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The Center for International Private Enterprise (CIPE): A Case Study on the Supply Side of Corruption in Thailand

Location

Thailand has been plagued by corruption for many years. The corruption in Thailand has hamstringed business activity, economic growth, and the political process. Corruption delegitimizes government legitimacy in Thailand. CIPE designed their project to reduce corruption through Thailand’s private sector so it would not need government assistance or approval to materialize. In addition, it was designed this way because governments don’t often last too long in Thailand.

The Center for International Private Enterprise (CIPE) teamed up with the Thai Institute of Directors (IOD) to build a coalition of Thailand’s largest businesses and most influential business associations. CIPE and IOD built this coalition in 2010 and have developed it since then in an effort to jointly confront the epidemic of supply side of corruption in Thailand. The members of the coalition are required to sign the Collective Action Against Corruption Declaration. Furthermore, they are required to take substantial and assessable actions to reduce supply side corruption risks within their organizations. The coalition made significant strides and progress over 4 years, “The IOD estimates the member companies of the coalition to now represent nearly 20 percent of the Thai economy and more than one million employees.” The coalition was successful in the establishment of consistent and systematic standards of business conduct among its members. The coalition has effectively aided Thailand’s business community by helping create a fair foundation for businesses to compete. Correspondingly, it has assisted in the advancement of accountability and transparency in Thailand.

Lessons Learned

   1. Private businesses in Thailand want to reduce corruption and they can be effectively employed to combat it.
   2. Two key factors were restraining Thailand from initiating a collective action program. The first factor was that the business community did
      not know how to initiate the process. The second factor was that there was a basic or limited understanding of  “collective action.”
   3. Collective action led by the private sector cannot be guided by the government or commenced by donors.
   4. Positive media coverage and a strong media presence assist the effort of collective action against corruption. The combination helped
      create encouragement and incentives for additional companies to join the coalition in Thailand.
   5. Respectfully motivating the Thai business community to lead the project, while focusing on and supporting the local context was crucial.
   6. Engaging and stimulating the Thai business community from the ground up, in addition to partnering with the IOD was vital to the success of
      the project.

Background

Thailand has a long and widespread history of corruption. In their book, “Challenging Corruption in Asia: Case Studies and a Framework for Action,” Vinay Kumar Bhargava and Emil Bolongaita write, “If corruption is a disease, then many see Thailand as quite infected and difficult to cure.”Thailand has a common “no money, no service” perception of what it takes to conduct business in the country and work with the government. Bhargava and Bolongaita connect the problems of corruption in Thailand to the Thai culture. Being rich is considered a virtue in Thailand, thus many people in Thailand see corruption as a way to prosper and achieve a higher social status.

Corruption is widespread throughout the public and private sectors. Bhargava and Bolongaita write, “Perhaps the most excessive examples of corruption involving large sums of money, and a complicated cast of players that includes politicians, bureaucrats, and private parties, can be found in government procurement.” Corruption in Thailand contributes to the lack of transparency and accountability within the government. Tackling the supply side of corruption within Thailand is an essential strategy to weakening state corruption. It will assist in combating corruption by making the government more transparent and accountable. Furthermore, it will assist in making the government more effective, efficient, and democratic.

Context

The supply side of corruption is a perpetual problem for governments across the globe. In their article, “The supply-side of corruption and limits to preventing corruption within government procurement and constructing ethical subjects” Premm Sikka and Glen Lehman examine corruption in government procurement programs. Sikka and Lehman argue that even the best internal control programs or supervision by government agencies would only prevent some individuals from engaging in corruption because they believe corruption is far too embedded in the present system of capitalism and competition that large businesses engage in. In response, they suggest making corporate records accessible to the general public in an effort to create a system of accountability. 

In his article, “Confronting the supply side of corruption,” Jamil Nasir examines the importance of the supply side or private sector in combating corruption. He writes, “In addition to criminalizing the offence of bribery by the corporations and businesses, improving corporate governance through better standards of accountability and transparency, encouraging the engagement of civil society, encouraging a coalition of honest businesses against corruption, facilitating adoption of voluntary standards/practices of clean business by the firms, and above all revisiting anti-corruption legislation and strategies to include supply side measures to tackling corruption, may be some of the important ingredients of a supply side anti-corruption strategy.” He thinks it is pivotal to include the private sector in anti-corruption policy.

Alex Mutebi examined the failure of Thailand’s anti-corruption regime. Mutebi reasons corruption was capable of surviving and thriving due to the, “ascendancy of a business–politics nexus more powerful in blocking reform than Thai constitutional drafters had anticipated, and because of the decline in political contestability as a result of Thaksin’s control of both the legislature and the executive, the stage was set for a dramatic increase in the levels of state capture.” The government corruption in connection with the business community in Thailand eliminated the transparency and accountability needed for the government to operate effectively and ethically, thus diminishing democracy.

Mutebi believes the national efforts in Thailand to reduce corruption failed because they never took an approach to target and break up the powerful business–politics nexus, which had been so strongly established. In connection with tackling the supply side of corruption, he writes, “Active competition and accepted rules of accountability make it more difficult for any individual, faction or interest group to dominate politics or the economy, while clearer distinctions between those two areas check the worst types of abuses.” Mutebi believes Thailand and its people needed the support of the private sector, civil society, and media to have successfully opposed and effectively regulated corruption within the country. 

In connection, emerging markets and fragile democracies are often susceptible to the economic anguishes and political unrests corruption produces. John Morrell believes corruption is one of the most destabilizing issues facing Thailand, if not the most damaging, “It has been the principal stated justification by the military and by the courts for the dissolution of elected governments.” Thailand ranks 102 out of 177 countries and territories in Transparency International’s Corruptions Perceptions Index. Anti-corruption thinkers and promoters tend to underestimate and look past the importance of the private sector within the state in weakening the power of corruption. They often underestimate or overlook the private sector because they believe competing business interests are the underlying root of corruption. Conversely, Morrell writes “a mounting body of evidence shows that high levels of corruption harm the private sector, with smaller businesses suffering the most.” CIPE’s project to assist the IOD and private sector within Thailand will create greater transparency and accountability in the government. This will assist in reducing and preventing further economic instability and political unrest corruption has habitually produced within the country.

Key Actors 

The principal actors involved in the “Tackling the Supply Side of Corruption in Thailand” case study are the Center for International Private Enterprise (CIPE), the Thai Institute of Directors (IOD), and Thailand’s largest businesses and most influential business associations. The Center for International Private Enterprise (CIPE) “strengthens democracy around the globe through private enterprise and market-oriented reform.” CIPE is the business and economic component of the four core institutes of the National Endowment for Democracy (NED). CIPE is also an affiliate of the U.S. Chamber of Commerce. It’s objectives include fostering institutions to assist market-oriented democracies, increasing the participation of the private sector in democratic processes, and improving governance through the establishment and sustainability of transparency and accountability in both the private and public sectors. The Thai Institute of Directors (IOD) is an organization in Thailand. Their mission is to, “Develop and support company directors to implement good corporate governance.”

Execution 

This project commenced when the government of Thailand started to explore possible collective action approaches to combat corruption in 2009. The first step was holding initial meetings between CIPE, IOD, businesses, business associations, donors, and government officials to discuss the prospects of the coalition and effort to form collective action. CIPE learned that there were two key factors restraining the country from initiating a collective action program. The first factor was that the business community did not know how to initiate the process. The second factor was that there was a basic or limited understanding of  “collective action.” This resulted in CIPE contacting the IOD to investigate the possibility of a partnership. In June of 2010, CIPE launched a project with the Thai Institute of Directors (IOD) to cultivate private sector support for anti-corruption strategies. 

CIPE’s initial action was the creation of workshops to conduct. In these workshops, CIPE illustrated the collective action approaches to fighting corruption. 

CIPE also created a survey for the IOD to administer to the Thai business community. The survey was created to gain a better understanding of the methods of collective action to employ in Thailand’s marketplace. The study discovered that Thai businesses of all sizes want to take action to assist in eliminating corruption. 

Following the initial steps, CIPE produced and provided the IOD and the private sector coalition with instruments and instructions to engage in collective action. The next sizeable victory in the execution of this project was the large conference held with important members of the Thai business community. At the conference, Thailand’s most prominent firms and business associations pledged to support the private sector initiative. In addition, they pledged to sign IOD’s Collective Action Against Corruption Declaration. 

The members of the coalition were required to sign the Collective Action Against Corruption Declaration. In signing the deceleration, they pledged to take substantial and assessable actions to reduce supply side corruption risks within their organizations. The actions required by businesses in the coalition include, “implementing anti-corruption policies and compliance programs, providing guidance on business conduct to managers and employees, and disclosing internal policies and experiences to help disseminate and promote best practices.” Additionally, business organizations within the coalition must submit to an external evaluation that authenticates they are taking the necessary actions to reduce supply side corruption risks within their organizations.

CIPE took additional steps to ensure the viability and sustainability of the coalition. They developed content and a curriculum with the intention of further educating employees within coalition companies on anti-corruption. CIPE developed two training courses on anti-corruption. CIPE’s final operation was to establish a legitimate and viable certificate program for the members of the coalition. With the assistance of the IOD, CIPE created a certificate program to be managed by the IOD. This certificate program is monitored by the IOD and a twelve-person panel of experts, who serve on the committee to review the self-evaluations and external audits submitted by the member companies. The audits submitted by the member companies to the committee are to ensure they are in line with IOD’s Collective Action Against Corruption Declaration. This certificate program and auditing process has helped establish a real sense of accountability and transparency among the member companies in the coalition, which has strengthened the collective action process against corruption.

Results

CIPE’s underlying goal in Thailand was to formulate a concrete strategy to assist the Thai business community in reducing corruption through the employment of the private sector. One of CIPE’s primary goals in this effort was to form a legitimate and genuine coalition of Thai private businesses and business associations. Similarly, it wanted to introduce and promote the use of collective action among the Thai business community. CIPE understood the coalition of private businesses and business associations it hoped to assemble would need to have legitimate checks in place to promote the accountability and transparency needed to effectively employ the private sector to counter corruption. Thus an additional goal for CIPE was the creation of an accountable, transparent, and certified evaluation program to ensure the coalition members honored their original commitments to engage in ethical business practices.

It is fair to say CIPE achieved their goals of tackling the supply side of corruption in Thailand. Their work spanned from June 2010 to September of 2014. In partnership with the IOD, CIPE was able to assemble a legitimate and genuine coalition of Thai private businesses and business associations to activate the public sector. Additionally, CIPE successfully educated the coalition members on collective action and provided them with the essential methods to employ collective action to eradicate corruption. In respect to CIPE’s goal to create an accountable, transparent, and certified evaluation program to ensure the coalition members honored their original commitments, they helped create the certificate program and auditing process that has established a real sense of accountability and transparency among the member companies in the coalition. This certificate program corresponds with the IOD’s Collective Action Against Corruption Declaration, CIPE assisted in formulating. 

The coalition of businesses and business associations CIPE and the IOD helped attract to the collective action initiative from 2010 to 2014 is remarkable. As of 2014 the coalition consisted of 325 members. Additionally, 157 of the member companies are listed on the Stock Exchange of Thailand (SET). The members of the coalition represent more than 25 percent of all listed companies on the exchange and account for more than 50 percent of the stock exchange’s total capitalization. Moreover, “CIPE and IOD estimate that the coalition represents nearly 20 percent of the Thai GDP and more than one million employees.” There are now around 900 companies or so in the coalition, with a strong multinational presence as well. CIPE and the IOD helped create a coalition that has the most influential and major Thai businesses and business associations as members.

Project Assessment 

Morrell believes CIPE’s effort in Thailand created a private sector anti-corruption force as powerful as any other in the world. Thailand now has a more accountable and transparent marketplace for businesses to positively contribute to the country. In assessing this project, it is significant to keep in mind the long and rampant history of corruption Thailand has endured. CIPE did a tremendous job in this private sector led anti-corruption effort in spite of a traditionally prone corrupt culture. CIPE enjoyed success because of the innovative approaches it took. CIPE engaged and stimulated the Thai business community from the ground up. CIPE’s partnership with the IOD was vital to the success of the project as well. Furthermore, CIPE’s display of respect in motivating the Thai business community to make it their own, while focusing on and supporting the local context was crucial. 

It is important to note the challenges this project faced as well. CIPE did not suffer any “failures” per say; however, there could have been serious roadblocks if CIPE did not partner with the IOD. CIPE did not want this project to be a generic business pledge, anti- bribery controls are an investment companies want to pay for and employ in Thailand. With that said, CIPE needed a partner with lots of business connections. An NGO would not have been able to offer the same support or connections as the IOD. Additionally, a potential failure for the project would have been not having the right people in place. The project’s success and implementation was dependent on having great people on the ground. Not having the right people or support is a potential choke point that makes a project of this magnitude tougher to replicate somewhere else. 

Citizen engagement is a new element being introduced to the project. CIPE wants to establish a citizen engagement program because Thai companies are still having trouble conducting business without using bribery. For example, companies often still have to engage in bribery to attain a building permit in Bangkok. CIPE has developed a text message survey they are tying to employ that would survey citizens who visit government offices prone to corruption. The survey would ask citizens if they had to pay a bribe and if so, for how much and what for. CIPE aspires to incorporate citizen feedback to put pressure on the Thai Government. CIPE will publish the results with the hope it motivates the government to reduce corruption within the country. 

The stimulation and formation of such an expansive and influential coalition of private sector organizations to combat corruption will produce positive ripple effects in Thailand. Hopefully these ripple effects will include a more democratized or at least accountable and transparent Thailand. This would help assist Thailand in developing a more robust economy and secure political system. With that said, it would be wise to keep tabs on the private sector coalition and its progress. Quarterly or annual meetings to ensure the stability and continuation of the private sector effort would be practical. Additionally, CIPE could provide more workshops and training programs on a quarterly or annual basis for new coalition members and their employees. It is also significant to note autocratic military leaders are currently governing Thailand. The military seized control of the country in 2014. It would be advantageous to keep tabs on the current political situation and provide support to the Thai private sector, as they might need more resources and instruction in ensuring the permanence of their coalition.