April 27, 2015 - 17:00 ( Brasília )

Defense

Defence groups quiet on anti-corruption measures


Peggy Hollinger, Industry Editor

Source: Financial Times

 

Two-thirds of defence companies show little or no evidence of having programmes to combat corruption, according to an extensive study of the industry.

Dassault Aviation, a key partner for Britain in the development of unmanned fighter aircraft, is among the worst in disclosing what it does to prevent corrupt practices, said Transparency International in its second anti-corruption report to be published on Monday.

The two-year study measures the transparency and quality of anti-corruption programmes in 163 defence companies around the world. Dassault declined to comment.
 
The report also highlights growing concern over a lack of transparency surrounding so-called offsets, the side deals demanded by governments as a condition for awarding defence contracts. These can include local production requirements, or even investments in unrelated activities such as Raytheon’s joint venture with Saudi Arabia in shrimp farming.
 
Avascent, a US consulting firm, has estimated that offset obligations could total some $500bn by 2016.
 
Their lack of transparency is seen as high corruption risk. Only 13 of 163 companies surveyed showed public evidence that offset risk is addressed or that partners are subjected to due diligence.
 
Mark Pyman, head of defence at TI, said: “Corruption in defence affects us all. It is not just about commissions on sales. Corruption can also directly threaten the lives of citizens and soldiers.”
 
TI has called on governments to demand that their contractors implement ant-corruption measures and make public what they do to ensure best practice. “If government contracts are contingent on companies having appropriate ethics and anti-corruption programmes in place, it will create a step change in accountability,” Mr Pyman added.
 
Tougher anti-bribery and corruption regulations and stronger enforcement in many countries appear to be having an effect, however. The report finds that 33 per cent of companies surveyed have improved the quality of their anti-corruption programmes and their transparency since the previous report in 2012.
 
Cracking down on corrupt practices has become a priority for governments from China to Britain. Companies such as Rolls-Royce in the UK and Airbus in France are under investigation for alleged bribery or corruption dating back many years. India has suspended a contract with Italy’s Finmeccanica amid allegations of corrupt practices.
 
However, all three companies have improved in the latest TI study as they seek to introduce new measures to combat corruption. Rolls-Royce, for example, has reduced the number of local middlemen in an attempt to reduce the risks.
 
US defence companies are the top performers in combating corruption, with Raytheon, Bechtel, Lockheed Martin and Fluor Corporation reaching “Band A” — TI’s top assessment level based on information made publicly available about their anti-corruption measures.