Transcript Global Issues Seminar Series Global Economy: Governance and Corruption May 4, 2006

Global Issues Seminar Series
May 4, 2006
Global Economy:
Governance and Corruption
Vinay Bhargava, Director
International Affairs, The World Bank
Slide 1: Definition
The World Bank
defines corruption as:
the abuse of public office
for private gain
Bangladesh
Nigeria
Pakistan
Indonesia
Venezuela
Philippines
Vietnam
India
Mongolia
China
Egypt
Mexico
Brazil
Thailand
Columbia
South Africa
Italy
Malaysia
Botswana
Estonia
Japan
USA
United Kingdom
New Zealand
2005 CPI Score *
Slide 2: Corruption is present in all countries
in the world—pervasiveness varies
TI 2005 Corruption Perceptions Index
12
10
8
6
4
2
0
Slide 3: Consequences—
corruption lowers incentives for investment
Slide 4: Consequences—corruption
affects the personal lives of citizens and
hurts the poor the most
Slide 5: Consequences—
corruption undermines institutions
Slide 6: Consequences—corruption
undermines trust in institutions
Slide 7: Globalization
of the Fight Against Corruption
 UN Oil-for-Food Scandal
Slide 8: Globalization
of the Fight Against Corruption
 UN Oil-for Food Scandal
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Of $100-billion-plus worth of transactions,
$1.8 billion diverted as illicit payments
More than 2,200 companies were involved
Illicit kickbacks came from companies and
individuals from 66 countries
Illicit surcharges were paid by companies
from or registered in around 40 countries
Slide 9: A Global Consensus
for Fighting Corruption
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Millennium Declaration adopted by the UN General
Assembly in 2000 commits member to good
governance nationally and internationally—reaffirmed
in Monterrey Consensus of 2002 and 2005 World
Summit
NEPAD (2001)—African leaders pledged to fight
corruption; G8 matched this with support under G8
Africa Action Plan and at G8 Economic Summit in
2005
European Consensus on Development stresses good
governance (European Parliament, Council, and
Commission)
Slide 10: Forces Shaping Evolution
of Corruption as a Global Issue
 Demand: Policies to increase transparency in
public, corporate, and international finance
arenas; research supplying credible
information
 Supply: Anticorruption measures
—national and international
 Institutions: Speed at which national and
international governance institutions mature
 Integrated financial systems—harder to
monitor; increases risks of corrupt behavior
Slide 11: Demand
for Controlling Corruption
 International
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TI: CPI (1995-), Source Book, BPI (1999-),
GCR (2001-), GCB
WBI (1996-)
IFC: Costs of Doing Business and Enterprise
Surveys
 National
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SWS in Philippines
Opinion survey in Norway
ADVOCACY
Slide 12: Disclosure—The Right to Know
Slide 13: Increasing the Supply
of AC Measures
 ADB-OECD Anti-Corruption Initiative for
Asia-Pacific: 2000, 36 members
launched, 25 endorsed (2005); 3 pillars
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Transparent systems for public service
Anti-bribery actions and integrity in business
operations
Active public involvement
Anticorruption Institutions
 National Integrity System: judiciary,
regulatory agencies, ACAs,
Ombudsman, media, civil society, etc.
Slide 14: International Actions
to Combat Corruption
 Ensuring that loans and grants to developing
countries are used effectively
 Bolstering donor support for reform
 Reducing the incentives for multinational
businesses to pay bribes
 Promoting international programs to control
organized crime and the flow of illicit funds
 Improving the institutional framework for
resolving international disputes
Slide 15: International Actions
to Combat Corruption
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UNCAC: 133 signed; 30 ratifications to enter into
force reached on Sept. 15, 2005—preventive
measures, criminalization and law enforcement,
international cooperation, asset recovery
OECD Convention Against Bribery: all 30 OECD
members and 6 non-members have complied with
making it a punishable offense to bribe an official in a
host country; as of 2005, only 4 have prosecuted
more than 1 case; uses a 2-step peer review system
FATF: national and international policies vs money
laundering and terrorist financing; 30 countries + HK,
EC, and Gulf states are members
Slide 16: Civil Society Initiatives
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Transparency International
EITI: 8 countries implementing; 14 more have
endorsed; IFIs, donors, mining and oil companies,
NGOs included
Global Witness: investigative org to break link
between natural resource exploitation and the
funding of conflict and corruption—led to demise of
Khmer Rouge, now active in Asia and Africa
Global Organisation of Parliamentarians Against
Corruption (GOPAC): 400 parliamentarians from 70
countries fighting corruption
Slide 17: Raising International Disclosure
Standards in Corporate Sectors
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International Accounting Standards: 10 countries in
1974 to over 70 countries to date
International Chamber of Commerce: published Rules
of Conduct to Combat Extortion and Bribery in 1977
(revised in 1999)
International Organization of Securities Commissions
has benchmarks for transparency—members regulate
90% of global securities markets
Global Reporting Initiative: GRI Sustainability
Reporting Guidelines released in 2000—
now over 800 companies from 80 countries file
reports
Slide 18: Raising International Disclosure
Standards in Corporate Sectors
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Publish What You Pay (George Soros, 2002): now a
coalition of over 280 NGOs worldwide
Wolfsberg Group: 11 major international banks
published the Wolfsberg Anti-Money Laundering
Principles of Private Banking
Partnership Against Corruption Initiative: WEF in
2004
Global Compact: 10th principle against corruption
added in 2004—hundreds of companies have
committed to the compact which urges them to lobby
for ratification and implementation of the UNCAC and
collaborate with other anticorruption efforts
Slide 19: World Bank governance and
anticorruption strategy (PW 4/11/06)
 Country approach
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Expand World Bank’s anticorruption work at the
country level to support country-partner reforms
 Invest in professional expertise
 Back up teams in the field with governance specialists
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Develop strategies in high-risk countries to
mobilize all World Bank instruments, loans, grants,
research, technical assistance, and private-sector
investment to strengthen the fight against
corruption
Increase investments in such key areas as judicial
reform, civil service reform, the media, freedom of
information, and decentralization of public-service
delivery
Slide 20: World Bank governance and
anticorruption strategy (PW 4/11/06)
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Implement a new system for minimizing the risk of
corruption in World Bank–funded projects
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Deploy anticorruption teams in many Country Offices to
work with local institutions like government audit units
and anticorruption commissions to protect Bank projects
and strengthen public procurement systems
Re-design projects to address the incentives and
opportunities to fight corruption right from the start
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Example: communities can determine village investments,
control funds, and monitor project results
Strategies are published on the Web; Investigations Unit
empowered with staff, skills, and resources to detect and
follow-up allegations of corruption in Bank-financed
projects
Slide 21: World Bank governance and
anticorruption strategy (PW 4/11/06)
 Expand partnerships with stakeholders
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Private sector—work with firms and individuals to
identify misuse of funds in World Bank–financed
private-sector projects
Multilateral development banks—heads agreed on a
common approach to the problem
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Common strategy to blacklist firms that engage in
corruption on MDB projects (WB publishes list)
Share information on these firms
Civil society—key to holding governments
accountable; can help ensure that aid dollars flow
to communities that they are intended to go to
Slide 22: Role of the World Bank
in Combating Corruption
 In February 2005, the Bank released its first
annual report on corruption and fraud
investigations involving Bank-financed
projects as well as internal cases
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The Bank spends $10 million annuallyon
investigations and sanctions—more than all other
MDBs combined
The INT has over 50 staff and is larger than any other
unit in similar organizations
Among MDBs, the Bank pioneered in the use of
voluntary disclosure
Slide 23: Role of the World Bank
in Combating Corruption
 The Bank actively supports international
and inter-agency programs
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Joined the IMF and the RDBs in reaching a
consensus agreement on the broad policies
and practices needed to address corruption
within the organizations and in member
countries
Partners with institutions for research such
as BEEPS with EBRD
WBI research is highly participative; has
partnership agreements with nearly 200
organizations from all sectors