:00:00. > :00:11.the economic impact of corruption on developing countries.
:00:12. > :00:15.Is corruption holding back economies or is it a way of doing business? We
:00:16. > :00:44.are Talking Business. Welcome to the programme. Corruption
:00:45. > :00:46.is an issue for emerging economies. It affects investment in
:00:47. > :00:50.infrastructure, especially in countries will be like the policy
:00:51. > :00:59.which can deter businesses from investing. I sat down with the
:01:00. > :01:07.president of the Jim Kim, to catch up on closed prospects in China. I
:01:08. > :01:17.was just in the Philippines. The president has taken an incredibly
:01:18. > :01:22.ambitious effort. The way that we were tattered, we actually have what
:01:23. > :01:28.we call a global practice, that focuses on governments. Too often,
:01:29. > :01:35.we have said that this government is or is not corrupt, and we have an
:01:36. > :01:38.analysis about it. What we need to do is help governments put systems
:01:39. > :01:45.and police that will detect and punish corruption. We have found
:01:46. > :01:50.that some governments are good at this and others have tried but
:01:51. > :01:55.failed. We are trying to take an approach of delivery. Not so much
:01:56. > :02:00.that you should do this, but you should do this and this is how
:02:01. > :02:08.governments around the world have been successful or how they have
:02:09. > :02:23.field. `` failed. Think of a strategy that might work. A very
:02:24. > :02:29.popular book, Capital of the 21st Century, it talks about
:02:30. > :02:34.controversial topics. They may never happen. But it also says that the
:02:35. > :02:41.two forces that have led the world towards convergence, have been the
:02:42. > :02:43.diffusion of knowledge and the investment in skills and
:02:44. > :02:57.productivity. He uses China as an example. What career may be a better
:02:58. > :03:03.example. `` But Korea. It is because they have had this insatiable
:03:04. > :03:08.curiosity. To find technologies that they can bring into the country.
:03:09. > :03:16.They have also been extremely committed to investing in the
:03:17. > :03:20.people. We thank a real opportunity, to help all of the economies in the
:03:21. > :03:26.region move in that direction with global market capitalisation can
:03:27. > :03:39.happen. Yesterday I had a long talk with meet us in Vietnam about the
:03:40. > :03:49.murder, a market reform process. `` murder. If we can move them towards
:03:50. > :03:54.greater convergence, that is our job. We want to continue to get
:03:55. > :03:58.better to being the facilitators. Bringing knowledge from one part of
:03:59. > :04:04.the world, that will allow the Central African Republic to leapfrog
:04:05. > :04:11.generations of bad practice to generate roads and educational
:04:12. > :04:16.systems, that will not only grow the economy but in a more inclusive way.
:04:17. > :04:21.Is that the recession you are getting in China? You have met the
:04:22. > :04:26.Prime Minister. Is that the relationship that you are forging?
:04:27. > :04:33.How are you finding them to the advice that you are giving? They
:04:34. > :04:39.need to invest but maybe invest too much in certain sectors. Equality
:04:40. > :04:48.can be an issue. How are you assessing that? My predecessor
:04:49. > :04:57.started a wonderful process. They put together a report. It laid out
:04:58. > :05:01.all of them calls for reform. From growth that was more driven by
:05:02. > :05:06.investment to one that was more driven by consumption. In other
:05:07. > :05:12.words, they made explicit commitments to move towards higher
:05:13. > :05:16.quality, more sustainable growth. They followed the plan. The
:05:17. > :05:26.following it today, even though the numbers have dropped. The minute I
:05:27. > :05:39.sat down with him, he said that the next one we want you to take on its
:05:40. > :05:45.organisation. `` urbanisation. It started with my predecessor. He was
:05:46. > :05:49.critical in developing this. If we can work through these difficult,
:05:50. > :05:58.complicated problems and, with the plan, people do it. On my last
:05:59. > :06:08.visit, last week, the Prime Minister asked me to tackle killed there. ``
:06:09. > :06:17.health care. They have got to get it correct. We are very happy that the
:06:18. > :06:32.trusting relationship continues. We also a wheel that we have top Iraqi
:06:33. > :06:43.in. `` We are also aware we have to up our game. If we can do that, we
:06:44. > :06:48.will show that it is very important. Finally, you have been in many
:06:49. > :06:56.leadership positions, and this is your elitist challenge. What is the
:06:57. > :07:00.secret to being an effective leader? I think you need to have the
:07:01. > :07:06.humility, and understand that you can always get better. People think
:07:07. > :07:13.it is about charisma and having good ideas, but in my view, the most
:07:14. > :07:17.important part is that you have people who are either structurally
:07:18. > :07:21.positioned or are systematically able to give you advice about what
:07:22. > :07:31.you are not doing so well. I have a leadership coach. He is one of the
:07:32. > :07:38.sale of deleted leadership cultures. He gives me advice about
:07:39. > :07:44.how people are viewing me. The most important thing is to continuously
:07:45. > :07:50.be open to the kind of feedback that will let you see how others see you.
:07:51. > :07:55.When you get into a leadership position, usually good feedback
:07:56. > :07:57.stops. It is not in any one's interest to get into a leadership
:07:58. > :08:02.position, usually good feedback stops. It is not in anyone's's
:08:03. > :08:14.interest to give you that. He gets feedback and gives it to me at full
:08:15. > :08:31.speed. It is weathering. `` withering. I have a 360. I shared my
:08:32. > :08:41.360. I went over all of the specific things that people have said I was
:08:42. > :08:44.doing cruelly. `` poorly. It can take time for them to feel
:08:45. > :08:51.comparable but I am going to continue to do this. To ask the
:08:52. > :08:59.people I work with to help me. I think the minute you lose that sense
:09:00. > :09:04.of humility, you are in trouble. That was Jim Kim. The ease of doing
:09:05. > :09:08.business is one gauge of corruption. According to the business rankings,
:09:09. > :09:21.the best places are Hong Kong and New Zealand. In the bottom ten, are
:09:22. > :09:27.predominantly African countries. It is difficult to quantify the cost of
:09:28. > :09:30.corruption. But it is estimated that it asked him passing to the cost of
:09:31. > :09:36.doing business. The International Monetary Fund 's finds that
:09:37. > :09:58.investment is 5% more in more corrupt countries. I am joined by
:09:59. > :10:08.two guests. Also, from London, a lawyer with decades of experience.
:10:09. > :10:17.Welcome to the programme. We felt earlier from Jim Kim that corruption
:10:18. > :10:20.is being addressed. But when you are advising businesses, what are the
:10:21. > :10:27.most concerned about in terms of corruption? One of the issues that
:10:28. > :10:35.they are clearly concerned about is getting caught up in the drive to
:10:36. > :10:46.eradicate corruption... Bit of irony. We have seen well`known
:10:47. > :10:52.companies caught up in this. They feel that it could be being. The
:10:53. > :11:00.unknown is something the body about. What do you find that your clients
:11:01. > :11:04.are worried about? Governments have tried to tackle corruption, and we
:11:05. > :11:12.have found that these drives are quite openly and unpredictable. On a
:11:13. > :11:22.tactical level, we have seen clients conceal about the partnerships that
:11:23. > :11:28.they have. Relationships, and so on. We are doing a lot of work with our
:11:29. > :11:30.clients at the moment and we understand that they were so focused
:11:31. > :11:36.on growth and entering into acquisitions, they are now taking a
:11:37. > :11:42.step back and asking what have we got into. Let's do some due
:11:43. > :11:59.diligence. I'll be putting us at risk? `` Are they? This is something
:12:00. > :12:02.familiar to you because you won't in China. What have you found in terms
:12:03. > :12:09.of companies and what we are worried about? Western companies are caught
:12:10. > :12:16.in the middle, on the one hand they find that the best intention of the
:12:17. > :12:22.government 's is applied in a differential fashion. That is to say
:12:23. > :12:29.that foreign investors make juicier and more attractive targets. They
:12:30. > :12:34.are just easier to attack. Secondly, an enormous pressure from
:12:35. > :12:38.Chinese partners. To do things in a Chinese way. Not so long ago, the
:12:39. > :12:45.partners were immensely grateful for the arrival of these companies that
:12:46. > :12:54.now be few that they are conceding. I think the global economic context
:12:55. > :12:58.itself has put the wind in the sales of Chinese partners and it has
:12:59. > :13:06.reinforced the ability to seek to partners to do things ever be. Doing
:13:07. > :13:11.things the way as hazardous. In The could you elaborate on that? What do
:13:12. > :13:15.you mean by that poses a great risk to foreign partners? There have been
:13:16. > :13:24.well publicised cases of corruption crackdown is on western corporis.
:13:25. > :13:27.Another issue is that with the improvement in transport and
:13:28. > :13:30.communications in China, as well as government policies urging
:13:31. > :13:34.investment into the lesser developed regions, a lot western investors now
:13:35. > :13:39.find themselves doing business in parts of China which relatively
:13:40. > :13:44.underdeveloped when compared with places they were active previously.
:13:45. > :13:50.So this creates a kind of perfect storm of potential for corruption.
:13:51. > :13:55.Issues ranged from fertility should payments `` facilitation payments.
:13:56. > :14:02.As well as braiding of business partners and all sorts of
:14:03. > :14:06.corruption. Moving away from China, are there are similar kind of
:14:07. > :14:12.concerns in other emerging markets? Yes. We are seeing similar concerns
:14:13. > :14:18.being raised about Indonesia, similar uncertainties. Also the
:14:19. > :14:22.sense that if you are an international investor, you may be
:14:23. > :14:25.seen as a target for someone who is looking to push the agenda forward
:14:26. > :14:35.so I think the same things to apply in Indonesia as China. Angela. There
:14:36. > :14:39.is a real gap between headquarters of multinationals and wanting to get
:14:40. > :14:44.a certain revenue growth out of China and emerging markets. In China
:14:45. > :14:48.clients have said to us, we are expecting to bring in 40% year on
:14:49. > :14:53.year growth. There is a gap between that and how you do business in
:14:54. > :14:58.China, so we are starting to see clients, and this has to be done at
:14:59. > :15:07.this EU level, is to say, what are the long`term sustainable rates of
:15:08. > :15:11.growth? Maybe it is not 40%. What are more realistic rates of growth?
:15:12. > :15:16.is looking for a yield, the global is looking for a yield, the global
:15:17. > :15:21.economy is still quite flat and Asia and China are areas we are looking
:15:22. > :15:25.for a lot of growth. Is there a sense of the headquarters not quite
:15:26. > :15:28.understanding her business practices are actually done? Is that part of
:15:29. > :15:34.the issue? That must be hard for you to advise clients. It is difficult.
:15:35. > :15:39.The nice thing about our company, we are global, we can work both
:15:40. > :15:43.angles, but small things like corporations will put in and take
:15:44. > :15:47.corruption programmes but then they will do training in local cities and
:15:48. > :15:50.it will not be in the local language. So you have to make sure
:15:51. > :15:53.you are tailoring your training and again from the top`down level,
:15:54. > :15:57.making sure you are understanding what they trying to achieve. We had
:15:58. > :16:02.a client recently in Asia they said to us, if I really took a zero
:16:03. > :16:06.tolerance perspective on corruption like my headquarters to do, I would
:16:07. > :16:11.miss my annual revenue targets tomorrow. There is a real disconnect
:16:12. > :16:16.there are between how HQ wants to be it and the realities of this on the
:16:17. > :16:20.ground. At a local level, what are strategies businesses can think
:16:21. > :16:23.about to cope with corruption? A lot has to do with the canes of senior
:16:24. > :16:33.and middle level management that are put in place. With foreign investors
:16:34. > :16:37.in China. There is often a very poor understanding of cultural issues, of
:16:38. > :16:40.the human resource issues, by the western investor. They often do not
:16:41. > :16:44.know what they are looking at in terms of Peabody interview. They
:16:45. > :16:49.often delegate the task of interviewing `` in terms of people
:16:50. > :16:52.they interviewed. They often delegate to other Cheney staffers
:16:53. > :16:57.and do not involve themselves in this, so what they end up doing is
:16:58. > :17:03.blindly allowing the replication of local cultural practices which are
:17:04. > :17:09.conducive to corruption. So much more rolling up their sleeves and
:17:10. > :17:13.getting involved with HR issues in a very full one way, there is no
:17:14. > :17:16.substitute for. It does not mean it is necessary for every singer
:17:17. > :17:20.manager from a western corporate to learn how to speak Chinese but it
:17:21. > :17:25.means that an awful lot of thought has to be put into drilling down
:17:26. > :17:32.into the menu shout of HR decision`making `` the minutiae. It
:17:33. > :17:35.is not simply enough to wave a set of compliance rules under people's
:17:36. > :17:40.noses and say, you have been instructed about corruption. You
:17:41. > :17:43.must follow through and monitor. One of the things that Chinese
:17:44. > :17:48.businesses do a lot, that I know western businesses probably would
:17:49. > :17:52.have to think twice about, because of the anti`corruption drive, is a
:17:53. > :17:56.lot of business in China is about relationships. It is about
:17:57. > :18:01.banqueting, gift exchange. What would be the best advice you would
:18:02. > :18:05.give on that front? The best advice is to promulgate house rules, that
:18:06. > :18:10.is corporate rules, for how you conduct your business in China, what
:18:11. > :18:15.the threshold are and to make sure that things are done in a systematic
:18:16. > :18:21.and reported fashion. I think if you do it that way, you are less likely
:18:22. > :18:26.to encounter what you could call Cowboy or improvisational behaviour
:18:27. > :18:30.on the part of local managers. What is the best advice you would give in
:18:31. > :18:35.terms of trying strategies for coping with corruption? In addition
:18:36. > :18:40.to making sure you have good HQ policies that are pushed out and
:18:41. > :18:44.tailored to the regions and in addition to making sure you have got
:18:45. > :18:48.due diligence done on the parties, we are doing a lot of work on
:18:49. > :18:52.corruption risk assessments. So taking a look from the top down and
:18:53. > :19:01.stating, what sector REM, what jurisdictions REM, it is taking a
:19:02. > :19:06.top down and mapping out what the biggest risks at your business from
:19:07. > :19:16.a corruption perspective. `` what sector are we in? You should vote
:19:17. > :19:20.senior management. Don't let people stay in situ for too long and they
:19:21. > :19:24.could pick up bad habits. A number of our clients have learnt that.
:19:25. > :19:29.What is the worst incident of corruption you have tried to give
:19:30. > :19:35.advice on and deal with? I was acting for a mining company, this
:19:36. > :19:41.was 19 years ago in northern China, a province which will remain
:19:42. > :19:46.nameless. And a demand was made for a facilitation payment of some
:19:47. > :19:52.amplitude, a pretty big one, our advice was, you step on that
:19:53. > :19:57.slippery slope and you will go tumbling down pretty fast so don't
:19:58. > :20:01.do it. Negotiations carried on, things got a little bit sour and we
:20:02. > :20:07.knew that because one evening I was sitting with the clients in a
:20:08. > :20:13.meeting room at the hotel, it was a northern city. And a rocket came
:20:14. > :20:19.through the plate glass window and it had two bullets taped to it. We
:20:20. > :20:27.took that as a sign that it was time to leave town. `` a rock. My client
:20:28. > :20:30.who was wise in these matters and had done business in difficult
:20:31. > :20:34.places around the world thought obviously the stakes were too great
:20:35. > :20:41.to carry on doing business. This is highly uncharacteristic of China.
:20:42. > :20:44.There is a lot of corruption, it is also an incredibly engaging and
:20:45. > :20:49.charming place. I am talking about its people. It is a wonderful place
:20:50. > :20:56.to do business in many ways as long as you simply draw clear lines and
:20:57. > :21:03.follow your rules. What is the worst instance you have had to cope with?
:21:04. > :21:05.Thailand. A couple of instances there were a local singer manager
:21:06. > :21:11.has effectively sold his company down the river with some contract he
:21:12. > :21:17.should not have signed and it was very bad for the company. Angela,
:21:18. > :21:22.what about you? It was in Russia and involved a large case of significant
:21:23. > :21:27.fraud involving up charging invoices, international wire
:21:28. > :21:31.transfers, the client was beholden to US Foreign Corrupt Practices Act,
:21:32. > :21:34.but it did not hit the headlines locally but it became a mess in
:21:35. > :21:43.trying to untangle where the money was moving to, a lot of in politics.
:21:44. > :21:47.In emerging markets, politicians are often very interested, have strong
:21:48. > :21:56.vested business interests that can cause conflicts. It was a real mess.
:21:57. > :22:02.Thank you. That was Angela, and gagged. Coping with corruption is a
:22:03. > :22:05.problem in rich economies as well. It can have a major cost to
:22:06. > :22:09.businesses including foreign legal advice. Progress is being made by
:22:10. > :22:12.social media which has increased the transparency of governmental actions
:22:13. > :22:17.around the world. Coping with corruption better could add
:22:18. > :22:20.considerably to investment and growth. That is all we have time
:22:21. > :22:36.for. Check out our website and check out me on Twitter.
:22:37. > :22:46.Good evening. Talking weather over the next two x five minutes. The
:22:47. > :22:48.changes on the way, we have seen it begin in Scotland and Northern
:22:49. > :22:51.Ireland, much cooler conditions developing here and we will see that
:22:52. > :22:53.across the rest of the UK, temperatures dropping to the
:22:54. > :22:57.seasonal norm. So shine in the next few days but equally a little bit of
:22:58. > :23:01.rain as well. It was wet in the West of Scotland, much of Scotland's
:23:02. > :23:02.heavy bursa rain today. One or two showers elsewhere but