Business Today

CEOs worried law unable to tackle graft

According to a survey, India's top business executives felt corruption made it difficult for companies to attract investments from overseas and was unfairly skewing the playing field.

Anuradha Shukla   New Delhi     Last Updated: March 15, 2011  | 09:26 IST

India Inc does not believe that existing laws and government measures will be able to stem the rising tide of bribery and corruption in India. Not even a single member from a panel of chief executives and chief financial officers of India's top 100 corporates felt that India had a good track record on enforcing bribery and corruption laws. They were polled by a leading global consultancy on the impact of bribery and corruption on the economy and the business environment.

The growing number of scandals and scams is denting India's image as a dynamic and growing economy, industry honchos feel. According to a survey on corruption and its impact by management consultancy KPMG, India's top business executives felt corruption made it difficult for companies to attract investments from overseas and was unfairly skewing the playing field.

At a time when the economy is poised to grow at over 9 per cent, corruption is threatening to "derail" the nation's credibility, the report said. "Regulation in India tends to focus on the bribe taker rather than the bribe payer and hence corporates do not shy away from adopting corrupt practices," Deepankar Sanwalka, head of KPMG's Risk & Compliance Group, said.

"However, the global environment is rapidly changing and it will only be a matter of time before Indian regulations align themselves to global anti-bribery and corruption laws and practices," he added.

But that could take some time happening. Half the respondents said that corruption will stay at the same level as at present over the next two years as well, while another 17 per cent felt it would get worse.

Among the key reasons for India's abysmal track record in enforcing its own anti-corruption laws, respondents cited political Interference (20 per cent), delayed justice that impairs the effectiveness of the verdict (18 per cent), penalties not being harsh enough to deter repetition of the crime (15 per cent) and the involvement of multiple agencies in investigating charges filed, which further delays fact finding and eventually the verdict (14 per cent).

Not surprisingly, given the spate of high-profile scams in these sectors, real estate and telecom emerged as the most corruption prone sectors. Around 32 per cent of the respondents named real estate and construction sector as most prone to corruption, followed by telecommunications (17 per cent). Development sectors such as education and poverty alleviation came third with 13 per cent respondents terming it as the most corrupt.

"This does not come as a surprise since in all these sectors government and political intervention is considered higher. Large capital investments, multi-level approvals, complex processes and huge projects give immense opportunity for corruption in these sectors," KPMG said in the report.

Asked to respond to the findings, Navin Raheja, chairman and managing director of Raheja Developers, said, "I would not like to comment on the issue. All I will say is that all the clearance processes should be put online to bring transparency in the system.

Also, it is important to make people responsible for procedural delays accountable. There is a need for a real estate regulator which penalises all the stake holders, from the developer to the bureaucrat, for any lapse." The survey was based on responses from 100 top CEOs, CFOs and legal experts from Indian companies and multinationals who are doing business in India on the recent scams that hit the confidence level of corporate India.

"At a time when India is aiming for a nine per cent GDP growth; the rising level of bribery and corruption cases have cast a dark cloud over the country's hard earned success of the last two decades," the report said.

"Corruption is the biggest problem faced by the country today. No corporate wants to pay bribes, but sometimes, they are compelled to," said Vijay Kalantri, president of the Association of Indian Industry. Drawing parallel with the "compulsions" of coalition politics referred to by the Prime Minister, Kalantri said industry was also "helpless in dealing with corruption" due to business compulsions.

As many as 99 per cent of the corporations were of the view that the biggest impact of corruption on business was that it skewed the playing field. Interestingly, a majority (68 per cent) of corporates admitted to corruption by saying that in many cases corruption is induced by the private sector itself.
Among other things, respondents believed that a solid, foolproof mechanism should be put in place by the government to check and arrest the rising cases of corruption and bribery. Strict enforcement of existing provisions under law, for both the taker and the giver, is believed to be the need of the hour to prevent further erosion of trust and credibility of India's economic success.

Industry appeared poised to actively participate by willing to support a legislation that would deal with the bribe-giver with equal strictness as that with the bribe-taker.

The corporate sector has also demanded a structured and effective whistle blowing mechanism to report potential bribery or corruption issues; thereby, ensuring more scams come under the public purview, while assuring complete security to the whistleblower.

There is also a realisation of the importance of implementing new steps within organisations to tackle and prevent promotion of bribery and corruption. Industry bodies have also been advised to take the lead in standing up against bribery and corruption in their respective sectors to ensure a corruption-free environment.

India Inc strongly believes that its efforts along with the steps taken by the government can go a long way in diminishing corruption. According to the KPMG survey, 51 per cent respondents expressed apprehension that rising corruption will make India less attractive for foreign investments, while 90 per cent were of the opinion that corruption increases volatility in the stock markets, preventing long-term investors from coming to the country.

According to Harsh Mariwala, president, Federation of Indian Chambers of Commerce and Industry (Ficci), "Even though India's growth story is intact, the recent corruption cases have certainly affected the business sentiment of India Inc. Governance is a matter of concern for us and this will be on the top of our agenda this year."

Courtesy: Mail Today 

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