Bangkok--26 Mar--Grant Thornton
The majority of businesses in the global real estate and construction sector are still not properly insulated against fraud and corruption according to the latest research from the Grant Thornton International Business Report (IBR). This comes despite warnings suggesting that such practices could account for as much as 10% of global sector revenues or around US$1 trillion, rising to US$1.5 trillion by 2025. 1
Worldwide, just 41% of sector businesses have measures in place to accommodate potential whistleblowers, although this ranges from 70% in North America to just 23% in Europe. A majority of businesses globally do have a compliance and ethics programme in place (57%) but again while this is common in North America (76%), it is much less so in many other parts of the world, including Asia Pacific (51%), Europe (45%) and Latin America (43%).
Thailand showed mixed results. An impressive 80% of those surveyed indicated they had measures to accommodate potential ‘whistleblowers’ in their organisation and 70% stated they already had a compliance and ethics programme. However only 10% said they had implemented a specific program to define and monitor potential conflicts of interest.
Somckid Tiatragul, Assurance Partner of Grant Thornton Thailand said “Conflict of interest is an important issue and very important to monitor to proactively discourage potential corruption. Whistleblowing and compliance and ethics programmes, whilst important, are more passive activities and ‘after the fact’. Therefore monitoring and ensuring compliance to stringent policies that avoid conflicts of interest can help prevent fraud and corruption before it’s too late.”
Somckid continued: "The lack of focus on governance is perhaps understandable, if still a concern. Real estate and construction businesses have been in ‘wait and see’ mode in Thailand for a long time after being very severely impacted in 1997 and subsequently by the political challenges of the last 10 years. Thus they have focussed on staying afloat rather than expansion. But now that the market is moving in the right direction, businesses need to make sure that the correct proactive controls are in place so that governance issues do not stifle their next phase of growth."
The IBR survey reveals that net 42% of businesses are optimistic for the sector in 2014, led by Southeast Asia (78%). The Philippines have the strongest level of optimism at 70% whilst Thailand still shows strongly at 60%. Similar levels of optimism can be found in Latin America (60%) and North America (56%). Europe (33%), however, is somewhat polarised between persistent pessimism in southern Europe but growing optimism across northern and eastern parts of the region. This optimism is feeding into business growth prospects for the year ahead, with an increasing proportion expecting to raise revenue and profitability in 2014, compared with this time last year.
Clare Hartnell, global leader for real estate and construction at Grant Thornton said: "Developers, property companies, investors and homeowners suffered disproportionately during the global financial crisis, but now, finally, expectations for profitability, jobs and orders are all on the rise. House prices are climbing in key markets such as the UK and the US, contributing to the so-called 'wealth effect' which boosts the consumption patterns of homeowners”
“Increasing activity in the sector is a strong indicator that the global recovery is gaining momentum, although it would not take much to destabilise these improvements. As cities rather than countries seem to be the focus for investors and businesses alike, this can also mean distorted values in a small area, with the risk of some potential future realignment."