Published October 22, 2009

Strong hand against palm-greasing

By CHEW XIANG

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JUST 17 organisations - business federations, chambers of commerce, NGOs, listed multinationals - signed a pledge to stamp out graft at an anti-corruption conference here last month.

Only 17? In Singapore, a net number of some 15,000 companies are formed each year. There are over 700 companies listed on the local stock exchange. Just a handful - literally about five Singapore-listed firms - signed the pledge.

It's not surprising. Singapore is famously more or less corruption-free but in the Asia-Pacific as a whole, 'corruption and lack of transparency, particularly in political financing, clearly remain serious challenges', notes a 2008 report by Transparency International, a non-profit group.

Singaporean companies are probably clean in their own country. But away from home, they may face societies with greater moral fluidity. Retainers, personal donations, special discounts, miscellaneous outgoings, agents' fees, political contributions, management expenses - all are possibly part of business as usual.

A Philippines anti-corruption official said a fifth of her country's budget is diverted by venal bureaucrats. Almost everyone has a corruption story, off-the-record stuff that happened to a friend of a friend of a friend. Unsurprisingly, companies think those that put themselves in the firing line might get shot in the foot.

The chairman of a small listed company here told an annual general meeting that his brother - the company's representative in China - bought thousands of dollars worth of supermarket vouchers to distribute among officials there. He was explaining a $167,000 hole in the company's accounts which auditors had refused to accept. There were no receipts for the vouchers, no receipts to show who had taken them, and no way of tracing the money. That sum has now been written off; predictably, the company was not a signatory to the anti-graft pledge. And one suspects this particular experience is not unique.

How then to curb corruption? One way - the Singapore way - is to pay good salaries and to strictly enforce laws against venality. In a 1997 research paper, Alberto Ades and Rafael di Tella said there were three approaches to curbing corruption, broadly speaking: the lawyer's approach, the businessman's approach, and the economist's approach.

The first is to set and enforce draconian laws on corruption, the second is to pay higher wages to bureaucrats, and the third is to increase the level of competition in the economy among companies and bureaucrats. Opportunities for corruption exist only where there is some exclusive exercise of power.

Singapore and Hong Kong do well on all three counts. Both are models of laissez- faire societies 'with market forces competing away rents in an extreme way'. The only problem, the authors noted, is that their anti-corruption agencies have sweeping powers (in Singapore, the Corrupt Practices Investigation Bureau is directly accountable to the prime minister) which may not be easily adapted to other territories.

It is a good thing if corruption can be eradicated. But it will take more than pledges and documents to do that - and graft has an unnerving tendency to come to life just when it is thought to be extinct. The fight will be long and persistent, and perhaps Singapore can profit in the meantime.

In a dialogue session with students on Monday night, Minister Mentor Lee Kuan Yew said the absolute rule of law would remain a competitive edge for Singapore. That is one of the few things the big emerging economies like China cannot immediately replicate, he said.

It is no bad thing to be a corruption-free zone in Asia, to be in a place where the rule of law is paramount. Even the corrupt need protection from corruption. Perhaps 17 is a sensible number, after all.