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