Corruption is a systemic problem that plagues many transitional countries across the world, rooted in weak rule of law and lack of private property rights. Not only does corruption erode trust in public institutions, such practices also hinder economic growth and weaken democratic governance.
The corruption challenge can be addressed by building responsive institutions that offer basic assurances of private property rights and ensure law and order. CIPE programs address the root causes of corruption through a multi-pronged approach. CIPE programs mobilize the private sector to raise anti-corruption standards and advocate for reforms; streamline regulations and reduce implementation gaps to limit opportunities for corruption; improve corporate governance to strengthen firm-level integrity; facilitate collective action to level the playing field and coordinate company efforts; and equip small and medium-sized enterprises to resist bribery and meet the requirements of global value chains.
Two recent case studies, described below, show these CIPE approaches in action.
Collective Action Against Corruption in Thailand
Since 2010, under the guidance of CIPE, the Thai Institute of Directors (IOD) has built a coalition of Thailand’s largest businesses and most influential business associations united in their commitment to tackle the supply side of corruption.
Coalition members all sign the Collective Action Against Corruption Declaration and pledge to take tangible, measurable steps to proactively reduce corruption-related risks. These steps include implementing anti-corruption policies and compliance programs, providing guidance on business conduct to managers and employees, and disclosing internal policies and experiences to help disseminate and promote best practices. Companies also agree to an external evaluation of their anti-corruption practices.
IOD estimates that member companies now represent nearly 20 percent of the Thai economy and more than one million employees. These anti-corruption efforts in Thailand are unprecedented and speak to the power of an organized private sector to tackle one of the most ingrained and challenging political and economic problems, while increasing transparency and accountability.
SMEs FIGHT CORRUPTION IN Armenia
Since gaining independence from the Soviet Union in 1991, Armenia has suffered from widespread corruption and the dominating role of oligarchs in politics. In 2001, 95 percent of all business entities in the country lacked any kind of formal representation to advocate for business reforms. To address these challenges, CIPE partnered with the Association of Foreign Investment and Cooperation (AFIC) in order to combat corruption and improve the environment for small and medium-sized enterprises (SMEs).
CIPE and AFIC galvanized small business engagement in the policy process through collective action. The outcome of these efforts is an improved operating environment for SMEs in Armenia with a reduction in corruption risks and lower costs of doing business. Regulatory improvements included the adoption of a new SME law, a reformed law on state inspections of private sector entities, and improved regulations protecting the rights of SMEs in commercial property transactions.
In the forthcoming publication of Strategies for Policy Reform, two case studies on collective action against corruption from Armenia and Thailand illustrate the power of the private sector to self-organize and become an effective advocate for better business practices and an improved operating environment.
Teodora Mihaylova is Research Coordinator at CIPE.
Originally posted at CIPE Development Blog