Corruption in Asia

Corruption.

It’s a hell of a word, bringing up images of autocrats screwing over their populations, or 1%ers accepting payments in order to assure that they stay rich.

And, with the nonsense going on in the States, it’s pretty much front-of-mind for everyone.

 

I previously discussed the way that Japanese marketing companies and TV stations employ a “washing machine” to spin money around the economy here; basically, if you sell equipment to a TV station then it is implied that you will purchase advertising from them. It’s never stated in the contract, however it’s pretty much a given if you’re expecting to get any future business from the industry.

There was a comment about this, stating that it was “blatant corruption” (I’m paraphrasing). The thing is though, that it isn’t. At least in this instance, you have two businesses that are engaging in trade. They both enter contracts to buy legitimate services. Sure, they might not need those services, but they are purchased nonetheless. The money only goes to the companies involved; there are no under-the-table payments to individuals.

I’m not saying that those kinds of things don’t happen in Japan – they happen here as much as anywhere I suspect.

However, there is certainly a societal definition of corruption, and certain things are tolerated to different degrees in different countries. A case in point is that most Japanese companies own shares in their competitors, but this is considered completely legal…

Let’s have a look at some examples, shall we?

Here’s a simple one. I used to work in an performing arts facility. I’ve since moved into an equipment manufacturer; initially as a sales guy. One of the first people I called up was my old boss and started selling him stuff. Now, my friends have becoming the purchasing authorities at that institute. If they buy things from me, is that corrupt? Are they doing a full due diligence on my products? Is it OK if I buy them a beer? A meal? Attend their wedding?

Sure, it might be ok in that context, but now let’s say that instead of an arts organisation, it was a government job, and instead of selling broadcast equipment, I was selling warplanes. Would that still count…? I know that most people would consider the first example OK, and the second one not so much.

(I should note that I have a strict anti-graft policy for myself and my team, even where the rules are a little laxer than they are in Aus).

I’ve been in the front line of some corruption as well. The most obvious example was discussing a contract for a regional sporting event. Someone introduced our company to another one in the host country. During dinner, the “introducer” and the host company (our distributor) moved to the end of the table, still within earshot, and discussed the “introduction fee”. Two weeks later, the distributor flew to our regional office and asked for a meeting with myself and my point man in that country. He flat out asked for cash to pay for the “introduction”. We haven’t done any business with that distributor since.

 

In another, similar tale, we had been awarded the technical phase of a tender, when suddenly we got a phone call from a “consultant” demanding 10% of the final invoice price. We refused, and lost the deal to a technically inferior system.

 

So that’s one end of the spectrum. Let’s come back to Japan now (the previous examples were all from other parts of Asia).

For now, I’m going to “ignore” the bribes that are paid or the allegations of match fixing in Sumo. I’m sure that, to some degree, those things happen.

But in Japan, there is a slightly more insidious form of corruption – societal corruption.

One of the main principals of Japanese culture is “Wa,” or “Harmony”. Being one of the last countries to shrug off feudalism, and having suffered under some pretty terrible martial law for the best part of a millennia, the overarching culture here is based around maintaining the peace at all costs. Korea also has some similar history, but that’s another story for another day.

So, you will have companies and people make decisions based on what is/appears to be the path of least resistance. There is a reluctance to be the person that bucks the trend, and a severe risk aversion. This is one of the reasons behind a common lament of foreign companies setting up in Japan – everything here is so damned slow! Maybe that is a post for another time though.

The result, then, is that you might have companies buying products or services from other companies that would make no sense to an outside observer. However, to the decision makers, it seems like the “safe” choice. Let me use an example to illustrate. I’ll try to obfuscate the details but we’ll see what happens.

 

My company provides services to large events. Most of these events are funded (in part) by the Government, so their procurement rules apply. They are insanely strict about this – in our final tender presentation, we were told not to even greet anyone in the room, and to assume that we knew no-one.

Anyway, we had a pretty competitive bid and experience to back it up. We lost the contract to a domestic manufacturer who had no experience and a higher price.

We got some feeble excuses from the tender committee, but offline I received some information that, since the Government is paying for the event, the tender committee thought that it would be better to go with a domestic supplier so that the government could show how they were supporting the local economy.

The thing is, I honestly doubt that there was any direct order given for this outcome. Personally, I think that the committee thought that the government would want to see this result, and hence they went for that option.

Oh, and of course, the winning vendor has now signed on as a sponsor of the event…

 

In essence, I moved into Asia thinking that you could be pretty black and white on corruption. I once travelled with one of my vendors (at my previous job) and we were so strict about probity that I didn’t even let them buy me as much as a coffee for the whole trip. But the last 2.5 years have taught me that it’s not as easy as saying “this is/isn’t corrupt.” Of course, there are cases that are blatant, for example a world leader being given a share in a foreign power’s oil company and then easing sanctions on that company, but there is a whole layer that exists below that in the murky grey sea of “should this be allowed?”

 

 

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2 thoughts on “Corruption in Asia

  1. If friends did not due their due diligence investigating products sold by a friend then that is blatant corrupt behavior that should lead to firing in the private sector. If a public servant committed the act jail time or being barred from holding public offices and positions should be due. The only reason it is so commonly done without repercussion is the high bar of difficulty to prove intent versus mistake or incompetence and it being so common place people become blind to it. If products are still under review then the seller should absolutely not be buying them a beer, meal, or attending personal events until the transaction is concluded. Both examples are inappropriate behavior but especially dangerous in the example of the government official.

    The not accepting coffee while on a business trip part sticks out to me because that is an almost exact example of what I could be fired for in my old job. Because the clients had government allocated funds, and would inherently be using them to buy anything they purchased, any pattern of accepting anything from a client would result in being fired. Accepting anything “large” (for example a $30 meal) or a pattern of accepting things could lead to legal action in addition to being fired. Because of the involvement of public money being strictly absolut 0 tolerance of any gift or monetary gesture was absolutely necessary. Of course people were regularly fired because they didn’t think it was a big deal and/or figured something as small as a soda or cigarette would never be found out. In fact some groups of colleges took small gifts regularly on the shared assumption that none of the others would be reporting it and they were often safe in that assumption.

    Corrupt dealings of various levels are very common and often not illegal or at least not able to be prosecuted in every country and culture. That doesn’t make them acceptable or even reasonable.

    1. I should clarify that during tender/evaluation processes we usually stay clear of each other to prevent any rule-breaking, and most Aussie institutions have rules that allow for a little common sense – e.g. anything under $50 (or similar) doesn’t need to be reported if it is outside of a tender evaluation.

      But at the end of the day, you’re going to fight harder for a friend than for a stranger. That might mean that you have a little higher price in the tender but you say that there are technical differences etc…

      Whilst it might be easy to stamp your feet and say “Anything is corruption,” there is a clear difference to treating a person to a coffee than to leaving a suitcase with a few thousand dollars in it, or asking for “consulting fees” or similar after the deal has been done.

      I think that my opinion of corruption in general has changed in the past couple of years. Maybe because I’ve been exposed to more “real” corruption than just wasteful fretting over friends buying each other a beer…

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