kidd & richter - fighting corruption in asia (2003)

Before that, as deputy director for UNDP's Management Development and Governance Division, he assisted 35 countries with public sector reforms in Asia and the Pacific, Africa, and the Ca

Fighting

in A s i a Causes, Effects and Remedies

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FIGHTING CORRUPTION IN ASIA

Causes, Effects and Remedies

Copyright © 2003 by World Scientific Publishing Co Pte Ltd

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Contents

Chapter 1 Introduction: C o r r u p t i o n a n d Its Measures 1

John B Kidd and Frank-Jurgen Richter

Chapter 2 T h e O E C D Convention a n d Asia 27

Enery Quinones Chapter 3 T h e Asian Money L a u n d e r i n g Explosion 47

Peter Lilley Chapter 4 C o r r u p t i o n in Context 73

Leslie Palmier

Chapter 5 Is the 21st Century ' T h e Age of Asia-Pacific

Region'? H o p e s a n d Expectations as

Viewed from East Russia 91

Anatoly Korchagin and Alex Ivanov

Chapter 6 Monopoly Rights a n d Wrongs: Two Forms of

Intellectual Property Rights Violations in Asia 115

Hock-Beng Cheah Chapter 7 C o r r u p t i o n in Mainland C h i n a Today:

Data a n d Law in a Dubious Battle 175

Francois-Yves Damon

Chapter 8 Culture a n d Level of Industrialization as

D e t e r m i n a n t s of C o r r u p t i o n in Asia 203

Domenic Sculli

vi Fighting Corruption in Asia

Chapter 9 T h e E c o n o m y of Seepage a n d Leakage in Asia:

T h e Most Dangerous Issue 221

A Call to an E n d of t h e "White Buffet" 317

Maneewan Chat-uthai and Gary N McLean Chapter 14 Comparitive Study of Anti-Corruption Systems,

Efforts a n d Strategies in Asian Countries:

Focusing on H o n g Kong, Singapore,

List of Contributors

Maneewan Chat-uthai is an assistant professor in the graduate

program in human resource development of the National Institute

of Development Administration (NIDA), a public graduate sity in Thailand Maneewan received her B.A from Thailand's Thammasat University and her M.A from Northeast Missouri State University She received a Japanese Government Scholarship to com-plete her Ph.D at the University of Missouri-Columbia

univer-Her work experience includes being chief researcher at the ness Information and Research Company, planning and policy ana-lyst of King Mongkut's Institute of Technology, administrative secretary to the deputy permanent secretary for University affairs, and deputy and director of the NIDA-HRD Graduate Program Maneewan is a frequent lecturer and guest speaker for staff devel-opment in public and private organizations She has worked as a consultant for the United Nations Development Program and is currently seconded to join the UN International Labour Organi-zation's International Program on the elimination of child labour, as the National Program Manager for Thailand

Busi-Hock-Beng Cheah researches and teaches at the School of

Econom-ics and Management, University College, University of New South Wales In economics, his research interests are focused on economic development and political economy in the Asia-Pacific region In the management field, his teaching and research interests include human resource management, organizational development, and entrepreneurship He was a visiting Research Fellow at the Snider Entrepreneurial Center, University of Pennsylvania, where he pro-posed a new perspective of the entrepreneurial process Since then,

VIM Fighting Corruption in Asia

h e has e x p l o r e d m o r e extensively the ramifications of this tive of e n t r e p r e n e u r s h i p for organizations, m a n a g e m e n t a n d eco-

perspec-n o m i c developmeperspec-nt

H e has also u n d e r t a k e n research at the Economics Research ter at Nagoya University, J a p a n , a n d the Institute of Southeast Asian Studies, Singapore His work has b e e n published in a variety of

Cen-m o n o g r a p h s a n d j o u r n a l s including: Creativity and Innovation

Man-agement, Journal of Business Venturing, Journal of Enterprising Culture, Manchester Papers on Development, a n d Labour & Industry

Francois-Yves Damon studied history at the S o r b o n n e , a n d Chinese

in t h e Ecole des L a n g u e s Orientales, Paris, a n d Peking Now is Maitre d e conferences habilite a diriger des r e c h e r c h e s , Universite Charles d e Gaulle in Lille H e is also C h e r c h e u r Associe at the

C e n t r e d e r e c h e r c h e s sociologiques sur le droit et les institutions penales, Ministere d e la justice, Guyancourt His thesis c o n c e r n e d the textile industry a n d trade in China, a n d since t h e n h e has

r e s e a r c h e d the economy, e m p l o y m e n t , a n d Law in China (e.g Translation of the Law o n the d e p l o y m e n t of the People's Army in

H o n g Kong after the first of July 1997) H e is also a m e m b e r of the Association francaise d e criminologie

H e has published widely, for instance o n criminality from various

justice, police a n d Chinese reviews, in Perspectives Chinoises, a review

of the F r e n c h C e n t e r o n C o n t e m p o r a r y China, H o n g Kong; o n illegal immigration, analysis of sociological a n d psychological condi-tions of six m u r d e r s by a l o n e m u r d e r e r in Fujian A n d f o r t h c o m i n g

is The Traffic of Women in Guangdong (women sold for domestic slavery, a n d pregnancy, t h e n re-sold); plus Transition and Corruption,

(the t h r e e strata of c o r r u p t i o n in China) ESSCA, Angers-France,

2001

His o t h e r work c o n c e r n s ' t h e cultural revolution', a n d the

statis-tical relationships between the Great Leap Forward a n d the

constitu-tion of the establishment of the provincial revoluconstitu-tionary committees

Gilbert Etienne is a professor emeritus of d e v e l o p m e n t economics

at the G r a d u a t e Institutes of I n t e r n a t i o n a l Studies & D e v e l o p m e n t

List of Contributors IX

Studies, Geneva H e has s p e n t m a n y years in Asia since 1952, first

as a s t u d e n t at the School of Oriental Civilisations & Languages, Paris; t h e n in business; a n d since 1959 for research o r consultancy with the Swiss g o v e r n m e n t

H e has published a n u m b e r of books o n d e v e l o p m e n t in South

Asia, Afghanistan a n d China, the latest being: Rural Change in South

Asia — India, Pakistan, Bangladesh New Delhi, Vikas Also Feeding Asia in the next Century Macmillan, New Delhi; a n d Chine, Inde,

le match du siecle Presses d e Sciences Po, Paris This latter b o o k has

b e e n u p d a t e d a n d translated into Chinese a n d published by X i n h u a Press, Peking, 2000

H e has b e e n visiting professor at M.I.T., T h e E c o n o m i c

Develop-m e n t Institute of the World Bank, has often lectured in France, Pakistan, India a n d China

Alexander M Ivanov gained his Doctor of Laws after his activity as a

state p r o s e c u t o r b e i n g a lawyer for ten years Now, h e is a senior lecturer o n comparative law a n d criminology at law school of FESU,

a n d as a fellow of Vladivostok c e n t r e for the study of organised crime a n d c o r r u p t i o n This c e n t r e was established by, a n d works

u p o n t h e initiative of Professor Louise Shelly (American University,

W a s h i n g t o n ) H e has a b o u t 50 papers, b o o k chapters a n d books

o n organised crime, e c o n o m i c crimes, c o r r u p t i o n a n d comparative, criminal, constitutional a n d c h u r c h law

John Kidd was e d u c a t e d in the UK a n d worked for several major UK

organizations before r e t u r n i n g to University scholarship In the versities of Birmingham a n d now Aston Business School, his research focused on the d e v e l o p m e n t of IT use in SMEs; the m a n a g e m e n t of projects; a n d the softer m a n a g e m e n t issues t h a t c o n c e r n multina-tional j o i n t ventures H e has h e l d visiting professorships in several

Uni-E u r o p e a n universities, a n d in the C h i n a Uni-E u r o p e I n t e r n a t i o n a l ness School, Shanghai

Busi-His r e c e n t books o n Asian matters, co-edited with Li X u e a n d

Frank-Jurgen Richter, are Maximising Human Intelligence Deployment in

Asia: The 6 th Generation Project a n d also Advances in Human Resource Management in Asia L o n d o n & New York, Palgrave (both 2001)

X Fighting Corruption in Asia

Taek Kim is currently working as a special advisor to the Korea

I n d e p e n d e n t Commission Against C o r r u p t i o n (KICAC) in Korea Kim was a visiting scholar at the Transnational Crime a n d C o r r u p -tion C e n t e r at the American University, Washington, D.C., USA

t h r o u g h 2001-2002, t h o u g h h e r e m a i n e d attached to the SIT tute of Seoul City G o v e r n m e n t (from 1999) T h e Ministry of Educa-tion in Korea awarded h i m a full scholarship to visit the US

Insti-H e majored in bureaucratic c o r r u p t i o n a n d public tion, a n d in 1997 h e o b t a i n e d his Ph.D in Korea Kim has worked

administra-at S o o n g Sil University, University of Seoul, D a n Kook University, Hallym University Broadcasting University a n d Kang Won National University as Adjunct Faculty (from Oct 1992-Dec 2000) H e was also a policy consultant official in the presidential commission o n anti-corruption u n d e r the Korean President Kim Dae J u n g ( 2 0 0 0 -2001)

H e is a distinguished c o r r u p t i o n scholar a n d N G O researcher in Korea, a n d h e is well known for his research on bureaucratic corrup-tion, writing a n d p r e s e n t i n g many papers at world-class conferences Recently, h e has b e c o m e m o r e interested in global anti-corruption, crime a n d h u m a n rights

Anatoly G Korchagin after his Doctor of Laws, h e worked as a senior

lecturer o n criminal law, correctional law, criminology at the law faculty a n d later at the Law School of the Far East State University (FESU), Vladivostok, Russia Besides lecturing, h e is the D e a n of the Law Faculty of FESU a n d a well-known scholar H e has over 100 papers, b o o k chapters a n d books o n e c o n o m i c crimes, c o r r u p t i o n

a n d comparative criminal law, a n d h e c o m b i n e s his scientific activity with his lawyer's practice consulting citizens a n d companies

Peter Lilley has b e e n involved in the prevention, detection a n d

investigation of international fraud a n d m o n e y l a u n d e r i n g for the last seventeen years H e s p e n t 13 years with a large financial institu-tion w h e r e h e created a n d h e a d e d their fraud a n d m o n e y launder-ing prevention d e p a r t m e n t H e has led n u m e r o u s successful projects worldwide a n d advised a wide r a n g e of organizations o n the preven-tion of m o n e y l a u n d e r i n g a n d organized crime

List of Contributors XI

Peter Lilley holds an English d e g r e e from the University of East Anglia, is a fellow of the UK C h a r t e r e d Institute of Banking, a certified fraud examiner, a fellow of the Royal Society of Arts a n d a

m e m b e r of the Institute of Professional Investigators H e has written

n u m e r o u s articles t o g e t h e r with two books, the latest b e i n g Dirty

Dealing — The Untold Truth About Global Money Laundering, Kogan

Human Resource Development Quarterly, ex-general editor for Human Resource Development International, N o r t h American editor for the Journal of Transnational Management Development, a n d consulting edi-

tor for the Journal of Education for Business

H e currently serves as p r e s i d e n t for the Academy of H u m a n source D e v e l o p m e n t a n d previously served as p r e s i d e n t of the Inter-national M a n a g e m e n t D e v e l o p m e n t Association H e has b e e n a n

Re-i n d e p e n d e n t consultant, prRe-imarRe-ily Re-in traRe-inRe-ing, organRe-izatRe-ion

developm e n t , a n d quality transfordevelopmation, for over 30 years His u n d e r g r a d u ate d e g r e e was in Business Administration a n d Secretarial Studies at the University of Western O n t a r i o , in L o n d o n , O n t a r i o , a n d his masters a n d d o c t o r a t e in Business E d u c a t i o n are from Teachers College, Columbia University, in New York City

-Yong-Lin Moon is a professor at Seoul National University, Seoul,

Korea, a n d is o n e of Korea's foremost educators in educational psychology, moral d e v e l o p m e n t / e d u c a t i o n , a n d h u m a n resources development H e is a B.A a n d M.A g r a d u a t e of Seoul National University a n d a Ph.D g r a d u a t e of the University of Minnesota Later, h e served as director of the Moral E d u c a t i o n B u r e a u at the Korea Education D e v e l o p m e n t Institute (KEDI), in which h e

XII Fighting Corruption in Asia

directed t h e design of the nation-wide curriculum a n d textbook

d e v e l o p m e n t for m o r a l e d u c a t i o n in elementary a n d secondary education

H e also served as a standing m e m b e r to the Presidential sion for e d u c a t i o n reform, in which h e led a strong task force for

Commis-e d u c a t i o n rCommis-eform rCommis-esCommis-earch a n d p r o p o s Commis-e d an Commis-e d u c a t i o n rCommis-eform

a g e n d a H e led Korean e d u c a t i o n as Minister of E d u c a t i o n in President Kim D a e j u n g ' s administration D u r i n g his visit to the University of Minnesota as a Fulbright visiting scholar, h e focused

o n education reform a n d c o r r u p t i o n problems

Leslie Palmier was formerly r e a d e r in sociology at the University

of Bath a n d associate fellow of St Antony's College, Oxford H e was also founder-director of the c e n t e r for d e v e l o p m e n t studies

at the University of Bath H e has b e e n c o n c e r n e d with Asian studies since 1951, w h e n h e u n d e r t o o k field research in Indonesia

His publications i n c l u d e State and Law in Eastern Asia (ed.) (Aldershot, D a r t m o u t h 1995; Detente in Asia (ed.) L o n d o n , Macmillan 1992; The Control of Bureaucratic Corruption: Case Studies

in Asia New Delhi, Allied, 1985

Enery Quinones is h e a d of the anti-corruption division of the

depart-m e n t for financial, fiscal a n d enterprise affairs in the Organisation for E c o n o m i c Co-operation a n d D e v e l o p m e n t ( O E C D ) As h e a d

of the division she is responsible for overseeing e n f o r c e m e n t of the O E C D anti-bribery convention a n d o t h e r a g r e e m e n t s b a n n i n g bribery a n d c o r r u p t i o n Thirty-five countries participate in these

a g r e e m e n t s p u t t i n g the organisation a n d the anti-corruption sion at the forefront of international efforts to stem c o r r u p t pay-

divi-m e n t s in international business transactions T h e division conducts regional activities covering the former Soviet U n i o n countries, Asia-Pacific, Latin America, a n d South East E u r o p e to e n c o u r a g e dialogue a n d co-operation between public authorities a n d business

a n d civil society representatives

T h e O E C D recently published No Longer Business As Usual:

Fight-ing Bribery and Corruption u n d e r h e r m a n a g e m e n t a n d she has

writ-ten articles for specialised anti-corruption publications, the most

List of Contributors XIII

r e c e n t for Transparency International's Global C o r r u p t i o n R e p o r t

2001

She is a U n i t e d States national living in Paris since 1976 She received h e r University d e g r e e in Economics from New York Univer-sity, a n d h e r Juris D o c t o r from H a r v a r d Law School

Frank-Jiirgen Richter is the Director in charge of Asia at the World

E c o n o m i c F o r u m , Geneva H e was e d u c a t e d in Germany, France, Mexico a n d J a p a n At o n e time, h e was based in Beijing for several years where h e m a n a g e d the operations of a E u r o p e a n multi-national enterprise: t h e r e h e developed naturally a k e e n interest in Asian business practices As a scholar-practitioner, h e has written several books a b o u t Asian business, international m a n a g e m e n t a n d

global competition His most r e c e n t books include The East Asian

Development Model (MacMillan, 2000)

Domenic Sculli lives in H o n g Kong with his wife Oi-yin a n d

daugh-ter Pauline H e has b e e n employed by the University of H o n g Kong since 1974, a n d is now a senior lecturer in the d e p a r t m e n t of indus-trial a n d m a n u f a c t u r i n g systems e n g i n e e r i n g H e was b o r n in the small village of Ferruzzano in s o u t h e r n Italy a n d at the age of 10

h a d to follow his e m i g r a t i n g p a r e n t s to M e l b o u r n e , Australia

Earlier, after a long exposure to Australian culture a n d education,

h e g r a d u a t e d from the Royal M e l b o u r n e Institute of Technology in

1967 with a fellowship d i p l o m a in mathematics; h e is now a fellow of

T h e Institute of Mathematics a n d Its Applications a n d a c h a r t e d

m a t h e m a t i c i a n H e was employed by Australian Consolidated tries as a n o p e r a t i o n a l research analyst from 1968 to 1973, a n d was given leave for o n e year to complete the MSc (operational research)

Indus-p r o g r a m m e at Birmingham University in 1 9 7 0 / 7 1 His early research interests were mainly technical a n d resulted in quite a n u m b e r of publications in the O R / M S j o u r n a l s In later years, h e c o n d u c t e d

a n d published research in the cross-cultural aspects of m a n a g e m e n t

Matthias Schramm h e studied economics a n d M a n d a r i n in Duisburg

a n d W u h a n (PR C h i n a ) As of April 2001 h e is a n assistant at t h e faculty of economics, Institute for East Asian Studies a n d Chair for

XIV Fishting Corruption in Asia

East Asian Economics (China) at the University of Duisburg: further

h e is a Ph.D s t u d e n t at the Institute for Marketing of F o o d a n d Agricultural Products at the University of Gottingen His areas of research i n c l u d e — new institutional economics, t h e economics of transformation a n d institutions with a regional focus on China, game theoretic analysis of price formation with special focus on food industry a n d trade, philosophy of science

Lionel F Stapley is the Director of O P U S (an Organisation for

Pro-m o t i n g U n d e r s t a n d i n g of Society) a n d an organizational consultant

T h e work of O P U S is c o n c e r n e d with ' p r o m o t i n g a n d developing the study of conscious a n d unconscious organizational a n d societal dynamics t h r o u g h educational activities, research; consultancy a n d training; a n d , the publication a n d dissemination of these activities for the public benefit.'

H e has worked as a staff m e m b e r of several international G r o u p Relations Conferences a n d his consultancy clients i n c l u d e a variety

of organizations i n c l u d i n g the football industry H e is the a u t h o r

of The Personality of the Organisation: A Psychodynamic Explanation of

Culture and Change (1996), Free Association; a n d co-editor with Larry

Gould a n d Mark Stein of The Systems Psychodynamics of Organisations

(Karnac, 2001)

H e is a Fellow of the C h a r t e r e d Institute of P e r s o n n e l a n d

Devel-o p m e n t (FCIPD), a FellDevel-ow Devel-of the Institute Devel-of M a n a g e m e n t (FIMgt);

a n d a m e m b e r of t h e I n t e r n a t i o n a l Society for the Psychoanalytic Study of Organisations (ISPSO)

Markus Taube b o r n in 1965, studied sinology a n d economics in Trier

a n d W u h a n (PR C h i n a ) , a n d holds a d o c t o r a t e from the R u h r versity, B o c h u m , in the faculty of the economics of East Asia H e was the winner of the Walter-Eucken Price 1998 while a researcher at the Ifo Institute for E c o n o m i c Research, Munich, from 1996 to 2000 As

Uni-of April 2000, has b e c o m e the prUni-ofessor for the East Asian E c o n o m y

a n d C h i n a at the University of Duisburg H e researches u p o n the theory of e c o n o m i c o r d e r a n d new institutional economics, the eco-nomics of developing a n d transformation e c o n o m i e s with a regional focus o n C h i n a a n d Southeast Asia

List of Contributors xv

Clay G Wescott is a senior public administration specialist with

the Asian Development Bank Before that, as deputy director for UNDP's Management Development and Governance Division, he assisted 35 countries with public sector reforms in Asia and the Pacific, Africa, and the Caribbean

During several consulting positions through 1976-1989, he was director of the finance, management and economics, Division of Development Alternatives, Inc in Washington, D.C He also worked with PriceWaterhouse, Dames and Moore, and the Harvard Institute for International Development Among many assignments, he ad-vised the governments of Malawi and Kenya on financial manage-ment and decentralization reforms

He has degrees in government from Harvard College (A.B 1968, Magna Cum Laude), and Boston University (Ph.D., 1980) He is the author of many published articles and book chapters, and is a certi-fied management consultant

1

Chapter 1

Introduction: Corruption and Its Measures

John B Kidd and Frank-Jurgen Richter

Introduction

Let us take, j u s t for the m o m e n t , take the viewpoint of o n e of us,

J o h n Kidd as I grew u p in rural England, I lived to play a m i x t u r e

of cricket a n d rugby football These s e e m e d to m e to b e natural simple pastimes In a s u m m e r evening, I was able to go to the village cricket field to sit a n d watch t h e players battling to win, bowler against batsman, with the latter s u r r o u n d e d by fielders all of

w h o m were i n t e n t o n intimidating t h a t l o n e guy into m a k i n g a mistake Yet, after this p e r i o d of palpable aggression all the guys

c o n g r e g a t e d r o u n d sandwiches (often p r e p a r e d by their wives) a n d

d r a n k a b e e r (sometimes provided, as a loss l e a d e r by the local p u b

l a n d l o r d ) T h e r e was a clear split between the activity of playing this skilful game a n d t h e social elements a p p a r e n t in the casual after-match de-briefing a n d subsequent camaraderie I h a d the same feeling as I played a m a t e u r rugby: a g a m e with 15 players — n o t the professional o n e with only 13 players (who are all paid a h i g h salary, with even h i g h e r b o n u s e s ) Again I enjoyed the rivalry a n d the intensity of a powerful g a m e (even if covered in chilly winter

m u d ) , which was to b e b a l a n c e d against the friendly eating a n d

2 John B Kidd & Frank-Jurgen Richter

drinking after the game when all on-field animosity was forgotten It was playing the game that counted, not the result

At some point in my 'growing up', I met the beginnings of corruption in these simple games The better amateur players were being offered 'boot money' That was understandable to me and to many players, as those good players were called to practice long hours each week, to travel to country games and even to national games far away from our home ground The rules of the amateur game forbade any payment to these important players — yet national honor had to be upheld by the young men — hence the practice of placing 'travel expenses' in their street shoes in the locker room became commonplace There was much furor at the breakdown of their amateur status

Now of course I am gready perturbed by the widespread corruption

in all sport; no game seems to be free of its effects, not even in the Olympic games In the latter, maybe even more than in national games, there has been a rampant demand for [and use of] performance-enhancing drugs since the h o n o r of individual countries depends on winning 'gold' But change is afoot: Sir Paul Condon, one time head of Scotland Yard (the UK's police headquarters), is developing a dossier upon global corruption in the game of cricket In his preliminary report, he says that corruption has been rife in cricket since the 1970's (Condon, 2001)

Soccer too has its problems — also caused by the lure of money

— either directly to individuals or associated with the concentration

of a major set of games at one location: such as the World Cup A decade ago, the Cup generated about $100 million, but the events

in Korea and in Japan in 2002 are expected to generate over $1 billion in television and marketing rights alone It is big business, and as such attracts many villains Business Week documents some

of the Federation of International Football Associations' (FIFA) problems, such as a missing $50 million transferred from the Brazilian TV group Globo, but not deposited in a designated bank account (Business Week, J u n e 25t h, 2001) The other author, Frank-Jiirgen Richter, was raised in Germany — naturally he likes

Corruption and Its Measures 3

soccer, a n d h e too is c o n c e r n e d a b o u t t h e scandals a n d c o r r u p t i o n

in that game

T h e s e are m o d e r n p r o b l e m s , a n d we will r e t u r n to these times

in d u e course First we have to n o t e that c o r r u p t i o n has b e e n with

us from time i m m e m o r i a l It is often said that prostitution is the world's oldest profession, a n d a c c o u n t i n g c a m e second After all,

s o m e o n e has to m a n a g e the m o n i e s gleaned by nefarious m e a n s ,

a n d most likely, as the m o n i e s would have b e e n o b t a i n e d in ways outlawed by society t h e r e would also have b e e n c o r r u p t accountants, advisors o r extortionists We may see this effect even a t h o u s a n d years ago w h e n the O r d e r of the Knights Templar was set u p to

p r o t e c t t h e pilgrims o n their passage to t h e Holy Land T h e s e were warriors w h o s h o u l d never retreat, w h o s h o u l d b e valiant a n d incorruptible Yet d e e p in their own history is mystery — a n d if

t h e r e is mystery t h e n t h e r e are stories t h a t develop: b o t h correct

as well as techniques which they adopted from their Muslim opponents

in the east, they developed the concept of financial transfer by 'note of hand' into something like its modern equivalent: they developed also the bankers cheque and the pre-cursor of the credit card (round about

1200 AD) From their amassed wealth they lent to bishops to finance church building programmes; and to princes, kings and emperors to finance their state works, building programmes, wars and crusades Within the twin embrace of financial security and safe travel, Europe began to transform itself Safe and effective trade over longer distances led to the general accumulation of capital and the emergence of a newly prosperous merchant class, the urban bourgeoisie The newfound wealth

of the city merchants changed the balance of power still further in favour

of the towns and cities and thus their inhabitants The Order was not

4 John B Kidd & Frank-Jurgen Richter

merely the medieval pre-cursor of the m o d e r n multi-national conglomerate but was in many respects an early embryonic form of the European Union However, success, wealth and power stimulated jealousy and resentment, especially from those who were heavily in debt

to the order We thus see the potential for corruption and strife arising between the 'haves and have nots' in mediaeval times (extracts from

http://www.tylwythteg.com/templar.html — accessed July 3rd, 2001) Readers m i g h t like to n o t e a 'sister' b o o k to this is focused o n 'Governance in Asia' (Kidd & Richter, 2002) In that book, we address issues arising from co-joining different m o d e l s of c o r p o r a t e

a n d national cultures in asian countries w h e r e i n some nations are

j u s t b e c o m i n g e c o n o m i c a l l y viable yet h a v e b e e n i n t i m a t e l y [economically] invaded by the major i n t e r n a t i o n a l corporations over the last 20 to 40 years, perhaps longer In that book, we illustrate

h o w m o d e l s of g o v e r n a n c e a r e d e p e n d a n t o n t h e d e g r e e of

c o r r u p t i o n prevalent in the local society (as seen in this book) —

in many ways these two books c o m p l e m e n t each other

The Measurement of Corruption

We should now turn to the m e a s u r e m e n t of corruption — for without

a base we c a n n o t m a k e a p p r o p r i a t e comparisons To p u t this into

a context, P e t e r Lilley wrote earlier a b o u t m o n e y l a u n d e r i n g in its various forms, n o t i n g that j u s t o n e form — illicit drugs dealing — was estimated to have a turnover of $400 billion p e r a n n u m ; a n d this turnover was larger t h a n the world's c o m b i n e d oil a n d gas industry (Lilley, 2000: 3 ) H e c o n t i n u e d , saying that t h e whole of the l a u n d e r i n g processes — which is n e e d e d to 'make clean' monies arising from d r u g s , p r o s t i t u t i o n , a n d c o r r u p t i o n in g e n e r a l — reaches a staggering $1.5 trillion, a n d it is a b o u t 5% of the world's Gross Domestic P r o d u c t (GDP) It is the m a g n i t u d e of this vice that makes it imperative to u n d e r s t a n d o u r base m e a s u r e m e n t s a n d thus b e able to state what we have d o n e to ameliorate its effects

A l t h o u g h this book, t h r o u g h the efforts of all its authors, reviews

c o r r u p t i o n in Asia we all u n d e r s t a n d that this is a global issue

Corruption and Its Measures 5

Hardly a week passes without national press in s o m e country, or international j o u r n a l s such as T i m e , BusinessWeek, F o r t u n e , the Economist [and all serious r e p o r t a g e ] m a k i n g s o m e reference to

c o r r u p t i o n in Asia, or E u r o p e or the Americas — a n d they refer to the very h i g h profile trials t h e r e i n involving senior ministers, or ex-ministers of State We find these p e o p l e are n o t above the law, b e they the one-time US President, or the senior ministers of Germany, France or Italy; o r in o t h e r states in Africa or South America T h e public is b e g i n n i n g to realise that their judiciary are i n d e p e n d e n t

of the State a n d can enforce the law with the same 'sharp t e e t h ' it uses o n us, the public " O n e law for all" is u n d e r s t o o d in Western countries It is seen to b e m o r e o r less working, since indictments

a n d gaol sentences are b e i n g passed on senior figures that were once

u n t o u c h a b l e a n d apparently above the law Happily local television

in China is now depicting corruption in its society in general, t h o u g h

in m a n y cases it also shows the weak a n d oppressed d o n o t achieve the justice they deserve Yet this is i n d e e d progress, as transparency

b e c a m e the n o r m in the r u n - u p to their W T O entry: thus ordinary

p e o p l e can b e forewarned a b o u t the c o r r u p t practices they knew took place, b u t could only refer to folk-tales

Even so, ' t h e p u b l i c ' r e m a i n s confused: take two items in the

Gor-d o n C r a m b r e p o r t e Gor-d a ministerial m e e t i n g in T h e H a g u e w h e r e i n the delegates were hopeful a b o u t the setting u p of a U n i t e d Nations legal i n s t r u m e n t to fight c o r r u p t i o n In part, this would c o n c e r n it-self with 'off-shore' international financial operations a n d thus secure the r e t u r n of corruptly derived m o n i e s to their rightful countries Yet, on the same page, an item by Edward Alden & Michael Peel

r e p o r t e d that the Bush administration in the US is ' r e c o n s i d e r i n g the vices a n d virtues of financial privacy' They wish to relax the disclosure rule o n cash deposits of $10,000 or m o r e — which, if carried t h r o u g h , would severely weaken the ability of US banks to control m o n e y l a u n d e r i n g In t u r n , as we u n d e r s t a n d from Lilley

(ibid), t h e r e would b e r a m p a n t abuse of this newly u n c o n t r o l l e d

b a n k i n g system to p r o m o t e the whole spectrum of illegal operations

6 John B Kidd & Frank-Jiirgen Richter

A few major g r o u p s have stood o u t against c o r r u p t i o n : n o n

-g o v e r n m e n t o r -g a n i s a t i o n s s u c h as t h e O E C D , T r a n s p a r e n c y International, a n d m o r e recently — we see consultants amassing data from their global outposts: firms such as Pricewaterhouse-Coopers We will review their efforts

The OECD Mission against Corruption

We n o t e the global pressure to have organisations conform to GAAP (Generally Acceptable A c c o u n t i n g Principles) This was driven first

by United States accountants looking for easier-to-apply rules yielding

g r e a t e r t r a n s p a r e n c y , w h i c h in t u r n , w o u l d p r o m o t e c l e a r e r comparability across firms in different States in the U n i t e d States,

a n d later between firms located in different countries A c c o u n t i n g regulators in many countries have a g r e e d their national m e t h o d s should i n c o r p o r a t e GAAP Even d u r i n g the S u m m e r of 1997 C h i n a publicly a g r e e d to a d h e r e to GAAP, as h a d the J a p a n e s e by that time: b u t the Chinese authorities said they would ' d o it their way'

It is p r u d e n t to t h i n k a b o u t t h e m e a n i n g of ' g e n e r a l l y acceptable' as it may apply in Asian countries since it has b e e n shown that a c c o u n t i n g disclosure, at least historically, is strongly correlated with cultural measures (note later in this c h a p t e r ) , a n d

t h a t o r i e n t a l c u l t u r e s a r e b i a s e d t o w a r d s s e c r e c y a n d n o n transparency (Gray & Vint, 1995; Salter & Niswander, 1995; Zarzeski, 1996) T h u s o n e may now ask if different regularity practices a n d the m o r e o p e n financial markets in these regions will force firms to

-b e m o r e t r a n s p a r e n t (in a GAAP sense)? In fairness, we should n o t e that opacity is n o t a u n i q u e East/West issue since the Channel Islands, Belgium, Spain a n d Switzerland all practice low levels of financial disclosure (Gray, 1996) A n d Austria has ' S p a r b r u c k e n ' banks that are m o r e secretive t h a n o n e ' s traditional view of a Swiss bank; notwithstanding the former country is a signatory of the O E C D Article against C o r r u p t i o n (Lilley, 2000)

Research o n the Oriental c o n c e p t of probability a n d risk has shown that asian persons may b e 'fate-oriented' a n d less willing to take a probabilistic view of the world (Phillips & Wright, 1977)

Corruption and Its Measures 1

This m i g h t suggest t h a t sophisticated a c c o u n t i n g is n o t n e e d e d in Asia since "what will b e — will b e " a n d ultimately n o subtle provisioning will h i d e p o o r p e r f o r m a n c e O n the o t h e r h a n d the Asian collective spirit will carry a n ailing firm so ameliorating any loss of face In contrast, in t h e West, t h e rules a n d clarity of

a c c o u n t i n g m i g h t well r e p o r t a technical failure, a n d the firm b e forced to liquidate, n o t withstanding any mitigating circumstances

T h e lack of disclosure in Asian a c c o u n t i n g a n d the d e g r e e to which

m a n a g e m e n t a c c o u n t i n g is n o t u n d e r t a k e n in Asia are seen as quite

d e e p research issues by Western academic accountants — even to the e x t e n t that some question if a c c o u n t i n g practice m i g h t i n d e e d

c h a n g e Asian culture! (Baydoun et al, 1997: 422)

T h e World Bank a n d the I n t e r n a t i o n a l Monetary F u n d (IMF) are now ready to 'be whistle blowers' w h e n they detect funding diversions, a n d o t h e r organisations now m o r e publicly claim they resist bribery T h e U n i t e d States has h a d laws from 1977, which criminalized commercial payoffs to public servants a b r o a d if offered

by US national p e r s o n n e l ; a n d others follow similar r e a s o n i n g — the Royal D u t c h / S h e l l G r o u p in its April 1998 a n n u a l r e p o r t said it fired 23 of its workers o n ethical g r o u n d s a n d t e r m i n a t e d contracts with 95 firms, also o n ethical g r o u n d s (Walsh, 1998) It is now clear that J a p a n has b e e n paralyzed for years t h r o u g h b e i n g u n a b l e to disentangle its o p a q u e systems which are resting o n bribery a n d

extortion Similarly in China, t h e r e is a strong history of guandao

(official c o r r u p t i o n ) that, according to Walsh, is m o r e pervasive

t h a n that in J a p a n President J a i n g Zemin declared war o n this 'evil' o n c e it b e c a m e obvious that a $2.2 billion scandal h a d involved

C h e n X i t o n g (who was a former Party chief a n d Politburo m e m b e r )

a n d his d e p u t y W a n g Baosen (who killed himself) Altogether s o m e 500,000 persons in C h i n a in r e c e n t years have b e e n r e p r i m a n d e d

or p u n i s h e d for taking kick-backs, b u t the use of extortion is still

rife in China: Walsh (ibid) I n d e e d a cursory review of the

English-language press r e p o r t i n g o n C h i n a (and m o r e widely o n Asia) raises these issues frequently

T h u s we have to suppose the following r e c o m m e n d a t i o n of the

O E C D will prevail:

8 John B Kidd & Frank-Jurgen Richter

In 1994, the OECD Council adopted the 'Recommendation on Bribery of

Foreign Public Officials in International Business Transactions', which calls

on Member countries to act to combat illicit payments in international trade and investment As part of that Recommendation, reference was made to the need "to take concrete and meaningful steps including examining tax legislation, regulations, and practices insofar as they may indirectly favour bribery": C (94) 75 Following this, the OECD's Committee on Fiscal Affairs undertook an in-depth review of tax measures that may influence the willingness to make or accept bribes

The Committee concluded that bribes paid to foreign public officials should

no longer be deductible for tax purposes, which will require many Member

countries to change their current practices [emphasis by John Kidd]

[The Recommendation was adopted by the Council of the OECD on

11 April 1996, and ratified by many of the OECD countries by 1997]

It is thus quite alarming, as we m e n t i o n e d above, to find the Bush administration is now inclined to relax their b a n k i n g rules that d e m a n d e d a careful investigation of persons who wished to deposit m o r e t h a n $10,000 as cash This base level ruling has evolved across the world to g u a r d against the deposition of illicit payments,

or ' h o t ' money, into an official b a n k i n g e n v i r o n m e n t w h e r e , o n c e the m o n e y is deposited, the depositor has access to 'clean', or as

o n e may say — ' l a u n d e r e d ' — money

Corruption Perception Index

Transparency I n t e r n a t i o n a l (TI), located in Berlin, was set u p in the early 1990s to h e l p c o m b a t c o r r u p t i o n a n d it now has National

declares:

Transparency International is a non-governmental organisation dedicated to increasing government accountability and curbing both international and national corruption

Our movement has multiple concerns:

Corruption and Its Measures 9

• humanitarian, as corruption undermines and distorts development and leads to increasing levels of human rights abuse;

• democratic, as corruption undermines democracies and in cular the achievements of many developing countries and countries

parti-in transition;

• ethical, as corruption undermines a society's integrity; and practical, as corruption distorts the operations of markets and deprives ordinary people of the benefits which should flow from them

We will highlight o n e of their indices relating to t h e p e r c e p t i o n

of c o r r u p t i o n that they first b e g a n publishing in 1995 O n e s h o u l d

n o t e that they, a n d we, have to accept these m e a s u r e m e n t s as ' b e i n g

in the eye of the b e h o l d e r ' — h e n c e their use of the word perception

— since t h e r e are n o absolute measures T h e O E C D r e c o m m e n dation (above) is indicative of the same p r o b l e m — decrying the official acceptance of bribery as a tax-deductible item of e x p e n d i t u r e which a c c o u n t a n t s in m a n y c o u n t r i e s a r o u n d world h a d o n c e

k e e p c o r r u p t i o n a p r o m i n e n t item o n international policy agendas,

a n d t h a t the GCR will serve as a central e l e m e n t in TFs advocacy work F u r t h e r m o r e , a n d I q u o t e from their web site again,

"The GCR will also contain a separate empirical section TI will solicit contributions from leading scholars and institutions engaged in empirical research on corruption for this section These contributions will enable this section of the GCR to reflect the "state of the art" in knowledge on corruption, as assessed from the perspective of various organisations - public sector, private sector, and academia"

But what of their 2001 C o r r u p t i o n P e r c e p t i o n I n d e x (CPI)?

"This year's index, published by the world's leading non-governmental organisation fighting corruption, ranks 91 countries Some of the richest countries in the world — Finland, Denmark, New Zealand, Iceland,

10 John B Kidd & Frank-Jursen Richter

Singapore and Sweden — scored 9 or higher out of a clean score target

of 10 in the new CPI, indicating their very low levels of perceived corruption But 55 countries — many of which are among the world's poorest — scored less than 5, suggesting high levels of perceived corruption in government and public administration The countries with a score of 2 or less are Azerbaijan, Bolivia, Cameroon, Kenya, Indonesia, Uganda, Nigeria and Bangladesh" Peter Eigen, the chair of

TI, continues, "The new [CP] Index illustrates once more the vicious circle of poverty and corruption, where parents have to bribe underpaid teachers to secure an education for their children and under-resourced health services provide a breeding ground for corruption The world's poorest are the greatest victims of corruption Vast amounts of public funds are being wasted and stolen by corrupt officials."

We will n o t r e p r o d u c e their i n d e x in its entirety, after all this b o o k focuses o n c o r r u p t i o n in Asia, b u t we will r e a r r a n g e the data to b e related to issues that m i g h t be relevant to the Ministers in Singapore (as p e r Figures 1 a n d 3)

Some while ago a formula was derived (Kogut & Singh, 1988) which allowed o n e to create a simple comparison against a target

— in fact they a p p l i e d their formula to t h e d a t a collected by Hofstede o n cultural differences (Hofstede, 1980 & 1991) They showed how to c o m b i n e the four original Hofstede measures into

o n e i n d e x that would b e suitable for r a n k i n g against a target profile

— as we m e n t i o n e d above, we will take the profile of Singaporeans

as the target to c o m p a r e with o t h e r countries It is thus possible to plot t h e relative rankings with respect to cultural difference [from the zero base of Singapore] against cross-related national c o r r u p t i o n figures We d o this in Figure 1 N o t e that the clustering ellipses are only to draw attention to t h r e e g r o u p s of data points — they are

n o t derived from a mathematical algorithm

It seems quite clear that Singaporeans would prefer to work with

p e o p l e from H o n g Kong, as they are close to Singapore o n the

c u l t u r a l d i f f e r e n c e s c a l e , a n d n o t d i s t a n t w i t h r e s p e c t t o corruptibility O n t h e o t h e r h a n d , they may wish to work with those culturally close r a t h e r t h a n with persons h o l d i n g m o r e different views a n d or ethics Yet, as the two larger clusters indicate, most of

12 John B Kidd & Frank-Jurgen Richter

the asian countries (which we suggest m i g h t b e culturally closer to the Singaporeans) are m u c h m o r e c o r r u p t t h a n the Singaporeans;

b u t those countries which are similarly c o r r u p t (little distant from Singapore o n this measure) are r a t h e r far away w h e n considering cultural differences

Of course we may p r e s u m e for the S i n g a p o r e a n g o v e r n m e n t these data raise problems for their future international relationships They have said they wish to have bi-lateral trade a g r e e m e n t s with

m a n y countries r a t h e r t h a n follow the World Trade Organisation suggestion of having multi-lateral a g r e e m e n t s But which countries should b e their targets?

Opacity Index

Recently, PricewaterhouseCoopers (PWC) at the 2001 a n n u a l meeting

of t h e World E c o n o m i c F o r u m in Davos, Switzerland i n t r o d u c e d a new i n d e x of c o r r u p t i o n In fact, it is a b r o a d m e a s u r e covering five sectors d e e m e d to b e i m p o r t a n t to businesses v e n t u r i n g across their

national b o r d e r s T h e PWC Opacity m o d e l 'CLEAR' encompasses

c o r r u p t i o n , legal, economy, a c c o u n t i n g a n d regularity opacity In their 'Opacity I n d e x ' any increase above a n o m i n a l base in o n e or

m o r e of the measures raises the opacity of d o i n g business "over there", a n d thus raises the perceived difficulty of the venture We illustrate their m o d e l in Figure 2, a n d n o t e that greater detail may

w h e r e a full discussion is offered of how their data was elicited

a n d compiled into a c o h e r e n t index

PricewaterhouseCoopers say in their 'opacity' web site: "Opacity

a n d Transparency are the master terms in a truly i m p o r t a n t wide dialogue This site is d e d i c a t e d to p r e s e n t i n g a n d hosting

world-i n f o r m e d dworld-iscussworld-ion of a new Opacworld-ity I n d e x , whworld-ich measures the opacity of a growing n u m b e r of countries in all parts of the world" They c o n t i n u e , "Opacity is said to a d d m o r e t h a n $160 billion to countries' a n n u a l b o r r o w i n g costs"

It may s e e m clear t h a t t h e Opacity I n d e x (OI) is in m a n y ways c o m p a t i b l e with t h e CPI of T r a n s p a r e n c y I n t e r n a t i o n a l

14 John B Kidd & Frank-Jursen Richter

I n d e e d , Figure 3 shows the relationship between the O I a n d the

n o t all data from b o t h sets can b e correlated d u e to a lack of overlapping measures

It is clear that Singapore (if we c o n t i n u e to focus o n this country) scores relatively too low against the regression line — suggesting it

is m o r e t r a n s p a r e n t t h a n m i g h t b e expected But o n the o t h e r

h a n d , we may see that C h i n a (absolutely m u c h m o r e c o r r u p t t h a n Singapore) is seen also to b e m o r e o p a q u e t h a n t h e regression line would lead o n e to expect E n t r e p r e n e u r s from Singapore m i g h t b e

a little shocked to find the reality (as expressed by this figure) is

n o t as they m i g h t have h o p e d it to b e as they a t t e m p t to create a

j o i n t v e n t u r e ( C h a n & Tong, 2000: 79) T h e s e remarks will b e amplified slightly below

The Business of Asian Business

We have to u n d e r s t a n d guanxi, the Chinese word for 'networking'

(Lou, 2000) We accept this c o n c e p t pervades the whole of Asian business, as does the word itself having m i n o r changes to spelling

a n d p r o n u n c i a t i o n as o n e passes t h r o u g h different Asian countries Yet its m o d e of use s h o u l d n o t b e taken for g r a n t e d — especially

w h e n focusing o n expatriates (Pyatt et al., 2001)

In a study centred on the traditions of family business in Hong Kong and Thailand, these authors found that the firms they had studied had managed to disentangle cultural and relational components from the transactional and pragmatic (as noted in Donleavy, 1995) However they cautioned against exaggerating the scope and domain of these Chinese forms of organisational architectures They further noted that the Chinese sojourners in the 'outposts' of Hong Kong and Thailand have

no greater affinity with each other locally (as diaspora) than with their counterparts in Europe, America or other countries; or indeed as between the 'British' in the US or in Australia with those in the 'homeland' On the other hand, they concluded, the elite in the major entrepreneurial firms have strong linkages that go beyond kinship to

16 John B Kidd & Frank-Jurgen Richter

support their trade Perhaps we may question if it is these forms of hidden links that may support corrupt practices as a way if tying-in senior managers into a wide web of intrigue?

John Child and others further caution us, 'the outsiders', in a report to the Hong Kong Chamber of Commerce They warn us,

'don't get into any relationship that depends on guanxi — you don't understand it' (Child et al, 2000) In other words with respect

to guanxi, given that in its promotion many banquets are given, as

well as many gifts exchanged (together with other giving of favours)

it is very difficult for an outsider to understand the complex net of personal relationships Thus staying outside is quite a positive policy

— but if outside, one will suffer the fate of the outsider — one is starved of insider information

Finally, perhaps we have to accept the complex history that China has had We note that the relatively recent Cultural Revolution left many without good education and which allowed a cadre to develop who were eventually seen to be corrupt and who condoned corrupt

practice We are reminded by Wu Wei-Ping of the film Farewell to

My Concubine in which two childhood friends were turned

against each other (Wu, 2000) In the Cultural Revolution it was commonplace, and in that non-ideal world it was understandable that children turned against parents, spouse against spouse, and so

on — simply to survive, to have a reward, or to be promoted It is against this background we have to consider the wide spectrum of corruption, not just in China, but also across the whole of Asia

The Structure of the Book

One of the strengths of this book is that it does not adhere to the sanctity of Western beliefs — of the firm, organization or institution

— with respect to 'corruption' Rather, it reviews the tenets underpinning this activity that ought to lead to a lessening of corruption however promoted in all nations; it then goes on to review specifically how this may take place in Asia from the viewpoint

of specialists in Asian matters

Corruption and Its Measures 17

Many management theorists spend a great deal of time refining their analyses of trade effects, for instance, on how Foreign Direct Investment (FDI) and other financial support is helping a country

or commercial sector to grow and reach out to the global trade that is apparent in several economic sectors There are also many multinational enterprises which are studied, in depth, in order to ascertain how they modify regional and national economies through their involvement in local or national processes in developing count-ries These investigations become well cited Case Studies However these analyses often miss the [often] enormous cash flows predicated upon corrupt practices We might say therefore that the analysis of the upperworld, in omitting the distortions arising from the underworld, yields a biased view of 'best practice' a n d / o r exemplary performance

This book illustrates the breadth of these distortions, standing the frequent avowals of national leaders that they are stamping out black (or gray) practices in their countries

notwith-Part 1: An Introduction

Chapter 1 by John Kidd has noted that no country is free and blameless in this debate — developed countries' organizations and their managers are not exempt, but they are in general less corrupt than their counterparts in developing nations However, as the developed world is looking to Asia as a vast marketplace in the near-term future, it is pertinent to review the interaction of Occidental and Oriental business methods, and take cognizance of their ethics and their corruption management practices

Very many governments have Charters and Ministries acting against corruption and many are signatories of the OECD charter against corruption All have official statements to make on how they are combating corruption in their country but observers say otherwise Earlier, this very chapter by way of an introduction has noted that corruption is widespread and that there are several measures that may be employed to gain an appreciation of its magnitude before making an alliance contract in a target country

18 John B Kidd & Frank-Jurgen Richter

Part 2: Combating Corruption, Money Laundering and Crime

In C h a p t e r 2, Enery Q u i n o n n e s writes u p o n the d e v e l o p m e n t of the

O E C D studies o n c o r r u p t i o n t h a t led to t h e convention against

c o r r u p t i o n H e r e i n she begins by i n f o r m i n g us of t h e core of

countries, only 30 or so, which have signed the O E C D Convention

on Combating Bribery of Foreign Public Officials in International Business Transactions To g e t to this p o s i t i o n she o u t l i n e s t h e g r o w i n g

awareness by institutions, ministries, firms a n d individuals of the cost of c o r r u p t i o n a n d its disrupting effects T h a t these official activities have b e e n e n a c t e d only t h r o u g h the 1990s seems to b e an

i n d i c t m e n t of m o d e r n society — b u t it is t h r o u g h these measures

we h o p e we can m a k e global progress

Peter Lilley in C h a p t e r 3 illustrates the vast r e a c h of the m o n e y

l a u n d e r i n g s c h e m e s globally a n d in p a r t i c u l a r in Asia, while elsewhere it is estimated by US law e n f o r c e m e n t that West Africans

a n d S o u t h e a s t Asians u s i n g West African C o u r i e r s wash s o m e

$500,000 on a weekly basis (Lilley, 2000) H e notes that in May

2001 the Malaysian Finance Minister, Daim Z a i n u d d i n c o m m e n t e d that the washing of dirty m o n e y gives "wicked legitimacy to proceeds

a c q u i r e d t h r o u g h d r u g trafficking, extortion a n d a r m s smuggling" Thus we n e e d to c o u n t e r the ease by which this process is conducted, since c o r r u p t i o n raises the costs of contracts whilst further debasing the poorest in o u r societies H e also notes the c o r r u p t e n v i r o n m e n t

in Indonesia is immediately a p p a r e n t t h r o u g h its escalating

money-l a u n d e r i n g p r o b money-l e m T h e i r generamoney-l picture is saddeningmoney-ly famimoney-liar, with o n e critical factor b e i n g that their national police lack sufficient resources, training or expertise to tackle the serious p r o b l e m s that they face

In C h a p t e r 4 Leslie Palmier n o t e s ' t h e State, w h e n weak, is perceived to b e partial, so traditional loyalties are aroused, which

f u r t h e r w e a k e n t h e S t a t e ' It is c u s t o m a r y to invoke ' m a r k e t pressures' to explain western commercial behavior, while 'peer g r o u p pressures' are used to explain individual activity Similarly, it would

s e e m a p p r o p r i a t e to i n c l u d e ' t r a d i t i o n a l g r o u p p r e s s u r e s ' in

Corruption and Its Measures 19

analyzing c o r r u p t i o n in developing countries, in Asia as elsewhere However, such pressures are p e r h a p s best seen as permissive a n d supportive, n o t a d e t e r m i n a n t More i m p o r t a n t is the p r e s e n c e of

o p p o r t u n i t i e s , which usually m e a n s t h e i n d u c e m e n t of money

T h e m o r e of it that passes t h r o u g h the h a n d s of State officers in a weak State, the m o r e will stick to their fingers T h u s w h e n law a n d

o r d e r break down a n d are n o t quickly restored, the State is perceived

to b e partial towards the lawbreakers H e also presents the case

of Indonesia

In C h a p t e r 5 Anatoly Korchagin & Alex Ivanov offer us a view from Vladivostok in Eastern Russia — a n i m p o r t a n t portal between Asia a n d E u r o p e ( t h o u g h i n d e e d far from Western E u r o p e ) They suggest that Russia (the g o v e r n m e n t ) itself is gradually b e c o m i n g the fiction, because the people, o u t of their practical n e e d to survive,

go over to a n illegal way of life This t h r e a t is so real that now the

"Russian mafia" (to p u t it exactly — organized crime) is described

as a serious actor in the r e s h a p i n g of the world's e c o n o m y a n d territories — in all countries, especially in the developing ones Strictly speaking, t h e r e is n o t h i n g strange a n d u n u s u a l in this — it

is simply the r i p e n i n g of the harvest t h a t h a d b e e n p l a n t e d d u r i n g the process of b r e a k i n g down Russia But even h e r e — in the Wild East, so to speak — they emphasis, as a conclusion, that it is possible

to specify that the systemic character of c o r r u p t i o n in a m o d e r n society s h o u l d b e o p p o s e d by a systemic c o u n t e r a c t i o n — so with

c o u n t e r m e a s u r e s in p l a c e we s h o u l d see a g r a d u a l r e t u r n to 'normality'

In C h a p t e r 6 Hock-Beng C h e a h notes, from a q u o t a t i o n in 1999

by the US Customs: t h a t IPR theft h u r t s n o t only o u r national economy, b u t o u r world e c o n o m y as well This crime is already costing industry approximately 200 billion [US] dollars a year in lost r e v e n u e a n d nearly 750,000 j o b s O u r investigations have shown t h a t organized criminal g r o u p s are heavily involved in trade-

m a r k c o u n t e r f e i t i n g a n d c o p y r i g h t piracy T h e y often use t h e

p r o c e e d s o b t a i n e d from these illicit activities to finance other, m o r e violent crimes

20 John B Kidd & Frank-Jiirgen Richter

C h e a h goes o n to state that TRIPs [the A g r e e m e n t o n Related Aspects of Intellectual Property Rights] is b e i n g used as a protectionist i n s t r u m e n t allowing large corporations use intellectual

Trade-p r o Trade-p e r t y rights (IPR) to Trade-p r o t e c t their markets, a n d to Trade-p r e v e n t

c o m p e t i t i o n An excessively h i g h level of intellectual p r o p e r t y

p r o t e c t i o n r e q u i r e d by TRIPs has shifted the balance away from

t h e public interest, towards t h e m o n o p o l i s t i c privileges of IPR holders This u n d e r m i n e s the sustainable d e v e l o p m e n t objectives that u n d e r p i n [the E u r o p e a n U n i o n ' s ] d e v e l o p m e n t policies that are b e i n g generally p r o m o t e d in Asia t h r o u g h the W T O

H e goes o n to discuss theft of software IPR n o t i n g the available evidence suggests t h a t overall in 2000 approximately o n e - q u a r t e r of the total global revenue losses o c c u r r e d in Asia H e concludes,

n o t i n g the progression from stage 1 to stage 2 of the IPR laws, that even in the somewhat arcane a n d esoteric realm of IPR

t h e r e are serious developments that have the potential to arouse grave c o n c e r n s a n d r e s e n t m e n t s in Asia, in t h e USA a n d elsewhere

In C h a p t e r 7 Francois-Yves D a m o n concentrates o n the legal aspects of c o r r u p t i o n as n o t e d in official reports of convictions for

c o r r u p t practice H e suggests that c o r r u p t i o n is o n e of the est political a n d e c o n o m i c challenges that face C h i n a in the twenty-first century Conservatively it is estimated to cost some 1 3 - 1 6 % of China's GDP — thus c o r r u p t i o n is a h u g e e c o n o m i c loss a n d is a social pollution It contributes to p r o b l e m s such as e n v i r o n m e n t a l

bigg-d e g r a bigg-d a t i o n , social a n bigg-d political instability, a n bigg-d t h e bigg-d e c r e a s e bigg-d credibility of g o v e r n m e n t officials According to surveys c o n d u c t e d

in 1998 a n d 1999, the Chinese p e o p l e viewed c o r r u p t i o n as the

n u m b e r o n e factor c o n t r i b u t i n g toward social instability However,

in 2000, fearful of the i m m i n e n t pains of e c o n o m i c reform, the Chinese p e o p l e n a m e d u n e m p l o y m e n t a n d the fear of b e i n g laid-off, a h e a d of c o r r u p t i o n , as the primary sources of social instability (Hu, 2001) It is h o p e d t h a t this grass-roots fear does n o t detract from the h i g h e r officials search a n d reaction against c o r r u p t i o n since the latter evil may well enforce the ill-rest d u e to u n e m p l o y m e n t

Corruption and Its Measures 21

Part 3: National Comparisons throughout South and East Asia

Dominic Sculli in C h a p t e r 8 leads us immediately to a consideration

of ' c u l t u r e ' H e notes o n e s h o u l d n o t b e looking for a single p o i n t

in t h e m u l t i - d i m e n s i o n a l c u l t u r a l s p a c e , b u t r a t h e r trying to eliminate certain aspects a n d thus h o p e that a small e n o u g h space remains in which t h e core of Asian cultural values abides However,

we have to recognize that the Asian c o n t i n e n t takes in a large p a r t

of Russia a n d even in a sense, the Middle East, i n c l u d i n g Israel Also i n c l u d e d in the region t h e r e is the large a n d diverse I n d i a n

s u b c o n t i n e n t a n d m a n y Islamic countries, stretching as far southeast

as Indonesia a n d the s o u t h e r n Philippines Therefore, in the context

of this chapter, ' c u l t u r e ' essentially refers to the culture of China

a n d to that of some of its n e i g h b o r s , particular those with some historical influence from China, such as J a p a n a n d Korea

Cross-cultural research into different m a n a g e m e n t styles attempts

to d e t e r m i n e the effect of the level of industrialization a n d also the role that culture plays — the general finding is that the m a n a g e m e n t style is a function of t h e level of industrialization, b u t is also

t e m p e r e d by cultural characteristics T h e same question c a n b e posed c o n c e r n i n g c o r r u p t i o n : to what e x t e n t is it d e p e n d e n t o n the level of industrialization a n d to what e x t e n t is it d e p e n d e n t o n culture? H e concludes that certain characteristics of Asian culture may give the impression that it is m o r e p r o n e to c o r r u p t i o n , yet the proposition that a firm link exists between culture a n d c o r r u p t i o n seems u n t e n a b l e However, c o r r u p t i o n will b e c o m e m o r e organized

a n d possibly m o r e efficient w h e n a clear authority [governance] is established o r w h e n t h e rule of law is m o r e strongly enforced — which inevitably occurs as a n a t i o n state develops a n d b e c o m e m o r e sophisticated

C h a p t e r 9 by Gilbert E t i e n n e illustrates a wide view H e has traveled extensively in Asia over a l o n g p e r i o d a n d thus has f o r m e d

a distinct view u p o n the different reactions to c o r r u p t i o n , c o u n t r y

by country In particular h e focuses u p o n the e c o n o m y of seepage

a n d leakage that goes b e y o n d c o r r u p t i o n H e suggests the p r o b l e m seems to have t h r e e tiers: misallocation ( t h r o u g h weak administra-

22 John B Kidd & Frank-Jursen Richter

tions a n d infrastructures for instance), general loss of revenue (due

to fraud), a n d simple c o r r u p t i o n (including malpractice)

Clay Wescott in C h a p t e r 10 allows us to reflect o n modern-day

c o r r u p t i o n in Asia t h r o u g h the anti-corruption campaigns b e i n g

e n a c t e d in four countries in South East Asia — h e examines the progress of the authorities in Cambodia, Laos, T h a i l a n d a n d Viet

N a m as they set u p effective institutions to fight c o r r u p t i o n in the public sector H e makes comparisons by drawing o n governance assessments recently carried o u t by the Asian D e v e l o p m e n t Bank Anti-corruption efforts in these four countries reveal b o t h similarit-ies a n d d i f f e r e n c e s , m a k i n g t h e s u b - r e g i o n i n t e r e s t i n g f o r comparative analysis of t h e causes a n d c o n s e q u e n c e s of different

a p p r o a c h e s T h u s h e makes r e c o m m e n d a t i o n s b o t h for improving

o n g o i n g efforts at the country level, a n d for j o i n i n g forces at the regional level

In C h a p t e r 11 by S c h r a m m & Taube we find a detailed study of

guanxi They e x a m i n e the p h e n o m e n o n of c o r r u p t i o n in C h i n a

using the i n s t r u m e n t of ' t h e new institutional e c o n o m i e s ' T h e i r goal is n o t to illuminate the relationship between the parties involved

in c o r r u p t i o n using a principal-agent analysis Instead, their analysis focuses o n the institutional framework for c o r r u p t transactions in

C h i n a whose goal is to p r e v e n t opportunistic behavior of o n e of the involved parties In this respect, they will e x a m i n e especially

the relationship between c o r r u p t i o n a n d the guanxi networks; and,

in addition, how they are affected by the (non-) existence of a functioning legal system

Moving o n we see in C h a p t e r 12, by M o o n & McLean, that Korea has h a d a positive stance against c o r r u p t i o n from 1960 w h e n General J H Park seized power Since that time, especially in r e c e n t years, they have realized t h a t their rapid growth in their e c o n o m y has rested u p o n u n s u r e foundations based o n c o r r u p t practices

C o r r u p t i o n , they emphasis, is a multifaceted p h e n o m e n o n — it comprises many factors a n d c o m p o n e n t s : socio-economic, cultural, politico-systematic, bureaucratic-administrative, psychological, a n d

so on This multifaceted aspect of c o r r u p t i o n must b e taken into

a c c o u n t if a n t i c o r r u p t i o n efforts are to succeed They c o n c l u d e that

Corruption and Its Measures 23

it will r e q u i r e a gradual, evolutionary process of massive cultural

c h a n g e which must b e widely s u p p o r t e d by the p o p u l a c e a n d those

i n l e a d e r s h i p W i t h o u t s u c h a c o m m i t m e n t , t h e n e g a t i v e consequences of c o r r u p t i o n will c o n t i n u e to i m p e d e South Korea's

e c o n o m i c , political, a n d moral development

C h a p t e r 13 by Chat-Uthai & Mclean p r e s e n t s details of the situation in Thailand T h e 2000 C o r r u p t i o n P e r c e p t i o n I n d e x (see

http://www.transparency.org) has given T h a i l a n d a trust status that

c o r r u p t i o n are reflected in n e a t phrases which are used to describe the act of c o n s u m i n g the public wealth: "hot tea fees," "eating

a l o n g the river tide," "gifts of g o o d will," a n d the famous "white buffet" cabinet This c h a p t e r explores how historically the Thai public has a c c o m m o d a t e d c o r r u p t i o n , a n d it examines the r a n g e

of c o r r u p t i o n that now exists It also provides r e c o m m e n d a t i o n s for

a n t i c o r r u p t i o n activities

Part 4: Ethical Futures

T h e chapters in the earlier sectors may have p a i n t e d too gloomy a picture, so we will now review, briefly, what m i g h t be d o n e to h e l p

c o r r u p t nations In passing it would be quite fair to p o i n t o u t how the less c o r r u p t nations (generally the developed ones) m i g h t p u t

in place b e t t e r filters a n d practices — p e r h a p s to lead by example?

We would conclude that the western managers lead, n o t by shouting,

"look how g o o d we are" — b u t by employing a d e g r e e of modesty, which m i g h t be well a p p r e c i a t e d by Asian m a n a g e r s

Taek Kim in C h a p t e r 14 describes the techniques a n d

instru-m e n t a l instru-m e c h a n i s instru-m s for the control of c o r r u p t i o n , casting light o n

c o r r u p t i o n from m a n y different viewpoints F o c u s i n g o n four countries in Asia — H o n g Kong, Singapore, Malaysia a n d Korea —

h e considers the anti-corruption infrastructures a n d the c o r r u p t i o n

p r e v e n t i o n systems of the first t h r e e countries in o r d e r to c o m m e n t

on the situation in Korea To g a t h e r primary evidence, the a u t h o r visited the I n d e p e n d e n t Commission Against C o r r u p t i o n (ICAC) in

24 John B Kidd & Frank-Jursen Richter

H o n g Kong a n d the C o r r u p t Practices Investigation Bureau (CPIB)

in Singapore wherein their legislative instruments a n d their research data were the m a i n focus

Finally, Lionel Stapley in C h a p t e r 15 says that his p u r p o s e is to explore in general terms the dynamics c o n c e r n i n g the relationship between the ' c o r r u p t e r ' a n d the ' c o r r u p t e d ' , a n d to h e l p in the

d e v e l o p m e n t of cutting edge practices that will r e d u c e the chances

of seduction into bribery N o m a t t e r which society we are referring

to we can b e sure that bribery is c o n d e m n e d because of its i n h e r e n t inequity: yet, w h e n a bribe is e x p e c t e d as p a r t of a transaction it still presents us with a considerable m o r a l dilemma What, t h e n , we

m i g h t ask is right a n d ethical a n d just? By taking action to c h a n g e the Asian culture to o n e where c o r r u p t behavior is internalized as

u n a c c e p t a b l e , we can directly influence the corrupter In addition, those in the West can develop strategies a n d practices to e n s u r e that those from the West who are likely to be seduced into corruption are sufficiently aware of, a n d able to control a n d m a n a g e their emotions, so that they will n o t act in c o r r u p t ways

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