Corruption and Integrity Improvement Initiatives in Developing Countries United Nations Development Programme Management Development and Governance Division Bureau for Development Policy 304 East 45th Street, 12th Floor New York, NY 10017 Tel : (212) 906-5054 Fax : (212) 906-6471 Email : [email protected] Corruption And Integrity Improvement Initiatives In Developing Countries offers views of eminent international thinkers and practitioners on how to reduce and eventually eliminate corruption. The book shows that, while helpful, democracy is by no means a cure for corruption, nor is economic liberalisation a panacea for ending public sector crime. The contributors call for strategies that combine law enforcement, prevention through institutional reforms and public support. A strong correlation between successful anti- corruption programmes and civil liberties is demonstrated throughout the book. Publication of this material follows an international conference in Paris on the same theme, co-sponsored by the United Nations Development Programme (UNDP) and the OECD Development Centre. CORRUPTION AND INTEGRITY IMPROVEMENT IN DEVELOPING COUNTRIES The views expressed in this book are those of the authors. They do not necessarily reflect the official views or policies of the United Nations Development Programme (UNDP) or the OECD Development Centre. Table of Contents Message from Transparency International, Peter Eigen Preface Acknowledgements Overview, Sahr J. Kpundeh and Irene Hors Part 1 1. "Cross-Border Corruption": Points of Vulnerability and Challenges for Reform, Michael Johnston 2. Corruption and the Global Economy, Susan Rose-Ackerman Part 2 3. Corruption and Anti-Corruption Strategies: Issues and Case Studies from Developing Countries, Alan Doig and Stephen Riley 4. Revisiting Anti-Corruption Strategies: Tilt Towards Incentive-Driven Approaches, Daniel Kaufmann Part 3 5. The Role of Civil Society, Peter Eigen 6. Political Will in Fighting Corruption, Sahr J. Kpundeh 7. The Role of Civil Society and Patron-Client Networks in the Analysis of Corruption, Mushtaq H. Khan Part 4 8. Different Perspectives of International Organisations in the Fight Against Corruption Pauline Tamesis 9. Strengthening Domestic Institutions Against Corruption: A Public Ethics Checklist, Alexandra Mills 10. OECD Actions to Fight Bribery in International Business Transactions, Carolyn Ervin About the Contributors Appendices 1. United Nations General Assembly, Resolution on Corruption in 1997 2. OECD Convention on International Bribery in 1998 3. The Lima Declaration in 1997 Message from Transparency International Corruption is present in almost any country, but has the most devastating effects in developing economies, because it hinders any advance in economic growth and in democracy. Corruption wastes resources by distorting government policy against the interests of the majority and away from its proper goals. It turns the energies and efforts of public officials and citizens towards easy money instead of productive activities. It hampers the growth of competitiveness, frustrates efforts to alleviate poverty and generates apathy and cynicism. The harms caused by corruption, which are as numerous as the shapes corruption can take, have destroyed well-intentioned development projects in the South and undermined political and economic transitions in the East. Whereas in a developed country corruption may prevail in a single component of the body politic, in a developing country, which often has weaker administrations and political institutions, the corruption problem can actually become part of the system. In Ecuador, its proliferation has endangered the country’s democracy. In Tanzania, corruption has been found in all sectors of society and has appeared as the main source of public discontent. Dealing with corruption is far from being simply a matter of law enforcement. The casualties of corruption include the country’s integrity system itself, and therefore reform of the national integrity system has to take place. In this effort, it is important from the outset that the political will is present to obtain legislative or administrative changes effective enough to contain corruption. It is also essential to have the three main actors of society working together: the government, the private sector and the civil society. The energies of all three are needed to assure changes in moral and ethical attitudes and to achieve meaningful reforms. The role and the importance of international institutions in dealing with corruption have increased dramatically within the past few years. At the national level as well as internationally they have declared war on corruption and taken concrete steps to minimise its prevalence. Agreements over recommendations and international conventions (OECD), the introduction of specific procurement guidelines (World Bank, OECD DAC) and the development of projects promoting greater monitoring, transparency and accountability (UNDP, USAID) in countries in which donor agencies work, are examples of very effective measures towards the banishment of corruption. This publication will provide the reader with a clear idea of the approaches mentioned above, what their strengths are and how they can weaken corruption practices. Corruption is multiple and needs to be fought on different fronts simultaneously. I therefore feel a certain relief and encouragement to see so many dedicated people and institutions, providing support and commitment to eradicate corruption. I would also like to express my appreciation to the OECD Development Centre and to UNDP’s Programme for Accountability and Transparency for having provided us, during the conference on Corruption and Integrity Improvement Initiatives in the Context of Developing Economies, with a valuable opportunity for presenting and exchanging ideas, perspectives and approaches toward the analysis of the corruption problem generally and in specific cases, as well as with regards to ways of acting to curb this scourge. Peter Eigen, Chairman Transparency International (TI) Berlin, Germany April, 1998 Preface The international community's concern with corruption issues is not a passing phenomenon. It is now an accepted fact that corruption hinders economic growth and sustainable development and often results in human right violations. A firm commitment from all players -- government, the private sector and civil society -- is required to develop and implement solutions. Such solutions must include concrete measures -- preventive as well as punitive -- that address issues of accountability, transparency and inequity at various levels of social and economic systems. In this respect, the international community has a role to play both as catalyst and supporter for these reform efforts. The particularly complex nature of corruption makes international co-operation and co-ordination even more critical to the successful implementation of strategies to improve integrity in governance. The need to build partnerships and encourage closer collaboration among all players in the international development community was underscored at the conference Corruption and Integrity-Improvement Initiatives in Developing Countries, held at the OECD Headquarters in Paris on 24-25 October 1997. The conference was jointly organised by the OECD Development Centre and the UNDP Programme for Accountability and Transparency (PACT). The meeting provided a forum for participants -- policy makers, academics, government representatives, experts, international development institutions and aid agencies -- to discuss the difficulties surrounding the design of effective strategies given a context of diverse corruption patterns and country-specific circumstances. In addition, the international dimension of corruption and the role of aid and lending agencies were addressed. Finally, and perhaps most importantly, the participants had the opportunity to debate some of the solutions and strategies that are proposed to developing countries to assist in their anti-corruption campaigns. Both the OECD Development Centre and UNDP have programmes in place to study corruption and to assist policy makers in the fight against corruption. UNDP’s involvement is rooted in its mandate to create an enabling environment for sustainable human development. The PACT serves as the focal point within UNDP to ensure a coherent and effective strategy in supporting anti-corruption programmes. Its work focuses on (i) facilitating good governance interventions in specific domains; (ii) supporting methods to curb corruption, including policy dialogue, capacity building, documentation and analysis of best practices and support to national programmes; and (iii) making reformers aware of the importance of country conditions in programme development. At the OECD Development Centre, policy-oriented research on corruption in OECD non-Member countries has been a priority since 1996. This work has a dual objective: to provide policy recommendations to developing country governments and aid agencies in their fight against corruption; and to provide OECD Member countries with a clearer understanding of the causes and consequences of corruption in developing countries. By using an analytical framework of corruption issues to explore country case studies, the project seeks to identify the diverse forms of corruption in various countries and the ways in which they affect economic efficiency and governance. This publication covers a broad set of issues ranging