Saudi sheep: cavalier ethics and excessive private interests

The Saudi sheep scandal, as laid bare yesterday by the auditor general’s report, shows up two major flaws in New Zealand politics: a growing disregard of ethics, and the privileging of private over public interests.

On ethics, much turns on the question of what is a bribe, and what isn’t. By definition, a bribe is a payment that allows you to get some kind of unfair advantage over others, an advantage outside the normal rules of the system. In other words, you are not paying the person who receives the bribe for any normal, legitimate service – there is no proper exchange.

At the heart of this matter are the payments authoried by Murray McCully to the Saudi businessman Hamood Al-Khalaf. McCully has dressed up his actions in the scandal, has tried to avoid accusations of bribery, by claiming that the payments he made were in exchange for a genuine service. The auditor general’s report seems to accept that conclusion, but then immediately undermines it by saying:

It is not clear on what basis the amounts paid to the Saudi Arabian investor’s company under the contract were arrived at. A key objective of the Saudi Arabia Food Security Partnership was to remove a perceived obstacle to a free trade agreement with the Gulf Cooperation Council…

In my view, settlement of a grievance was provided under the guise of a contract for services. The Saudi Arabia Food Security Partnership was the result of a need to resolve a diplomatic issue and, in the view of Ministers, to settle a Saudi Arabian investor’s grievance. The situation was complicated by views about live sheep exports. The contract does not outline those different policy objectives or the complexities. Importantly, the contract does not specifically reflect the settlement component relating to the grievance.

In other words, there is no evidence that payment was to settle a genuine legal dispute, or obtain other genuine services from Al Khalaf. So it does look rather like a bribe – a payment made to get New Zealand top of the queue for a trade deal with the Gulf states.

Unfortunately, this fits into a wider pattern of lax New Zealand approaches to corruption. Transparency International has pointed to a growing problem as New Zealand businesses increasingly operate in countries where bribery is the norm. We are sleepwalking into a situation that could badly compromise our integrity and our reputation for being a free and open country – something that is enormously important as a trading advantage, quite apart from the moral issues.

On my second point, about public and private interests, it is fascinating to note that the whole idea of payments to Al-Khalaf came about because he felt his business interests were harmed by New Zealand political decisions, specifically, the decision to ban live sheep exports.

Now, his business interests may have been harmed. But so what? Of course, governments shouldn’t go out of their way to hurt business interests, and a stable environment for business is, all other things being equal, useful to have.

But one individual’s private interest cannot trump the public interest, which was clearly in favour of banning exports on ethical grounds. And there is no such thing as a right to further profits. If you are expecting to make money from a business venture, you have to take the risk that public action may render that impossible.

That is an unpleasant thing, of course, and all countries should have a strong safety net to help out entrepreneurs when things go wrong. But we cannot elevate the concerns about individuals losing future profits over the general public interest. To do so would be an affront to democracy, and would make it nigh on impossible for governments to operate properly.