In 2007, shipping a container from a business located in Sub-Saharan Africa, India and Brazil was, on average, twice as expensive and six-times more time consuming than transporting it from the United States1. Corruption significantly increases the costs of moving goods by sea. Small bribes are often embedded in local culture. If masters resist demands for cigarettes and whisky, consequences may be severe. Ships can be detained and threats made to the safety of the crew. On the other hand, masters who accede to ‘facilitation payments’ risk prosecution. Corruption in shipping is a global issue. Collective Action presents an opportunity to safeguard the long-term success of the maritime industry.
What is Collective Action?
Collective Action is not a new concept but is gaining growing attention from businesses, NGOs and policymakers, as a tool to fight corruption. It provides opportunities to use the power of a group to make a change; to engage with competitors and the public sector and develop initiatives to combat systemic issues such as ‘facilitation payments’. The World Bank has explicitly encouraged businesses to take part in Collective Action and funding is available for new enterprises2. While companies may have ensured that the activities they control reflect good practice, isolated efforts are insufficient to counter institutionalised corruption3.
Collective Action increases the credibility and impact of initiatives, complimenting individual compliance efforts. It can be achieved either through one-off or long-term projects. The Maritime Anti-Corruption Network (MACN) is an example of a principle-based initiative. Its members promote good corporate practice by adopting shared ideals, developing best practice and collaborating with other stakeholders to create sustainable solutions. For instance, in conjunction with the Nigerian Ports Authority (NPA), MACN has helped launch the Electronic Ship Entry Notice (e-SEN)4. The system enables ship agents to submit and obtain notification approvals electronically. Most instances of corruption in the maritime sector surround payments to workers so that ships can dock, cargo can be unloaded, goods can pass inspection and so on. Because e-SEN replaces a manual system, it should reduce delays and the demand for bribes.
How to identify the problems
In order for Collective Action to be successful, stakeholders must identify the scope of the problem. GACI is a recent joint initiative developed by the International Road Transport Union and the UN Global Compact to collect data on bribery and extortion in the logistics industry5. An e-questionnaire completed by transport companies will help to identify areas of business, and geographic locations, that are most susceptible to corruption. Similar initiatives exist in the maritime sector. Members of the UK Chamber of Shipping and MACN are encouraged to report incidents of bribery and corruption. A recent study between the World Bank and London School of Economics (LSE) has also compiled a rich dataset on bribery in African ports, to document the magnitude and costs of corruption in the shipping industry6.
Certain jurisdictions are of particular concern; where port workers are well-known to invent novel costs and requirements, and pilots, tug masters and mooring gangs demand cartons of cigarettes and other small bribes as the norm for example. Low-level corruption is so severe at Maputo port in Mozambique that many firms travel an additional 319 km – nearly doubling transport costs – to avoid it7. Hot spots pose greater problems but no port is entirely free from graft. Data collection has confirmed the global scale and endemic nature of issues facing the shipping industry.
When ascertaining relevant stakeholders and creating a list of potential partners it is advisable to involve governments, trade bodies and/or NGOs. Collective Action can be more successful if convened by a neutral facilitator who can bring together members and provide an impartial platform. The Foreign & Commonwealth Office, in particular, can assist companies through diplomatic channels. Governments, trade bodies and civil societies can significantly extend the reach and impact of Collective Action initiatives.
Benefits of Collective Action
Collective Action has benefits for a range of stakeholders. For all concerned, initiatives contribute to enhanced public reputation and credibility. Businesses can show to law enforcement and regulatory authorities their serious commitment not only to improving their internal anti-bribery programmes but also to making a difference to the wider maritime sector. This dedication is cited among the adequate procedures under the UK Bribery Act. Collective Action is specifically encouraged by the World Bank in their Integrity Compliance Guidelines8.
It enables Small and Medium-sized enterprises (SMEs) to engage in concerted compliance efforts. Although any compliance programme must be proportionate to the risk posed by a company, SMEs often lack the financial and human resources to implement the necessary systems to prevent corruption. Collective Action enables SMEs to participate in a joint effort to tackle the issue of corruption through shared standards and will allow them to leverage influence more effectively, in an effort to promote ethical conduct.
The benefits of Collective Action can be seen at an international level. It helps to ensure the consistent and fair enforcement of regulations, and means that national legislation and international conventions are supplemented and bolstered by engaged industry stakeholders. Although care must be taken to balance between national and international concerns, if approached correctly, Collective Action can fill lacunae in legislation or replace or augment inadequate local law in emerging markets and high-risk jurisdictions.
Why should you get involved?
In recent years, there has been a significant uplift in regulatory activity coupled with increased cooperation between international regulators in the area of bribery and corruption. Collective Action is a means for businesses to demonstrate proactive compliance efforts. It increases the impact of individual companies by making fair business practice more common and elevating participants into an influential alliance of like-minded parties.
Collective Action requires expertise, commitment, patience and, in some cases, a skilled facilitator to mediate between the interests of stakeholders. Central to its success going forward will be increased publicity of significant networks, coupled with renewed engagement from other interested stakeholders at a national and international level.
Given the growing attention on anti-corruption efforts in the maritime industry, now is the time to think about what you can do to effect a change in the wider business environment through Collective Action. Initiatives such as e-SEN are a good start. However, much more needs to be done. The fragmented nature of the shipping sector makes fighting small bribes difficult – Clarksons estimates that there are approximately 20,000 ship-owners globally9. The problem demands collaboration in order to put pressure on governments to improve their reputations for transparency.