There are half a dozen ways in which defence corruption can manifest itself, according to Mark Pyman of Transparency International UK. "From the point of view of both the importing government and the society trying to see corruption reduced, they are all equally bad."
1. No tender. Persuading the purchasing company or government not to hold a tender, but to favour your company as the sole bidder, which puts you in a uniquely privileged position both to win the contract and reward the people who saved you from facing competition.
2. Using an intermediary. Exporters may find agents in the purchasing country to favour their bid at the government level over anyone else's. Exporters pay the intermediary, who usually has no official position, and somehow they are thereby favoured in the tender. Payments usually flow from one third-party country to another, and you will not see the money flow into the purchasing country or out of the selling country. It will all be handled through unrelated companies or law firms outside of both countries
3. Paying a bribe. This is probably the most direct way, and involves actually paying money to an official involved in making the decision, such as an army general or a defence ministry official. Again, usually that would happen in a third-party country.
4. Off-sets. These are counter-trade transactions that reward the purchasing country after the deal is done. They are quite often equal in size to the actual defence sale. In the transactions that the seller country is required to set up, there are limitless opportunities for rewarding officials in the country that helped you, such as by making them shareholders in one of the offset companies, or giving them a favoured position in an offset contract.
5. Employment. Sometimes, officials in the purchasing country are looking to move somewhere else, and you can offer them or their children or their relatives jobs abroad, or scholarships or what have you.
6. Financing. There are many ways to reward the people who helped you by favouring the terms of the financing so some commission or percentage or some commercial aspect of the financing favours an official or his company.
26. Mar 2007 at 0:00 | Tom Nicholson