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recent report by Transparency International on bribery in 28 selected countries, entitled “The 2011 Bribe Payers Index”, aims at evaluating the supply side of corruption. The report highlights the likelihood of firms securing business abroad by paying bribes, and focuses on the world’s most industrialized countries.

The report places Indonesia near the bottom of the list, which says that companies from Indonesia are more likely to bribe abroad. Mexico, China and Russia are all below Indonesia. Consistent with common perception, the report shows that public works contracts and construction are highlighted as the sectors where companies are most likely to bribe.

According to Transparency International, this is due to many contracts in these areas being large and often unique, making them difficult to benchmark for cost and time and thus creating opportunities for inflating and hiding additional expenditure.

Often categorized as part of the corruption scheme (e.g. by the Association of Certified Fraud Examiners Fraud Tree), bribery is the center of attention in countries across the world. The United Nations (UN), through its Convention against Corruption (adopted in 2003), has aimed to establish a universal, legally binding anticorruption instrument.

The convention itself covers five main areas: prevention, criminalization and law enforcement measures, international cooperation, asset recovery, and technical assistance and information exchange. On the other hand, bribery has also been the subject of many studies by behavioral scientists trying to find a “cure for the disease” by understanding the factors that drive people to engage in the offence.

Other than due to reasons of pressure and opportunity, bribery also occurs because of offenders’ rationalization of their unlawful acts. Studies of bribery cases suggest that bribery often rears its head as a result of membership in an organization (e.g. political parties) as well as familial and social ties to government.

It has been evident in such studies that a company’s involvement in bribery is largely influenced by the decisions of its executives. These executives’ ties with government or political parties may result in shared norms and trust as well as a perceived obligation to support others in the group.

One may say that these are normal behavioral patterns exhibited by individuals who are members of a group. However, when perceived obligations are fulfilled through unlawful conduct, allowing other group members to achieve their goals, then bribery as well as other corrupt practices may occur as a result of a “this is how business is done around here” rationalization.

As suggested by Transparency International’s report, countries where corrupt practices are seen as common will be more likely to bring this kind of rationalization into business activities overseas.

It is interesting to see that in countries that are host to many corrupt business practices, bribery is often seen as a cost component, which then determines a companies’ profitability level. In other words, such a company may have allocated resources to bribing government officials to reduce uncertainties in their business.

Nevertheless, although gaining an edge in business is an expected, immediate result of spending money to bribe government officials, many anticorruption experts believe that in corrupt countries such benefits do not last long. This is because once a company is seen to have gained a business advantage from bribing government officials, others will shortly follow.

Finally, an assumption will develop that all companies are paying the same level of bribes, and the advantage of doing so will be diminished or eliminated. This may induce companies to pay higher amounts of bribes to government officials in the hope of getting more benefits compared to those who pay fewer
bribes.

To completely eliminate bribery over a short period of time may be next to impossible. Just like any other fraudulent activity, the best thing we can do is minimize the factors that cause corrupt practices to occur. Among other things, this means creating a transparent culture, particularly in conducting business throughout the nation, so that the “this is how business is done around here” rationalization is no longer
applicable.

As suggested by Transparency International, governments should strengthen existing anti-bribery legislation as well as enforcement. Further, the organization also recommends that companies can contribute to combating bribery by strengthening the enforcement, monitoring and reporting of corporate anticorruption policies and procedures, enhancing their transparency commitments and ensuring integrity throughout their entire organizations.

The writer is director of the Center for Forensic Accounting Studies in the Department of Accounting at
the Islamic University of Indonesia. He obtained his Masters and PhD in forensic accounting from the
University of Wollongong, Australia.