A prescription for fixing corrupt ports

Cargo shipments may face ruin on the high seas from Somali pirates and 15 m swells, but their most perilous passage typically begins when they approach a corrupt port. The cargo ship is often boarded by local pilots and government officials carrying empty suitcases that they expect to be filled with cigarettes, liquor and, lately, iPads. Getting the cargo unloaded onto the dock, through customs and off to its ultimate destination requires another set of bribes to port operators.

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Bribery is a fact of life at many of the world’s ports. The centuries-old tradition is still going strong in the emerging markets of Africa, Asia and the former Soviet Union. “It’s ingrained in the culture and very difficult to clean up,” says Herbert Igbanugo, a Minneapolis lawyer who specializes in international maritime issues. In 2004, the World Bank Institute estimated that more than US$1 trillion is paid in bribes of all kinds each year. Shipping industry experts estimate shipping-related bribes total in the hundreds of billions of dollars.

The problem has prompted a number of efforts to get at root causes. Bribery thrives because civil servants in many emerging markets are woefully underpaid. A good percentage believe supplementing their salaries is acceptable and look to the people they encounter to do so. In most sub-Saharan countries, the position of customs official is highly sought-after. Not only do the officials count on the bribes to survive, but the culture expects them to become rich enough to support their extended families—sometimes even their entire village of origin. Government officials often exert little effort to control bribery because many get a cut.

Reformers have suggested creating both carrots and sticks for underpaid customs officials. Governments could combine wage incentives with better monitoring mechanisms and discipline structures that would ensure that customs officials get sacked if they’re caught. While those solutions sound straightforward, governments are often reluctant to enact them because if they put their customs officials on an incentive system, they would have to do the same for all their civil servants.

Another approach is to engage private contractors to manage cargo handling and other day-to-day port operations on the theory that private companies typically do a better job of monitoring and disciplining their employees. This model, which is used throughout Europe, the Americas and Asia, is now gaining ground in Africa.

Technological solutions that discourage bribery by preventing face-to-face negotiations between clearing agents and customs officials are also being developed. Many countries are moving to systems that require shippers to submit all documentation online both to speed customs and reduce the opportunity for requesting (and offering) bribes. In Mozambique, for example, officials have recently installed an electronic document submission system that makes it much harder for customs officials to collect a bribe by changing the value of a shipment or moving it into a lower tariff category.

Making more real-time data on port operations available to shippers can also discourage collusion between shipping agents and customs officials. In many cases, shipping agents include extra charges for bribe payments in their fees, but shippers have no way of knowing if the agents are slipping some of that cash into their own pockets. Accurate data on how long shipments take to clear customs in specific ports could help companies determine whether cargo is moving slowly because of a bribery issue or because of general inefficiency. Detailed breakdowns of official tariffs paid and the status of required customs documents could give companies additional leverage.

Igbanugo suggests that companies protect themselves by being particularly careful about the agents who manage their customs clearing. An agent who refuses to abide by anti-bribery laws, charges higher than the going rate or is sloppy with paperwork should be given the boot.

James Tillen, a lawyer at Miller & Chevalier, a Washington, D.C. law firm suggests that companies determined not to pay bribes take the following steps to protect themselves:

• Develop a reputation as a company that has a clear no-payment policy. If officials know you won’t make a payment, they will be less likely to demand one.
• Make sure your paperwork is in perfect order, thus giving customs officials less leverage.
• Plan ahead and build in time so the threat of bribery-related delays won’t affect you.
• Learn all you can about the port. The situation can be different from port to port in the same country and even within the same port.

While these steps may help reduce the amount of bribery in ports, they’re unlikely to eliminate the problem. Sandra Sequeira, an assistant professor at the London School of Economics, found that efforts to reduce bribery sometimes caused customs officials to demand larger bribes from other shippers and move to more coercive methods of extracting payment.