26/07/2014 Talking Business with Linda Yueh


26/07/2014

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the economic impact of corruption on developing countries.

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Is corruption holding back economies or is it a way of doing business? We

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are Talking Business. Welcome to the programme. Corruption

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is an issue for emerging economies. It affects investment in

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infrastructure, especially in countries will be like the policy

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which can deter businesses from investing. I sat down with the

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president of the Jim Kim, to catch up on closed prospects in China. I

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was just in the Philippines. The president has taken an incredibly

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ambitious effort. The way that we were tattered, we actually have what

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we call a global practice, that focuses on governments. Too often,

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we have said that this government is or is not corrupt, and we have an

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analysis about it. What we need to do is help governments put systems

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and police that will detect and punish corruption. We have found

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that some governments are good at this and others have tried but

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failed. We are trying to take an approach of delivery. Not so much

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that you should do this, but you should do this and this is how

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governments around the world have been successful or how they have

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field. `` failed. Think of a strategy that might work. A very

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popular book, Capital of the 21st Century, it talks about

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controversial topics. They may never happen. But it also says that the

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two forces that have led the world towards convergence, have been the

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diffusion of knowledge and the investment in skills and

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productivity. He uses China as an example. What career may be a better

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example. `` But Korea. It is because they have had this insatiable

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curiosity. To find technologies that they can bring into the country.

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They have also been extremely committed to investing in the

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people. We thank a real opportunity, to help all of the economies in the

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region move in that direction with global market capitalisation can

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happen. Yesterday I had a long talk with meet us in Vietnam about the

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murder, a market reform process. `` murder. If we can move them towards

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greater convergence, that is our job. We want to continue to get

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better to being the facilitators. Bringing knowledge from one part of

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the world, that will allow the Central African Republic to leapfrog

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generations of bad practice to generate roads and educational

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systems, that will not only grow the economy but in a more inclusive way.

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Is that the recession you are getting in China? You have met the

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Prime Minister. Is that the relationship that you are forging?

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How are you finding them to the advice that you are giving? They

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need to invest but maybe invest too much in certain sectors. Equality

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can be an issue. How are you assessing that? My predecessor

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started a wonderful process. They put together a report. It laid out

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all of them calls for reform. From growth that was more driven by

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investment to one that was more driven by consumption. In other

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words, they made explicit commitments to move towards higher

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quality, more sustainable growth. They followed the plan. The

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following it today, even though the numbers have dropped. The minute I

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sat down with him, he said that the next one we want you to take on its

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organisation. `` urbanisation. It started with my predecessor. He was

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critical in developing this. If we can work through these difficult,

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complicated problems and, with the plan, people do it. On my last

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visit, last week, the Prime Minister asked me to tackle killed there. ``

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health care. They have got to get it correct. We are very happy that the

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trusting relationship continues. We also a wheel that we have top Iraqi

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in. `` We are also aware we have to up our game. If we can do that, we

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will show that it is very important. Finally, you have been in many

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leadership positions, and this is your elitist challenge. What is the

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secret to being an effective leader? I think you need to have the

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humility, and understand that you can always get better. People think

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it is about charisma and having good ideas, but in my view, the most

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important part is that you have people who are either structurally

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positioned or are systematically able to give you advice about what

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you are not doing so well. I have a leadership coach. He is one of the

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sale of deleted leadership cultures. He gives me advice about

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how people are viewing me. The most important thing is to continuously

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be open to the kind of feedback that will let you see how others see you.

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When you get into a leadership position, usually good feedback

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stops. It is not in any one's interest to get into a leadership

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position, usually good feedback stops. It is not in anyone's's

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interest to give you that. He gets feedback and gives it to me at full

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speed. It is weathering. `` withering. I have a 360. I shared my

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360. I went over all of the specific things that people have said I was

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doing cruelly. `` poorly. It can take time for them to feel

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comparable but I am going to continue to do this. To ask the

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people I work with to help me. I think the minute you lose that sense

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of humility, you are in trouble. That was Jim Kim. The ease of doing

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business is one gauge of corruption. According to the business rankings,

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the best places are Hong Kong and New Zealand. In the bottom ten, are

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predominantly African countries. It is difficult to quantify the cost of

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corruption. But it is estimated that it asked him passing to the cost of

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doing business. The International Monetary Fund 's finds that

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investment is 5% more in more corrupt countries. I am joined by

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two guests. Also, from London, a lawyer with decades of experience.

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Welcome to the programme. We felt earlier from Jim Kim that corruption

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is being addressed. But when you are advising businesses, what are the

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most concerned about in terms of corruption? One of the issues that

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they are clearly concerned about is getting caught up in the drive to

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eradicate corruption... Bit of irony. We have seen well`known

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companies caught up in this. They feel that it could be being. The

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unknown is something the body about. What do you find that your clients

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are worried about? Governments have tried to tackle corruption, and we

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have found that these drives are quite openly and unpredictable. On a

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tactical level, we have seen clients conceal about the partnerships that

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they have. Relationships, and so on. We are doing a lot of work with our

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clients at the moment and we understand that they were so focused

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on growth and entering into acquisitions, they are now taking a

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step back and asking what have we got into. Let's do some due

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diligence. I'll be putting us at risk? `` Are they? This is something

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familiar to you because you won't in China. What have you found in terms

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of companies and what we are worried about? Western companies are caught

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in the middle, on the one hand they find that the best intention of the

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government 's is applied in a differential fashion. That is to say

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that foreign investors make juicier and more attractive targets. They

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are just easier to attack. Secondly, an enormous pressure from

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Chinese partners. To do things in a Chinese way. Not so long ago, the

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partners were immensely grateful for the arrival of these companies that

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now be few that they are conceding. I think the global economic context

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itself has put the wind in the sales of Chinese partners and it has

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reinforced the ability to seek to partners to do things ever be. Doing

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things the way as hazardous. In The could you elaborate on that? What do

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you mean by that poses a great risk to foreign partners? There have been

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well publicised cases of corruption crackdown is on western corporis.

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Another issue is that with the improvement in transport and

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communications in China, as well as government policies urging

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investment into the lesser developed regions, a lot western investors now

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find themselves doing business in parts of China which relatively

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underdeveloped when compared with places they were active previously.

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So this creates a kind of perfect storm of potential for corruption.

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Issues ranged from fertility should payments `` facilitation payments.

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As well as braiding of business partners and all sorts of

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corruption. Moving away from China, are there are similar kind of

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concerns in other emerging markets? Yes. We are seeing similar concerns

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being raised about Indonesia, similar uncertainties. Also the

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sense that if you are an international investor, you may be

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seen as a target for someone who is looking to push the agenda forward

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so I think the same things to apply in Indonesia as China. Angela. There

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is a real gap between headquarters of multinationals and wanting to get

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a certain revenue growth out of China and emerging markets. In China

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clients have said to us, we are expecting to bring in 40% year on

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year growth. There is a gap between that and how you do business in

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China, so we are starting to see clients, and this has to be done at

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this EU level, is to say, what are the long`term sustainable rates of

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growth? Maybe it is not 40%. What are more realistic rates of growth?

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is looking for a yield, the global is looking for a yield, the global

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economy is still quite flat and Asia and China are areas we are looking

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for a lot of growth. Is there a sense of the headquarters not quite

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understanding her business practices are actually done? Is that part of

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the issue? That must be hard for you to advise clients. It is difficult.

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The nice thing about our company, we are global, we can work both

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angles, but small things like corporations will put in and take

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corruption programmes but then they will do training in local cities and

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it will not be in the local language. So you have to make sure

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you are tailoring your training and again from the top`down level,

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making sure you are understanding what they trying to achieve. We had

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a client recently in Asia they said to us, if I really took a zero

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tolerance perspective on corruption like my headquarters to do, I would

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miss my annual revenue targets tomorrow. There is a real disconnect

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there are between how HQ wants to be it and the realities of this on the

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ground. At a local level, what are strategies businesses can think

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about to cope with corruption? A lot has to do with the canes of senior

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and middle level management that are put in place. With foreign investors

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in China. There is often a very poor understanding of cultural issues, of

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the human resource issues, by the western investor. They often do not

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know what they are looking at in terms of Peabody interview. They

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often delegate the task of interviewing `` in terms of people

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they interviewed. They often delegate to other Cheney staffers

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and do not involve themselves in this, so what they end up doing is

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blindly allowing the replication of local cultural practices which are

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conducive to corruption. So much more rolling up their sleeves and

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getting involved with HR issues in a very full one way, there is no

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substitute for. It does not mean it is necessary for every singer

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manager from a western corporate to learn how to speak Chinese but it

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means that an awful lot of thought has to be put into drilling down

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into the menu shout of HR decision`making `` the minutiae. It

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is not simply enough to wave a set of compliance rules under people's

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noses and say, you have been instructed about corruption. You

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must follow through and monitor. One of the things that Chinese

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businesses do a lot, that I know western businesses probably would

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have to think twice about, because of the anti`corruption drive, is a

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lot of business in China is about relationships. It is about

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banqueting, gift exchange. What would be the best advice you would

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give on that front? The best advice is to promulgate house rules, that

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is corporate rules, for how you conduct your business in China, what

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the threshold are and to make sure that things are done in a systematic

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and reported fashion. I think if you do it that way, you are less likely

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to encounter what you could call Cowboy or improvisational behaviour

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on the part of local managers. What is the best advice you would give in

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terms of trying strategies for coping with corruption? In addition

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to making sure you have good HQ policies that are pushed out and

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tailored to the regions and in addition to making sure you have got

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due diligence done on the parties, we are doing a lot of work on

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corruption risk assessments. So taking a look from the top down and

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stating, what sector REM, what jurisdictions REM, it is taking a

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top down and mapping out what the biggest risks at your business from

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a corruption perspective. `` what sector are we in? You should vote

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senior management. Don't let people stay in situ for too long and they

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could pick up bad habits. A number of our clients have learnt that.

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What is the worst incident of corruption you have tried to give

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advice on and deal with? I was acting for a mining company, this

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was 19 years ago in northern China, a province which will remain

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nameless. And a demand was made for a facilitation payment of some

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amplitude, a pretty big one, our advice was, you step on that

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slippery slope and you will go tumbling down pretty fast so don't

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do it. Negotiations carried on, things got a little bit sour and we

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knew that because one evening I was sitting with the clients in a

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meeting room at the hotel, it was a northern city. And a rocket came

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through the plate glass window and it had two bullets taped to it. We

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took that as a sign that it was time to leave town. `` a rock. My client

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who was wise in these matters and had done business in difficult

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places around the world thought obviously the stakes were too great

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to carry on doing business. This is highly uncharacteristic of China.

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There is a lot of corruption, it is also an incredibly engaging and

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charming place. I am talking about its people. It is a wonderful place

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to do business in many ways as long as you simply draw clear lines and

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follow your rules. What is the worst instance you have had to cope with?

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Thailand. A couple of instances there were a local singer manager

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has effectively sold his company down the river with some contract he

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should not have signed and it was very bad for the company. Angela,

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what about you? It was in Russia and involved a large case of significant

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fraud involving up charging invoices, international wire

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transfers, the client was beholden to US Foreign Corrupt Practices Act,

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but it did not hit the headlines locally but it became a mess in

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trying to untangle where the money was moving to, a lot of in politics.

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In emerging markets, politicians are often very interested, have strong

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vested business interests that can cause conflicts. It was a real mess.

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Thank you. That was Angela, and gagged. Coping with corruption is a

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problem in rich economies as well. It can have a major cost to

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businesses including foreign legal advice. Progress is being made by

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social media which has increased the transparency of governmental actions

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around the world. Coping with corruption better could add

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considerably to investment and growth. That is all we have time

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for. Check out our website and check out me on Twitter.

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Good evening. Talking weather over the next two x five minutes. The

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changes on the way, we have seen it begin in Scotland and Northern

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Ireland, much cooler conditions developing here and we will see that

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across the rest of the UK, temperatures dropping to the

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seasonal norm. So shine in the next few days but equally a little bit of

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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

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