Bribes lead to bad governance

By Stuart Eizenstat

WASHINGTON (JP): Most of the world's largest industrialized democracies stand ready to take a historic step in the battle against corruption. In the next few weeks, 34 governments will try to hammer out in the Organization for Economic Cooperation and Development (OECD) the final text of a far-reaching convention that makes illegal the bribery of foreign public officials in international business transactions.

The cost of bribery is high. Bribes distort trade, lead to bad governance in developing countries and penalize citizens in those countries through higher prices for the products and services involved in the bribe.

Once completed, the convention will help diminish the flow of kickbacks and payoffs to the growing markets of the developing world. It will help promote economic development, support accountability and good governance, and strengthen free and fair competition in international business.

The stakes are staggering. For example, government procurement contracts worth tens of billions of dollars each year involve international competition, with critical implications for economic growth and development in host countries. The proposed convention will greatly improve the chances that such important decisions will be based on economic efficiency, rather than on the personal greed of corrupt public officials.

Several key issues remain to be resolved, however, in the final negotiations on this convention. We must ensure that bribery prohibitions cover not only all executive, legislative and judicial officials, but also officials of public enterprises owned or controlled by the government.

We must make penalties for corporations found liable for acts of bribery effective and dissuasive. And, we must ensure that this new convention is implemented as soon as there are countries prepared to bring it into effect.

These are critical matters, but it is important that we focus particularly on another key unresolved issue: whether bribes paid to foreign political parties and their officials in international business transactions will be criminalized.

The issue here is not any effort to prohibit legal contributions to foreign political parties permitted under local laws, but to eliminate those payments to parties and their officials made in exchange for pledges by party officials to deliver a desired government action.

Based in part upon disclosures in the mid-1970s of bribes paid to political parties by U.S. companies, the U.S. Foreign Corrupt Practices Act has specifically prohibited such bribery since 1977. I was involved in helping shape this legislation as President Carter's chief domestic adviser. This act prohibits payments of bribes by U.S. companies to foreign officials to obtain contracts and penalizes companies found liable for acts of bribery.

In much of the developing world, public power and decision- making flow just as easily through tightly controlled political parties as they do through government ministries. A large payment can be just as effective in obtaining government business as a bribe to a corrupt government official. This is particularly true in countries where one party dominates the political system.

Imagine how effective an OECD anti-bribery convention would be that failed to prohibit bribes to political parties of a Mobutu- led Zaire or a Philippines of Ferdinand Marcos. Is there any reason to assume that unscrupulous businesses would not simply shift their bribe payments toward the political organizations controlled by strongmen? Should such action continue to be legal (and, in some countries, tax deductible)?

The answer should be a resounding "no".

By not covering bribes to foreign political parties and party officials, the OECD convention would leave open an avenue for kickbacks and payoffs and perhaps even serve as a guide for continued acts of corruption by dishonest business executives.

Only a few weeks remain to meet the commitment made by OECD ministers in May to conclude the anti-bribery convention by the end of the year. OECD governments have made significant progress towards reaching this goal. But we must ensure that the convention is broad in its scope and effective in its reach -- and, to do that, we must outlaw in international business transactions bribes paid to political parties and party officials.

For too long, international bribery has been excused as "the way business is done". Too high a price has been paid for corruption in terms of wasted economic resources and political instability. The member governments of the OECD are about to strike a major blow against such practices. We must make certain that we complete the task.

The writer is the United States Under Secretary of State for Economic, Business and Agricultural Affairs.