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To bribe or not to bribe: a refreshingly, if infrequent, realistic operational question

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"How can you work in diamonds in Africa, Russia or some other weak-governance places in the world without paying an occasional (or frequent) bribe?"

The latest Diamond Best Practice Principles from De Beers' Diamond Trading Company (DTC) have repeatedly brought this question to the fore among industries in and beyond the diamond market. And not without reason. When OECD member states, accounting for "more than 90 percent of foreign direct investment worldwide," signed a convention "outlawing bribery by multinational companies of officials abroad, it was regarded as a milestone in the global fight against corruption." Given that France, among the most arch of violators, was one of the signatories, my response was of course laughter.

France's oil firm, Elf Aquitaine, was nothing less than a secret arm of French policy, using cash to cement its acquisition of oil and gas assets and advance French foreign policy in Central Africa, the Gulf of Guinea, Central Asia, and China. The French security services supplemented what money could not achieve. No prosecutions occurred from the 1997 signing (in any country), at least not until Elf's slush funds began repatriating into the French political establishment.

Only the US Foreign Corrupt Practices Act has put perps behind bars and US business at a disadvantage. What was said of the African diamond and mineral industries applies to all industries and in areas beyond "troubled regions":

Bribing was considered part of normal business conduct. Until recently the bribery of foreign public officials was accepted as a normal cost of doing business by many developed western countries. Companies claimed that they must pay bribes in order to be favorably considered for the awarding of contracts. By allowing the tax deductibility of such bribes as an expense in earning income, several governments were perceived as condoning this practice and, actually, they did. Many still do today. Often governments themselves are engaged in bribing other governments or private sector players.

Mindful that the road from mine to mistress can be damaged by "reputational issues," the diamond industry has increasingly displayed intolerance by issuing zero-tolerance rules even as company managers "recognize that the very strict rules may inadvertently and unwittingly create a problem for lower or mid-level level field (out-in-Africa) employees: they are expected to do their job and senior management prefers not to know how things are done. These employees are always at the ‘mercy’ of top management – and are in a no-win position."

No less accomplished than the French, Hezbollah and al Qaeda have maintained an active presence in West Africa since at least 1998. Both active in the diamond trade (Hezbollah in Sierra Leone, Liberia and the Democratic Republic of Congo; and al Qaeda in Liberia and Sierra Leone). Al Qaeda paid a premium over the going rate for uncut stones, not to profit but to "move funds out of traceable financial structures into commodities" prior to 11 September. "The available evidence points to al Qaeda purchasing some $30 million to $50 million worth of RUF [Revolutionary United Front] diamonds during the eight months prior to 9/11."

If you are a diamond extractor, especially one operating in "problematic countries," who are you going to treat in order to maximize income? If you are among the nomenklatura of the kleptocracies that pass for government in too many states, with whom will you prefer to show preference? To these parties, it is immaterial that:

Bribery erodes public confidence in political institutions and leads to contempt for the rule of law... distorts the allocation of resources, inflates spending on public procurement and undermines competition in the market place [has] a devastating effect on investment, growth and development [and] impacts the poor by denying them access to vital basic services.

World Bank officials said that "attempts to improve the transparency of oil production had struggled to gain traction, increasing the probability that corruption would siphon off the benefits of extractive industries in poor countries." Little wonder that actions such as the World Bank's establishing transparent accounts in Chad and Cameroon (for the Chad-Cameroon oil pipeline) into which "revenues would be paid and used for the whole population" are marked by their infrequency.

Bribery And Corruption Still Seen As Rampant In Developing Nations
World Bank DevNews
Oct 21, 2004

To Bribe Or Not To Bribe – Is That The Question?
Chaim Even-Zohar
August 22, 2004
Tacy Ltd. Consultants

"Fighting Terrorism In Africa"
Statement By Douglas Farah
House Committee on International Relations, Subcommittee on Africa
April 1, 2004
 

Big oil's dirty secrets
May 8th 2003,NEW YORK
The Economist

Gordon Housworth



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