The Asean Economic Community (AEC) and the Trans-Pacific Partnership (TPP), two of the most important trade deals signed by Southeast Asia, have the potential to change the way business is conducted in the region and help stamp out corruption.
As an expert on ethics and compliance practices, Leas Bachatene, chief executive officer of ethiXbase, believes that it is in the interest of companies in the region to up their game so that they can attract more investments and maximize the benefits of both the AEC and the TPP.
The AEC, established by the 10-member Association of Southeast Asian Nations (Asean) in November last year, unites the region as a single market of 630 million people and combined GDP of US$2.5 trillion.
Focusing on cooperating in the areas of skills development, macroeconomic and financial policy among others, the AEC is aimed at transforming the region into a community with free movement of goods, investment, services, labour and capital.
The TPP, a trade agreement inked on 5 October 2015 by 12 Pacific nations – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam – seeks to similarly promote economic growth, create jobs, enhance innovation, productivity and competitiveness, and reduce poverty.
As both agreements contain clauses on lifting the standards of governance and improving transparency, Bachatene says they could help stamp out corruption among the signatories.
ethiXbase is a Singapore-based firm set up in 2011 that helps organisations improve their ethics and compliance practices. It organised the first Asia Pacific Ethics & Compliance Summit, to discuss topics surrounding corruption and ethics in business on 21 January. It was held at the Sheraton Towers Singapore and was attended by more than 300 representatives from business, government and academia from all over the region.
“The benefits are too strong to ignore,” Bachatene says in a recent interview.
“We are looking at trillions of dollars of foreign as well as local investments, and millions of new jobs. Every single stakeholder – no matter how behind or advanced they are, compared to the global (anti-corruption) framework, will make that happen because it is in their best interest.”
Bachatene points out that the TPP, in particular, has been hailed as a landmark agreement setting a new standard for global trade, with other analysts saying that it contains the strongest anti-corruption standards of any multilateral trade agreement in history.
Article 26 of the TPP, covering transparency and corruption for instance, requires parties to have and enforce anti-bribery laws and to accede to and ratify the United Nations Convention against Corruption. Among the TPP countries, Japan and New Zealand have yet to ratify it.
The article also includes a section that is a first for trade treaties: it commits the countries to actively include civil society, NGOs and community-based groups in fighting and preventing corruption in the areas of international trade or investment.
Bachatene says that these provisions, if enforced, could level the playing field for companies operating in Asia-Pacific. The trick, however, is in the enforcement.
“The TPP’s anti-corruption framework can only be ranked as one of the best,” Bachatene says, “(But) you can put one of the best frameworks in place and if you don’t have a mechanism to enforce it, it’s going to be difficult. So the question is how countries are going to put together a unified enforcement practice.”
The missing piece: Enforcement?
Corruption still plagues Southeast Asia, with many public institutions lacking accountability and inadequate anti-corruption laws, according to Transparency International, a non-government organisation set up to fight corruption globally.
Three Asean states – Cambodia, Laos and Myanmar – were ranked among the 30 most corrupt countries in the world, while one – Singapore – was among the 10 least corrupt, according to the organisation’s annual Corruption Perception Index released last month.
While two Asean countries were seen as becoming more corrupt, other Southeast Asian nations either improved or remained the same, according to the index.
In a report published in April last year, Transparency International said that while each Asean member state has taken some steps to addressing corruption at the national level - such as ratifying the United Nations Convention Against Corruption - much more is urgently needed to stop corruption.
In light of establishment of the AEC, stamping out wrong-doing and abuse of power has become even more important, it added.
“If economic integration is not built on a strong foundation of transparency, accountability and integrity then the Asean community’s vision will be jeopardized,” the report’s authors said. “A robust strategic regional anti-corruption framework through the formation of an ASEAN Integrity Community is therefore a critical step.”
While greater economic integration brings benefits, it also poses a number of risks to the region that, if unaddressed, threaten to make the corruption problem even worse, they added.
For instance, the increase in the number of economic transactions could lead to more corruption. The higher flow of goods, money or people across borders may also come with an increase in illicit trade.
Legal movement of people may make human trafficking easier; greater trade in timber and other forest products may cause more illegal harvesting; and the free flow of capital in an integrated financial market may make money-laundering more widespread.
Bachatene says that companies, governments and regulators must enforce anti-corruption laws that are already in place and to comply with the AEC and TPP guidelines.
This will require communication, collaboration, transparency, training, shared values, and goodwill among countries, he adds.
He notes that the questions that companies need to ask include: How do we take that third-party list and classify the different firms under high risk, medium risk, and low risk?
How do you educate the third parties to follow the same level of conduct? How do you run due diligence on those parties so that as an organisation, you ensure you are doing business with the right people?
“Each country has a very clear, robust and in most cases, anti-corruption legal framework. What we do is help organizations in each of those countries adhere to those practices,” he says.
“Size does not matter, it’s how you do what you do that counts.”
Edited by Jessica Cheam and Stanley Tang