Fifth of executives say business impossible to do without illicit payments
It’s been a tough year for officials on the take in Jordan.
Spurred by chronic street protests, whose list of grievances is topped by official malfeasance, former Amman mayor Omar Maani was arrested on fraud charges in December and two months later, Mohammad Dahabi, former director of Jordan’s intelligence service, was taken into custody on charges of money laundering.
The year is not half over, but Jordan’s Anti-Corruption Commission has already referred 41 cases of suspected wrong-doing to the judiciary. Even a member of the country’s anti-corruption panel, Sanaa Mihyar, was detained briefly this month. She and her old boss, Amer Bashir, a former deputy mayor of Amman, have been charged with graft in connection with the purchase of two garbage trucks.
Across the Middle East and North Africa (MENA), fighting corruption has been the clarion call of Arab Spring protestors, ensnaring once untouchable officials in places like Egypt and Libya. But if a survey published this week by the accounting firm Ernst & Young and the security consulting firm Perpetuity Research and Consultancy International is correct, the anti-corruption drive has barely scratched the surface.
They asked 139 people from 64 organizations in UAE, Jordan, Kuwait, Egypt, Qatar, Saudi Arabia and Bahrain about the extent of corruption, and the answers they received painted a picture of endemic bribery, graft and fraud. More than a fifth said it was impossible to compete in business in the MENA nations without committing fraud. Half doubted that legislation could prevent it.
“The general view is that its problem here, particularly bribery. That’s not saying it isn’t a problem in other parts of the world, but it is problem here,” Michael Adlem, an Ernst & Young partner specializing in fraud investigations and dispute services and a co-author of the report, told The Media Line.
Although the West has taken the lead in cracking down on corruption, the impact of tougher rules in the U.S. and Britain is being felt across the Middle East and North Africa. “Companies here is that want to play in the global space can’t ignore it,” Adlem said.
It’s no secret that corruption is a serious problem for MENA countries. The annual Corruptions Perceptions Index survey by Berlin-based Transparency International found eight out of 19 countries are in the bottom half of the global rankings. Among the worst offenders are Yemen (164), Libya (168) and Iraq (175) on the list of 183 countries worldwide.
A few scored well, like Qatar (22, two places ahead of the U.S.) and the United Arab Emirates (28). But this week even Qatar is contending with the aftermath of a deadly fire that killed 19 people at a shopping mall and revealed a hugely inadequate fire safety mechanism. Although no corruption or other charges have been leveled, five people, including the mall owner, have been arrested in connection with the blaze.
Egypt, Palestine and Lebanon do not have anti-corruption agencies and though Morocco does, it has no power to investigate or punish, according to Transparency International. Experts attribute the persistence of corruption to autocratic governments, sprawling governmental bureaucracies of low-paid, under-trained civil servants; and a lack of media freedom or impendent institutions that keep tabs on malfeasance.
The Arab Spring has let loose long-suppressed anger at widespread corruption. In Egypt, where crime and corruption cost Egypt around $6 billion annually, according to Washington-based Global Financial Integrity (GFI), Zakaria Azmi, a powerful and long-serving aide to former President Hosni Mubarak, was convicted on Sunday of corruption charges and sentenced to seven years in prison.
The court found that Azmi used his position to make illicit gains of 42.6 million Egyptian pounds ($7 million). He is one of some three dozen Mubarak-era figures facing corruption charges including two former prime ministers, an ex-speaker of parliament and several wealthy businessmen and cabinet ministers.
But it isn’t just the Arab Spring that has heightened sensitivity to corruption. Martin Gill, the chief executive officer of Perpetuity, told a conference in Jedda this week that the economic downturn that hit Dubai in 2008 exposed many ongoing frauds that had been inspired by fat government contracts and easy money.
Most anti-corruption efforts focus on the recipients – politicians and civil servants – but the problem is as much supply-driven by business executives anxious to win a contract as it is demand-driven.
The Ernst & Young/Perpetuity survey found that 52% of the respondents admitted that their companies had no relevant anti-fraud strategy and 35% confessed that no policy was in place for reporting corruption. Not surprisingly, even though two thirds of executives polled said fraud and bribery were also a “major problem” in the Middle East, only 14% said they believed that corruption was an issue within their companies.
“Corruption is viewed as easy and unlikely to be detected. In addition, admitting to be a victim of fraud can cause reputation damage and companies often prefer to deal with it secretively and avoid taking formal external action,” Gill told the conference, according to the daily Saudi Gazette.
Both the U.S. and Britain have clamped down on corruption not only by their own companies but also by foreign firms operating subsidiaries in the two countries’ jurisdictions. The U.S. Foreign and Corrupt Practices Act, which dates back to 1977, and the UK Bribery Act, passed in 2010, can ensnare companies accused of criminal practice in the MENA and elsewhere in the world, even if local officials fail to pursue allegations.
“The fact that the U.S. that is cracking the whip means international companies make sure their agents as on the ground in other parts of the world are complying with the rule,” Adlem of Ernst & Young said. “The new UK bribery act has not seen any big prosecutions yet, but it has very draconian powers.”