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How To Do Business in a Corrupt Country

How To Do Business in a Corrupt Country

I often ask people who run their own business what their biggest challenge is.  I find it intriguing.

I was emailing one of my subscribers recently and I was surprised at his answer when I asked him what his biggest challenge was – he said the biggest challenge of doing business in his country (Bangladesh) was corruption.

This may sound unusual for the mass of people who read my blog in the UK but bribery and corruption are rife in many countries, particularly emerging markets.  Since I had this email exchange I have found myself Googling what to do if you are operating in a corrupt country.  I thought this would make an interesting blog post.  Hopefully my friend in Bangladesh will get some new ideas from this…

Establish An Ethical Reputation From The Outset

Corruption is a slippery slope and once you have engaged in the wrong practices you will be branded that way.  The easiest way to avoid corruption is never to engage in the first place.  A good starting point for any company is to have a robust policy against corruption in place.  Also, no matter how corrupt a market you are operating in, it is invaluable to establish a good reputation for your business.  Success breeds success.  If you are viewed as as an ethical company it will pay dividends in the long-run.  If your company is known to cut the odd corner it will eventually become habitual.  This should be avoided at all costs.

Engage With Specialists and Consultants

Whenever I identify a gap in my company’s knowledge, I bridge it with training.  Learning to do business in a new marketplace is exactly the same.  The UK is home to a very useful organisation called UK Trade and Investment (UKTI) who offer advice to UK companies setting up overseas.  I took it upon myself to look into what UKTI say about doing business in Bangladesh.   One service they offer is to investigate companies overseas to establish if they are reputable or not.  I also learned that if I encounter any issues exporting to Bangladesh I can contact the Bangladesh Ministry of Commerce, being sure to send a copy to UKTI.  I wonder if UKTI carries some weight with the Bangladesh Ministry of Commerce?

UK Trade and Investment - UKTI can investigate companies overseas to establish if they are reputable or no

Study Legislation

In the UK, the Bribery Act 2010 protects businesses from engaging in corruption.  It has pretty severe ramifications; if an individual is found guilty of a bribery offence, they may be imprisoned for up to 12 months and fined up to £5,000, whereas someone found guilty on indictment faces up to 10 years’ imprisonment and an unlimited fine.  One example is Oxford Publishing having to pay £1.9 million as settlement after admitting unlawful conduct in its East African operations.

Each country has it’s own legislation and enforcement.  Again, taking Bangladesh as one example, there is an Anti Corruption Commission (although according to Wikipedia “this has since been crippled by an amendment of the Anti Corruption Commission Act: 2013 which makes it necessary for the commission obtain the permission from the government to investigate or file any charge against government bureaucrats or politicians”).  Hopefully the UN will pass something soon to rectify this.  Alternatively, there is also a non-government organisation called Transparency International which monitors and publicizes corporate and political corruption, though I have no idea how effective this may be (or not).

Each country is different, it’s worth familiarising yourself with the legislation in your markets.

Another consideration is doing business in a largely unregulated market.  A total lack of regulation presents even more problems.  One solution I came across for doing business in a completely unregulated market is to create a regulatory body who can become an authority, encouraging competitors to join, though admittedly this is probably far easier for larger companies who have the resource to implement such a body and not so useful for SME’s.

Engage In Networking

Just like in the UK, networking is massively powerful when it comes to business.  The line “it’s not about what you know, it’s about who you know” is all too true.  If you have a personal relationship with the right person, or the right people, you may be able to side-step engaging in corruption which would otherwise be applied to a stranger.  Any businessman worth his salt will spend time developing his contacts and nurturing his network strategically.

Select Agents Wisely

Many companies use third party representatives, agents and distributors to get their products to market.  It is imperative that all third parties are selected carefully – if these parties engage in corruption their actions could potentially tarnish the reputation of your company – as a result, you should be particularly rigorous when selecting third parties as their behaviour can be a reflection of your brand.  You should also ensure you have complete control over their activities and are aware of what they are doing at all times.

Consider Alternative Options

An African telecoms company called Celtel had a policy of refusing to pay bribes.  Some parts of Africa can be quite corrupt, which made it difficult for Celtel to expand their network in some territories.  One of the ways they got around having to bribe local chiefs was to offer donations to local communities and let the chief take the credit for them.

Move Location

When push comes to shove, not all markets are corrupt.  If you are struggling to do business in a corrupt market, there is always an option to move out.  A business model which is successful in one country can be replicated in another country.  Globalization is accelerating and it’s easier than ever for companies to set up overseas.  If you’re in a corrupt country, there is always the option to get out.  And if you aren’t in one, there are plenty of other non-corrupt countries you may want to consider entering first.  I come back to what I said at the beginning – the best way to avoid corruption is never to engage in it.

Further Reading

Forbes.com – Even The Virtuous Can Thrive In Corrupt Countries
London Business School – Managing Ethically in Corrupt Environments
African Arguments – Is It Possible to do Business in Africa Without Engaging in Corruption?
TheBriberyAct.com – When it Goes Wrong: Penalties for Bribery
Strategy & Business – Doing Business in Corrupt Places

Footnote

Just for the record, my businesses have never and would never engage in corruption.  I run a tight ship and I would not tolerate this activity under any circumstances.  My personal view is when you are in something for the long-haul, as I am, it’s always best to follow legislation to the letter and be completely transparent in everything you do.

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