What is Corruption in Ports and Why Does it Matter?
Table of Contents
In today’s highly interdependent world economy, business and societies depend on the efficient clearance of vessels and goods in ports worldwide to function, develop and prosper. Around 90 % of world trade is transported by sea and via ports, and any business that is part of global supply chains does to some extent rely on ports for import and export. However, seaports are in many cases, the most corrupt place in the maritime value chain.
Every day, vessels and cargos enter ports, and the processes involve numerous stakeholders across several jurisdictions, resulting in multiple interactions with government officials. This provides fertile ground for corruption where government officials in the port enjoy broad discretionary powers. See report on Operations at Nigerian Seaports and Terminals. Further, the port is an administrative monopoly over an essential public service that businesses depend on to function and prosper. This creates breeding ground for ‘coercive’ corruption where port officials extract bribes from companies for performing routine processes during e.g. vessel and cargo clearance.[1] See report on Tackling Corruption in The Nigerian Ports.
The World Bank estimates that corruption constitutes an additional cost on business totalling as much as 10% of sales in high-risk markets and over 5% in many other countries. A recent OECD study reveals that foreign direct investment is undermined when corruption affects the passing of goods through customs, and that foreign direct investment in corrupt countries is almost 5% less than in countries that are relatively corruption-free (OECD, 2014).
Moreover, corruption in the port sector facilitates tax evasion and has a detrimental impact on national revenue collection through, for instance, malfunctioning custom regimes (Attila: 2008). Recent estimates from the World Customs Organization suggest that customs-related corruption causes a global loss in customs revenue of USD $ 2 billion each year (Michael: 2012).
Overall, corruption reduces efficiency and increases inequality. At a global level estimates show that the cost of corruption equals more than 5% of global GDP (USD $ 2.6 trillion, with over USD $ 1 trillion paid in bribes each year (see International Chamber of Commerce /Transparency International / United Nations Global Compact / World Economic Forum Partnering Against Corruption Initiative, 2008).
Eliminating corruption in ports, especially in developing countries, is therefore instrumental for promoting development, trade and a more inclusive global economy. For a developing country, maritime corruption is a key barrier to
- making essential goods more affordable to the poor;
- achieving greater integration into global value chains; and
- attracting much-needed capital, technology and know-how.
Not dealing with Corruption in Ports also impacts ports users negatively (see below) however, there is a certain inertia due to attitudes of actors in the ports towards acting to curb the corruption. See also, Avoiding 3 Barriers to Dealing with Corruption in Ports.
[1] Sequeira, S. and Djankov, S. 2009. ‘On the Waterfront: An Empirical Study of Corruption in Ports’ 2009, 2.
5 Impacts of Corruption in Ports
Corruption comes with a cost for business and societies. The impact of corruption in ports has been documented in several studies and through data collected by the Maritime Anti-Corruption Network.
MACN and Nigeria’s Effort to Deal with Corruption in Ports
The Maritime Anti-Corruption Network (MACN) is a global business network of 130+ entities working towards the vision of a maritime industry free of corruption that enables fair trade to the benefit of society at large. Established in 2011, MACN is comprised of vessel owning companies within the main sectors of the maritime industry and other companies in the industry, including cargo owners and service providers. MACN was created by business and remains driven by business and is today the leading anti-corruption initiative within the maritime industry.
MACN promotes the shipping industry as an industry that wants to drive compliance and focus on port and ocean governance. It does this by avoiding a “blaming exercise” focusing on results not reports. MACN engages the whole value-chain in country-specific efforts using its collective buying power to effect change and share best practices in the belief that tackling corruption in ports can reduce many other types of risks e.g. illegal trade, security risks etc.
Avoiding 3 Barriers to Dealing with Corruption in Ports
1. Institutional Barrier
Many actors argue that how you do business at Nigeria’s ports does not receive sufficient regulatory attention to warrant change. Those who do wrong are not always sanctioned and those who insist on doing the right thing are faced with extra checks, delays not always able to successfully conclude their business at the ports on time and without having to make unreceipted payments.
However, there is an external stimulus for change coming from extra-territorial anti-corruption laws such as the UK Bribery Act (UKBA), the Foreign Corrupt Practices Act (FCPA), the OECD Convention on Combatting the Bribery of Foreign Public Officials and the United Nations Convention Against Corruption (UNCAC) etc., and from the work of pressure groups like Transparency International, the Maritime Anti-Corruption Network (MACN) and increasing local vigilance through groups like the Convention on Business Integrity (CBi).
2. Situational Barrier
Some other actors argue that not enough cargo and/or vessel owners require ethical compliance as pre-condition for engaging them and therefore feel that dealing with corruption in ports might not be expedient. However, MACN members calling Nigerian Ports and those doing business in Nigeria require integrity for engagement and a private sector coalition in Nigeria, Business Action Against Corruption (BAAC) is building its capacity to do the same under complimentary projects funded by the Danish Government and the Siemens Integrity Initiative.
3. Behavioural Barrier
Some see ethical compliance as a moral but impractical nice-to-have given the Nigerian business environment. The Nigerian ports agencies and policy makers will soon start exchanging compliance reports and user experiences with the private sector on your ethical compliance with SOPs and necessary consequence management. The space for corrupt behavior is shrinking.
5 Points to Change Nigerian Attitudes to Corruption in Ports
- Attitudes are learnt and what is learnt can be unlearned, even if it is at some effort. MACN’s collective action initiatives demonstrate that attitudes and practices can change faster than you expect, even in locations where corruption is severe and endemic. Strategic collaborations and business partnerships with integrity champ ions can create a community of likeminded change makers. No one can fight corruption singlehandedly and support, experience sharing, and collective action can drive real change on the ground and change in attitudes.
- Changes in attitudes should not only be driven by integrity concerns, but also make business sense and make it easier and less costly to do business. Are you the sort that believes the most important thing is to simply get the job done whatever it takes (Pragmatism)? Or, are you one of those that feel lucky about being able to profit from your ability to get away with non-compliance (Opportunism)? Do you justify your acceptance of the status quo and do what others are doing because you feel it is the only way to “survive” the system (Survivalist)? Or, you feel the need for ethical compliance but feel your efforts may be futile (Moralist)? Ideally, you want to be the one that feels the need to comply with and promote Standard Operating Procedures (SOPs) as means of curbing corruption in Nigerian ports to ensure a level playing field, efficiency and effectiveness of ports operations (Principled).
- What is your current attitude to corruption in Nigerian ports? Are you a Pragmatist, Opportunist, Survivor, Moralist or Principled Actor when dealing with Nigerian ports? Are you aware of and do you understand the positive and negative responses you have to the issue of corruption in Nigerian ports? Where do these influences come from? How much of it is a reflection of the positive and negative responses of your influencers, sponsors, inspirations and role-models? What will it take to move you from Pragmatist, Opportunist, Survivor, Moralist to Principled Actor?
- Cliché or not, the change truly starts with you. The Pragmatist, like the proverbial boiled frog in a beaker, adapting to the temperature changes in the environment rather than considering what ought to be, is in danger of allowing itself to be boiled alive by the time the damage sets in an options are foreclosed – a bit more idealism and faith in reforms at the ports is needed. For the Opportunist, the adage, “everyday for the thief, one day for the owner” should remind you that putting expediency above principle and serving to promote only your self-interest would boomerang sooner than later. It is better for the Opportunist to become more mindful that you are connected to a community of Actors at the ports and in the society at large – you will be found out eventually. The Survivor, having put on a victim mentality thinks they are hard done-by, ports officials have it in for them, they are singled out for bad treatment and to be extorted, they are powerless etc. but you would do much better taking a more mature view of your role as an important port actor: take responsibility for your actions and the choices you make because corruption now exists side by side with integrity – your ability to report wrongdoing and get redress thanks to the PSSP gives you the power not to be a victim any longer! The Moralist is not left out. As a Moral Person and nothing else, you are very ethically passive, and your morality can amount to nothing. You also have to be a Moral Manager, able to make ethical choices and ensure they are not compromised. Only if you are a Moral Manager and a Moral Person at the same time can you start to make a difference – you become an Ethical Leader, a Principled Actor.
- You must change the way you think, act and socialise around the issue of corruption in Nigerian ports. Are you thinking about corruption differently from how you previously did? Is it clearer to you now that there are both positives and negatives that shape your attitude and do you now want help making better choices? Do you now see how destructive it is to adopt corrupt approaches merely because you think “that is what everyone else is doing” and/or “that is what everyone else expects of you”? Do you need help in form of courses, toolkits, advice, support or further information to complete your transition to Principled Actor? Contact us now for free support and consultation.
5 Major Things That Change how we think about Corruption in Nigerian Ports
Nigeria is a dreaded destination for most ship captains as then they get there, “anything can happen”. It is not uncommon for some Immigrations official to board a vessel, cite some sort of ‘problem with their Seamans Passports and demand payments in cash of some $8,000 per head, in cash, to fix the problem.
In the old days, there would have been pressure on the captain and the agent to negotiate this “fine” (which is not really a fine since authentic paperwork would be absent or the officer would refuse for payment to be made direct through the official channels).
Nowadays, the company would escalate the matter to MACN Nigeria’s PortCallAssist and through it to the PSSP (through the Nigeria Shippers Council) and it would be immediately escalated to the highest levels of the Nigeria Immigrations Service and the tops of all other agencies operating at the Nigerian Ports.
The speed and responsiveness of the Nigeria Immigrations Service, for example, has been so commendable that, usually from being queried to resolving the matter now takes a matter of a few hours whereas it used to take days. So long as the vessel has not contravened any real rules, they would get off without having to pay the demanded sum and call again in future without consequence to crew or captain.
Corruption in Nigerian Ports now exists side by side with processes that enable anyone demand integrity and achieve it. This is progress from when there was only the one shady way of interacting to when Nigeria now provides the option of a clean channel of interaction while the fight continued to rid the ports of the shady ways that still exist.
How do we tell the story of this sort of change around the world? We have to change the story/narrative around corruption in Nigeria’s ports. These stories have real characters, real conflict, in a setting, a good plot and some kind of resolution is being achieved at the end.
- Characters – The story of change in the Nigerian ports is about the service providers, users, the various regulatory bodies involved, the beneficiaries of the services being rendered such as cargo owners, ship owners and agents etc. and the general public. Level of awareness of alternatives to corruption in their interactions, such as through insistence on Standard Operating Procedures (SOPs) and/or using the Grievance Reporting Mechanism housed at the Nigeria Shippers Council is starting to grow.
- Setting – The ports in Nigeria themselves have their own challenges. For example, the gridlock around the Apapa area where the Lagos Ports are or the lack of dredged channels in some of the Eastern ports and the general insecurity in Nigeria’s waters provide a backdrop to the myriad ways in which officials are able to manufacture opportunities for demanding illicit payments. For example, calling a Floating Production Service Operation (FPSO) some 200 nautical mile off the coast of Port Harcourt has different challenges to calling Tin-Can Island port in Lagos. The MACN in Nigeria is finding that risk of these illicit demands increases the further away from Lagos you go on the coast and the further offshore you go from mainland Nigeria. These activities continue to damage the credibility of the maritime sector for all characters in this story.
- Plot – The start of this plot is the quest to rid Nigeria’s ports of corruption. This starts with corruption risk analyses, integrity and remediation plans. On such is what threw up the need for training of ports officials on professional integrity which led to the Convention on Business Integrity training 1,000 stakeholders between 2017 and 2018. It also led to the need to document Standard Operating Procedures for all actors using or operating at the ports and a Grievance Reporting Mechanism for resolving issues of non-Compliance.
- Conflict – This story continues to build as early users of the system are finding it hard to trace the conclusion and consequence of their reports. Currently this is very competently dealt with by the Complaints Unit of the Nigeria Shippers Council but getting facts and figures published around issues and their resolution lags a little too long for business. Nigeria Shippers Council also complains that complainants are also not forthcoming with the details necessary to conclude the matters as sometimes due to apathy and other times due to a fear of retribution, companies shy away from giving the details needed.
- Resolution – There is need for more formal compliance and consequence management to be put in place. Nigerian ports also need to be benchmarked against their competitors around Africa for how well they do in making procedures transparent, how well they consistently apply their own published procedures and how predictable their operations are to users in cost and time.
Do you like the direction in which this story of change in levels of corruption in Nigerian ports is going? We would love to hear from you at PortCallAssist.
What’s-in-it-for Nigerian Ports-Actors that Refrain from Corruption?
Users of the Nigerian ports expect to encounter visibly ethical persons who send a consistent message. Being a moral actor is never sufficient as rank-and-file officers are usually far away from their leaders, but they still typically look to their supervisors and leaders for cues and guidance on what constitutes acceptable behaviour, refraining from corruption is no exception.
Only when direct reports and subordinates see and believe that you care about and believe what you say, and only if you practice what you preach will you will earn legitimacy. This requires great care to create and sustain an ethical culture that sends a consistent message. These are some of the things that were brought to the attention of the ports officials who attended the Professional Ethics course delivered by GAN Integrity and the Convention on Business Integrity in 2016.
In the course of delivering training, you should have heard these two pathetic stories:
- A very heavily decorated Officer (with medals across his chest). The facilitator intrigued by all the shiny medals, asked how they came about. He reported he was at one of the Eastern ports in Nigeria when he spotted a vessel flying the Nigerian flag and had immediately thought there was something suspicious about the vessel.
To cut a long story short, there were serious anomalies with the vessel, and he proceeded to detain the vessel. The owners of the vessel showed up and offered him $1m (one million US dollars) in cash. He rejected their offer, escalated the matter to Head Quarters. The Nigerian Government took the matters up and collected revenues of $6m (six million dollars) from the owners and he was consequently decorated by the service.
Not too long after, his superiors at the local level redeployed him and his family to Lagos without relocation allowance and with moist eyes, he reported his family and himself were sheltering with a kind colleague who had taken them in as they were now homeless and struggling to make ends meet. His question to the facilitator, “should I have refused the $1m I was offered?” - A Law Enforcement officer who had lost one eye and had a permanent limp in one leg. The officer recounted how they had accosted a criminal gang and in the exchange of fire he was shot in the eye and wounded in the leg. His first shock came when the force concerned asked him to go and treat himself. He said there was a sum of about $1,000 (one thousand US dollars at the time) available for him to claim, though inadequate, that he could have used to defray his costs. He said a superior (who presumably was going to pocket the sum for himself) asked him to choose between collecting the money and keeping his job. He further narrated how if you start a case in Lagos and you get posted somewhere else in the country, you are expected to fund yourself to and from the court hearings as your formation may not provide any specific transport support to you. He also asked the facilitator, “next time I see the enemy of the State and he offers me money not to apprehend him, what do you think I should do?”
These are some of the pathetic welfare stories you will hear from real operatives in Nigeria. When you speak of professional ethics, they will respond with tales about their welfare and the need for them to survive. They have an unwritten code in these formations they call, ‘Espirit-de-Corps’ a code which imposes a code of silence on one officer witnessing another officer doing the wrong thing. The question then is, for those who buck the trend, what is in it for them?
- Can you (as a ports user or official) rely on the fact that there will be reward and punishment for compliance and/or non-compliance?
- Can you (as a ports user or official) consciously position yourself for rewards when you express positive attitudes against corruption? Because you are inclined to repeat those behaviors that are rewarded.
- Can you (as a ports user or official) incorporate corruption avoidance into your attitude towards use and promotion of Standard Operating Procedures? Noting that presence of a reward could increase the chance that you will express the attitude again, repeatedly.
In these cases, assurance comes from the presence of an effective compliance function that can clearly defines acceptable and unacceptable practices; works to prevent unacceptable practices by ensuring the right tone-at-the-top, education and effective communication; is able to detect deviance rapidly like through a whistleblowing platform, audits or a Grievance Reporting Mechanism; can respond adequately to exceptions reported by instituting cases, investigating taking it to closure, performing a root-cause analysis, dealing out consequences and drawing lessons from the case; and, ability to evaluate against various metrics and benchmarks the efficacy to the compliance arrangements to ensure that lessons lead to improvements in policy, procedures and practices so that risks are redefined and arrangements improved etc.
The Siemens Integrity Initiative has made a three-year grant to the ongoing MACN-CBi intervention at Nigerian Ports and to strengthening such an incentive system along with compliance are some of the components of the project. See here for details of the project.
How to Avoid Corruption in Nigerian Ports and Terminals
Captain’s Check List | Port Calls in Nigeria
The purpose of this summary is to help shipping companies prepare for port calls in Nigerian ports, and to provide guidance on how to report any eventual corrupt demands received during clearance. The Maritime Anti-Corruption (MACN) and the Convention on Business Integrity (CBi) have been working together with the public and private sector in Nigeria to tackle corruption in the maritime sector since 2012. This document builds on our experience to date. A full version of the document is available to members of MACN.
MACN Success Stories in Combating Corruption in Ports
Case Study: From Marlboro Canal to Zero-Tolerance Transits in the Suez Canal
The Suez Canal has historically been a consistent hot spot for corruption, with Captains and crew facing frequent demands for “facilitation payments” for passage or for routine services. Incident data from MACN’s incident reporting mechanism has shown that demands in the Suez Canal can be accompanied by threats of retaliation to the Captain and ship if cigarettes are not provided to the authorities. Refusal of pilots to cooperate has led to heavy delays, making timely passage difficult. As cigarettes have been the most frequent form of demand, the Suez Canal has been referred to as the “Marlboro Canal” in media.
To tackle systemic challenges like this—and in particular, to reduce threats to the safety of crews—MACN launched a collective action “Say No” campaign for the Suez Canal on International Anti-Corruption Day 2015. The campaign was a true collective effort, with MACN member companies agreeing to reject demands by using a coordinated zero tolerance policy, communication material, and an onboard toolkit for Captains developed by MACN. The campaign was piloted with a handful of companies after engagement with the Suez Canal authorities. Following positive results from the pilot, MACN agreed to make the collective action a permanent campaign.
Since the launch in 2015, MACN has assessed the impact of the campaign by surveying members and by collecting incident data. After two years implementation, companies taking part in the campaign are transiting Suez without any delays or issues. Demands for cigarettes decreased dramatically or had even been eliminated, while threats to the safety of both crew and vessel also decreased significantly.
Cecilia Müller Torbrand, MACN Executive Director, commented: “Addressing this issue is a milestone for the whole maritime industry and we now encourage more industry players to follow. The campaign has not led to delays or threats, and many Captains have welcomed the initiative. The purpose of this campaign is not to name and shame anyone but to find constructive workable solutions to an industry problem.”
Müller Torbrand added: “It is however important for shipowners to prepare their Captains and offer support. Individual captains cannot bear full responsibility but must rather have the backing of the company”.
This collective action Say No campaign demonstrates that it is possible to change the business as usual also in locations where corruption is systemic. This change was brought about in just two years, and the methodology used is being replicated by MACN in other ports across the world.
Case Study: Reported Corruption Incidents Down 90 Percent in Argentina
In 2014, MACN recognized through its anonymous incident reporting mechanism frequent recurring reports of cash demands made during the vessel clearance process in Argentina. Shipping companies operating in Argentina faced challenges in connection with the inspections of holds and tanks, customs declarations, and on-board inspection practices. Data from MACN member companies highlighted a systemic issue with cash demands for payment for unclean grain holds, including cases of extortion.
To address this challenge, MACN sought to understand the root causes and devise solutions with a coalition of champions. MACN and local partner Governance Latam (now Bruchou, Fernández Madero & Lombardi), in collaboration with other industry stakeholders, catalyzed a collective action initiative to investigate the root causes of the problem and support the government in reforming its procedures to tackle systemic corruption.
After three years of public-private collective action efforts, an integrity-driven regulatory reform was adopted in 2017. The new regulatory framework modernized the inspections system in line with international standards, balancing the government’s responsibility to ensure the cleanliness of vessels exporting agricultural products with the necessary conditions for integrity in the context of foreign trade relations. After the regulation entered into force, MACN has been training and raising awareness throughout the industry about the new requirements to support broad adoption of the new practices.
As a result of the collective action, MACN has seen a 90 percent drop in incidents in the ports covered in the project. There has also been a dramatic decrease in cash demands. This initiative shows that it possible to address systemic corruption when building strong alliances between the public and the private sector. For MACN the initiative is a best-practice template to fight corruption through public-private collective action.
Contact Us Please contact the MACN Secretariat or CBi if you have questions or would like to have further information about this initiative.
For Port Users (Shoreside)
MACN and CBi are currently collecting baseline data to understand the challenges faced by business using Nigerian Ports and Terminals. If you are a business using ports and terminals in Nigeria, please share your experience by taking this Baseline Survey available here. The result of the survey will be aggregated and shared with project stakeholders, MACN members, and be used to inform the next steps to further improve the operating environment in Nigeria.
For the Maritime Industry (Seaside)
MACN Helpdesk Portal System (PortCallAssist) is a web-based solution developed to serve as a feedback mechanism for users of the Nigerian seaports and terminals. Those giving feedback to regulatory authorities via the system will be able to track their port call status and any issues raised, all the way to final resolution. Contact us if you face challenges during port calls:
Website: www.integritynigeria.org/portcallassist
Call: +234 907 101 3336; +234 818 738 0696
Email: helpdesk@cbinigeria.com