BEIJING, Aug. 20 -- As investigations into the
alleged Rio Tinto bribery scandal continue, many executives and officials within
China's steel and other industries will be feeling hot under the collar.
With many more expected to be implicated, experts say
the arrests of four Shanghai-based employees of the multinational mining giant -
including Australian citizen executive Stern Hu - on charges of stealing
commercial secrets have highlighted a common business practice that is spinning
out of control.
A lack of systematic supervision has been blamed for
a "bribe culture" that has flourished in China's rapidly developing economy,
while the heads of many State-owned enterprises (SOEs), which still dominate the
most profitable sectors, are believed to be its biggest champions.
In the past two months alone, two bosses of SOEs have
been severely punished for taking bribes. Chen Tonghai, former chairman of China
Petrochemical Corporation (Sinopec), was given a suspended death sentence in
July for accepting birbes of more than 195 million yuan (28 million U.S.
dollars), while Li Peiying, former chief of Capital Airports Holding Company
(CAH), was executed on Aug. 7 for taking 26 million yuan and misappropriating
82.5 million yuan.
Kang Rixin, general manager of the China National
Nuclear Corporation (CNNC), is also reportedly under investigation over a
1.8-billion-yuan corruption scandal.
"Corruption is ingrained in SOEs, so SOE leaders
don't see taking money as a problem," said Meng Ting, an experienced lawyer with
Jinque Law Firm in Beijing . "They also accept brand cigarettes, bottles of
quality wine, cars and even luxury villas."
"And just look at how many send their children abroad
to be educated or are already running businesses themselves," added Wu Dong, a
Shanghai lawyer with the M&A Law Firm, who has years of experience in
mergers between foreign and Chinese companies.
A picture published on an Sina.com, a major Internet
news portal, last year appeared to show Zhou Jiugeng, a government official in
Nanjing, Jiangsu province, smoking cigarettes that cost 180 yuan a pack and
wearing a watch worth 100,000 yuan. The vitriol it sparked led to a probe into
his dealings and his detention this year for allegations of taking bribes.
And when a government official is suspected of being
corrupt, business leaders with whom they have links are usually quick to follow.
After the former Party chief of Shanghai, Chen Liangyu, was found guilty of
embezzling billions from the city's pension fund in 2006, dozens of senior
government officials and SOE leaders were also arrested and sentenced for their
involvement.
"The recent outbreak of high-profile cases shows the
nation's determination to deal with the problem. However, it also highlights the
prevalence of corruption in Chinese business circles and that the amount these
people are accepting in bribes is drastically increasing," said Zhuo Zeyuan, a
political law professor for the Party school of the Central Committee of the
Communist Party of China (CPC).
"There are plenty of rules to regulate SOE bosses,
government departments to watch SOE assets and profits, as well as an increasing
number of random inspections to check operations. But none of them work."
Local offices of the central State-owned assets
supervision and administration (SASAC) were launched in 2003 and are charged
with tracking assets and carrying out random audits to ensure correct
operational procedures are being followed.
When allegations of corruption arise, however, the
matter then comes under the responsibility of the disciplinary and juridical
systems.
"But when lots of departments are supposed to be
watching for wrongdoing, it usually ends up that none of them do the job
efficiently," explained Zhao. "Also, corruption is usually only discovered after
huge losses to public funds have already been made because anti-corruption is
not a feature of the daily management of SOEs."
Hu Xingdou, an economics professor at the Beijing
Institute of Technology, agreed. He added: "SOEs have independent supervisors;
they have board directors and work unions, who are both expected to oversee the
management teams. But they seem to be only for decoration and offer no real use.
"Leaders even spend lots of money on hiring
professionals to draw up internal regulations to prevent corruption. But they
can invalidate all of them with just one order."
Xue Lan, deputy chairman of the school of public
policy and management at Tsinghua University in Beijing, added the system is
also being held back by SOE bosses often having administrative ranks that are
higher than the government officials charged with supervising them.
In the pyramid of power at SOEs, the chairman is
king. "They have the power to employ millions with one signature, so people are
not surprised by the amount of bribery that goes on, even if it totals millions
or hundreds of millions," said Zhang Peihong, a lawyer representing one of the
four arrested Rio Tinto employees.
Chen, the ex-chairman of Sinopec, had earned himself
a reputation for his arbitrary and despotic exercise of power and, before his
downfall, was once famously quoted as saying: "The 1 or 2 million yuan I spend
socializing in a month is a piece of cake compared with the 20 billion yuan my
firm brings to the State in taxes every year. You can't make money unless you
know how to spend it."
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Hu Hancheng, left, received a life
sentence on March 2 at Beijing No 1 Intermediate People's Court for taking
bribes of more than 5.5 million yuan. Chen was a former official from
China Development Bank. Ren Hesheng, right, was sentenced to 11
years, File photo. (Source: China Daily)
Photo
Gallery>>> |
Meanwhile, Fang Weigang, director of the Fanyu district TV
station in Guangzhou, capital of Guangdong province, who received five years in
prison for graft, bribery and embezzlement in 2007, also told media reporters:
"If I don't accept the money, they (the company officials offering the bribes)
will feel restless. If I do, they will expect to be treated fairly. Giving me
money is a way for people to show me respect."
Zhang, who refused to comment directly on the Rio
Tinto allegations, said he would not be surprised if every executive from the 16
Chinese steel firms participating in the ongoing iron ore talks had received
bribes.
"Anti-corruption raids are like seasonal typhoons;
wherever it goes, corruption and the shocking damage it causes are revealed," he
said. "But I fear what we are seeing is only the tip of the iceberg."
Speeding up political reforms is the only way to
tackle corruption head-on.
"The country has experienced fast economic growth
over the past 30 years but the political reform has lagged far behind. It is
like someone trying to walk when their legs are moving at different speeds, one
faster than the other. That person will almost always fall down," he added.
A recent study of the economies and business
practices employed in 152 nations found corruption was more prevalent in those
with a large number of state-run companies, according to Hu in Beijing.
It also found that, like in China, the majority of
these companies were the dominant forces highly profitable industries and had
little in the way of competition.
"When politics and enterprises are not clearly
divided, business ownership is not clearly defined and the management is not
scientifically structured, leading to low efficiency and corruption," said Hu.
"In China, SOEs are simply an extention of the central government and follow the
rules of bureaucracy instead of the market.
"We need to establish a database of experienced and
professional managers and then choose the heads of SOEs from it, while SOEs
should also be opened up for market and public supervision."
Lawyer Zhang agreed and said more transparency is
vital to cleaning up the image of SOEs. "The media and public need to be able to
keep a close watch," he said.
The government in Guangzhou announced plans to reform
SOEs under its administration in May, focusing on stripping the administrative
rank of bosses, replacing them with professional managers and linking the income
of SOE leaders with a company's performance.
Officials at the SASAC were unavailable to comment
yesterday. However, in July, the central government and CPC released a
"definition of good executive conduct" for leaders of SOEs in an effort to halt
the spread of corruption.
The guidelines state bosses should not abuse their
power to impair the interests of the State or other investors, or use their
position to reap personal gains at the expense of the enterprise.
Compared with similar guidelines issued in 2004, the
new stricter rules clarify their scope and are more comprehensive in drawing the
lines executives must not cross. They cannot set their own salary, housing
allowance and other welfare benefits, and are barred from traveling at the
expense of the company. Their spouses, children and spouses of children are also
barred from investing in any company related to their SOE.
The rules apply both during and after a leader's
tenure.
Every SOE boss is also required to file an annual
report to the local SASAC detailing their investment and property status, as
well as the employment and overseas residency status of their spouse and any
children.
Premier Wen Jiabao announced in February the State
Council is also working on a plan to publish the assets of government officials.
"The earnings of SOE leaders must be connected to the
success of their company," added Xue. "It is the only way to make sure they
focus on the busness, rather than the politics."
(Source: China Daily)
