Seven Initiatives to Combat Corruption in Development

Contents

Introduction Global Initiatives United Nations Convention on Corruption National Integrity System Country Studies

Developing World Initiatives African Peer Review Mechanism Extractive Industries Transparency Initiative

Developed World Initiatives Business Principles for Countering Bribery The OECD Guidelines and Business Information Services

Joint Donor Initiatives Utstein Partnership

Introduction The following snapshots of seven key anti-corruption initiatives reflect a sustainable and concerted movement both in the developed and developing world to improve governance in both worlds. The programmes address both the supply and demand elements of corruption, stress the need for multi-agency response, and promote multi-sectoral participation.

They are mutually supportive and dependent – a holistic approach to combating corruption is essential if any one initiative is to succeed.

Not all initiatives are covered. Media, professional, civil society and other grassroots initiatives are not highlighted in this document. However civil society engagement is needed to underpin the top-down legal and institutional reforms implied by the pursuit of the global and regional initiatives outlined here.

TI Ireland will pursue public education, research and capacity building programmes that complement these initiatives.

The source material for analysis on UNCAC, the APRM and EITI is based on the recent Commission for Africa report and U4/Transparency International resources.

John Devitt Transparency International (Ireland) +353 86 1737 487 [email protected] www.transparency.ie

United Nations Convention on Corruption The United Nations Convention against Corruption (UNCAC) provides a platform on which international cooperation can flourish. It is the first global convention which specifically targets corruption The areas covered by the UN Convention include: •

International agreement on importance of addressing corruption with a comprehensive framework, setting common standards. It is the only Convention that is truly global.

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Asset recovery framework elaborated for the first time on a global basis, north and south.

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International cooperation framework improved for mutual law enforcement assistance, notably in extradition and investigations.

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Extensive coverage of ways, means and standards for preventive measures for public and private sectors.

Among the additional benefits highlighted by the U4 Helpdesk is the recognition of the role of private sector (both “private-to-public” and "private-to-private") corruption as part of the problem. The UNCAC provides for a Conference of the States Parties to agree upon activities, procedures and methods of work to achieve the objectives of the Convention. These include mobilisation of voluntary contributions. Thus the Convention provides the possibility of an international institutional framework for assessing needs and coordinating development assistance in the field of anti-corruption. Donors can use the provisions of the UNCAC and regional Conventions on prevention and criminalisation as a basis for supporting recipient countries with regard to anti-corruption measures in programmes and institutions supported by development assistance. The UNCAC sets out an agreed framework for providing support to developing countries. It specifically includes a chapter on technical assistance and information exchange. This covers a range of issues, including (i) building capacity in the development and planning of strategic anticorruption policy, (ii) training competent authorities in the preparation of requests for mutual legal assistance, and (iii) activities relating to prevention of transfer of proceeds of offences. Donor agencies can use the UNCAC, the OECD Convention and relevant regional Conventions to which the donor country is a party to check the performance and raise the standards of institutions in their own country. This can give them far greater credibility in asking recipient countries to take effective action against corruption th

France was the 29 country to ratify the Convention in July 2005. The 30 expected soon, with UNCAC coming into force 90 days thereafter. Further information is available at: • •

www.unodc.org/unodc/crime_convention_corruption.html www.u4.no/themes/conventions/unconvention.cfm

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National Integrity System Country Studies National Integrity System (NIS) Country Studies offer a systematic, comprehensive, and coherent approach to assessing existing programmes and statutory controls on corruption. They also can encourage countries to use it as the basis for national plans and to identify areas for further reform. For donors, it provides a sound basis for their discussions with governments. For civil society, it is an important assessment tool in its demand for greater accountability. NIS Country Studies have been used by Transparency International with the financial backing of DFID and other development agencies to assess over 70 countries so far including Uganda, Tanzania, Zambia and Mozambique. NIS studies are also planned for Ethiopia and Lesotho. An NIS is the sum total of the laws, institutions and practices in a country that addresses accountability and integrity of government and other public sector institutions. It comprises a number of inter-dependent pillars founded on society’s values and public awareness, including not only the legislature, the executive and the judiciary but also “watchdog” agencies, the media, and citizen organisations such as churches and NGOs. The purpose of a Country Study is to assess the NIS and its components: for example, which components have been more successful and why, and are they mutually supportive; what factors support or inhibit their effectiveness; where should the emphasis be placed for the future; what factors are further required to support the development of a NIS; and, what activities or areas could benefit from further in-depth research or donor support. Country Studies are concerned with structures and systems and how they work in practice. They are not a vehicle for investigating or exposing specific cases not already in the public domain. As the Country Studies are to form an international overview, it is essential that each be prepared in the same manner and, as far as possible, adhere to the same criteria. The Country Studies work to an international Terms of Reference, designed by Transparency International and Teeside Business School, Middlesbrough. The country studies are then coordinated by TI Secretariat in Berlin in collaboration with an in-country lead researcher and external referees. Country Studies complement the African Peer Review Mechanism by providing an inexpensive (studies normally cost no more than US$20,000) and accessible diagnostic assessment of a country’s efforts, institutional and legal controls on corruption. This can be used to equip civil society with a sound analytical basis for its participation with government on the African Peer Review Mechanism. Donors are also using the Country Studies to complement existing measurements such as the Corruption Perceptions Index as well as desk research from their missions in partner countries. A NIS Country Study for Ireland is planned for 2005/6. Further information on methodology and copies of existing studies are available from: •

www.transparency.org/activities/nat_integ_systems/country_studies.html

African Peer Review Mechanism (APRM) The African Peer Review Mechanism (APRM) was designed in collaboration with the New Partnership for Africa’s Development (NEPAD) and adopted by the African Union (AU) in July 2002. Its aim is to promote good governance throughout the continent through placing responsibility for reform with African governments and civil society. The purpose of the APRM is “to identify the country’s priorities and the time-bound and costed steps needed to address the weaknesses, including capacity shortages” which have prevented progress in addressing corruption and waste. Peer pressure creates a strong incentive for participating countries to implement review findings: reports are discussed by Heads of State and Government of participating member countries, then formally and publicly tabled in key regional bodies (NEPAD and AU); and follow-up reviews (every two to four years) which report on progress made. The APRM covers political and economic governance (including issues such as the independence of the judiciary and the transparency of the budget process), as well as corporate governance (including codes and standards) and socio-economic development. As of May 2005, 23 of the AU’s 53 member states had signed the APRM memorandum of understanding. They are Algeria, Angola, Benin, Burkina Faso, Cameroon, Republic of Congo, Egypt, Ethiopia, Gabon, Ghana, Kenya, Lesotho, Malawi, Mali, Mauritius, Mozambique, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Tanzania, and Uganda. (DCI Programme Countries in bold). Four countries are currently in the process of peer review: these are Ghana, Kenya, Mauritius and Rwanda. The work of the APRM is governed collectively by the heads of state or government of the countries that have acceded to the APRM. This is referred to as the APR Forum. The APRM Secretariat, based in South Africa, is charged with coordinating the reviews and action plans. The reviews and action plans are prepared in collaboration with a national APRM coordinator or focal point which assists the Secretariat in gathering information. In addition, the country must create a Panel including civil society to co-ordinate public input into the process. Despite the substantial progress made so far however, it is widely recognised that the APRM is understaffed and its finances (provided by participating governments) are limited. Wealthy countries are therefore urged to provide political, technical and financial support. An APRM Trust Fund has been established and has set the modest target of US$15.5million between 2005 and 2007. This fund should secure the effective short term work of the APRM Secretariat. Technical assistance, on a case by case basis, will also be required to implement the Reviews and Programmes of Action. Meanwhile, political support should be voiced through official bilateral/multilateral and other unofficial channels (including the media). Further information on the APRM is available from TI Ireland and at •

www.nepad.org

Extractive Industries Transparency Initiative (EITI) Announced by Tony Blair in September 2002, the EITI is a multi-stakeholder agreement under which oil, gas and mining companies agree publicly to disclose all payments they make to developing country governments and governments agree to publish what they receive (both parties adopt the principle of Publish What You Pay). Published information is audited independently, and there is a clear role for civil society, which participates actively in the design, implementation and overview of the disclosure process. EITI is currently being implemented in nine countries, four of which are in Africa (Nigeria, Ghana, Republic of Congo and São Tomé e Principe). Several other African nations have expressed an interest in implementing it in the near future. Timor-Leste is also a member of the first implementation group. The Commission for Africa’s report on the EITI is concise in its appraisal and recommendations: “The EITI has the potential to be a firm first step towards greater accountability and better management of valuable natural resources. Among its strong points are its participative nature and the fact that it makes revenue disclosure mandatory for all companies active in a country whose government has signed up to EITI, including those owned by the state, thus levelling the corporate playing field. It is therefore recommended that as many resource-rich countries as possible sign up to EITI, and that they take full ownership of the process to ensure its longer-term sustainability. The international community should support this by promoting EITI as a global framework for resource revenue transparency with African governments, with the continent’s regional organisations, and with the AU/NEPAD, which could potentially absorb the principles encapsulated in EITI into the transparency criteria of the APRM. Particular attention should be given to resource-rich countries that are emerging from conflict, where transparency measures should be built into the process of restoring the state’s ability to capture revenues. It is also important that the necessary capacity is created for each of the parties to participate in the process as intended. In most countries, the need is particularly great among civil society, where capacity is needed to interpret and respond to disclosed information. All this will happen faster if such schemes are backed by developed countries, both politically and with cash. Recommendation: The international community should give strong political and financial support to schemes such as the Extractive Industries Transparency Initiative (EITI) to increase the transparency of payments made to, and received by, governments, and should encourage its acceptance by all resource-rich African countries. It should support the development of criteria and a means of validating EITI implementation. Donor countries should also support and fund capacity-building among public servants as well as civil society, by contributing to the EITI Multi-donor Trust Fund.” The Commission for Africa has also recommended that the EITI be extended to other natural resource sectors, including forestry and fisheries. The World Bank Group formally endorsed EITI in December 2003. Peter Eigen, current global Chairman of Transparency International will take up the post of Chairman of the EITI in 2006. Further information is available at • •

www.eitransparency.org www2.dfid.gov.uk/news/files/extractiveindustries.asp

Business Principles for Countering Bribery The Business Principles for Countering Bribery are the most comprehensive set of guidelines to help businesses of all sizes implement compliance programmes to prevent bribery. The ‘Business Principles’ are not a code of conduct. The Business Principles were published by TI and Social Accountability International in 2002 The Business Principles not only commit a business to prohibit bribery in international transactions, but also compel that business to develop and implement an on-going programme to ensure compliance with the law on bribery (including Ireland’s Prevention of Corruption Act 2001). This covers the in-house and external monitoring of political and charitable contributions, and the receipt and payment of gifts and hospitality. The business’s board of directors and senior management are obliged to take responsibility for the anti-bribery programme and to apply the programme in its dealings with subsidiaries, joint venture partners, agents, contractors and other third parties with whom it has business relationships. Provision should be made for ongoing training for key staff and management, and also provide secure and accessible channels through which employees and others should feel able to raise concerns and report violations (“whistle-blowing”) in confidence and without risk of reprisal. The Business Principles have recently been adopted by the World Economic Forum. Sixty member corporations agreed to apply those principles at Davos earlier this year. This initiative is further supported by the UN Global Compact as a pragmatic multi-sectoral implementation effort that is in line with the goals of the Global Compact 10th Principle. DFID has provided both financial (£50,000 in 2003) and public support for the promotion and dissemination of the Business Principles in both the UK and in DFID’s programme countries. The World Bank and US Departments of Commerce and Justice have been amongst the most proactive international and domestic bodies in combating the bribery of foreign public officials. The World Bank has a policy of debarring and public ‘blacklisting’ of any company or individual found to have made a corrupt payment on a World Bank project. The US government meanwhile has shown that it is willing to prosecute (16 companies from 1977-95) as well as debar such companies from Federal contracts. TI is therefore working with the World Bank and the US in promoting the Business Principles for those businesses found to have committed bribery overseas. The World Bank is considering placing the implementation of such a programme as a precondition for a business to be taken off its black-list. Meanwhile, those US companies who can prove they have made an honest effort to apply the Business Principles, may have a sentence for bribery significantly reduced under the US Federal Sentencing Guidelines. Agreement has also been reached with PricewaterhouseCoopers on an external assessment and auditing system for the Business Principles. . A steering group of representatives from the following organisations has overseen and continues to monitor design and development: AccountAbility, The Conference Board, Ethos, European Bank for Reconstruction and Development, General Electric Company, Institute for Business Ethics, Universiteit Nyenrode, Norsk Hydro ASA, PricewaterhouseCoopers, Rio Tinto plc, Responsible Business Initiative, Shell International Ltd, SGS Société Générale de Surveillance S.A., Social Accountability International, Tata Sons Limited and the Trade Union Advisory Committee to the OECD Further information on the Business Principles is available at: •

www.transparency.org/building_coalitions/private_sector/business_principles.html

The OECD Guidelines and Business Information Services Developing countries cannot be expected to combat corruption alone. Coordinated action between developed countries is vital in the enforcement of the law on overseas bribery, together with the detection and repatriation of laundered foreign state assets. It is also essential that government departments provide for information and reporting facilities for their business operating abroad, particularly in preventing corruption in the developing world. The following multilateral and state business information and reporting initiatives are currently underway: The OECD Guidelines for Multinational Enterprises are the first international instrument to facilitate a mechanism for monitoring and influencing corporate behaviour overseas. OECD governments, including Ireland, have made binding commitments to promote the Guidelines among multinational enterprises operating in or from their territories. The Guidelines are in turn promoted by National Contact Points (NCPs), normally based at government departments (in Ireland’s case, the Department of Enterprise, Trade and Employment). The NCP is not only obliged to raise awareness of the Guidelines but to handle inquiries, and assist in resolving problems under the Guidelines. Businesses operating abroad are encouraged to seek advice from their respective NCPs and to report any incidents of concern to the NCP or through other acceptable channels (including trade or diplomatic). Complaints can also be made against MNEs to the NCP by members of the public. The following NCPs demonstrate both political will and concerted effort within government. •

NCPs in Australia and Canada host meetings and workshops with the public, NGOs and industry on a regular basis, host clear and accessible dedicated websites on the guidelines and publish their annual reports and information brochures on the website.

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In Australia, Canada, New Zealand, Sweden and the UK there is a high degree of interagency collaboration. The Canadian NCP for instance is an interdepartmental committee of the federal Government, comprising representatives from the Department of Foreign Affairs, Industry Canada, Human Resources Development Canada, Environment Canada, Natural Resources Canada, the Department of Finance and the Canadian International Development Agency. Promotion is also channelled through diplomatic missions and in the UK, through the FCO’s business information service.

TI Ireland recommends that DCI engages with Irish National Contact Point and other governments in exploring ways in which to best promote the OECD Guidelines. Development Cooperation Ireland’s Private Sector Forum and Corporate Social Responsibility Forum in 2006 may also offer DCI and other government agencies the opportunity, amongst many, to educate business on the reputational, financial and legal risks and responsibilities to be faced when trading and investing overseas. TI Ireland will undertake preliminary research in liaison with the OECD Investment Committee to establish an information and reporting system for all OECD-member country businesses operating overseas.. This should help companies with operations (especially in weak governance zones) to conduct business in conformity with the OECD Guidelines for MNEs. It should also offer OECD member governments a consistent flow of reliable data on MNE activity, and the challenges faced by those MNEs in such zones. This data will in turn better inform development, trade, justice and other important areas of government policy. It is worthwhile underlining the importance of the Financial Action Task Force (FATF) an inter-governmental network that promotes and monitors best practice and facilitates

cooperation and information exchange on international money laundering. Ireland is a member of the task force with responsibility for this area resting with the Money Laundering Steering Committee at the Department of Finance. The systemic observation of trends in money laundering from the developing world should better inform anti-corruption policy design at Development Cooperation Ireland. Further information is available at: NCP Websites • • • • • •

Ireland - www.entemp.ie/trade/bilateral/ Australia - www.ausncp.gov.au/default.asp?areaid=10 Canada - www.ncp-pcn.gc.ca/menu-en.asp New Zealand - www.med.govt.nz/buslt/bus_pol/oecd-multinationals/about.html Sweden - www.sweden.gov.se/sb/d/3087/a/18334 UK - www.dti.gov.uk/ewt/ukncp.htm

OECD Guidelines website •

www.oecd.org/department/0,2688,en_2649_34889_1_1_1_1_1,00.html

Financial Action Task Force •

www.fatf-gafi.org/pages/0,2966,en_32250379_32235720_1_1_1_1_1,00.html

Utstein Partnership The success of anti-corruption activities in-country and bilateral initiatives will also depend greatly on donor collaboration. The Utstein Group of donors is committed to concerted action to reduce the damaging effects of corruption on development. It consists of the development agencies of Canada, Germany, the Netherlands, Norway, Sweden and the United Kingdom. It has a general agreement to co-ordinate its development assistance policies through regular ad-hoc meetings of officials and through exclusive access to the U4 Help Desk and Resource Centre at the Chr Michelson institute in Bergen, Norway. Donor collaboration on specific programmes is on a case by case basis, and with DFID as lead sponsor, there are few resource pressures implied by membership. The partnership is however bound by a set of principles (based on Participation, Policy Coherence; Interagency Co-ordination; Strengthening of the multilateral system; Partnership with the recipient countries; Untying of aid; Debt relief; and commitment to reaching 0.7% ODA) which has set the policy agenda and an action plan for the Utstein group. The action plan, agreed in May 2000, contains four main policy elements with the following objectives: 1. Strengthen the international anti-corruption framework, principally the OECD Convention combat bribery and the Inter Governmental Financial Action Task Force (FATF) _ Promote additional adoption of OECD Convention _ Promote adherence to OECD Convention _ Support efforts to - Curb money laundering - Improve standards of corporate governance 2. Provide co -ordinated support to developing countries committed to fighting corruption _ _ _ _

Promote the inclusion of anti-corruption programmes in partner country PRSP documents Adopt common and integrated approaches to anti-corruption efforts in selected countries Increase anti-corruption efforts in poorer and transitional countries Support implementation of anti-corruption programmes in partner countries

3. Improve capacity in the development assistance administration of the Utstein partners to assist developing country efforts to combat corruption, and to protect development assistance co –operation from corruption. _ Continue to improve financial management and procurement systems, in particular in developing countries _ Co-ordinate and strengthen sanctions/blacklisting against corrupt suppliers and institutions _ Increase transparency of donor systems/operations _ Improve capacity to develop anti-corruption strategies and programmes 4. Learn from the experience of others and develop resources for anti-corruption activities _ Establish capacity to provide information and advice _ Establish capacity for monitoring and review of anti-corruption activities _ Increase exchange of information Further information on the roll-out of the action plan and the mechanics of the Utstein partnership are available at: •

www.u4.no