Djordjija Petkoski

Global corruption can add as much as 20 to 25 percent to the cost of public procurement¹, yet many companies are still faced with the dilemma of paying bribes to win business or withdrawing from high-risk markets. Aside from the business cost, corruption undermines local development by weakening the rule of law, diverting resources from intended recipients, and typically adversely impacting the poorest most dramatically.

In the face of prevalent corruption – which hurts companies, government and citizens – no single stakeholder can significantly reduce the problem on their own. It takes a broader effort to implement effective institutional and business environment reforms, and to create a climate that minimizes opportunities for corruption.

For example, when engaging in public procurement projects in corruption-prone countries, companies can seek to make each transaction transparent, but they cannot ensure that competitors and government counterparts do business in a similarly transparent and ethical manner. One solution is to work with their peers and other key stakeholders to create procurement systems that are less susceptible to discretionary decision-making and corruption.

This is exactly the idea behind collective action. Collective action enables companies to collaborate with industry peers and stakeholders to create markets where decisions are driven by economic considerations and not influenced by corruption. By working collectively, companies can help level the playing field between competitors, improve the quality of legal and regulatory systems, create incentives to avoid bribery among individuals and organizations, and introduce greater transparency and predictability to business transactions in corruption-prone countries and sectors.

There are a variety of collective action frameworks that can be utilized to achieve these benefits – depending on particular needs, local circumstances and actors. They include integrity pacts (building off the model pioneered by Transparency International), anti-corruption declarations, certifying business coalitions against corruption, and principles-based initiatives. Some are more appropriate to use for minimizing corruption in specific projects and transaction-based agreements, such as within procurement for a major infrastructure project. Others are suited for longer-term approaches that seek to strengthen the institutions and regulatory frameworks against corruption. Recent examples of collective action in Paraguay and Colombia are provided below.

Procurement Law Reforms in Colombia: The Colombian Confederation of Chambers of Commerce as Advocate for Reforms To limit corruption opportunities in procurement processes, the Colombian Confederation of Chambers of Commerce (Confecamaras), encouraged by the Center for International Private Enterprise, began working with local mayors and the national Colombian Government to reform procurement practices across Colombia. Specifically, Confecamaras was a leading advocate for the reform of Colombia’s Procurement Law No. 80 and successfully promoted guidelines that enhanced competitiveness and transparency in public procurement. It also led implementation of the “Transparency Pacts” aimed to solidify public commitment to transparency, which have been adopted by 77 mayors and governors.

Choosing the collective action framework that is most effective in a given situation, and then deciding how to tailor and operationalize it, are not easy tasks. By bringing together highly diverse stakeholders – often including industry competitors – implementing collective action becomes immediately more complex.

Successful collective action requires from all participants: trust, top-level commitment and agreement on the consequences of violation. It also requires the willingness of participating organizations to have strong internal compliance and transparency programmes in order to ensure the group’s credibility in advocating against corruption. There are no simple, cookie-cutter approaches. However, the very process of engaging in a collective initiative can help create tailored solutions and a sense of shared ownership that is worth a great deal in environments where the rule of law can be weak.

In order to strengthen understanding of collective action approaches and build capacity for their application, the World Bank Institute has led a consortium of leading NGOs, multilateral organizations and private sector partners, including the United Nations Global Compact, in developing new collective action resources for business.

Notably, "Fighting Corruption through Collective Action - A Guide for Business" and its companion web portal (http://www.fightingcorruption.org/) were recently launched in June 2008. This new guide outlines multiple options for combating market corruption based on proven “how-to” examples from many regions and sectors. Cases from a diverse group of countries, including Mexico, Germany and Pakistan, are detailed in the guide, as well as a range of tools, such as decision trees and process steps, that help users to tailor collective action frameworks to their specific circumstances and needs.

Collective action is by no means a silver bullet to end the corruption problem, but it can be a useful approach to complement efforts taken by individual stakeholders. It will require concerted efforts by the private sector, governments, civil society actors and international institutions to further identify opportunities for collective action, facilitate the process, and scale up impact. This is important for the benefit of the business environment, as well as more equitable and sustainable development. The World Bank Group, together with a consortium of organizations committed to promoting collective action, is dedicated to catalyzing further steps in this direction.