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Multinationals have thrived in 'loose policy environments'

By Yu Tianyu (China Daily)
Updated: 2009-08-20 15:42

The reputation of multinational companies has been badly smeared in China by a host of bribery scandals.

According to a report by Beijing-based consultancy firm the Anbound Group, of the 500,000 suspected corruption cases in China during the past decade, 64 percent involved international trade and foreign firms.

Other than Anglo-Australian mining company Rio Tinto, the latest to add its name to the "black list" is United States label-maker Avery Dennison's Asia Pacific Group, which admitted last week its subsidiary Avery China had offered bribes to research institutions and other officials in return for business contracts.

Last October, Avon Products, the world's largest direct seller of cosmetics, also announced it would conduct an internal probe of its China operations following claims that travel and entertainment expenses may have been incurred improperly.

Supermarket chain Wal-Mart, research laboratory firm Lucent Technologies, computer giant IBM and telecom company Siemens have all had bribery scandals in recent years, while Carrefour, Diagnostic Products and Morgan Stanley were involved in bribery scandals.

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"It is normal for multinationals to adjust their strategies and activities to pursue profits in accordance with local situation, policies and culture," explained Luo Laijun, an expert at the department of international economics at the Renmin University of China in Beijing and a member of the Academy of International Business.

"As part of China's reform and opening up policy in 1990s, preferential policies related to tax, loans and land were offered to these companies to encourage foreign investment. But some local governments, driven by economic interests, set up very loose or flexible policy environments."

Jiang Heng, deputy director of the research academy for the Ministry of Commerce, also said clear gaps exist between China's laws on bribery and those governing multinationals.

While offering bribes makes them in breach of the internationally agreed Guidelines for Multinational Enterprises and US Foreign Corrupt Practices Act, the country "cannot fully rely on controls and punishments in a multinational firm's parent country as they only take action when their own interests are seriously infringed".