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Growth Strategies

Here Comes The Bribe

Honesty isn't always the best policy abroad
Magazine Contributor
3 min read

This story appears in the October 2000 issue of Entrepreneur. Subscribe »

Sometimes global entrepreneurs face hazards far more insidious than unfamiliar languages and customs. One of the worst experiences of doing business abroad: dealing with corruption.

"Bribery is a common way of doing business in a lot of places," says Steve Veltkamp, president of Biz$hop, an import/export business and consulting service in Port Angeles, Washington. Veltkamp, 47, notes that bribery is most common in underdeveloped countries. "Where basic jobs don't pay well, it's tempting for an official to 'supplement' income that way," says Veltkamp. "It's deeply ingrained."

Another contributing factor, according to Transparency International, an organization that monitors international corruption, is the degree to which officials perceive themselves as immune to any penalties for demanding and receiving bribes.

From the perspective of U.S. entrepreneurs, bribery presents a double-edged sword. While bribes are expected in many countries, the United States' 1977 Foreign Corrupt Practices Act prohibits payments made to foreign government officials with the aim of gaining or maintaining business.

Not all payments are prohibited by the act. Some payments are acceptable if they don't violate local laws. "Gifts," for instance, to officers working for foreign corporations are legal, according to Veltkamp.

But it can be difficult to determine the difference between a gift and a bribe in a given situation. "If you give a gift to someone and it leads to a business deal, is that a bribe or a gift?" asks Veltkamp. "In some cultures, gift-giving is an entrenched part of doing business. If you look at it in a certain sense, maybe it's a bribe, since they won't talk to you until you've made that gesture."

Consider this: Until an anti-bribery convention proposed by the Organisation for Economic Co-operation and Development (OECD) was signed by 34 countries in 1997, many nations, including Germany and Canada, allowed companies to deduct bribes as legitimate business expenses. Many U.S. entrepreneurs who believe this placed them at a disadvantage in the international business arena expect the OECD act to level the playing field.

This hardly means corrupt officials and governments have stopped demanding bribes. Transparency International lists the following as the top 10 most corrupt nations, based on the prevalence of bribery (in order): Cameroon, Nigeria, Indonesia, Azerbaijan, Uzbekistan, Honduras, Tanzania, Yugoslavia, Paraguay and Kenya. (Interestingly, the United States doesn't make the top 10 list of the least corrupt, which is topped by New Zealand, Denmark and Sweden.) In terms of countries most willing to pay bribes abroad, China tops the list-the United States comes in 10th (tied with Germany) out of 19 countries.

What can you do if your overseas associate demands a bribe? Veltkamp suggests staying out of the loop entirely. "I always recommend that, if possible, you let the local nationals deal with [government officials], because they know the system. Let them tell you what fees have to be paid."

Veltkamp doesn't recommend asking embassies or consulates for assistance, as "they have to stick to the official line." Instead, he believes "the best resource in almost every country of the world is the U.S. Chamber of Commerce, [where you can find] Americans who live in the country and [understand] how things are done."

Finally, watch your bookkeeping. The Foreign Corrupt Practices Act requires all publicly held companies to keep records that clearly indicate how funds are used-so bribes can't be disguised in slush funds.

Moira Allen is a freelance writer in Mountain View, California, and editor of Global Writers' Ink, an electronic newsletter for international writers.

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