It is widely expected by foreigners undertaking commercial activities in the Asian region that “facilitation payments” or corruption by another name will be required for most services provided to them.
Every country has corruption in one form or another and the prevalence is extremely variable, but the most visible is the expectation that payment will be made for the provision of a service or rights to undertake some actions. In other countries, corruption is mainly at the corporate level and is in the form of “looking after your friends” or reciprocation for previous benefits.
In the “Australian Business in Asean”, which is the annual survey of the perception of Australian businesses operating in the region, and is an excellent source of information on the views of Australian companies in the region, and among a wide range of issues, each company was asked to identify the top 3 challenges of operating in Asean, and in 9 out of the 10 countries Corruption was in the top 3 challenges and was recognized by almost 50% of respondents that it was a challenge
There is an expectation by both the foreigner and the local that some form of “facilitation fee” is appropriate, so most do not even query the activity, however, it seems counter-productive to pay a person to provide an outcome when the incentive for that person is not to provide an outcome, but keep you paying.
This presentation based on our experience 30+ years of commercial activity in the ASEAN region, providing advice and expert assistance to those organisations which wish to establish or enhance a commercial presence, and consequently, there were many projects which had to be identified, promoted and activated.
Conventional wisdom says that by refusing to enter into corrupt practices some projects will not be available to you, however, our experience is that once you are known for clean projects you will be able to bypass the facilitation phase. Some examples of successful commercial activities are: –
- Thailand: achieved a change in regulations in relation to import-export on behalf of the client
- Indonesia: won major infrastructure projects on behalf of the client
- Vietnam: won major contract purchases from the government on behalf of clients
None of these involved any bribes, although, from the outsider’s point of view, one would have expectations that payments were made, as that is the expectation. That is the operative word “EXPECTATION”, on the part of the foreigner and on the part of the local. However, a fundamental question is how does the foreigner avoid the expectation of paying a bribe? I am not sure that the following is the complete answer, but it seems to work in many circumstances.
The first requirement is that the foreigner must be prepared to consistently decline to participate and be prepared to walk away. This may be seen as being difficult, but to avoid corruption, the declining of a project is a must. The foreigner may use it not only to stiffen his resolve, but the effect on the local is quite dramatic, as he knows your stand is real and you both know that the next project you or he brings will be corruption free.
Another approach is when you develop good relationships with the locals and only enter into commercial relationships with them or through them. It could mean a narrower commercial landscape and initially means that a leaner project list.
In both cases it also means that you understand that the local contacts rely on trust and friendship; however, this takes time to develop and that it also means it will be necessary to return any favours which are made to you. It will be important that the local understand that return favours should not be seen as a bribe but as a genuine desire for your local colleague to participate, as you would for any colleague. But it should not be seen as a payment for services rendered
The other fact is one of trust; there are many pundits who indicate that trust must be developed, and that is absolutely true, however possibly of more importance is avoiding placing temptation in front of your colleague.
As a good example of being prepared to walk away from a project, some years ago a government contract was being considered in an Asian country. The CEO of this government facility was somebody with whom we knew but did not have a personal connection with. One evening two young fellows came to my apartment and introduced themselves as the nephew of the CEO, and asked me what I was offering as an inducement to win the project. They told me that the opposition was offering significant dollars in cash plus vehicles, et cetera, and I responded that I would offer nothing except that the corruption commission would not chase them. I won the contract. I was certainly prepared to walk away if we were not successful.
The biggest problem with bribery and corruption is the expectation, and when this expectation is overcome through alternatives, clean business can be established
The perception of many people about doing business in Asia is that it involves corruption of one type or another. It is a persistent and almost all-pervading perception so that when one encounters it for the first time there is no expectation of avoiding it or seeking an alternative.
This is from the article posted by Asia Century Institute of 24 May 2020, https://asiancenturyinstitute.com/politics/1608-corruption-in-southeast-asia] and is reproduced with the kind permission of the owners.