term paper on bribery impact

8/14/2019 TERM PAPER ON Bribery Impact

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Department of management Lovely Professional UniversityPhagwara

ACKNOWLEDGEMENT

I take this opportunity to present my vote of thanks to allthose guidepost who really acted as lightening pillars toenlighten our way throughout this project that has led tosuccessful and satisfactory completion of this study.We are really grateful to our COD Mr.Devdhar shetty for

providing us with an opportunity to undertake this project inthis university and providing us with all the facilities. We arehighly thankful to Mr.vishwas chakranarayan for his activesupport, valuable time and advice, whole-hearted guidance,sincere cooperation and pains-taking involvement duringthe study and in completing the assignment of preparingthe said project within the time stipulated.Lastly, We are thankful to all those, particularly the variousfriends , who have been instrumental in creating proper,healthy and conductive environment and including new andfresh innovative ideas for us during the project, their help, itwould have been extremely difficult for us to prepare theproject in a time bound framework.


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Name MOHAMMADABBAS

Regd.No 10906034Roll no. RS1904A24

IntroductionCorruption and bribery are complex transactions that involveboth someone who offers a benefit, often a bribe, andsomeone who accepts, as well as a variety of specialists orintermediaries to facilitate the transaction. By perpetuatingthe abuse of entrusted power for private gain TransparencyInternationals (TI) definition of corruption both the bribepayer and bribe taker cause damage in a number of ways.Ultimately, their corrupt dealings create extreme inequity both in markets and in societies.

Much blame has been apportioned over the years to the bribetakers those who pocket the wealth and take advantage of the influence and authority that corruption affords them. And,indeed, bribe takers must be exposed, prosecuted and


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appropriately punished. The systems that breed this behaviourrequire holistic reform, so that bribes are not demanded in thefirst place.

TI believes it is also critical to shine a spotlight on the bribepayers whose supply of bribes, irregular payments and otherforms of influence-buying fuel the machinery of corruption. Ithas been part of TIs mission for the past 15 years to curb theso-called supply side of corruption, both domestically andacross borders.

This report presents highlights of a brand new surveycommissioned by TI, the 2008 Bribe Payers Survey.1 It looks indetail at the sources of corruption in the internationalmarketplace, both in terms of where the bribes are paid andby which businesses. Above all, the Bribe Payers Surveyillustrates how the supply of corruption is viewed by a globalselection of senior business executives, who understand themarkets and market pressures in their own countries, some of which drive corruption. Based on the results of the 2008 BribePayers Survey, TI has produced an index and two sectoralrankings:

The 2008 Bribe Payers Index (BPI): a ranking of 22 of theworlds most economically influential countries according tothe likelihood of their firms to bribe abroad.

Two new rankings of industrial sectors: one that ranks sectorsaccording to the likelihood of firms in that sector to bribepublic officials; and another that ranks sectors according tothe degree to which their firms use contributions to politiciansand political parties to achieve undue influence ongovernment policies, laws or regulations a phenomenonoften referred to as state capture.

The findings of the 2008 BPI and the sectoral rankings showthat many of the worlds most influential economies, andsome key industrial sectors, continue to be viewed as greatlycompromised by international corruption. As such, TI calls ongovernments and the private sector to renew their efforts to


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curb the supply side of corruption. It is only with concertedand continued effort that we can stop the abuse of power forprivate gain and mitigate the devastating impact it has onlives and livelihoods the world over.


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1. Survey Methodology in Brief The 2008 Bribe Payers Survey consists of 2,742 interviewswith senior business executives in 26 countries and territoriescompleted between 5 August and 29 October 2008. The

survey was carried out on behalf of TI by Gallup International,which was responsible for the overall implementation of thesurvey and the data quality control process. GallupInternational relied on a network of partner institutions tocarry out the survey locally.

The countries surveyed were selected on the basis of theirForeign Direct Investment (FDI) inflows and imports, andimportance in regional trade. Total inflows of FDI and importsof goods from these 26 countries amounted to 54 percent of world flows in 2006. In each country there were a minimum of 100 senior business executives interviewed and samples ineach country were designed taking into consideration thefollowing variables: the size of firms, sector and location.Additionally, due to the nature of the phenomenon underanalysis, the survey oversampled large and foreign-ownedfirms.

To assess the international supply side of bribery reflected in

the 2008 Bribe Payers Index (BPI), senior business executiveswere asked about the likelihood of foreign firms from countriesthey have business dealings with to engage in bribery whendoing business in the respondents country. In short, seniorbusiness executives provided their informed perceptions of the sources of foreign bribery, and these views formed thebasis of the 2008 BPI.

The 2008 BPI ranks 22 countries. The countries chosen aresome of the worlds largest and most influential economies,with combined global exports of goods and services andoutflows of FDI that represented 75 percent of the world totalin 2006. Australia, Brazil, India and South Africa were alsoincluded for their role as major regional trading powers. The2008 BPI is calculated based on two questions from the Bribe


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Payers Survey. Senior business executives were first askedwhich of the 22 countries to be ranked they have commercialrelationships with. For those countries that they selected, theywere then asked to assess the frequency with which

companies from these countries engage in bribery whenoperating in their own (the respondents) countries. Toconstruct the Index, the 5-point response scale used in thesurvey was reversed, converted into a 10-point scale systemand then a simple average was calculated for each country.Assessments of a respondents own country (12 countries intotal) were not included. The countries are then ranked basedon the mean scores obtained for each country.

Table 1 (page 5) shows the 2008 BPI results along withadditional statistical information that indicate the level of agreement among respondents about each countrysperformance, and the precision of the results.9 Scores rangefrom 0 to 10, indicating the likelihood of firms headquarteredin these countries to bribe when operating abroad: the higherthe score for a country, the lower the likelihood of companiesfrom this country to engage in bribery when doing businessabroad. According to the senior business executivesinterviewed around the world, companies from Belgium and

Canada were least likely to engage in bribery when operatingabroad. These two countries are followed closely by theNetherlands and Switzerland. At the other end of thespectrum, respondents ranked companies from Russia asthose most likely to engage in bribery when doing businessabroad. No country receives a 9 or 10 in the 2008 BPI. Thismeans that all of the worlds most influential economies wereviewed, to some degree, as exporting corruption.

Types of Bribery The 2008 Bribe Payers Survey allows us to evaluate theinformed views of foreign bribery by companies from the 22


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30 percent of respondents indicated that companies fromIndia are likely to bribe low-level public officials to speedthings up, which was a higher result than the other two typesof foreign bribery assessed.

Even top 2008 BPI performers were reported to be weaker insome areas than others:

16 percent of respondents considered Belgian companies tooften or almost always use familiar or personal relationshipsto win public contracts.

Ten percent reported that use of familiar or personalrelationships is often engaged in by Canadian companieswhen operating abroad.Seven percent of respondents reported that companiesheadquartered in the Netherlands often engage in bribery tolow-level public officials to speed things up when operatingabroad.When asked about the behaviour of Swiss companies, fivepercent of respondents reported that Swiss companies oftenengage in bribery to high-ranking politicians or to politicalparties or used personal and familiar relationships to obtainpublic contracts.


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of firms to shape and influence the underlying rules of thegame (i.e. legislation, laws, rules and decrees) through privatepayments to public officials. 14 These payments may be legalor illegal, but they create a distortion of both the legal

framework and policy process, with a negative impact on thebroader economy and society.

The practice of state capture is of particular concern becauseit extends beyond efforts to secure a particular deal orbusiness opportunity. State capture implies that the veryframework governing a sector, or even the economy, is guidedby a particular interest, rather than by the public interest. Thispractice obscures policy decisions and undermines publicaccountability.

In the 2008 Bribe Payers Survey, senior business executivesindicated that public works contracts/construction, oil and gas,mining, and real estate and property development were thesectors most likely to engage in practices of state capture.Banking and finance was seen to perform considerably worsein terms of state capture than in public sector bribery,meaning it exerts considerable influence on the rules of thegame. At the other end of the spectrum, agriculture, fisheries

and light manufacturing are believed to be the sectors leastlikely to engage in state capture.

A total of 19 sectors have been evaluated in the 2008 BribePayers Survey.15 For the rankings of both public sectorbribery and state capture, respondents were asked their viewson up to five sectors in which they had business relationships.As with the 2008 BPI, these sectoral rankings therefore drawon informed perceptions of senior business executives, eachof whom evaluated an average of three sectors.


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"You haven't added any wheels to file. How's the file going tomove if it doesn't have any wheels?"

"You haven't made any arrangements for the tea and water."

"You haven't paid the facilitation charge."

"How about something for the kids?"

"How about the UTT allowance?" (UTT=under the table)


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In many parts of India, there exists a de-facto system forresolving traffic tickets (among other things), with which I amsure many of you are familiar. Typically, when a person is

pulled over for some traffic violation, they have the option of paying roughly half the official ticket amount as a bribedirectly to the policeman instead of receiving the officialchallan (fine). Having directly witnessed this system in actioncountless times, I often find myself wondering whether this isactually such a bad thing.

There are three major reasons why bribery is considered a badthing in situations like this. First, the government loses asource of legitimate revenue. Instead of going intogovernment coffers, the fine money is going into the pocket of the policeman. Second, by taking bribes the police underminetheir legitimacy as those who uphold the law. Widespreadknowledge of police corruption is not conducive tomaintenance of law and order. Third, the option of briberyreduces the incentive for people not to break laws in the firstplace (assuming that the bribe is less than the expectedpunishment conditional on being caught).

In the Indian context, however, not all of these concerns arenecessarily applicable. The first issue of depriving thegovernment of revenue is not particularly notable when oneconsiders that corruption is endemic to almost everyadministrative branch of the Indian government, and it istherefore difficult to determine whether the money is betteroff in the policemans pocket. If it were a safe assumption thatthe government would use the fines collected for somesocially useful purpose, it would be easier to condemn suchinstances of bribery. Unfortunately, it is rare that one canaccurately make such an assumption in the Indian context.

The issue of police undermining their own legitimacy alsoseems to be a much more muted concern India, primarilybecause the police themselves do not enjoy a great deal of


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social legitimacy to begin with. Bribery is to a large degreeinstitutionalized and often considered simply a cost of doingbusiness with the police. The vast majority of the police forcein India is also severely underpaid taking bribes like this

allows them to supplement their meager income. As long asthe police are severely underpaid and have the bargainingpower to take bribes, one can only expect that most will.Assuming that the police will seek to supplement theirearnings with bribes, we can only hope that they engage intypes of bribery that have a relatively low social cost. Thesocial cost of accepting bribes instead of traffic tickets seemsrelatively low compared with say, demanding bribes to filepolice reports or to have criminal cases dropped.

Bribery as practiced in this context also maintains someincentive to follow traffic laws. Since the police will generallyonly pull over someone who has actually broken a law, thebribe replaces the fine as a financial incentive to follow therules. Since the bribe will always be smaller than the fineitself, its possible that the incentive is watered down a bit, butthe fact that bribes are only taken from those who havebroken the rules in the first place maintains some degree of incentive to follow the law. This is in sharp contrast to hafta

bribes (weekly payments collected from local businesses)which are more indiscriminate in nature.

We have been reporting from time to time on this blog abouthow corruption is widespread (as if I had to tell you that :) inIndia and who are the people who take maximum bribes.

However, I was not able to actually provide any numbers onthe extent of corruption in India. Finally after some research,we have some numbers for you that can quantitativelymeasure the extent of corruption.

India Corruption & Bribery Report


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What is the amount of bribes requested by people inIndia?

The above numbers clearly suggest that Bribery in India is at a

grass root level with close 86% demands were done for $5000or less (2,50,000 rupees or less, out which more than half were for $26 (Rs. 1300) or less.

Because, corruption takes place at such a grass root level, it isextremely difficult to contain it.

Having said that, 14 people out of 100 taking bribes are foramount more than $5000 (Rs. 2,50,000). Actually, if you lookat the top officials are even more corrupt. I will tell you why Isay that

The number of big bosses is merely 1%-2% of all officials, yetaccording to the report 14% of bribes are of huge amounts,


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showing that big bosses are involved even more compared tolow level officials who are taking bribes.

On a sidenote, Chinas number is much higher with 24% of

reported demands were for amounts between $5,001 and$50,000, 6% of reported demands were for amounts between$50,001 and $500,000, and 6% werefor amounts greater than $500,000. interesting

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What is the nature of Bribe Demands in India?

No guesses here if you want to get your work done, bribeem ! thats what is quite clear and in line with the notion wehave.

More than half of all the bribes were paid to get the work intime !

77% of all reported bribe demands in India are related to theavoidance of


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harm, including securing the timely delivery of a service which is actually a right of a person (such as clearing customsor having a telephone line installed) and receiving payment forservices already rendered

Only 12% of the bribe demands were for gaining a personal orbusiness advantage (including exercising influence with orover another government official, receiving inappropriatefavorable treatment or winning new business).

One thing for sure, we are now used to this corrupt systemand take it in our stride as part & parcel. We do not want to goextra lengths and take the easy way out. But this easy wayout is actually the roots of corruption in India.

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Who demand bribe in India?


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No guesses here !

Whooping 91% of reported bribe demands originate from

government officials in India. The greatest sources of bribe demands, were from nationallevel Government officials (33%), the police (30%),state/provincial officials and employees (16%), and cityofficials (10%) respectively .

Do you know which of the two Indian ministries ask for bribemore than other? They are Customs office (13%) and

Taxation and Water (9%).

China fares slightly well when it comes to Government officialstaking bribe (85%) Another major difference is that IndiaPolice (30%) are far more corrupt than their Chinesecounterparts (only 11%).

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What is the frequency of Bribe Demands in India?


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Nearly 90% indicated being solicited for a bribe between twoand 20 times.

Overall 60% people reported bribe demands of 5 times orlower from the same individual. However, 9% asked for bribesmore than 100 times.

Compared to China, it differs significantly with 73% peopleindicating that they had received multiple bribe requests.Almost 20% of those individuals reported receiving more than100 bribe demands in China.

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In what form was the bribe requested?


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Do you want any tips on how to give bribes? here is what ourcorrupt officials prefer..

If in doubt, give cash, as 92% of all bribes are preferred to be

cash or cash equivalent, The next best thing is a gift, (5%)including requests for company products, jewelry and similaritems. Less common still, at approx. 1% each, were requestsfor hospitality or entertainment items; travel for other thanbusiness purposes; and other assistance, such ashelp with a visa, medical care, or scholarships.

Surprisingly, there were no reports in India of demands foradditional business or sexual favors. In China, thosedemands accounted for a combined total of 7% of reportedbribe solicitations.

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So, there you have it How, what, who and why of IndianCorruption.

[These numbers were gathered from BRIBEline, a project

managed by TRACE International Inc., an anonymous onlinereporting tool that collects data about bribe solicitations madeby official, quasi-official and private sector individuals andentities in India ]

Author: Arun PrabhudesaiArun Prabhudesai is founder / chief editor at trak.in. He

jumped the Entrepreneurship bandwagon in early 2008 after along 13 year stint in I.T Industry. You can follow him on twitter@trakin or get in touch with him at 91.9822575676.

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term paper on bribery impact

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