Monday, 2 May 2011

Widespread corruption undermining business, causing companies to invest money elsewhere

Few firms caught for bribery and illegal acts, researcher tells panel; fears for impact on development

Bribery, red tape and corruption have to be reduced before Thailand becomes non-competitive and unsuitable for many corporations, which would seek to invest elsewhere, a roundtable on corporate good governance concluded last week.Building a climate of good governance will take years and will also require the government to be less corrupt than it is, said the panellists at the seminar organised by Krungthep Turakij, a sister daily of The Nation.

Big multinational corporations with their own codes of conduct may claim they no longer bribe politicians or bureaucrats. But if the climate is such that it demands bribes or bribes are offered by their competitors, these corporations may lose out given the lack of a level playing field, warned Deunden Nikomborirak, a specialist in economic governance at the Thailand Development Research Institute.

"If the demand [for bribes] continue, it's either you leave or you comply," Deunden said. "There can be no level playing field if competitors do not stick to integrity."

Deunden's recent research revealed that out of the more than 200 cases of illegal practises by firms listed on the Stock Exchange of Thailand from 1999-2010, those punished were just slightly over 5 per cent.

Many of these cases involved fraud worth Bt3 billion-Bt4 billion, and given the low rate of punishment and fines, which on average amounts to Bt500,000-Bt1 million, it all seems worth the risk to break the law, she said.

If offenders are not punished, the economy will find it hard to thrive, as laws and regulations fail to stem the violations, fraud and corruption.

On the other hand, in many instances governments tend to pass regulations for bidding on contracts or concessions that clearly favour a certain well-connected corporation.

"It means in this country, there is no genuine free competition," she said.

Such a situation ensures that more firms will have to seek illegal shortcuts to win contracts with the state or lose out on work.

"This is troubling because it undermines the overall economic outlook," she said.

As long as there is no political will among politicians and the country as a whole, the problem will fester. Just having a prime minister with a good image is not good enough.

"The reform that would address corruption must come from a sense of ownership [by society] and not from outside, otherwise no one will buy in," she said.

Participation is also needed.

Corrupt politicians would naturally resist reform but many more preventive measures can first be introduced, especially related to conflict of interest.

"Nobody will be jailed yet but it will have an impact," she said. "There's still a huge amount of problems relating to transparency and conflict of interest in the public sector."

It's still legal for a minister here to endorse a contract with a bidding firm that is owned by the minister's son or daughter, she said.

Another key measure would be to strengthen access to news and information by the population. In South Korea, where fighting corruption and instilling good governance practices have made impressive inroads, the broadband Internet penetration rate is 90 per cent. This combined with affluence among most people ensures that corruption and bad governance is becoming more of an exception rather than the norm in South Korea, she added.

Hilde Tonne, deputy head of Telenor Group, which runs the DTAC cellular company, said broadband penetration here is a dismal 10 per cent.

"And there's a reason for that," she said.

Ready and speedy access to news and information is crucial for the anticorruption drive, she added.

Pisawan Achanapornkul, president of Shell Thailand, was more optimistic.

Gathering from what Deunden said, it appears that at least there is an understanding as to what is the root of the problem that Thailand is facing. "It's good. That would be crucial," she said.

Business leaders and all Thais should think about how to move forward effectively by asking themselves a few questions, she said.

"Would you like to see Thailand as a backward country? Even at the Southeast Asian level? Is this how we like to see Thailand?"

If the situation continues, Thailand runs a real risk of seeing foreign investors leave due to the lack of a level playing field.

"We're not alone and just competing with ourselves. We have to compete with other nations," she said.

If the government continues to lack political will, perhaps the public should be mobilised to pressure the government to come up with the will, she added.

Manu Sawangchaeng, country manager for Pfizer, the American producer of Viagra, said corporations and business leaders who care about the issue must try to lead the way and put the issue on the political agenda within a year or two. Organisations can help, such as the Institute of Directors, which supports good governance in business and politics.

"We should be able to see some results in two years," he said.

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