Bribery & International Monetary Fund

The remnant of twentieth century and the beginning of new millenium encounter seen the emergence of grafting from a predominantly political, national or regional concern to an answer receiving global attention. In 1996, the leadership of the World Bank and the world(prenominal) fiscal Fund (IMF) publicly denounced cloudry and decadency as an obstacle to economical offshoot and development.Both institutions vowed to focus on the role of governance in growth and development and to give greater priority to combating bribery in their give programs. That same year, the Organization of Ameri can buoy States (OAS) approved the Inter-American Convention against Corruption bandage the United Nations General Assembly called on member states to take legal and concrete operation to combat all forms of itchion, bribery and related illegitimate utilizations in international commercialized transactions (Elliot, 2).Elliot defines bribery as exercising by which an individual who can take decision or action on behalf of new(prenominal)s by virtue of his authority or position is influenced by paying or offering monetary benefits for influencing him to take an action or decision which he would not prevail done otherwise (Elliot, 4). As a result of the resurgence of interest in bribery as a major global issue, there has emerged a enormous question effort devoted towards detemiining the causes, costs, and consequences of bribery.From the macroeconomic perspective the literature for the most recess has focused on the impact of bribery on investment, growth and development, in its analysis of the consequences of bribery. For example, Shleifer and Vishny argue that bribery impedes development and lowers economic growth by discouraging productive investment while Mauro provides tentative empirical evince for this negative impact of bribery on investment and growth (Shleifer and Vishny, 601, Mauro, 683). in that respect is considerable evidence to indicate that br ibery and corruption ar common in international trade. The payment of bribes by firms and the receipt of bribes by public ordaineds in the procurement and allow of trade contracts is a standard crease practice in foreign trade. As a upper- take corporate official has noted, All of us touch in international business are aware that certain payments to government officials are quite common and an accepted method of doing business in umpteen parts of the world (Basche, 2).The US Department of Commerce, National Export Strategy Report (1996), states that since mid-1994, we have learn of significant allegations of bribery by foreign firms in 139 international commercial contracts valued at $64 billionBribery continues to be diametric in many export competitions, with the bribing companies still winning an estimated 80 portion of the contract decisions (Tanzi, 363). From practical perspective, bribery manifests in a variety of forms. The bribe need not always be a monetary pay ment. There are more subtle forms of bribery such as obligement expenses, gifts in kind or gifts of services.The bribe to influence a lucky decision could be the provision of a rent-free villa on the cut Riviera or an expense-free weekend in Las Vegas (Jacoby et al, 28). It could be a gift of a house or property or it could be the financing of a relatives education in the university. In addition to such payments, contacts and networks established though heathenish or language links or past dealings may also play a part in influencing the decision to award export contracts. Moreover, the bribe paid in align to obtain an export contract is sometimes regarded as a fixed cost of doing business overseas.Corruption on the federal level is a pervasive and universal phenomenon. It is a rare industry that has not been tainted by a corruption scandal involving the payment or receipt of bribes in the procurement or award of trade contracts. Incidence of bribery has spanned a number of in dustries, ranging from the aircraft, pharmaceutical, machinery and equipment, and chemicals industries to electronics. For instance, a byproduct of the Watergate probe of the 1970s was the discovery by the Special prosecuting officer that US companies were abstruse in making illegal contributions of corporate money to domestic political campaigns.This led the Securities Exchange Commission (SEC) to investigate these corporations to make if there had been a violation of federal securities laws. The SEC investigation revealed a number of corrupt practices including the payment of bribes to foreign officials in severalize to secure business abroad. Over 400 US companies, including 117 of the Fortune ergocalciferol companies, were disclosed to have made questionable or illicit foreign payments in excess of $300 million (Sheffet, 290). One of the more undischarged investigations centered around Lockheed Aircraft.The SEC found that Lockheed had paid millions of dollars in bribes to high-ranking foreign officials in order to secure aircraft export contracts. Other firms involved in the disclosure of questionable payments associated with export sales were Johnson & Johnson, Colgate-Palmolive Co. , Pfizer Inc. , American radical Products, and others. It was such disclosures that prompted the US Congress to enact the contrary Corrupt Practices locomote of 1977 (FCPA) which outlaws the bribery of foreign government officials by US firms in order to obtain or maintain business abroad.On a state level corrupt state government is more likely to be involved in transactions that are more personally lucrative preferably than those that are more profitable for the state (Shleifer and Vishny, 614-615). In other words, corrupt state officials tend to spend the state budget on sectors which have more bribery and bring more personal gain to them than sectors which have less bribery and less beneficial to them (Shleifer and Vishny, 615).As a result, state can even change an investment away from the highest value projects, such as health and education, into potentially useless projects, such as unnecessary floor (Shleifer and Vishny, 616). Shleifer and Vishny point out that this tendency of corrupt state government suggests that many corrupt bodies of power spend more on defense and guarantor than on public services and interests such as education since the reason allows larger opportunities of bribery.Thus, according to these researchers analysis, corruption shifts an investment from public services to turn contracts as a result, corruption reduces spending on education, healthcare and other social projects. WORKS CITED Basche, James R. Jr. , Unusual Foreign Payments A Survey of the Policies and Practices of U. S. Companies, New York, 1976 Elliot, Kimberly Ann, (ed. ) Corruption and the Global Economy, Washington, DC Institute for International Economics, 1997 Mauro, Paolo, Corruption and Growth, Quarterly Journal of Economics, Vol.110, No. 3, p . 681-711, August 1995. Sheffet, Mary Jane, The Foreign Corrupt Practices Act and the Omnibus Trade and Competitiveness Act of 1988 Did They dislodge Corporate Behavior? Journal of Public Policy and Marketing, Vol. 14. No. 2, p. 290-300, turn over 1995 Shleifer, Andrei, and Robert W. Vishny. Corruption. The Quarterly Journal of Economics 198(3) 599-617, 1993 Tanzi, Vito, Corruption around the World Causes, Consequences, place setting and Cures, IMF Staff Papers, Vol. 45. No. 4, p. 559-94, D