Paul Midler has a post at The China Game, Alcatel-Lucent Bribes Chinese, Realizes Solid "ROB", in which he suggests that multinational companies create a return on bribes business ratio for benchmarking purposes. The post is tongue in cheek, but there is unfortunate truth in the matter. In the instance Paul writes of, Alcatel-Lucent settled a bribery case with the U.S. DOJ for $2.5 million on hundreds of millions of dollars of bribes to Chinese, and Paul speculates that Alcatel-Lucent realized hundreds of millions of dollars on top of the bribes. An ROB of ($2.5mil + $100s millions):$100s millions, is pretty good.
An article in the November 2007 China Law & Practice, "Managing Risks in China - Bribery, Corruption, and Little Red Packets," speculates that many companies probably do use an unofficial ROB, as "the atmosphere for doing business in China encourages corruption, because taking risks that may not be legal do in fact pay." A major problem appears to be enforcement issues. Different cities have different minimum bribes for the police to investigate cases. The article says that in Shenzhen, the bribery must involve more than RMB20,000, otherwise they will not investigate. In 2006, the average amount of money involved in bribes that were prosecuted in China was $20,000 USD. Even to an American public official RMB20,000 is a lot of money, and, this is pure speculation, there surely must be a significant amount of bribes below this level that are never even investigated. The article contrasts this situation with Hong Kong where a bribe "of only a few hundred dollars can end up in court."
Allowing bribery is an impediment to the Rule of Law because when bribes are accepted, someone is simply subverting the law. In a sidebar, the article discusses the efforts of TRACE International in promoting commercial transparency around the globe. TRACE created a website called BRIBEline that allows companies and individuals to anonymously report bribe solicitations in 14 languages. The plan is to report the information by country and ministry or sector, with the goal of reducing demand-side bribery.
4 comments:
I wonder how bribery would impact a country with no rule of law. May be they get rid of rule of law to facilitate that practise to enrich the lives of feudal lords.
Heya Will,
You know what I worry about regarding the giving of such gifts to get the paperwork going? I don't think I have the social ability to know how to give bribes accurately and in the most efficable manner. I mean we talk about giving bribes as if its so simple. But when you actually get down to the details there's a lot of fuzziness on how exactly to wrap up that money and sending it to the right person.
Perhaps the costs of bribery in China seems so much higher because:
1. Lack of transparency on who to bribe.
2. Since it is harder to determine who to bribe to get the job done, coupled with the gross rapaciousness of the corrupt, it just costs more since more people need to be paid and they all want to be paid more.
I prefer giving cartons of ciggies to everyone I meet in China. I don't think I am comfortable enough yet to giving cash to strangers to get them to do what I want them to do.
Bill,
In the feudal system there is no rule of law, more of a whomever has the biggest baddest retainers gets to set the rules. My education in the day-to-day workings of China's feudal system stems from 3 Kingdoms and Water Margin. In Water Margin, bribery of officials with anything from strings of cash to silver to gold, depending upon the rank of the official, was a common occurrence. The problem is that when business starts to grow and supplants the state as the greatest provider of opportunity, the rule of law with its consistency and predictability becomes more desirable. China has the rule of law, it is just not as strong as in the U.S. Countries that are lacking in the rule of law today tend to be ones that only produce natural resources for large foreign companies. These can function profitably because you only need to pay people to dig something out of the ground. See lots of Africa. The rule of law only becomes necessary for more complex business models.
Hi Howard,
Good to hear from you.
I think you're supposed to put the cash in a red envelope, palm the envelope in your fingers, ACT CAUSAL, and as you shake hands say something like, "I hope you won't have too much trouble pushing our deal through."
Jokes aside, the most common forms of bribery seems to be lavish meals and women. 20,000 yuan buys a lot of both. In the U.S. a lobbyist can't even buy a Congressman a cup of coffee. If the corruption problem is really as bad as we're led to believe, the first task in combating it is to eliminate the demand for the bribes.
On a side note, check out this link by one of the Freakonomics guys. He sat down and watched The Wire with some gangsters and talked about bribing cops. The payoff usually comes in the form of "services," adding up to at least $2,500 a month. The gangsters lamented that cops don't like taking cash.
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