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UNIS/CP/733
28 November 2013

Factsheet 6

Corruption and small medium enterprises (SMEs)

PANAMA CITY/VIENNA, 28 November (UN Information Service) - Corruption distorts markets and increases costs for companies, and ultimately for consumers. This crime remains a significant problem for tens of thousands of businesses globally, particularly small firms which often have little choice, but to use corrupt practices for market survival. However, the private sector can play a powerful role by rejecting corruption and embracing fair and transparent practices that create a level-playing field for everyone.  

Identifying the challenges

• Financial disparity: there is a considerable resource gap between what large companies and smaller companies can do against corruption.
• Knowledge management systems: developing countries often have limited capacity to collect and manage knowledge due to limited resources and technical know-how.
• Absence of ownership: private companies and individuals are often unwilling to report corruption for fear of the consequences, both legal and commercial.  
• Lack of regulation: often there is a need for governments to design, promulgate and enforce minimum legal standards and regulations for business ethics and integrity.
• Promoting leadership: to reject corruption, businesses need a strong corporate culture and guidance and support from governments as part of their own anti-corruption efforts.
• Demonstration of commitment: the public sector may often be unable to lead the way by demonstrating its own commitment to laws and by practising transparency and accountability.

The facts about SMEs

• The most damaging form of corruption for SMEs appears to be the "sale of rights granted by the Government" (licences, permits, contracts, tax incentives, dispensations etc.).
• SMEs face difficulties in the form of requests for unofficial payments from natural monopolies or "network industries". These bodies are usually public services responsible for the  supply of utilities.
• People employed in SMEs believe more strongly than those employed in larger businesses that corruption is part of the way things work in their particular country.
• In general, those employed in SMEs perceive corruption in the public sector and the private sector to be more pervasive than those employed in large companies.
• Persons working in SMEs are more likely to state that they have been asked for bribes in order to obtain licences or permits from the local government and in relation to the payment of income tax.
• SMEs make additional payments to get things done much more frequently than large companies.
• SMEs pay a much higher percentage of their annual revenues in bribes to public officials than large companies.
(All of the facts above are taken from "Corruption prevention to foster small and medium-sized enterprise development", Volume 2, United Nations Office on Drugs and Crime (UNODC), 2012)

UNODC: Working today for a better tomorrow:  

There are three key areas of UNODC's work to support SMEs in their fight against corruption:
• Encourage large corporations to invest in their supply chain and to help small and medium-sized companies in this area.
• Call for governments to work in partnership with business.
• Develop best practices in line with UNCAC.

UNODC has also prepared a number of tools in this area:

• An Anti-Corruption Ethics and Compliance Programme for Business: A Practical Guide Legal;
• Corruption Prevention to Foster SME Development (United Nations Industrial Development Organization (UNIDO)/UNODC);
• Guidebook on Anti-Corruption in Public Procurement and the management of Public Finances.
UNODC has also operated a small grants scheme since mid-2012 helping civil society in African countries such as Cameroon, the Democratic Republic of the Congo, Mozambique, Sierra Leone and Tunisia, to engage with the private sector on the issue of corruption.  

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For further information please contact:

David Dadge, Spokesperson, UNODC
Mobile: (+507) 6800 3353 Email: david.dadge[at]unvienna.org
or
Anne Thomas, Information Officer, UNIS Vienna
Mobile: (+507) 68002981 Email: anne.thomas[at]unvienna.org

For further information visit:
http://www.unis.unvienna.org/unis/en/events/2013/cosp5_panama_2013.html

Conference website of the United Nations Office on Drugs and Crime (UNODC):
http://www.unodc.org/unodc/en/treaties/CAC/CAC-COSP-session5.html

Conference website of the Host Country: http://cospvpanama.com/eng/index-e.html

For more information on UNODC's work against corruption visit:  
http://www.unodc.org/unodc/en/corruption/index.html?ref=menuside

Follow @UNODC on Twitter and join the conversation using #NoToCorruption and #CoSP5.