Sessions summaries Corruption in a globalised world
Reference Dialogue: Contributing to the Global Agenda

As part of Itinerary 8 of the Dialogue “Contributing to the Global Agenda”, organised by Transparency International, a threefold challenge was analysed: defining corruption and its context, examining the importance of transparency in preventing bribery and corruption and assessing the role of international bodies in repatriating stolen assets.

For this reason, this itinerary was developed in three sessions: a first session called “Defining the context: Corruption, one of the greatest challenges in a globalised world”; a second session devoted to the importance of transparency in preventing bribery and corruption”, and a third session called “Repatriating stolen goods – are international mechanisms a help or a hindrance?”

The first session took place in room 114 of the International Conference Centre in Barcelona on September 25, 2004, from 9.30 am to 11 pm. It was chaired by Eileen O'Connor, president of the International Centre for Journalists. There were speeches from Fernando Solanas, the Argentinean film director; Peter Eigen, head of Transparency International, Germany; and Marianne Camerer, director of Global Access, Centre for Public Integrity.

The second session took place in room 114 of the International Conference Centre in Barcelona on September 25, 2004, from 11.30 am to 1.30pm. It was chaired by Jeff Lovitt, director of communications of Transparency International in Germany. There were speeches from Miklos Marschall, executive director of the Central and Eastern European division of Transparency International; Jeremy Carver, partner from the London law firm Clifford Chance and director of the Public International Law Group; Sara Wykes, representative of Global Witness; and John Makumbe, a social activist for Transparency International in Zimbabwe.

The third session took place in room 114 of the International Conference Centre in Barcelona on September 25, 2004, from 3.30 pm to 5.30 pm. It was chaired by Jeff Lovitt, director of communications of Transparency International in Germany. There were speeches from Akere Muna, lawyer and president of Transparency International in Cameroon; Catherine Volz, director of the Treaty and Legal Affairs Branch of the United Nations Office on Drugs and Crime (UNODC); and Daniel Kaufmann, director of Global Governance and Regional Learning of the World Bank Institute (by videolink). At the end of the last session, Eileen O'Connor, president of the International Centre for Journalists, presented the general conclusions for this itinerary.

The first session started with a speech from the chairwoman, Eileen O'Connor, who defined corruption as “intervention in politics through payment of money or payment in kind which slows economic growth and increases social inequalities”. This definition of corruption ranges from buying state resources at a cut price to donations to political parties and all kinds of bribery and embezzlement.

O'Connor felt that the political discourse on the subject talks of ending corruption but the necessary means to do so are only made available as a result of pressure from civil society.

Next, Fernando Solanas began his comments by stating that “corruption is a genuine scourge in the lives of our societies” and he went on to briefly present the process which resulted in the serious economic crisis in Argentina at the end of the 90s.

In Argentina in 2000, there were 35,000 deaths due to malnutrition and curable diseases as a result of the public policies imposed by the IMF and the WB at the beginning of the 90s. The forced opening up of the economy, free circulation of capital and the dollarisation of the economy caused the decline of national industry, which had provided for 95% of domestic consumption before economic reforms were imposed. At the same time, flexible labour market measures imposed meant cutbacks in two thirds of workers’ rights.

The reasons for the failure of these reforms has to be sought, amongst other reasons, in the national government’s corruption and the IMF’s and WB’s declaration that they were not aware that it was a problem.

It must be remembered, Solanas said, that during the Menem presidency in Argentina the parliament delegated all of its legislative power to the government and the court of justice was split in two making it possible for the government to sell all the country’s natural resources without obtaining adequate considerations in return and paralysing legal actions brought because of these activities. Moreover, media privatisation led to a loss in independence and the adoption of the government line on state limitations and the advantages of privatisation, which public opinion came to accept.

The privatisation process meant a huge increase in the cost of public services, inflation of 0% because of dollarisation and extremely high bank interest rates of 5% a month. All of this resulted in the collapse of the national financial system.

At this point, the chairwoman invited Peter Eigen, WB head in Latin America between 1983 and 1988, to speak. He confirmed that during that period the IMF and the WB had tolerated corruption (and this was why he had left the WB). These financial institutions have now abandoned the most liberal doctrines and advocate the social market economy. Furthermore, at the moment, citizens are demanding greater participation in the processes which affect them directly, which implies greater transparency in negotiations between the WB and state governments.

Eigen continued his speech by stating that the international institutions and national governments no longer tolerate corruption as shown by the WB’s creation of internal bodies devoted to combating corruption (set up in 1996), the fact that the OECD has classified corruption as a crime, and the UN has taken a hand in combating corruption too… Civil society’s contribution, though, is still essential.

For her part Marianne Camerer, defined corruption as an “abuse of power” which had to be tackled through transparency. Information is the tool which encourages citizens to denounce the government acts of recklessness.

Global Access, which she represents, was founded to tackle the lack of data on corruption levels. They use the work of journalists and experts in different specialised areas in 25 countries to draw up a global activity report and establish a public integrity index which reflects aspects like: the existence of bodies to tackle corruption, the ease of access to economic information, the political party financing system … This index enables weak spots to be detected in the fight against corruption and these, if the government wishes, can then be improved.

Next Eileen O'Connor turned to Fernando Solanas and asked him about economic and political pressure on journalists and the media in general. Solanas replied that the “institutions are like knives; useful and necessary but very dangerous in the hands of a killer”. He then went on to describe the current media situation in Latin America. In that part of the world there are only five major media groups which means that most of the information is slanted to further their interests; it is a kind of “false freedom of the press”. Furthermore, it must be remembered that the media fosters an emotional relationship with its audience which allows it to convey ideology or hide information.

Eileen O'Connor called the session to a close saying that “the media have stopped being about providing a public service and have become groups of businesses solely concerned with profit”.

There was then a three-minute projection of Solanas’ documentary Memoria del Saqueo, on the recent economic problems in Argentina caused by corruption and wasting of public money (the documentary received the Honorary Golden Bear at the Berlin International Film Festival).

The second session started with a speech from the chairman, Jeff Lovitt, who explained that the cost of world corruption amounts to 3 billion dollars annually, of which 148,000 dollars a year correspond to Sub-Saharan Africa. Most of this corruption is in the contracting sector.

There was then a brief documentary showing some examples of the fight against corruption in Bangladesh, Turkey and Nairobi (Kenya), and a contribution from Miklos Marschall, who explained the considerable impact on a national economy of a small bribe paid to a national civil service employee over the purchase of some tractors, which, despite their low price, were not suitable for the ground for which they had been bought. This led to the ruin of all the small farmers who had taken out preferential-rate loans to buy them and their subsequent migration to the city with all the members of their families. This example shows that small bribes can lead to large-scale disasters and that the victims of corruption are always the poorest people because they are the only ones who cannot make up for their losses.

Marschall ended his speech by commenting that we live in an interdependent world and, as such, bribes not only affect the place where they are paid but also have consequences for our global society and economy.

Jeremy Carver focused on the need to extend the image of corruption to small offences and not restrict it to acts involving large sums of money because all forms of corruption are detrimental to economic and social balance. Corruption affects both the public and the private sector.

Sarah Wykes spoke of oil producing countries, which continue to be poor in spite of their natural resources. She gave the example of Angola, where for 2002 and 2003 there are no recorded incomes from oil operations in the state budgets. Her organisation was able to track these funds and found 700 million dollars of dubious origin in the Wtihs Bank in Washington and the Banco Santander Central Hispano, which is of Spanish capital.

To solve the huge problem of the cost of corruption, Wykes’ organisation proposes that all the economic results, for all oil companies, including operations in the worst off countries, be compulsorily published and that at the same time the states where production takes place should be obliged to publish their public expenditure budgets. At the moment this is done on a voluntary basis, so civil society should put pressure on national governments and international organisations to make this compulsory. Transparency is essential in order to prevent corruption.

Next, John Makumbe described the prevalent climate of political corruption in his country, Zimbabwe, where there are no checks on financing political parties: accounts are not published by companies and there are no rules regulating forms of financing. Donations made to individual candidates or political parties by companies are in fact a kind of investment guaranteeing favourable dealings in the future.

Another significant feature of political corruption in Zimbabwe is the use of public resources for the benefit of individuals and political parties. Makumbe gave the example of the private use of state vehicles, withholding international donations of educational material or computers until a few months before the elections, etc.

It must be remembered, Makumbe added, that businesses include the cost of bribes as operating costs, in other words, they are reflected in the final price paid by consumers, who are condemned to an existence riven by corruption.

At this point in the discussion, the chairman, Jeff Lovitt, asked Jeremy Carver y Miklos Marschall what they saw as the role of civil society in combating corruption.

Carver replied that corruption cannot be measured solely in terms of the economic costs involved – analysis must take into account the costs arising from citizens losing confidence in the system. Citizens must therefore be courageous and not get dragged down by the inertia of corruption; they must accept their individual responsibility. For Marschall the principles of individuals are important but institutional reform is more pressing. “Corruption is a reflection of poor quality in public administration”.

Jeff Lovitt then asked Sarah Wykes and John Makumbe if there have been cases of oil companies cooperating in the fight against corruption.

Wykes said that historically the oil companies involved in corruption scandals are the ones with the best economic performance results. It is pressure from public opinion which has forced them to react and voluntarily publish their results because if they do not, they appear to be involved in corruption.

It is Makumbe’s view that public administrations must establish legislation which safeguards the way that natural resources are exploited so that the economic agents involved are free from corruption.

Two ideas from the audience’s questions should be mentioned. Firstly, that civil society in democratic countries is responsible for electing the government which represents it in international organisations, and as such, is indirectly responsible for the agreements on international accounting transparency which these bodies reach. Secondly, that private international financial institutions need to be regulated so that they are forced to consider where the money they receive comes from.

The third session began with a brief speech from the chairman Jeff Lovitt, who then asked the speakers to contribute.

Akere Muna presented the African Union Convention Against Corruption adopted on July 11, 2003 by 32 signatory countries.

In order to ratify it, the countries must develop domestic legislation on corruption. For this reason and because, as Muna says, “it is a very powerful convention”, only four states have ratified it: Namibia, Rwanda, Cameroon and Libya.

The Convention’s aims are to provide for, punish, cooperate and educate in the fight against corruption. This is stipulated in the Convention’s articles. Muna highlighted the provisions of article 6 which set out that there are always two guilty parties when corruption takes place: the corruptor and the person who is corrupted.

In the African Union Convention Against Corruption its sphere of application is defined as all punishable offences linked to corruption: bribery, fraud, embezzlement … whether at national or international level. Makuna concluded by saying that “corruption is to the economic system what AIDS is to the human body”.

Next, Catherine Volz presented the United Nations Convention Against Corruption, which is part of the activities of the Treaty and Legal Affairs Branch of the United Nations Office on Drugs and Crime (UNODC). Volz began by signalling the importance of the existence of international conventions against corruption since the money corruption generates moves round the whole world in search of tax havens where it can be hidden. For this reason, although regional conventions are very useful in this fight, the United Nations Convention Against Corruption is needed.

Another aspect of the convention highlighted by Volz was that 111 countries have signed up and that it needs to be ratified by at least 30 countries to come into force. It is therefore still an ongoing process, despite the considerable advances made in combating corruption over the last 25 years.

In the United Nations Convention Against Corruption explicit definitions of corruption and associated offences have been deliberately left out to prevent some offences from lying outside the definition and the resulting legal loophole from being subsequently used to get around charges brought against parties involved in corruption. However, the Convention does stipulate that for an offence involving corruption the two associated parties are punishable: the corrupter and the person who is corrupted.

On repatriating stolen assets, for example, financial resources deposited in tax havens, Volz explained that at present the only solution is to bring legal action against the person responsible for the theft before the international institutions. However, this kind of case can become complicated, particularly if the perpetrator has subsequently died or if the money is in the name of their family members or close associates, since it then becomes difficult to prove involvement. In the United Nations Convention Against Corruption provision is made for the signatory countries to report the country which has received the stolen assets without there actually being a criminal trial.

In conclusion, Volz explained that the United Nations Convention Against Corruption establishes, besides international protection measures, preventive national measures against corruption, like: fully integrated training in schools, the need for civil servants to be paid decent salaries, etc.

The next people to speak were Daniel Kaufmann and an associate by videolink from the WB headquarters in Washington. Kaufmann began by saying that the fight against corruption must be part of a much larger framework of global governance, since it can be empirically demonstrated that combating corruption is very important for economic development and global security (including the fight against terrorism). Good governance results in an increase in national per capita incomes, a drop in infant mortality and an increase in competitiveness which lowers the risk of corruption.

He also said that whilst it is true that the Washington Consensus did not take corruption into account, now, in part because of civil society actions like those carried out by Transparency International, this situation has changed and the international financial institutions do consider this issue when developing their plans and actions. A clear example of this can be seen in the WB, which before 1990 made no mention of the word corruption, whereas now (since 1996) there are internal institutional bodies which work to combat it and calculate its economic costs, along with those of other related phenomena (bad governance, the terrorist threat, …). Kaufmann maintained in his speech that it is not true to say that globalisation, privatisations or other economic reforms related to them are factors in corruption. On the contrary, he stated that because they increase competitiveness in fact they make corruption more difficult.

In concluding Kaufmann named the factors that the WB feels are necessary to combat corruption: suitable use of new technologies, the “empirical revolution” (use of objective statistics to evaluate real situations), an increase in civil society’s power, reform of political financing and the acceptance of the responsibility involved in combating corruption by the private sector and the international institutions (OECD, G7, IMF…).

Kaufmann’s associate from the World Bank focused his comments on measures to be adopted nationally to ensure “good governance”: the right balance of institutional power, enhanced political responsibility, fostering transparency, maintaining a strong, well-informed civil society and promoting private sector competitiveness and public sector management efficiency.

He went on to explain briefly some of the successes achieved in adopting anti-corruption measures in: Uganda, where, through civil society collaboration, the illegal channelling of funds away from primary education was significantly reduced; Bangladesh, where assessment of customer satisfaction levels for certain departments led to a drastic reduction in petty bribes being paid to their civil servants; and the Philippines, where the register for public tenders was electronically catalogued, which resulted in a considerable drop in contracting costs.

He finished his speech by explaining some of the failures in combating corruption, such as: the impossibility of improving transparency in political processes in Bangladesh because of the resistance leading groups in the political hierarchy, and the judicial corruption in the Republic of Georgia, because the magistrates are the same as those of the previous regime.

Finally Eileen O'Connor, at the suggestion of the chairman gave a short speech in which she summarised all the views expressed in Itinerary 8 of the debate “Contributing to the Global Agenda” in 5 fundamental points: the need to improve education to create a social climate which prevents corruption; the fact that corruption always has a devastating social and economic effect, however extensive it is; all developed and under-developed countries and the international financial system must stop tolerating corruption; local economic destruction as a result of corruption does not just affect the local economy but has a global impact, too; and the international institutions need to collaborate in this struggle.