Fighting Corruption in Private Sector

10:52:22 AM | 22/5/2019

The amended Anticorruption Law has been ratified by the lawmaking National Assembly and set to enter into force in July 2019, with the scope of application extended to the non-State sector. This is the first time Vietnam governs corruption in the private sector.

According to research by the Project “Promoting integrity in business” launched by the Vietnam Chamber of Commerce and Industry (VCCI), corruption in the private sector already caught the considerable attention of the Government and the public in Vietnam. The research showed that businesses play an important role in the fight against corruption because they are both victims and motivators of corruption.

The new Law on Anticorruption underlines the importance of internal control and code of conduct (CoC) system: “Enterprises and other economic entities issue and apply the code of conduct and internal control to prevent conflicts of interests, preempt corrupt behaviors and build a healthy, noncorrupt business culture”. This shows that legislators have realized that the private sector is capable of adopting anticorruption measures in tandem with the Government's efforts to construct corporate systems and culture based on equity and transparency. The world also supports this view: Good internal control, a clear code of conduct and practical enforcement are useful tools to improve business performance, reduce costs and increase profits. For successful companies, business integrity is considered a competitive advantage rather than a business constraint.

The national survey on the Provincial Competitiveness Index (PCI) showed a clear evidence of bribery in the entire economy. PCI raised questions about unofficial payment by companies on a scale from 1 (very common and serious) to 10 (uncommon and unserious).

According to the survey, from 51% to 65% of respondents in 2011 - 2017 thought that their peers are paying bribes. In addition, more companies tended to pay 10% or more of total revenue for informal expenses, from 7% (2010) to more than 10% in 2014 - 2017. Recently, more than 80% of surveyed companies believed that informal charges they paid are “acceptable”. In 2018, Towards Transparency (TT) surveyed tenants in high-tech zones in Vietnam on bribery challenges, finding that a large share of businesses, including big ones, still regard bribery as a normal activity in business.

From the above evidence, according to the research report on “Applying internal control and the code of conduct in Vietnamese businesses: Reality and recommendations”, bribery in Vietnam is attributed to three reasons.

Firstly, a significant share of businesses in Vietnam are paying informal charges as a normal business activity. This increases pressure on other businesses to do the same to join the game. Over time, paying informal charges becomes a normal act rather than an exception.

Secondly, the limit of off-the-record payments has become popular in recent years, in stark contrast to the Government's efforts and the community’s expectations. There is clear evidence of an increase in bribe givers, bribery value (more than 10% of total revenue) and the popularity of informal payments.

Finally, private companies in Vietnam have seen bribes as a “business cost” rather than an issue of integrity in business. Most believe this payment is “acceptable”. The study has no evidence of how businesses view bribes as a matter of morality and integrity, but some other studies also revealed that businesses are engaged in bribes and other illegal activities.

In fact, until this study, there is little evidence of how much Vietnamese businesses care and what they are actually doing to improve business value standards. Some studies showed that many companies in Vietnam have not yet adopted global management tools to improve internal control, risk management and compliance such as code of conduct or internal control system. Many research projects on internal control and code of conduct analyze internal control and code of conduct in a specific company/entity such as the Electricity of Vietnam Group, the Vietnam Posts and Telecommunications Group. Most studies focused on proposing improvement of the corporate internal control system and consider whether the internal control system helps enterprises better control finance and have better social responsibility. Some studies showed a positive relationship between internal control and performance.

These studies revealed big differences in perception of enterprises in roles and benefits of these tools. On the other hand, businesses in Vietnam may simply not know how to build and apply these tools in the best way because they lack professional management experience.

With financial support from the United Kingdom Prosperity Fund, VCCI launched the Government - Business Integrity Initiative (GBII) to promote cooperation between the Government of Vietnam and the business community in the fight against corruption. GBII aims to support the introduction of the new Anticorruption Law in three main areas: Training for businesses, measuring impacts of legal regulations, and attracting broad attention of their stakeholders.

Companies play an important role in the fight against corruption because they are both victims and motivators of corruption.

Quynh Anh