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Forwarders and carriers must develop a strategy to help avoid bribery and corruption, which can be particularly prevalent in the maritime and road transport world.
Jack Storey, strategic advisor for anti-corruption organisation TRACE International, said it was becoming increasingly easy for companies to have conversations about bribery – taking them one step closer to beating it.
“To combat corruption, you need to talk about it. In the past five or so years, there has been a change. Now there is engagement – sometimes because of pressure from customers.
“It is a legal, an ethical and increasingly a commercial issue. In the past, people have said they can’t do anything about it – but that is changing,” he told delegates at FIATA’s World Congress in Dublin last week.
Some forwarders, particularly smaller ones, have believed that they must pay bribes on occasion to get freight released or to expedite processes.
“There was a general feeling that ‘facilitation’ payments are akin to commercial extortion with no legal recourse,” explained Mr Storey.
“Initially, people said they couldn’t do anything or they would lose customers or business.” But, he said, with compliance programmes and together with other businesses, it was possible to eradicate corruption.
According to the World Economic Forum, the cost of corruption is more than 5% of global GDP, and $1 trillion is paid in bribes each year (World Bank). Studies show it reduces efficiency and increases inequality, and adds costs to business in a variety of ways. Corruption brings the risk of prosecution and fines; creates business uncertainty; adds time and distorts fair competition. The WEF estimates that it adds 10% to the cost of doing business on average.
Mr Storey said companies at risk should look for internal factors which contribute to an incentive to pay bribes, such as time pressures, inadequate compliance or corporate culture, or operating through lots of subsidiaries or third parties.
Ports and border crossings are particularly at risk of corrupt officials. Umberto de Pretto, secretary general of the IRU, pointed out that up to 57% of transport time for hauliers can be at border crossings.
“Border crossings are conducive to corruption,” he said. “And about 38% of transport costs are unofficial levies.”
External factors likely to lead officials into corruption include poor infrastructure; a low level of automisation; lack of training and low public service salaries, explained Mr Storey.
“As long as these factors exist, you can suffer as an organisation.”
But, he advised, compliance programmes needed to be proportionate to the risk. “It depends where you are operating and what type of business you are,” he said. “You need to do a risk assessment.”
TRACE has identified ‘red flags’ that businesses should look for in determining their exposure to corruption. Mr Storey listed factors such as the country itself; whether an intermediary had been suggested by a foreign official; if an intermediary refused to clarify compliance or give complete information on a transaction; unusually large commission requests; if an individual had personal or business ties to officials, or use of a blind company or trust.
Companies could then form their own compliance processes.
“They need to be clearly stated, simple, easily accessible, and work for people on the ground. They must know what they are meant to do.”
He added that curbing corruption was easier to do together with partners.
“You cannot do it on your own. There are some huge companies working together, and as an SME there are great limitations to going it alone.
“The Trade Facilitation Agreement has given huge opportunities for this industry to help combat bribery,” he added.