AP News

Private sector corruption rising amid downturn


MANILA, Philippines (AP) — Private sector corruption appears to be on the rise in the Pacific Rim amid the global economic downturn, with countries in the region holding the worst reputation for bribery abroad, a U.N. expert said Thursday.

Samuel De Jaegere of the U.N. Development Program told an anti-corruption forum of the 21-member Asia Pacific Economic Cooperation group that companies in Indonesia, Mexico, China and Russia are the most likely to pay bribes when doing business overseas. He cited the 2011 Bribe Payer's Index.

He said a recent survey by Ernst & Young shows respondents indicating a 26 percent rise in private sector corruption in China and a 52 percent increase in Indonesia.

Between 75 and 93 percent of corruption cases being prosecuted before courts in Hong Kong and Singapore also involve private sector employees, De Jaegere added.

He said APEC members China, Russia, Mexico and Malaysia are among the top five countries with the highest cumulative illicit financial outflows from 2000 to 2008, according to the Global Financial Integrity Report. China tops the list with $2.18 trillion.

"The amount of ... capital flows generated from illegal activity, including corruption is staggering in the APEC region," De Jaegere said.

More than $1 trillion a year in illicit money leaves the developing world each year, and almost 90 percent of total flow in Asia is transferred through trade mispricing or the downplaying of profit to minimize overall tax, he said. Profit is then stashed in tax havens.

De Jaegere said the Financial Secrecy Index published last year for the first time ranked four APEC members in the top 10 as attracting illicit money flows from developing countries: Hong Kong, the U.S., Singapore and Japan.

Jesse Ang of the International Finance Corp. said a World Bank survey estimates that small and medium enterprises spend up to 33 percent and in some cases 49 percent of revenues on bribes.

Around 90 percent of companies worldwide are SMEs and they pay around $100 billion in bribes each year, said Shervin Majlessi of the U.N. Office on Drugs and Crime.

Majlessi said anti-corruption efforts should focus on SMES, which are more vulnerable than bigger companies to corruption because of their size and limited resources and bargaining power.


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