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Bribery and corruption continue to be a problem for businesses in the emerging markets: EY survey

In India, 12% of the surveyed companies said that they had experienced a significant fraud over the last two years, while 20% said they would justify cash payments to help the business sail.

Devika Singh   New Delhi     Last Updated: November 1, 2018  | 21:21 IST
Bribery and corruption continue to be a problem for businesses in the emerging markets: EY survey

More than 50 per cent of the business executives in emerging markets surveyed by professional services firm EY in a recent survey said that the corruption and bribery continue to be a problem, despite the numerous initiatives taken by the governments to curtail them.

The perceived level of bribery and corruption in emerging markets, including India, has continued to be double that of developed markets since 2012, says EY's Emerging markets - Integrity in the spotlight 2018 report. The report, surveyed 1,450 executives from 33 emerging market countries and territories from October 2017 and February 2018, as part of a global study on fraud, bribery and corruption trends.

According to the report, more than 42 per cent of emerging markets respondents believe that fraud and corruption pose one of the greatest threats to businesses, this is significantly higher than the 29 per cent of respondents in developed markets.

The report, however, also says that there were some improvements in some emerging markets. In India, for example, according to the report, 40 per cent respondents believed that bribery and corruption occur widely in business as compared to 67 per cent last year.

"The market has seen a transformation on multiple fronts, including new domestic reforms, initiatives for smart cities, single window clearances for infrastructure and industrial projects and the ongoing battle against fraud and corruption," the report said about India.

"There have been concerted efforts to enhance corporate governance and transparency through regulatory reform such as the Prevention of Corruption (Amendment) Act 2018, Companies Act 2017 and Insolvency and Bankruptcy Code (Amendment) Bill 2017, as well as increased penalties for non-compliance. However, fraud and corruption are still a major obstacle to growth. In the media, the more frequent reporting of larger cases of corruption pose a greater reputational risk for companies doing business in the region," it added.

Also in India 12 per cent of the surveyed companies said that they had experienced a significant fraud over the last two years and 20 per cent said they would justify cash payments to help the business survive.

Other interesting findings from the survey are:

Bribery necessary to win contracts: The report revealed that a number of organisations feel some form of incentive is necessary to guarantee a company's survival. Sixteen per cent of respondents from emerging markets acknowledged "it is common practice to use bribery to win contracts" as compared to 5 per cent in developed markets.

Offering cash payments, gifts and entertainment still acceptable: The report found that some business executives still believe that it is acceptable to give cash payments in exchange for commercial advantage. Nineteen per cent of emerging markets respondents felt this could be justified compared with just 6 per cent in developed markets. Overall, China ranked 6th and India stood at 12th among 33 emerging markets where offering cash payments could be justified.

Mismatch between intention and behaviour: While the majority of respondents in emerging markets understand the importance of demonstrating integrity (97 per cent), adoption of unethical practices is still justified. This shows a contradiction between employee intention and actual behaviour.

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