BOGOTA (TrustLaw) - Corruption is the biggest obstacle when doing business in Colombia, according to a recent survey by the World Economic Forum.
Nearly 17 percent of business leaders questioned ranked corruption as their top concern for the second year running - above a list of 15 other factors impeding commerce, including high tax tariffs and bureaucratic red tape.
The survey findings, however, came as a surprise to Fedesarrollo, a leading Bogota-based think tank on economic and public policy.
“I respect the survey but I don’t think corruption in the private sector is that big a problem and I’m very surprised corruption came out so high. There are other factors like high taxes and the road infrastructure being in a shambles that business leaders here talk about more as the main problems in the daily course of business,” Roberto Steiner, head of Fedesarrollo, told TrustLaw.
But he recognised that Colombia’s complex tax regime provided a breeding ground for corruption during the previous government of Alvaro Uribe.
“The highly distorted and convoluted tax code and all kinds of government subsidies and exceptions, like tax free zones, that we have here give grounds for corruption to emerge,” Steiner said.
“The government needs to make a major effort to make public policy more transparent and much less preferential.”
Corruption ranks far lower in Latin America’s leading economies, Brazil and Chile - sixth and eleventh place respectively, according to the survey published by the Geneva-based group.
VIOLENCE NOT A MAJOR FACTOR
A guerrilla insurgency, drug trafficking and high levels of violence in the world’s largest cocaine producer have often been portrayed as the biggest threats to Colombia’s economic growth and competitiveness.
But according to the World Economic Forum’s survey as part of its latest Global Competitiveness Report, only 4.5 percent of those business leaders surveyed identified crime and fraud as the biggest obstacles when doing business in Colombia.
The Colombian chapter for anti-corruption watchdog, Transparency International, states nearly a third of local business leaders say public officials solicit bribes during a contracting process, while nearly 17 percent believe that businesses offer kickbacks to secure a deal.
It is estimated that bribes cost on average around 13 percent of the total value to secure a contract in Colombia, while 84 percent of Colombian companies prefer not to take part in government procurement contracts because they believe these are not issued in a fair and or transparent way, says the anti-corruption watchdog.
While the private sector in Colombia has become more aware of corruption and its impact on commerce in recent years, business leaders need to take a more high profile and leading role in stemming graft, the group says.
Measures like simplifying tax codes, increasing salaries of public employees, urging companies to adopt a zero-tolerance on corruption, establishing transparent rules over conflict of interest and a clear legal framework on procurement can all help stem graft in the private sector, experts say.
The recently elected government of Juan Manuel Santos has made fighting corruption a priority but efforts are focused more on tackling rampant political corruption and the mismanagement of royalties the government receives from the oil and mining sectors.
Still, all this has not deterred foreign investors who are flocking to Colombia to tap into the country’s largely unexplored oil and mineral reserves. Since 2002, foreign investment to Colombia has increased five-fold spurred by improved security.
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