The Maritime Anti-Corruption Network (MACN): The results of the first's year work in Ukraine

The Maritime Anti-Corruption Network (MACN) provides a unique forum for businesses to contribute to the elimination of corruption in the maritime industry. MACN is composed of vessel-owning companies and others in the maritime industry, including cargo owners and service providers such as port agents, P&I clubs, and flag registries. 

MACN was established in 2011 as an industry-led Collective Action initiative. With a membership of over 160 companies representing over 50% of the world tonnage, MACN has a strong industry voice, and has become one of the preeminent examples of an industry-led Collective Action network taking tangible steps to eliminate corruption in ports. By working in partnership with the industry, governments, and civil society, MACN has successfully addressed integrity risks through country specific actions in locations such as Nigeria, Indonesia, Egypt, India, Ukraine, and Argentina. MACN’s initiatives have been welcomed by stakeholders and have resulted in tangible outcomes such as the removal of trade barriers, strengthened governance frameworks, and substantially reduced levels of corruption in maritime trade.

Background

Integrity risks in ports and the maritime sector are driving up trade costs, particularly in low and middle income countries where trade costs are already at their highest (see Sequeira and Djankov, 2010) [1]. In Ukraine, such risks are widespread around different industries within the country. This is evident from the challenges MACN’s members face in the maritime sector in Ukraine but also from e.g. the Corruption Perception Index (CPI) by Transparency International. In 2020 Ukraine scored 33 out of 100 and has been ranked 117th out of 180 countries in the CPI. Survey results from MACN members show that Ukraine is perceived as one of the most challenging countries in the Black Sea region for port calls.  

The shipping and ports industry play a crucial role in Ukraine’s economy which depends on the export of bulk commodities in global markets. However, corruption is pervasive in Ukrainian ports which slows down the country’s economic growth. Experts estimate that as a result of corruption Ukraine loses tens of billions of dollars annually and a large part of such a huge amount are the losses due to corruption in the shipping and ports industries of Ukraine [2]. A high level of corruption is a serious problem in the country and a major risk for investors for many years which impedes the development of maritime business. Improving operational efficiency of ports could significantly improve Ukraine’s export potential and competitiveness, which is why MACN seeks to engage in Collective Action. 

Integrity risks in the ports are common and affects international, as well as national shipowners and ship operators who are trading to Ukraine. In Ukraine, the shipping industry faces frequent integrity challenges in connection to vessel documentation clearance and inspections during port call and on-board practices (e.g. waste disposal, ballast water discharge). The majority of such integrity challenges are in the form of undocumented demands for large cash payments. Rejecting such demands leads to heavy delays of the vessels and the threat of fines for alleged non-compliance. Studies conducted by Ukrainian private sector associations have shown that there are significant financial implications to the shipping companies when doing business in such high-risk environments (European Business Association, 2018) [3].

In recent years, Ukraine has made great efforts to tackle corruption on the regulatory side. However, until today the regulatory framework in the Ukrainian maritime sector is not sufficiently enforced and companies continue to face such integrity challenges. Therefore, Ukraine is one of the priority countries for MACN to engage in Collective Action in order to build resilience and aim towards eliminating integrity risks in the ports altogether.

MACN in Ukraine 

MACN first started engaging in the Ukrainian maritime sector in 2019 and has started building relationships with core stakeholders to promote good governance and integrity in the Ukrainian maritime value chain and port sector. As part of the MACN Collective Action pilot initiatives, supported by two maritime industry foundations based in Denmark, MACN together with its local partner ANK law firm, launched a HelpDesk following the same methodology as MACN is applying in other countries in September 2020. As a local partner to MACN, ANK supports MACN member companies and stakeholders prior to and during ports calls, and when faced with undocumented demands. They provide initial operational advice to the relevant situation in liaising with and escalating cases to local public authorities. The HelpDesk supports individual companies to resist undocumented demands; empower the vessel Captain to Say No, and enable the company to report and resolve integrity risks via the HelpDesk without retributions. Additionally, MACN is engaging in local communication efforts and awareness raising about MACN’s Collective Action initiative, undertaking an integrity risk assessment of port-related challenges and developing relevant Integrity Tools for the industry.

MACN sees great prospects for further engagement in Ukraine using some of the learnings from its other key partner countries. With the pilot activities already undertaken, MACN believes to have a solid basis to build from in order to reach the outcome, i.e. building resilience with an aim towards eliminating integrity risks in the seaports altogether through Collective Action. The EU and Denmark are partnering on a larger anti-corruption engagement, the European Union Anti-Corruption Initiative (EUACI) which is implemented by the Ministry of Foreign Affairs of Denmark. This program contributes to reducing corruption in Ukraine at the national and local level through the empowerment of citizens, civil society, businesses, and state institutions. At the macro level, we believe both MACN and EUACI are working to promote integrity, reduce opportunities for corruption and tackle corrupt behaviour in public and private institutions. There is as such a degree of complementarity and high-level alignment between the two initiatives. Therefore, MACN envisions a deeper engagement in Ukraine through its Collective Action initiative at the seaports, which is being financially supported by the Ministry of Foreign Affairs of Denmark. 

Data as a Key Tool

One of MACN’s many key tools to members and the industry is its Anonymous Incident Reporting System. MACN’s anonymous incident reporting system enables maritime stakeholders to submit incident reports when a vessel is faced with corrupt demands during port operations. The results of the anonymous incident reporting allow MACN members to learn from each other to potentially avoid similar incidents in their own operations. MACN has collected over 45,000 incident reports of corrupt demands globally. MACN uses this data to analyse trends in frequency of incidents, allowing MACN to target Collective Action efforts and engage with governments. It has been a successful method to facilitate a constructive dialogue in meetings with governments and other stakeholders. It is important to note that reporting is anonymous and non-attributable, and therefore it is not possible for anyone to identify who has submitted a report, and the report does not include details that would identify ships or individuals (government or private sector). 

As indicated in the intro, MACN data for Ukraine shows that incidents happen mainly during vessel documentation clearance and inspections during port calls and on board practices (e.g. waste disposal, ballast water discharge). It is MACN’s view that such reported challenges faced by vessels during inspections and the subsequent fines imposed are neither reflective of any safety or environmental regulations currently in force internationally as developed and adopted by the International Maritime Organization (IMO), of which Ukraine is an important Member State. MACN also believes that the adoption and enforcement of enhanced legislation will increase Ukraine’s reputation for ease of business and ensure the integrity of the administration through sustained political commitment to the eradication of corruption. 

Therefore, with the activities in place and growing interest for collaboration MACN looks forward to working with the Ukrainian authorities in building resilience towards these challenges faced by the maritime industry through dialogue and Collective Action.