Upfront: The High Cost of International Bribery

It's been almost thirty years since passage of the Foreign Corrupt Practices Act (FCPA) and more than five years since member countries of the Organization for Economic Cooperation and Development agreed to adopt tougher anti-corruption laws, imposing criminal penalties on companies found guilty of bribery. But corruption remains a big obstacle to international business, according to a new survey conducted by Control Risks, a London-based international business risk consultancy, and global law firm Simmons & Simmons. The survey was based on telephone interviews with 350 international companies headquartered in seven jurisdictions: the United Kingdom, the United States, Germany, France, the Netherlands, Brazil and Hong Kong.

According to the report, leading international businesses have introduced anti-bribery codes and training programs. But more than half of the companies surveyed were not aware of their own country's legislation covering bribes paid abroad, indicating that bribery laws need to be promoted more effectively if they are to have a lasting impact.

Losing business to corrupt competitors is a widespread problem. Overall, 43 percent of respondents reported that they had failed to win new business in the last five years because a competitor had paid a bribe, and one-third had lost business to bribery in the last 12 months.

Companies in the construction industry and the oil, gas and mining sector have been most likely to lose business to corrupt competitors. The high value of projects increases the temptations of bribery, and deals in both sectors involve negotiations with government officials who may be well-positioned to receive bribes.

Respondents were asked to estimate the maximum percentage cost increase that corruption can generate in an international project. About one-quarter of respondents said that it was between zero and 5 percent, but almost 10 percent said that corruption could account for up to half of the total project cost, and more than 7 percent said it could be even higher.