New report confirms corruption as entrenched as ever

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Foreign analysts complain nothing ever changes; history shows local firms accept bribery as par for the course

Laborers work on the foundation of a new restaurant in Hanoi. 48 percent of 270 companies surveyed were willing to pay bribes in a bid to win contracts to provide items or services to the public sector, a national survey shows. Photo: Bloomberg

A national survey released last week has found that while local companies complain that corruption makes business more difficult, they see bribery as not only a key to success, but as an inseparable part of Vietnamese business culture.

Sixty-three percent of respondents to the survey by the Vietnam Chamber of Commerce and Industry (VCCI) said sending gifts, money to express gratitude to government officials is a common custom. 48 percent of companies interviewed were willing to pay bribes often in the form of cash, luxury vacations, or lavish dinners in a bid to win contracts to provide items or services to the public sector, the study said.

Some 70 percent of respondents agreed with the statement: "In case of working with government offices, give money first and everything will be easy."

And a staggering 90 percent agreed that "it is impossible to eliminate corruption in a relation-based business culture."

But none of this is very different from the findings of other reports issued years ago.

"Not enough has been done on this regards and the practice continues," said Jairo Acuña-Alfaro, policy advisor on anti-corruption for the United Nations Development Program (UNDP) in Vietnam. "This new survey re-confirms the challenge to address the problem of "˜systemic' corruption in Vietnam, and uncovers "˜business as usual' practices that hamper further investments."

The study, which interviewed 270 businesses in Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, Dong Nai, and Can Tho, also said 80 percent of respondents acknowledged corruption had hindered their operations.

While some foreign analysts took the VCCI survey as a reminder of the fact that private companies need to help fight corruption, others worried that the practice of giving and receiving under-the-table money was so common, and therefore "normal," for local companies that they might not regard it as a problem.

Business as usual

According to the World Economic Forum Global Competitiveness Report 2009-2010, companies operating in Vietnam cite corruption as one of the top ten most problematic factors for doing business in the country. Business executives surveyed in the report indicated that the diversion of public funds to companies, individuals or groups due to corruption is quite common. This view was supported by Grant Thornton Vietnam's Investment Outlook Survey 2009, in which 77 percent of the participants (all members of the investment community) saw corruption as a substantial problem.

Superfluous intermediary administrative levels, a lack of transparency in the decision-making process, administrative rules, regulations and procedures that frequently change without notice or reason, close formal and informal ties with officials and patronage systems perpetuate corruption and the ubiquitous use of facilitation payments by companies when dealing with frontline civil servants, according to the Bertelsmann Foundation 2008 report. Grant Thornton Vietnam's Investment Outlook Survey 2009 also confirmed that red tape, an uncertain legal system and underdeveloped infrastructure have remained a problem for investors.

But businesses continue to say what they have always said: they have no choice.

The World Bank Vietnam Development Report 2006 said only few companies ranked corruption as a significant constraint on their business activities in Vietnam. Experts explained this away on the long-time institutionalization of bribes, which means that companies may have learned how to live with corruption to the point that they do not see it as a significant constraint on their activities.

"Recent surveys still suggest that although many firms encounter corruption and make unofficial payments, they often do so as a way of circumventing red tape, speeding up procedures, or to get advantages for their firm," said James Anderson, senior governance specialist of the World Bank in Vietnam.

In 2009, the World Bank conducted an Enterprise Survey as has been done in more than 100 countries around the world. "The results showed that firms in Vietnam were more likely than firms in most countries in East Asia to say that unofficial payments are expected to get things done, while at the same time relatively few firms identified corruption as a major constraint for their operations," Anderson told Vietweek.

The World Bank-commissioned Vietnam Development Report 2010"”Modern Institutions apparently summed it up best, "If firms adapt to corruption to the extent that it becomes normal and less of a problem, even if no less frequent, it becomes even harder to eradicate."

"˜Grand corruption'

The Finnish Embassy in Hanoi said in a 2008 study that enforcement of Vietnam's Anti-Corruption Law 2005 was strong at first, but weakened thereafter. According to Vietnam's Provincial Competitiveness Index (PCI) 2011, foreign enterprises do not think highly of efforts to control corruption in Vietnam. The PCI survey recorded a deterioration of transparency associated with a continued importance of personal connections to facilitate access to businesses. Grand corruption like procurement bribes have tended to increase over time, it added.

Steven Dimitriyadi, president of the Hong Kong-based Quartexx Holdings that provides outsource services in Vietnam, said specific procurement fraud and corruption risks in Vietnam include instances where business professionals new to the country are exposed to longer procurement chains, a different economic climate, unfamiliar trade practices, language and cultural barriers, among others.

"Business success in Vietnam is often due to contacts, but what may be regarded as an acceptable business practice in Asia, could be illegal elsewhere," Dimitriyadi told Vietweek.

"The amounts paid to resolve claims resulting from procurement fraud and corruption can be high, but they are more likely secondary to the loss of reputation and damage to brands companies may suffer for being associated with such claims.

"In this context, fraud and corruption prevention activities may be the best investment of all."

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