Business Ethic Issues in Developing Countries

country and developing country and understand why business ethic issue become so critical around the countries. This study will also show the relationship between the economic level of a country and the reason of business ethic issue occurs in those countries as well.

2.0 Problem Statement

Business ethic becomes a very important element which used to evaluate a business not the performing but the moral side. Even those most of the people believe that business ethic is important but according to Hooker(2003), most of the company nowadays still believe in a company should focus on how to maximize their profit by strengthen their marketing side, financial or even the management but not on the ethics. Nike one of the cooperate who only focus on reduce the cost and don’t bother about ethics lead to a famous case in 1990s which is sweatshop and child labor and lead to a problem that the whole sports industry facing a problem that the people is starting to boycott some of the sports activities (Nasee 2010). For the same problem of Nike, Nike products also being boycott by the people in US due to the unethical decision in rural country (Thorsten 1997). So form the evidence provided, business ethic might not help the company generate more profit but without ethic, those company will not only unable to generate more profit but might facing bankruptcy as well. So understanding the business ethic is very important but from this study, we will find out the impact of business ethic towards a country and also reason business ethics issues occurs in those countries.

2.1 Research Objective

  • To differentiate most of the problem faced by rural and developing country
  • To understand the reason that the business ethical issues happen in rural and developing country
  • To understand the effect of the business ethical issues to the country respectively.

2.2 Research Question

What is the business ethical issues faced by rural and developing country the most?

Why the business ethical issues occur in rural or developing country?

What are the effects of the business ethical issues bring to the rural or developing countries which become so critical nowadays?

2.3 Research Background

According to Chris MacDonald(2010), business ethic can be defined as a way to examination of a behavior of an individual or an organization through the way they operate their own business to gain their own profit or benefit by affecting others people without exceed the limitation of moral that could be accepted by the people in the world.

In the past 10 years, there is lots of the business ethics issues had been occurs and the main issues are child labor and business corruption. According to Amaryllis Tiglao Torres(2003), the national statistics office have done a survey in year 1995 in Filipino on the child which age between 5 to 17 years old, and it shows that 16% of the children in Filipino had been engage to the economic activities in Filipino. Child labor is one of the critical business ethic issues among the world which occur in rural country due to the payment of the organization is low and the chances of study for those children will be plunder some of them will also working at a very dangerous situation just to get a little of wages and to fill up their stomach. So due to the evidence happened in the world child labor actually is an issue that had attract lots of attention from the world.

If child labor is the biggest ethic issues in the rural country, then in developing and maybe some advance country, business corruption will be the biggest ethical issues. According to the survey done by Cost Risk and Simmons & Simmons(2006), there are 43% of respondent and 76% of companies at the country done with the survey believe that they have been lost the competition of the business to the competitors who did pay bribery to the government as to get the project which is high value or high profitability. So if child labor case is the case which is a business issues which offended the human rights of the rural country, business corruption will be the another issues which actually offended the fairness of the market in the world no matter in developing or advanced country.

3.0 Literature Review

3.1 Business Ethic Issues in Rural Country

After reading the case study by Prof. Rajib Lochan Dhar & Prof. Rajul Joshi (2008), which they done with the research on the child labor available in restaurant and eateries at Pune City, we can actually understand the child labor issues will be very serious in Pune City at the restaurant and eateries, and most of the child labor in the city are male with a small population of female and they are distributed to restaurant, bar, canteen and stalls. More than half of the child labor in the city actually is the children who unable finish their primary school and needed to come out to work for their basic needs in daily life with the average payment around 1500 rupees (Prof. Rajib Lochan Dhar & Prof. Rajul Joshi 2008). In the research of case study also stated that the child labor in Pune City having an average working hour of 10 hour for male and 12 for female and they also need to work for six days in a weeks and some even doesn’t have any holiday while working in the canteen or stalls in camp and swargate area (Prof. Rajib Lochan Dhar & Prof. Rajul Joshi 2008), if the child labor needed for holiday or they unluckily fall sick can’t attend for work the wages of the day will be deducted when the wages paid (Prof. Rajib Lochan Dhar & Prof. Rajul Joshi 2008).

In year 1996, ILO Federal Bureau of Statistics of the Government of Pakistan have don’t a survey against child labor in Pakistan founded out that 58.6% or 1.96million of the children in Pakistan have been involved to working life and they might reach a number of 3.6million of children have been started their working life in year 2010 (Muhammad Shahzad Iqbal 2010). Muhammad Shahzad Iqbal (2010) also founded out that the working hours of children in Pakistan had reached more than 35 hours per weeks, it’s also similar to the average hours of a normal adult but this actually happen in children who having a body that unable to afford the high workload as an adult.

Child labor have become one of the main business ethical issues in rural country due to the impact brought by this issues not only affect the children right but even the human or employee rights. A children who had been start working will almost face some similar problems in rural country such a low salary, long working hours and physical damage, most of the children who working in Pakistan actually is taking the one fourth of the salary taken by an adult which unable to fulfill daily basic needs and they need to work for maybe 12 to 15 hours per day and they also might face several physical damage due to the accident on working place or factory and abuse of the adult workers or manager available in the company (Muhammad Shahzad Iqbal 2010). Out of these issues, children also might face another issue such as risk of health due to the dangerous working condition and sex abuse from the adult (Muhammad Shahzad Iqbal 2010). Due to these issues happened, we can understand that child labor is an issue which have been inroad the right of not only children but also human and employee, and this is becoming one of the biggest business ethical issue available in the third world country.

3.2 Business Ethic Issues in Developing Country

According to the short pilling case investigated by ICAC, Hong Kong anti-corruption department (2003), Hui Hon Contractors Ltd had contracted the pilling job of the Zen Pacific from Yuen Chau Kok Site which published by Housing Department of Hong Kong at year 1998, the pilling work of Hui Hon on Yuen Chau Kok was slow and Hui Hon decided to use synthetic soil stabilizer due to the lack of the support of soil to the pilling job and to chasing back the progress of the job they slow down without informing Housing Department (ICAC 2003), the two directors of Hui Hon had been arrested due to the bribery paid by them to the Housing Department officer through paying lunch and also the contractor to modified the report of the construction progress and the two building of the Yuen Chao Kok Site which pilling job done by Hui Hon had been demolished by Housing Authority in Hong Kong due to the safety problem of the building (ICAC 2003). The main issues of this cases will be the corruption of Hui Hon to modified the progress to avoid a bunch of penalty due to the delay of the pilling job compare to the plan and the jelly construction which will created lots of problem and will cost people die while staying inside the building due to the stable of the building or safety of the building (ICAC 2003).

Lai Changxing the owner of Xiamen Yuanhua Electric Ltd, he is a very famous people and successful people in Xiamen but not according to the manufacturer he set up or the quality of service or product are excellent but he very famous of creating relationship among the people and able to make himself famous and get power in Xiamen (Simone Menshausen 2005). Lai Changxing had been investigated due to the bribery he gives to the custom officer through hosting banquets and giving gifts so called ‘hongbao’ to build a good relationship against each other’s so the custom officer willing to Lai Changxing’s company Yuanhua Electronic Ltd to provide a fake VAT report so Yuanhua able to import their electronic with duty free and the quality actually higher than others competitors available in China market, and this kind of activities we called it as smuggling (Simone Menshausen 2005). Doing business by Smuggling, Lai Changxing able to make a huge amount of profit and 50 to 70% of the profit he made had contribute to maintain the relationship between him and the custom officer as to maintain his low cost and high profitable business and now Lai Changxing had been arrested in Canada because of the smuggling act Simone Menshausen ivities and corruption activities he involved during the running of his business (Simone Menshausen 2005)

Due to the evidence or the literature that had been read, we actually know that in developing country, most of the business issues occur is related to the business corruption. There also lots of effects that will bring by business corruption in business activities in several sector such as economic and social. The effect on economic will be unfairness competitive of market and delay the growth of the country’s economic, because of corruption there are some company will fail on getting government’s project and this show that the unfairness of the market that small and medium company might not have that much of money to pay bribery to the officer in government department to get the project and some of them who fail to get the project might facing bankruptcy because there couldn’t get enough job when this happen the employment rate of the country and the bankrupt of the company will delay the economic growth of the country and this also show the unfairness on the market between the company pay bribery and the company didn’t pay bribery (James P. Neelankavil 2002). When the business corruption happened in public service sector like hospital or school will lead to a social issues, because when some of the patient or student pay bribery to the doctor or teacher just to get a faster medical service like organ transplantation surgery or student pay for a distinction result and this will lead to a unfairness treatment of citizen and also will slow down the growth of medical service and education level of the country (James P. Neelankavil 2002). To another sector like mining industry, corruption will be a very critical issue due to the decision making due to the permission for mining base on safety, mining is a sector which full of dangerous if the owner pay bribery to the officer to get the permission to do mining and the mining area wasn’t safety the miners in the mining area will face a problem about dead or alive )Ian E. Marshall 2001). So business corruption is a very critical issue to developing country not only to the economic growth or fairness but also the benefit of the human right or their life in some dangerous condition working area.

3.3 Causes of Child Labor and Business Corruption

The main cause of child labor in rural country is because of the economic status of the household family, at rural country a family seldom do birth control and they might have 5 to 7 children in a family and this will bring a big economic burden to the family that they unable to feed their children even daily meal so they been asked by their parents to stop their study and to start their working life as to reduce the burden of the family (G.K. Lieten 2005). Others causes of child labor are employers selfish attitude and public decision on encouraging child labor, in poverty country some of the employers having a certain demand of child labor just to reduce their labor cost due to the longer working hour of children and also the lower wages pay to the children, at some of the country which wanted to boost their economic grow also encourage children involve in economic activities as earlier as possible just to increase the GDP of the country and the produce level of the country (Muhammad Shahzad Iqbal 2010).

In developing country the main causes of the business corruption can be defined in individual factors and firms factors, individual factors will be the greedy of the people and the individual wages, in some country government officer having a low salary paid, wanted to have more income by receiving bribery from the business organization at the same time helping them on some area that they able to help up (James P. Neelankavil) . Firms factor of business corruption in developing country will be the expansion of the current market share and to maximize profit, in developing country there are lots of the business opportunity which might come from the government project based on construction or some other sectors, business organization will also like to give bribery to government officer just to confirm that the officer able to give the project to them and the government officer also might help them on supplying some resources that they able to provide just to reduce the firm’s cost and also expand the market share and maximize their profit (James P. Neelankavil 2002).

3.4 Theoretical Framework

Economic Status of Country

Rural Country

Encourage child labor

Low demand from employee

People are poor

Business Ethical Issues

Child Labor

Business Corruption

Developing Country

Lots of market opportunity

People are greedy

Desire for the company growth

3.5 Analysis Pathway

From the framework, we will able to understand the relationship of the economic status of country and occur of business issue which the reason and also the issues occurs. Child labor will more likely happen in rural country dude to the people there are poor will lead to low demand of wages and family will encourage their children to work and corruption will happen while people are greedy and the company desire to expand their business with the market opportunity available.

4.0 Methodology

In this part, we will slightly mention about the way of the data collection and also the analysis of data for the study. To find out the issues occur, the effect and also the reason which lead to an issues for this study actually is based on the study done by the other people around the world for pass 20 years.

4.1 Data

4.1.1 Data Resource

In this study the data chosen to be used will be secondary data. Secondary data is the data which is chosen because the cost involved is less than the cost involved in primary data and it much more easier to be found in several media which consist of internet, journal, articles and some other resources. ((Romano 2004)

4.1.2 Data Analysis Procedure

In order to complete this study, the resources found to be analysis will be the book, journals and article which provided from the library of KBU International College, international search engine Google and also one of the online library Emerald.

4.2 Hypothesis

Research Question

Null Hypothesis

Alternative Hypothesis


  • Rural and Developing Country does not face much of business ethical issues.
  • Rural and Developing Country face lots of business ethical issues.


  • Rural and Developing Country do not have any internal element that attract people to create business ethical issue in their country
  • Rural and Developing Country have several elements which able to attract others create business ethical issue in their country.


  • Business Ethical issues does not create any effect towards the countries
  • Business Ethical issues did create some effects towards the countries

4.3 Limitation

The theoretical framework is done with the resources which being analyze and explain the relationship through the main elements which attract the people done business ethical issues and the main ethical issues occur in those countries. Due to the limited resources provided in KBU library, Emerald E library and studies could be found in Google, this study could not to be very accurate because as a student we do not have sufficient money to purchase an accurate report done by the research company.

5.0 Ethical Consideration

To ensure human rights, this study would not show any information of the people who involve in the study no matter is the people who give an idea or the people who accept an interview to come out a basic idea of the study.

6.0 Executive Summary

From this study, we realize that the business ethical issues was so critical in the society and the country who faces these problems was so passive because they could not control the elements in the country which attract this kind of problem but some of the elements are also because of the individual decision because of the greediness. So even those we could not solve the element which is could not being control so I hope this study will remind others that business ethical issues was so critical and not going to create such a issues because of their greediness.


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