Corruption in Transactions

Every country has corruption in one form or another, and the prevalence is extremely variable, but the most visible is the expectation that a payment will be made for the provision of a service or rights to undertake some actions.  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. In other countries the corruption is often at a higher level and may be in the form of “looking after your friends” or reciprocation for previous benefits.

I have just finished reviewing the “Australian Business in Asean  Survey 2025” , the annual survey of the perception of Australian businesses operating in the region, conducted by the Austcham group based in Singapore and supported by RMIT University.  It 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.  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 an operating 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, because it is the local custom.  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 to keep you paying.

Our experience is based on 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 foreign  client

·    Indonesia: won a major infrastructure project on behalf the client

·    Vietnam: won major contract purchases from the government on behalf clients

None of these involved any bribes, although from the outsider’s point of view, one would expect payments to be made, as that is the expectation by the local.  However, a fundamental question is how does the foreigner avoid the expectation of paying a bribe?

The first requirement is that the foreigner must be prepared to consistently decline to participate if a bribe is sought or expected.  This may be seen as being difficult, but to avoid corruption the decline of a project is a must.  The foreigner may use a it not only as  to stiffen or resolve his own stand, 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.

Even better is the approach that you develop good relationships with the locals and enter into commercial relationships with them or through them or perhaps use them as a reference. It could mean a narrower commercial landscape, and if that is not possible, and it is unlikely to be possible on every occasion. Real local contacts rely on trust and friendship; however, this takes time to resolve and that means it will be necessary to return any favours which are made to you.  It will be important that the locals understand that return favours should not be seen as a bribe but as a genuine desire for your local colleague to participate.  It may be the board seat, entering into a project, assist with a sibling or child to which you provide some benefit. But it should not be seen as 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 I knew, but I did not have a personal connection with.  One evening two young fellows introduced themselves as nephews of the CEO, asked what I was offering as a facilitation fee in order to win the project. They told me the opposition was offering $5 million dollars in cash & vehicles, et cetera, and I responded that I would offer nothing except that the Corruption Commission would not chase them, and I will offer the CEO an advisory role when he retires in about six months’ time from his present position. He had a reputation as being good strategist and manager, and his long-term input would have been very advantageous to the project.  I won the contract on behalf of my client

The biggest problem with bribery and corruption is the EXPECTATION is in both the foreigner and the local and hence it pervades all transactions.  When this expectation is overcome through alternatives, clean business can be established.

If the Expectation is turned around to provide clean business, that is the objective..