentions that bank loan defaulting in Nepal exceeded Rs. 40 billion, representing 30 percent of all credit flows into the country. Nepal’s Credit Information Bureau still carries a name list of hundreds of bank defaulters. Willful bank defaulting is just a tip of the iceberg indicating the increasing vulnerability of the private sector to scandalous corruption as much as the public sector.
Even the private sector can see big and scandalous corruption cases as in the public sector. But the corruption scandals in the private sector have failed to draw the attention of the Commission for the Investigation of Abuse of Authority (CIAA). The existing laws such as the Corruption Elimination Act 2002 and the CIAA Act (Second Amendment) 2002 have mandated this constitutional anti-graft commission only to investigate and prosecute public post holders on corruption charges.
As the CIAA and National Vigilance Centre are not regulatory bodies, probing corruption in the private sector, judiciary and army doesn’t directly fall under their jurisdictions. Therefore, as a matter of exigency, the supply side should also be taken as seriously as the demand side and extend the outreach of investigation to corrupt practices within the hitherto forbidden areas like the private sector, judiciary and army. Eliminating corruption from all sectors and areas would make the society less prone to corruption.
It is a reality in many countries like Nepal that ‘policy intentions’ have differed from ‘policy outcomes’, and the seemingly effective measures to reduce corruption have miserably failed to yield the expected results. Such a policy gap should be addressed if corruption is to be reduced by bringing the private sector into the periphery of legal investigation.
Costly repercussions
sThere have been colossal repercussions of corporate corruption globally. The GCR-2009 states that more than 283 private international cartels that came to light between 1990 and 2005 caused direct economic losses to the consumers through overcharges totalling some US$ 300 billion. Direct economic losses due to overcharges by international cartel activities alone could match or even exceed the total volume of development aid given to the developing countries.
In a survey of more than 2,700 business executives in 26 countries, nearly two in five respondents said they were asked for bribes when dealing with the public institutions. Half of them estimated that corruption raised project costs by at least 10 percent, in some cases by more than 25 percent. One in every five respondents claimed to have lost a business opportunity because of the higher bribes paid by a competitor.
In developing and transition countries alone, corrupt politicians and government officials receive bribes totalling 20-40 billion US dollars annually - the equivalent of some 20 to 40 per cent of official development assistance given to poorer countries worldwide. The private sector continues to play a very exposed role as supplier of corrupt payments to civil servants, members of the government and political parties.
(The writer can be reached at pbhattarai2001@gmail.com)
