Next trade war front: export bribery
New OECD and Transparency International report shows most Asian countries fail to punish payment of export bribes. It's only a matter of time before Donald Trump takes notice
Asia’s leading economies have been criticized for their failure to punish companies that pay export bribes, with the problem expected to become worse as the global trade war boosts competition in shrinking markets.
Japan, China, South Korea, Russia, Singapore, Hong Kong and India all do little or nothing to prevent corruption by firms in their trade dealings, according to studies by the Organization for Economic Cooperation and Development (OECD) and Transparency International.
In the Pacific, Australia has moderate enforcement and New Zealand a limited response.
While South Korea has regressed, the two agencies noted in their latest Exporting Corruption report that Singapore, China, India and Hong Kong, which account for 18% of world exports, had not signed the OECD Anti-Bribery Convention and did not comply with separate UN conventions.
China, now the biggest global exporter, has criminalized the bribery of foreign public officials but is not known to have taken any action against its own citizens. India, Hong Kong and Singapore have no specific laws.
“If China, Hong Kong, India and Singapore do not enforce hard-won international standards for conducting business, competitors from countries that do enforce will find themselves disadvantaged. The real losers will be the global economy and people in countries affected by exported corruption, especially grand corruption,” the report noted.
In 2014-17 Japan completed one major case involving bribery that led to sanctions and South Korea commenced two investigations. There were no cases started or completed in Hong Kong, China, India or Russia. Australia had 21 cases at various stages of completion, and New Zealand eight.
Beijing-based oil and gas industry giant Sinopec Group is among the firms cited by the OECD for alleged involvement in bribery activities. In 2016, a criminal investigation was launched by Geneva’s attorney general against Addax Petroleum, Sinopec’s Swiss subsidiary, over irregular payments of US$100 million that were made to “legal advisers” in Nigeria and the US.
Unable to substantiate the payments, Addax eventually agreed to make a one-off payment of US$32 million to Swiss authorities as compensation.
A separate probe was initiated by the US Department of Justice and US Securities and Exchange Commission in August 2017 into allegations that another Sinopec Group subsidiary, China Petroleum and Chemical Corp, made illicit payments from Addax to Nigerian officials through banks in New York and California.
Investigations into this case are still underway.
Two other Chinese firms, China Sonangol and China International Fund, have been indirectly drawn into actions by Australia, the UK and the US against Rio Tinto Group for alleged bribery in the Republic of Guinea.
The Australian Federal Police revealed in March 2017 that it was looking into a self-report by the world’s second-biggest mining company over a US$10.5 million payment made to a consultant in connection with the Simandou iron ore project in the poor West African country in 2011.
Britain’s Serious Fraud Office responded with an inquiry of its own. An Anglo-Australian company, Rio has listings in London and Melbourne.
Rio Tinto became aware in 2016 of emails detailing negotiations between the consultant and the Republic of Guinea’s President Alpha Conde – an old university pal – and suspended the executive overseeing the project.
In an unrelated case, former mines minister Mahmoud Thiam was jailed in New York in 2017 for receiving and laundering US$8.5 million in bribes from China Sonangol and China International Fund, sent through Hong Kong, in return for granting almost total control of Guinea’s mining sector.
Rio Tinto has not been directly implicated in this case, but Thiam has said he was offered a bribe by the company to win back control of half of the Simandou project from BSG Resources, owned by Israeli Beny Steinmetz.
Rio has denied the allegation and no charges have been laid in the US.
China Sonangol and China International Fund have also not been charged.
Other companies implicated in bribery allegations include the European Airbus consortium and several of its subsidiaries, the Brazilian engineering and petrochemicals group Odebrecht and two of its subsidiaries, and the gas and oil company SBM Offshore, which is based in the Netherlands.
Airbus, Europe’s largest aeronautics and space firm, is being pursued by authorities in the US, UK, Germany, Austria, France, Kuwait and Poland over alleged payments to secure sales of fighter jets and other aircraft. Some money was funneled through shell firms in Singapore and Hong Kong.
Countries allegedly targeted for bribery by Airbus included Indonesia, Pakistan, Thailand, China, India, Kazakhstan, Turkey, Kuwait and Sri Lanka.