U4 Helpdesk Answer | Private sector

Integrity risks for international businesses in Pakistan

By Matthew Jenkins
Reviewed by: Roberto Martinez B. Kukutschka
U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute (U4 Helpdesk Answer 2018:19)

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Corruption remains a major obstacle to companies operating in Pakistan, along with macro-economic uncertainty and lingering security risks. While companies are likely to encounter corruption across all sectors, certain industries and firm profiles are more at risk. Collusive contracting and kickbacks remain widespread in the energy and infrastructure sectors, while industries driven by fast-moving consumer durables, such as telecommunications, seem to be becoming more resistant to such practices. Larger firms are generally less vulnerable to coercive corruption, and the positive effects of foreign bribery laws can be gradually felt as local firms become increasingly sensitive to the compliance requirements of foreign companies.

Main points

  • Pakistan is a sizeable trading partner for the United Kingdom, and offers opportunities for investment in infrastructure, telecommunications, natural resources and textiles.
  • Firms view corruption as the most significant obstacle to business in the country, ahead of macro-economic uncertainty and lingering security concerns.
  • Key areas of integrity risks include public procurement, political exposure, bureaucratic corruption and fraud.
  • The forms of integrity risks vary significantly by firm profile, sector and the extent of interaction with government. Larger firms are generally less vulnerable to coercive corruption.

A sizeable and growing body of evidence has provided clear indication that, at the aggregate level, corruption is bad for business.ed7a5b19183e While cross-country panel data have shown that corruption adversely affects economic growth and market demand, firm-level studies have established corruption’s detrimental effect on firm growth, innovation, productivity and return on investment.

  1. Corruption has been shown to have a detrimental effect on:
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