Economy

Multinationals under scrutiny for corruption

By Chen Weihua (China Daily)
Updated: 2010-09-08 13:38

NEW YORK - Multinationals used to securing business deals through bribery will have more to worry about after Chinese and United States officials meet in early September to talk about the prevention and punishment of transnational corruption.

The two countries seem a perfect partnership since China is where business bribery has been deep-rooted and rampant while the US has had the most effective enforcement of overseas corruption laws.

According to Beijing-based private research firm Anbound Group, of some 500,000 corruption cases investigated in China from 2000 to 2009, about 64 percent were linked to international trade and foreign businesses.

TRACE International, a nonprofit anti-bribery agency based in Annapolis, Maryland of the United States, has reported that China is one of the countries reporting the largest number of enforcement actions involving alleged bribery of officials.

In its Global Enforcement Report 2010 published in mid-June, TRACE lists China as No 3 in terms of cases from 1977 to 2010. A total of 25 cases, accounting for 7.5 percent of the total cases of international enforcement, were in China.

The US has led the world in outbound bribery enforcement activities by undertaking more than two-thirds of all actions in the world. Its Foreign Corrupt Practices Act of 1977 was also one of the first anti-bribery laws in the world.

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In the past years, there have been many high profile bribery cases involving multinationals operating in China. Multinational companies such as Rio Tinto, Siemens, Daimler, Lucent, Avery Dennison, IBM, Avon, Diagnostic Products and UTStarcom have all been penalized.

In the case involving Australian mining giant Rio Tinto, company executive Stern Hu was sentenced to 10 years in jail in late March for receiving bribes from Chinese steel companies and stealing commercial secrets. Three other Rio Tinto employees were also sentenced.

Bribery has been known as a hidden rule in China. In order to defeat competitors and get deals, multinationals eager to cash in on the huge market are not immune from corruption. Many have compromised their ethical codes and adopted the new code of "When in Rome, do as the Romans do."

As more and more multinationals have been penalized for bribery, many may now want to take a second thought, officials said.

Both the US and the Organization for Economic Cooperation and Development (OECD) have beefed up their actions on multinationals involved in bribery overseas. The 1997 OECD Anti-Bribery Convention, which took effect in 1999, established legally binding standards to criminalize bribery of foreign public officials in international business transactions.

China's National People's Congress also ratified the UN Convention on Anti-Corruption.

The upcoming China-US talks on fighting corruption will surely send more chilling messages, experts said.