Corruption acts as a significant barrier to achieving the Sustainable Development Goals (SDGs). It erodes the rule of law and democratic structures, weakens security and human rights, and undermines the very foundations of economic innovation and development. The long-term effects include the weakening of enterprises’ viability, stunted job creation, and reduced opportunities for economic growth and poverty reduction.
Corruption and business integrity issues in the private sector of the SWANA region are shaped by a complex mix of political and economic factors. The region faces significant governance challenges, with issues related to transparency, and regulatory enforcement, and entrenched networks of cronyism and patronage. The 4th SWANA Regional Meeting explored these issues further.
The importance of multi-stakeholder action
The Policy Lead on Business Integrity at Transparency International, Kaunain Rahman, emphasized the importance of Multi-stakeholder Collective Action to advance business integrity, presented through so-called Integrity Pacts. The Integrity Pact is a type of multistakeholder collective action initiative, conceived by Transparency International in the 1990s, that aims to foster good governance and prevent corruption in public procurement.
According to Rahman, while we often hear of public private dialogue, public private dialogue often leaves out civil society, which is the point of integrity pacts. Civil society monitoring is what makes integrity pacts truly multi-stakeholder and truly inclusive.
What are the challenges facing civil society in the SWANA region in combating private sector corruption?
In the region, the following main challenges were identified:
– There is an educational and cultural crisis: In the Gulf region, this implies the subtle understanding that corruption only exists in the public sector and that private companies belong to individuals and are therefore considered private money. Furthermore, in Kuwait, the Law on Criminalization of Legal Entities only considers the public sector and not the private sector. This also applies to the access to information law that is only implemented in matters related to the public sector, not allowing access to companies’ financial records.
– Audit offices can be enablers of corruption: In the region, audit offices can play an enabler role in private sector corruption when they do not disclose suspicions of corruption and therefore need to be given wider spaces to report any expected corruption or bribery crimes. In Kuwait, a new law is in the making to bring about criminal charges for auditing offices that fail to fulfill their duties, but it has yet to be approved.
– The lack of independence, and transparency of the judiciary to extend the rule of law to the private sector.
– Civil society faces risks in monitoring the private sector as it is protected by powerful individuals. AMAN Coalition in Palestine is still facing legal cases filed against it as it decided to speak about the issue of laundering relating to settlement-produced dates.
– The influence of civil society in monitoring private sector corruption is still very weak and limited, particularly in regard to issues as money laundering that constitute transnational crimes.
– The Monopoly Phenomena: Major agreements are concluded between governments and the private sector without disclosing the terms of the contracts. In Palestine, the sectors of natural gas, electricity and communications have been privatized. The Palestinian Telecommunications Company, for example, is the only one that manages the issue of communications and there is no competitor.
– Beneficial ownership: namely the failure to disclose the real owner and sometimes discovering that the real owner is one of the influential elites.
The Role Civil Society Can Play:
Despite the challenging nature and risks coupled with monitoring the private sector, the following points were identified in how CSOs can and are trying to combat private sector corruption:
– Building capacities of private sector employees: It is crucial to brief private sector employees on what constitutes criminal and corrupt practices. Here there is a need to differentiate between two types in the private sector: Public shareholding companies that were established for the purpose of providing a public service and were privatized, for example in Palestine, the telecommunications companies and banks that provide services to citizens but were privatized; and private companies belonging to families or individuals. Exerting efforts with public shareholding companies is more likely to yield results because they provide services that they can be held accountable for, making the chances of holding these companies accountable higher.
– Building capacities of civil society organizations: Civil society also needs training and capacity building, targeting civil society specializing in other sectors such as agriculture and industry, on the importance of holding the private sector accountable as a key partner in development processes. In terms of detecting forgery and other forms of bribery in public tenders, CSOs need the help of experts to develop this set of skills and tools.
– Developing laws, systems and processes that promote integrity and transparency in the private sector, such as codes of conduct. AMAN Coalition developed a code of conduct that was shared with eleven companies. With PalTrade being one of the entities forming the Coalition, the companies that fall under its umbrella by default have incorporated these codes of conduct, which improves the internal governance of the public shareholding companies. In Kuwait, there are ongoing efforts to reform laws such as criminalization of legal entities and the access to information laws to encompass the private sector corruption.
– Networking and building coalitions with other civil society groups: In Palestine, a so-called Civil Society Team for Enhancing Public Budget Transparency was established, made up of a coalition of CSOs focusing on different sectors including industrial and agricultural focus.
– Leading advocacy campaigns through which we can raise citizens’ awareness and draw their attention to their rights and role in accountability.
– Enhancing e-government format and practices, which has been increasingly implemented in Kuwait, reduces direct communication and thus the issue of bribery.
Conclusion
The private sector is one of the most important pillars of the national integrity system. In the region, the interest and capacities in monitoring corruption in the private sector are very modest. The countries in the region face in this regard the shared issue of corruption in the context of public procurement, which is considered non-transparent and suffers from weak integrity, highlighting other obstacles, including restricting the right to access information, beneficial ownerships, and the phenomena of monopolizing entire sectors by singular companies lacking competitive alternatives. For the way forward, civil society organizations should follow up and build on successful initiatives in the private sector to enhance business integrity.