On Wednesday the world celebrated the International Anti-Corruption Day, designated in 2003 by the United Nations (UN) General Assembly when it adopted the UN Convention against Corruption. Recognizing the importance of fighting corruption in that way was a major step in a growing global effort to remove the taboo around addressing corruption in the international discourse on development. Indeed, the new expectation of governments and businesses alike is to face corruption head on everywhere it cripples democracies and markets.
This year’s theme for the International Anti-Corruption Day is breaking the corruption chain. CIPE’s work with private sector organizations in countries around the world reflects precisely that objective. In many environments where corruption has become entrenched, is very hard for an individual or a company to stand up against abuses such as bribery or extortion. Furthermore, it is hard for businesses to make a credible commitment to integrity without sufficient knowledge on how to build proper management systems to prevent corruption in daily operations. These limitations can be overcome through better anti-corruption compliance and collective action. These private sector-led approaches have the power to break corruption chains and make a real difference.
Earlier this year my colleague Frank Brown and I presented CIPE’s experiences from Russia, Kenya, Ukraine, and Thailand at the Society of Corporate Compliance and Ethics Institute in Las Vegas. To celebrate the International Anti-Corruption Day, we captured key takeaways from our presentation in CIPE’s latest Economic Reform Feature Service article:
Article at a glance:
- Corruption is primarily an institutional issue and combating it requires proactively preventing corrupt practices through supply- and demand-side reforms.
- Collective action and anti-corruption compliance are practical approaches that reform-minded businesses can use to build a critical mass of companies committed to operating with integrity.
Companies in emerging markets can greatly benefit from improving their anti-corruption practices, which makes them more attractive business partners in global value chains.
Read the whole article here.
Anna Kompanek is Director for Multiregional Programs at CIPE.
Did you know that public procurement — goods and services bought by governments — accounts for around one-fifth of global GDP? Or that in most high-income economies public procurement takes up a third of total public spending, and in developing countries even more – about half?
These figures represent a significant share of national wealth. If channeled properly, public procurement provides indispensable benefits to a society, such as infrastructure, hospitals, and schools. Yet, if squandered, public procurement can set back the economy and contribute to massive corruption. In fact, the Organisation for Economic Co-Operation and Development (OECD) estimates that corruption drains 20-25 percent of procurement budgets globally, which amounts to staggering $2 trillion per year.
The World Bank’s recent report, Benchmarking Public Procurement 2016, goes beyond the aggregate numbers to compare data on regulatory environments that affect the ability of companies to do business with the government in an open and transparent way.
This post originally appeared on the SCCE Compliance & Ethics blog.
I was truly honored to attend this year’s Compliance and Ethics Institute (CEI) in Las Vegas, and to present with my colleague Frank Brown, CIPE’s experience with motivating mid-sized businesses in emerging markets to launch compliance programs. Our session was one of the opening ones scheduled at 9am on Sunday morning (did I mention we were in Vegas?) so it was abundantly clear to us that everyone who attended was truly dedicated to the cause!
As we’ve heard throughout the event, emerging markets pose many compliance risks, especially in the area of anti-corruption. Local enforcement may be lax and bribery remains common in business transactions. What is more, under laws such as the U.S. Foreign Corrupt Practices Act or the UK Bribery Act, it is not just the behavior of a company’s own employees but also the conduct of it suppliers, agents, and other business partners that’s of concern.
Today is the International Day of Democracy, when the world celebrates the importance of democracy and democratic governance. But the role of the private sector in building democracies that deliver prosperity and opportunity to all citizens is often overlooked. That is why the contribution made by private sector participants at the 8th Ministerial Conference of the Community of Democracies (COD) is particularly noteworthy.
The Community of Democracies was founded in 2000 as an intergovernmental coalition specifically focused on promoting democracy and democratic ideals (at the time, only 68 of 189 UN member states were democracies; today the number has risen to 84). This year’s Ministerial, which took place on July 22-24 in El Salvador, gathered representatives of civil society, parliaments, the private sector, and youth in the capital of San Salvador. The leading theme for El Salvador’s 2013-2015 presidency of the organization was “Democracy and Development.” About 800 participants from more than 70 countries attended.
This post originally appeared on the Corporate Compliance Trends blog.
When I visited Nairobi a few weeks ago, the signs of President Obama’s recent visit to attend the Global Entrepreneurship Summit were still clearly visible all around – from welcome posters to the spruced-up cityscape. I was in Kenya to work with CIPE’s partner organization, Kenya Association of Manufacturers (KAM), on a training-of-trainers workshop devoted to anti-corruption compliance and practical ways in which mid-sized companies in particular can implement robust compliance programs. The topic is quite timely.
Corruption remains a key problems in Kenya, affecting both the country’s democratic and economic development prospects. It was one of the leading issued discussed during President Obama’s visit, which resulted in an agreement signed between the Kenyan government and the U.S. to introduce new anti-graft measures. The 29-point deal stipulates, among other things, that Kenya will step up investigations into corruption cases, increased U.S. assistance and advice to Kenyan anti-corruption agencies and advice on relevant legislation, and international commitments by Kenya to join the Egmont Group of Financial Intelligence Units and the Extractive Industries Transparency Initiative (EITI).
At the same time, profound challenges persist. Within days of Obama’s visit, Kenya’s Office of the Auditor-General released a troubling report that brought to light some uncomfortable numbers. According to the report, only 26% of money spent and collected by the government has been fully approved in an audit for 2013-2014. The health department alone failed to account for 22 billion Kenyan shillings ($216 million) worth of spending. What is more, over 12,000 false names were discovered on the government payroll.
What are the drivers of and institutional responses to corruption? Are current anti-corruption instruments used domestically and internationally effective? These were the key questions of a fascinating day-long event organized last week in Washington, DC by the George Washington School of Law and the International Bar Association, among others.
The event gathered a distinguished group of speakers from the government, academia, international organizations, law firms, and non-profits, as well as an engaged audience of anti-corruption scholars and practitioners.
While the discussion touched upon a multitude of corruption-related topics, the following aspects of corruption raised at event were the most valuable insights for me:
- Corruption as a violation of public trust. Janine Wedel, a Berkeley-trained anthropologist and a professor at George Mason University, emphasized that corruption is more than just simple quid pro quo. Instead, it is a sophisticated network rooted in informal power, influence elites, and often aided by the post-Cold War global economic openness as the revolution of the digital age.
- Corruption as a governance problem. Nikos Passas, professor at the Northeastern University, pointed out the roots of corruption in discrepancies between legitimacy and legality (lawful but awful conduct by government officials or businesses) and in unlawful but useful behavior (e.g., bribing a doctor to treat a patient in a failing healthcare system). International norms such as the United Nations Convention Against Corruption help by creating agreed-upon legal standards, but improving on-the-ground governance in countries around the world still has a long way to go. Read a Q&A with Nikos Passas here.
- Private sector as a force for anti-corruption. Baker & McKenzie’s Tom Firestone stressed that a broad-based business community in a given country can be an effective force in anti-corruption efforts. He recounted his experience in Russia where local businesses resisted corrupt encroachments of the state. Local firms, after all, have a strong interest in the rule of law and a level playing field in the business environment. But they can’t do it alone.
- Inter-governmental cooperation makes a difference. Kathryn Nickerson, Senior Counsel at the Department of Commerce highlighted the importance of the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery in International Business Transactions responsible for monitoring and implementation of the OECD Anti-Bribery Convention.
- Corruption as an attack on human dignity. Sarah Chayes, the conference’s keynote speaker, talked about her recently published book, Thieves of State: Why Corruption Threatens Global Security. She pointed out that there is a moral dimension to corruption – it leads to widespread moral decay and individual humiliation that goes beyond money. In extreme cases of corruption-ridden countries, it is not the weakness of the state that leads to corruption. Rather, the institutions of the state have evolved to make them a conduit for corruption that permeates entire societies.
Anna Nadgrodkiewicz is Director for Multiregional Programs at CIPE.
An increasing number of policy and governance challenges around the world demand private sector participation to generate viable solutions. Such challenges include poverty reduction, inclusive growth, government accountability, business integrity, national competitiveness, innovation, and access to opportunity. Although the obstacles to dialogue can be high, the value of dialogue is now widely recognized by governments and business leaders alike. Notably, the 4th High Level Forum on Aid Effectiveness in Busan, Korea, recommended that countries embrace “inclusive dialogue for building a policy environment conducive to sustainable development.”
In CIPE’s latest Economic Reform Feature Service article, Benjamin Herzberg, Program Lead, Leadership, Learning and Innovation at the World Bank Group, my colleague Kim Bettcher, Senior Knowledge Manager at CIPE, and I explore the importance of PPD and discuss its practical applications around the world.