Corruption in the Extractive Value Chain by OECD

Author:OECD
Language: eng
Format: epub
Tags: Development
ISBN: 9789264256569
Publisher: OECD Publishing
Published: 2016-08-18T06:00:00+00:00

Parties involved

For corruption cases associated with the enforcement of local content rules, the parties involved in the corruption may be public officials from state-owned enterprises or ministries, representatives of local authorities and communities and private parties including executives from the foreign company’s subsidiary or local suppliers.

In some countries, state-owned enterprises, in particular national oil companies, may be central to administrative corruption stemming from regulatory capture or the violation of local content rules. This may be due to the dual role they sometimes play, de jure or de facto, as producer and regulator of the sector. Where this occurs, national oil companies are typically filling the gap or compensating for the weak capacity of the formal regulatory agency (World Bank, 2007).

Corruption in customs clearance or visa and work permit issuance typically involve customs and immigration officials, yet public officials in ministries may also be bribed to expedite approvals.

For customs clearance and visa or work permit issuance, companies may resort to intermediaries, e.g. independent brokers or consultancy companies, commonly hired to facilitate administrative processing of routine activities (e.g. customs clearance of routine shipment of equipment and materials, issuance, extensions and renewals of temporary importation permits, visas and work permits, etc.).

Depending on the scale of the scheme, corruption related to the violation of environmental regulations, may involve high-level officials in the executive and judiciary, or government inspectors and administrative officers in charge of verifying legislative compliance or delivering authorisations for companies to operate.

In the private sector, junior companies may be prone to engaging in corrupt behaviour in cases of regulatory violation due to their short operational timelines, low reputational risks, highly mobile and flexible nature, limited internal control capabilities and reliance on fickle venture capital. Often subjected to less scrutiny than larger companies, they may operate below accepted standards of corporate ethics. Moreover, due to their higher dependence on finance capital compared with revenue, junior companies tend to face short-term horizons, invest in high-risk areas where the prospects of return are the highest, and operate in weak institutional and regulatory environments where larger firms do not tend to go (Dougherty, 2015).

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