“Any competitive advantage gained through corruption is a mirage.” That is a quote attributed to Robert S Khuzami, director of Enforcement, US Securities and Exchange Commission in an Ernst & Young report that addresses the challenge facing regional governments and companies as they battle to stamp out the practices of bribery and corruption in the Middle East. The report, entitled ‘Managing Bribery and Corruption risks in the Construction and Infrastructure Industry’, covers the global challenge of combating the issues that arise in regions and countries that see these negative practices flourish. With regards to the Middle East, Robert Chandler, partner, Assurance – Middle East and North Africa, for Ernst & Young Middle East, says that despite all appearances to the contrary, corruption in the Middle East is fairly widespread and is a legitimate cause for concern for both governments and companies in the region. “Many Middle Eastern countries fall in the lower half of the Corruption Perceptions Index (the GCC countries and Jordan are notable exceptions). Several high-profile corruption investigations in Western countries have related to activities in the region,” he explains in the report. “We have been seeing increasing Anti- Bribery and Corruption (ABAC) measures in many countries in the Middle East, but bribery and corruption is still prevalent, as shown by the numerous Foreign Corrupt Practices Act (FCPA) cases involving conduct in the region,” Chandler adds. This is often because companies fail to provide clear guidance to their employees over what is regarded as acceptable and unacceptable business practices specific to the region, or the procedures to manage such a situation, should it arise, the report says. However, Michael Adlem, partner – Fraud Investigation & Dispute Services, Middle East and North Africa, also with Ernst & Young, tells Big Project ME that the problem actually goes much deeper than that. “We spend a lot of our time working for companies that are mostly US, UK and European (owned), doing reviews of their agency companies out here in the region. And often we will find issues around bribery when we do these reviews,” he says. “I think it’s pretty much everywhere, to be honest. We surveyed companies around the region and it came back that everybody saw it as a major problem in the region, as a whole.” “Even though in many countries here, it (bribery) is an offence, but nobody treats it very seriously. There is a UN convention against corruption, which most of the countries in the region have signed up to, and that requires that they put better legislation in place to bring about prosecution and those sort of things. There is an international initiative to move things, but as with a lot of these things, it’s not happening as quickly as the UN would like,” he explains further. In an alarming observation, the Ernst & Young report states that although most of the Middle Eastern countries have ratified the United Nations Convention against Corruption (UNCAC), there are still gaping holes in the defence against negative practices. The Sultanate of Oman has not signed up to UNCAC, while Saudi Arabia and Syria are both signatories to it, but have not ratified it. Furthermore, the implementation of the specific policies of the convention continue to pose challenges to enforcers of the law. “I think the problem is that nobody has done very much about it, apart from the US. If you look at the statistics, most of the prosecutions around bribery and corruption, 95% of them have come out of the US, in the last 20 years,” Adlem says. “I think the UK is in second place with about 3%. So the rest of the world has done very little and there’s very little prosecution here in the Middle East.” This urgently needs to change, he says, if there is to be any major change in the way business is done in the region. One of the most common methods of bribery comes in the form of ‘kickbacks’ and ‘gifts’, which in the context of business dealings, is almost viewed as normal business practice in the regional market. “Bribes, particularly in the form of kickbacks, are still regarded as an accepted part of doing business in the Middle East, often with little thought for potential to corporate reputation damage,” says a research survey entitled ‘Bribery, Corruption and Fraud in the Middle East,’ which was released by Ernst & Young Middle East and polled 63 respondents from organisations in eight countries in the region, between August 2011 and January 2012. The countries included were: UAE, Jordan, Kuwait, Egypt, Oman, Saudi Arabia and Bahrain. Of those respondents, 36% said that they strongly agreed that bribery and corruption were major problems in the Middle East. 32% said that they agreed that it was a major issue. Only 10% said that they disagreed with it being a major problem. The remaining 22% neither disagreed nor agreed. Adlem does point out that the UAE is putting in motion legislation that will bring it in line with UN requirements, but says that the proof of its effectiveness will only come when the legislation is in place and prosecutions take place. He draws a parallel between the UK Bribery Act, which was introduced in 2010. “It (the UK Bribery Act) came into force in 2011. We’ve not seen too many prosecutions at the moment, though I understand that there are one or two ones in the pipeline. So when these countries out here do put the legislation in place, I think there will be some eyes watching to see what will happen, to see if they actually do enforce (the legislation).” However, as alluded to earlier, the culture of ‘gift giving and kickbacks’, especially in this region, is a tricky concept to tackle. On one hand, Adlem says, the practice of giving ‘gifts’ is almost cultural, and has been going on for a long time. On the other hand, it can veer into murkier territories when those gifts become excessive and force or move individuals into making a decision they would not normally make otherwise. “It’s not going to change overnight. I think it’s going to be a gradual shift. But I think what you’ve got to see is that some efforts are being made to get rid of it and to crack down on it. I certainly don’t believe it’s going to happen overnight, it’s going to take a long time,” he points out. But he does encourage his clients, and other companies operating in the Middle East, to actively pursue Anti-Bribery and Corruption policies, as he says it could ultimately be to their benefit. Citing an example of a local client, who declined to introduce ABAC measures into his business, despite working with US, UK and European partners, Adlem said that it lead to further complications down the line when those same partners asked to see his ABAC policies, his anti-fraud policies, his audit policies and so on. “My view is that you can turn that into a competitive advantage and have all those things in place and have them embedded in your business. When you’re able to demonstrate that, you’ll be able to win these contracts because European and US companies are really going to jump on to that,” he explains. This is because under some of these acts, these companies can get caught and prosecuted in their home nations. “We’re already seeing this in the pharmaceutical industry, with what’s happening in China,” he says. “Certainly the construction industry is no different in that respect, because it’s a big industry, and the spend is huge, it ticks all the boxes.” “We investigate this stuff all the time,” he says. “Bids get opened, information is shipped to other suppliers, so that they can come in at the right price or underneath… so they win the work and people get kickbacks for providing that information. I think anywhere you’ve got significant spend, whether it’s in the construction industry, the oil industry, or any industry, there’s a massive risk of bribes being paid. People will want to win contracts and they’re prepared to pay money to win it.”