Corruption is killing business deals, say India-headquartered foreign firms

Our Bureau | | Updated on: Jan 22, 2018


Survey shows 80% of respondents want extra territorial laws to improve business environment

 A large number of foreign firms headquartered in India feel that graft continues to be a major hazard despite a number of anti-corruption initiatives in the country, says a survey, while admitting that the overall picture is improving.

 Among India-headquartered foreign companies, 39 per cent respondents said they had failed to win a contract where there was strong circumstantial evidence of corruption by a successful competitor, said an annual survey of 842 senior legal and compliance professionals by Control Risks, a global business risk consultancy.

Overall, most respondents said corruption, which was still a major cost to international business for “killing deals”, continues to deter investors.

Forty one per cent cited the risk of corruption as the primary reason for pulling out of a deal on which they had already spent time and money.

‘Facilitation payments’ Among other things, the demands for ‘facilitation payments’ to speed up routine government transactions was a significant problem, said several respondents.

 In India, 48 per cent of  the respondents said they would face no more than minor delays if they refused  to make such payments; 17 per cent said refusal would lead to major delays and significant costs to businesses, while 9 per cent said their business ‘will grind to a halt’ if they do not pay.

The picture is better in countries that ensure tight enforcement, with 81 per cent of the respondents saying that international anti-corruption laws “improve the business environment for everyone”, deter corrupt competitors (64 per cent) and make it easier for good companies to operate in high-risk markets (55 per cent). In India, 80 per cent respondents thought that extra-territorial laws would improve the business environment and helping level the playing field, especially for those “unhappy with haphazard enforcement of domestic legislation. “

 The Control Risks’ survey, while suggesting that companies themselves need to do a lot more, said that third party risk was still relatively unrecognised.

Due diligence “Only 42 per cent of  the respondents from India have procedures in place for due diligence assessments of third parties and at most 58 per cent have an anti-corruption training programme for employees,” it said. Richard Fenning, CEO, Control Risks, said in a release that “governments and companies across the world are increasingly aware of the importance of countering corruption”, citing the example of China and Brazi, which had stepped up enforcement in the past year. 

Published on October 13, 2015
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