Opening Plenary of the 14th International Anti-Corruption Conference
Sri Mulyani Indrawati
World Bank Managing Director
November 10, 2010
Let me start by thanking Transparency International and the IACC Council for organizing this important event and the Government of Thailand for hosting us. I am delighted to have the opportunity to participate in the opening session for the 14th IACC. This is perhaps the only international event where all the stakeholders in the global fight against corruption meet to discuss challenges and identify solutions through a frank and open exchange of views. In that spirit, I would like to start by being controversial and - forgive me - disagreeing slightly with the organizers!
Take issue with the premise
The website for this 14th IACC paints a very bleak picture of the state of play in the global fight against corruption. As I read it, one would think the cup is not just half empty – as we would say, it is turned over and broken. While the homepage recognizes that we, collectively as a global community, have made the right commitments, it suggests that these have yet to deliver results. As a result, there is apathy, lack of trust creating an environment for corruption to flourish.
I am not convinced that is the case. I have seen real progress. And certainly my own personal experience suggests a very different picture. I would therefore be a bit more optimistic, and suggest that the cup may be half full, but it is leaking…..
I see the transformation in my own country over the last fifteen years and how much Indonesia has been able to achieve. It is true there is much to be done still. Corruption remains intertwined with politics, and there are brazen attacks on those fighting corruption. We are not alone in that regard. Nonetheless, corruption is an issue that no politician can ignore now in Indonesia, and the KPK – our anti-corruption commission - has made huge progress. It is an institution that Indonesians are proud of and trust. And Indonesia is not the only country making significant progress.
From my perspective, we - the international community, national authorities, the private sector, civil society - have worked hard to put the tools in place, to build the structures for an effective anti-corruption regime. We now have to put those structures to use. Here I see two challenges.
First, enforcement. When the public, citizens - the people who do not attend these conferences - think about whether progress is being made in fighting corruption, they do not immediately think of transparency. They look at whether there are successful prosecutions of the officials, individuals and corporations that they think may have been involved in corrupted practices and whether commercial banks and other institutions that may have given safe haven to the proceeds of corruption assist in retrieving the stolen funds. This is, I would argue, the area where we have the greatest challenge, where progress will have the greatest impact on public opinion, where we will begin to restore trust.
As you know the World Bank is not a law enforcement agency. We do not bring cases to court, and we do not prosecute officials or companies. Still, we are committed to this aspect of the anti-corruption agenda and we would like to see much faster progress and more concrete results. I am delighted that the two sessions at this conference in which the World Bank is taking the lead focus on this issue.
The World Bank’s Integrity Vice Presidency is dedicated to working with our partner governments to root out corruption in World Bank financed projects. As the Bank’s President, Bob Zoellick, has said, “We have to show our client governments that the financing is being used effectively and not being diverted for personal gain, and that we'll hold people accountable if they steal from the poor.”
We have made significant progress since this conference last convened, with debarments increasing to 58 over the past two years, from 9 sanctions the previous two years. And we’ve also had successes in several high-profile cases.
You have all heard of the settlement we reached in the Siemens case in July 2009. Some of you present today may be applying for funding from the $100 million that Siemens has agreed to pay for anti-corruption initiatives worldwide. In April 2010 we also debarred the UK publisher Macmillan Limited for six years, following an admission that the firm had paid bribes in an attempt to win a contract. We have also worked closely with our partner regional development banks for an agreement on cross debarment, so that companies that steal from one of the banks will be punished by all. I am grateful to the other MDBs here in attendance for their hard work to make cross-debarment a reality. We believe it will be a serious deterrent.
Follow-through at the national level
The remaining challenge – and I know you would agree with me on this - is to see more follow-up from national authorities. And I don’t just mean in developing countries; we have seen rich countries drop investigations as well, or perhaps not follow up on them as effectively as they should or could. Corruption was not invented by the poor.
We at the World Bank have been working to see more and better action on investigations. In the fiscal year to June 2010, we sent 32 referrals to governments and anticorruption agencies so that they could undertake corrective action and their own criminal investigations to determine if the laws of the country have been violated. Follow-up investigations take time and will not always lead to prosecutions. Still, we would like to see some follow up and we do expect to see a steady increase in the number of convictions over time. This is something we - and you - should be monitoring.
If you look at our 2010 INT Annual Report, you’ll see that we have, for the first time, made public where are referrals were sent – from the UK to Kazakhstan, from Canada and Norway to Tanzania. I encourage our friends here in civil society to look closely at the list. And if you don’t eventually see follow-up, you should begin to ask why.
Separately, the Stolen Asset Recovery Initiative (StAR) - the World Bank’s partnership with the United Nations Office on Drugs and Crime - tackles the issue of enforcement from another angle. StAR supports international efforts to end safe havens for corrupt funds. It is encouraging to see that there’s considerable demand. Some 23 countries, more than one in seven of the signatories to UNCAC, have asked for some form of assistance, and progress has been made in helping countries build capacity and cooperate in asset recovery cases.
Partner countries are making progress, six of StAR’s partner countries now have assets frozen, others have exchanged their first successful request for legal cooperation others still have launched their first investigations. StAR has also had some success in mobilizing the international community.
The real challenge for StAR is to increase the number of cases. That requires more action on the part of national authorities in developing countries and financial centers, to identify, investigate and prosecute corruption cases. Again, this is something that we - and you - should be monitoring.
The role of the private sector
From the point of view of businesses, combating corruption is about leveling the playing field, seeing fair competition and, above all, about managing costs – specifically, individual costs and company level costs. Every bribe taken is a bribe paid, and more often than not it is a company official delivering the envelope.
And while corruption may benefit individual companies in the short run, over time it becomes a real barrier to development, innovation and business growth. Because sometimes the corruption is in the form of counterfeit drugs, so people don’t get better, or they die. Sometimes corruption is a building that collapses in the face of a natural disaster, because the quality inspector took a payment from the construction contractor to falsify an inspection. Corruption can kill.
And so, it is encouraging to see that private firms are increasing their efforts to address corruption at multiple levels:
· By putting in place company-level anti-corruption programs
· By committing collectively to a statement of commitment to a set of ethical principles; (for example the World Economic Forum’s Collective Action Against Corruption Initiative), with enforcement honor-based;
· By agreeing to participate in integrity pacts – where bidding and implementation processes are observed by an independent monitor (Transparency International sponsored Integrity Pacts have shown the way globally here); and
· By establishing certifying business coalitions, with collective enforcement of compliance with these commitments by the coalition as a whole.
That said, as many of these initiatives lack the “teeth” of enforcement, I think we can all agree on the need for even more action on the part of the private sector.
Keeping our own house in order
Let me speak briefly about some other areas where we at the World Bank are moving forward.
As you may know, I only recently changed jobs, joining the World Bank Group as Managing Director. This new position has allowed me to appreciate how much this institution has transformed itself. In contrast to the situation fifteen years ago, when “the C word” was whispered if mentioned at all, Governance and Anti-Corruption is becoming central to everything that we do – in our country programs, our sector engagements and project design and implementation. It remains a work-in-progress, but one which we are making considerable headway on.
Embracing the governance and anticorruption agenda poses some difficult trade-offs to the World Bank Group and requires us to think more in term of “risk”. Much of our work is in the poorest countries, where institutions are often weak and the likelihood of something going wrong is high. Risk-taking is axiomatic to development work – and we need to apply high standards in recognizing, assessing, and managing such risk.
Demand side approach
When the World Bank first publicly uttered the word “corruption” in 1996, the Bank’s then President, Jim Wolfensohn, also spoke eloquently of the demand side of the “corruption” equation. He said, and I quote, “In country after country, it is the people who are demanding action on this issue. They know that corruption diverts resources from the poor to the rich, increases the cost of running businesses, distorts public expenditures, and deters foreign investors.” In that speech, Wolfensohn noted that solutions can only be home-grown, and that both national leaders and civil society play important roles.
Here one major transformation is especially noteworthy for us: demand-side approaches –approaches that focus on involving citizens and civil society - are now being systematically mainstreamed into our work.
This demand-side focus has already made considerable advances. A comprehensive 2008 review found that 42% of new Bank projects incorporated such types of measures – and this percentage is increasing. Here are two fairly recent examples:
· In the Pakistan Sindh Water Project, procurement oversight was provided by Transparency International Pakistan.
· Community participation: The Honduras Education Quality, Governance and Institutional Strengthening Project supports community participation in school-based management.
The Bank, and the development community more generally, still has a lot to learn in this area. So, going forward, we will continue to investigate more systematically what works when and under what conditions to enable us to better design and implement such interventions.
On this note, I would like to offer a challenge to my civil society friends. Help us. Bring us practical solutions. Not to have a victory against corruption, but to find the next steps to solve some of the difficult problems we all face. And I don’t just mean in prevention – though prevention is important. But prevention must be additional to enforcement.
As I look beyond the World Bank, I see a changing world, where anti-corruption is very much on the center stage. 147 of the 184 members of the United Nations are now parties to the United Nations Convention Against Corruption: this is truly a global commitment. Last year, in Doha these states agreed on a comprehensive review mechanism. While this may not have met everyone’s expectations, the agreement was reached and work has already begun. We have also seen the G20 take up this agenda. The G20’s Working Group on Anti-Corruption and Market Integrity has prepared an action-plan with specific commitments. I very much look forward to seeing a strong commitment on this action plan by world leaders when they meet in Seoul this weekend. But, as you here all know, these commitments, fron UNCAC to OECD to G20, must be followed by actions.
Over the next three days, we will have the opportunity to share ideas and exchange experience that will enable to move this agenda forward. Early next month, I hope some of you will also be coming to Washington for our Integrity Day initiative, where we will build on what we discuss here in Bangkok. Corruption, despite its complexity, is our shared challenge – and only through working truly together - across sectors, across boundaries, and across jurisdictions - focusing on impact and with a long term vision we can successfully address it. This is why events such as this are so important. By bringing together the world’s most important corruption practitioners, I am confident we can push this agenda forward.