Inter Press Service

December 13, 2002

An anti-corruption group has unveiled a set of guidelines that it says will help reduce corrupt practices by transnational corporations and their agents in the developing world. TRACE (Transparent Agents and Contracting Entities) says its ‘Standard for Doing Business with Intermediaries Internationally’ will fill a critical gap in global commercial practices and correct some of the wrongdoing seen increasingly in international business deals. The non-profit organization says its effort, supported by major law firms and investor groups, is aimed at corporations that conduct business with foreign governments. It focuses on the intermediaries that many companies hire to negotiate on their behalf but should also influence company-wide practices, adds TRACE, which has offices in London and Washington. The standard would apply to “scores of unscrupulous agents/intermediaries” across the world who “routinely use bribes when representing those companies in transactions with governments”, the group says. It would apply to many types of middle men hired by corporations — sales agents, consultants, suppliers, distributors, resellers, subcontractors, franchisees and joint venture partners — who are often blamed for corruption and official cronyism in the developing world. In September, the role of intermediaries came to the fore when Acres International, a Canadian engineering consulting firm, was convicted in a Lesotho High Court of paying bribes through an intermediary to win contracts on a multi-billion-dollar dam project. Many other international firms face similar charges in the same court. Although Acres denied the charges, saying the intermediary was acting without its knowledge, company officials acknowledged that their local representative was “secretly paying part of his fee” to an official handling the project. Applying the TRACES standard would eliminate exactly that sort of deal, says the group, particularly in industries like the arms trade, oil and gas, and construction and engineering, where multinational firms use agents in talks with foreign governments. Under the standard, firms would review the business and technical credentials of foreign business intermediaries; require three independent business references for the person; request disclosure of prior bankruptcies or lawsuits and do an extensive media search of the intermediaries and their work. They would also investigate whether any government official or political candidate has an ownership interest or family relationships to the business concerned. Intermediaries that become TRACE members would be required to have or adopt a code of conduct addressing bribes, kickbacks and conflicts of interest and to attend an annual ethics training programme. Global apprehension about corruption has escalated recently, with economists universally agreeing that corruption and official moral laxity hurt growth. The World Bank has identified corruption as the “single greatest obstacle to economic and social development.” The bank says that higher levels of corruption are associated with lower growth and lower levels of per-capita income, in part because it discourages dollars.” But civil society groups, including CorpWatch, Transparency International and Global Witness, have previously said that international corporations tolerate, if not encourage, the malpractice of some of their intermediaries to win contracts. Some transnationals work in developing countries with complete impunity, protected by the political might of Western nations and pro-corporate policies imposed on developing nations by international financial institutions (IFIs) like the World Bank and the International Monetary Fund, the groups add. Projects fuelled by the corrupt work of intermediaries include some of the most socially and environmentally damaging schemes affecting thousands of people, such as dams, electricity grids, roads and port constructions. The groups also complain that corruption runs far deeper and way beyond intermediaries, and that some governments have grown completely unaccountable to their citizens. They have demanded the implementation of well-designed internal audit measures that could help flush out bribes masked, for example, as agents’ commissions. Corrupt practices include awarding contracts without competition, favoring relatives with contracts for international companies or taking bribes and profit shares. Copyright (c) 2002 IPS-Inter Press Service. All Rights Reserved. Copyright © 2002, Inter Press Service, all rights reserved.