Combating Corruptionin Asian and Pacific Economies

Organisation for Economic Co-operation and DevelopmentAsian Development Bank

Combating Corruptionin Asian and Pacific Economies

Papers Presented at the Joint ADB-OECDWorkshop on Combating Corruptionin Asian and Pacific Economies

Asian Development Bank Headquarters, Manila29 September-1 October 1999

All rights reserved.

This publication was jointly prepared by Asian Development Bank(ADB) and Organisation for Economic Co-operation and Development(OECD) staff. The findings, interpretations, and conclusions expressedin it do not necessarily represent the views of ADB or those of its mem-ber governments or of the OECD and its member countries. ADB andOECD do not guarantee the accuracy of the data included in this pub-lication and accept no responsibility whatsoever for any consequencesof their use.

ISBN-971-561-288-1RETA No. 5829

Publication Stock No. 020400

Published by the Asian Development BankP.O. Box 789, 0980 Manila, Philippines

v

Contents

Foreword ........................................................................................ viiSHOJI NISHIMOTO and WILLIAM WITHERELL

Executive Summary..................................................................... xiii

Keynote Address ............................................................................. 1PETER H. SULLIVAN

Opening Remarks ........................................................................... 7RAINER GEIGER

I. Regional Strategies and International Instrumentsto Fight Corruption

1. India’s Anticorruption Strategy .................................... 13VIJAY K. SHUNGLU

2. Corruption in Papua New Guinea ................................ 19PAUL BENGO

3. International Instruments to Fight Corruption ........... 27MARK PIETH

4. Fostering Greater Transparencyin the Asia-Pacific Region .............................................. 35ROBERT LEES

5. Actions to Fight Money Launderingof Proceeds of Crime ....................................................... 45MICHAEL C. BLANCHFLOWER

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESvi

II. Measures to Combat and Prevent Corruption

1. Reforming the Philippine Customs ServiceThrough Electronic Governance.................................... 61GUILLERMO L. PARAYNO, JR.

2. Anticorruption Strategiesin Public Procurement .................................................... 71JEANMARIE FATH MEYER

3. Curbing Corruption in Procurement ............................ 83ROCKY H.T. WONG

4. Corruption: The Costs for Developmentand Good Governance .................................................... 87MICHAEL JOHNSTON

5. Accountability and Anticorruption Agenciesin the Asia-Pacific Region ............................................ 101JON S.T. QUAH

6. Pillars of Integrity: Supreme Audit Institutions ....... 125RICK STAPENHURST

7. Denying Tax Deductibility of Briberyin the United Kingdom ................................................. 161CAROLYN HUBBARD

8. Denying Tax Deductibility of Briberyin the Republic of Korea ............................................... 167KUEN HO CHANG

9. Measures to Fight Corruption ..................................... 173CARLOS R. ALINDADA

10. Combating Corruptionin the Asia-Pacific Economies ...................................... 181TUNKU ABDUL AZIZ

11. Encouraging Good Corporate Behavior ..................... 187DAVID LYMAN

Contents vii

12. Company Codes of Conduct ........................................ 193MICHAEL N. DAVIES

13. Fighting Corruption:The Role of Trade Unions ............................................. 203ESPERANZA OCAMPO

14. Managing Business Fraud Risk ................................... 207STEVEN INGRAM

15. Good Mass Media Governance ................................... 213KAVI CHONGKITTAVORN

16. The Use of Report Cardsin Monitoring Corruption ............................................ 217SAMUEL PAUL

III. Developing Anticorruption Strategies

1. Hong Kong, China’sAnticorruption Strategy................................................ 227JULIE MU FEE-MAN

2. Strategies for CombatingCorruption in Pakistan ................................................. 233SHAFIUR RAHMAN

3. Korea’s Strategies to Fight Corruption ....................... 237HONG JAE IM

4. Anticorruption Initiativesof the United States Agencyfor International Development .................................... 249ED ANDERSON

5. Anticorruption Initiatives of theInternational Monetary Fund ...................................... 255ANTON OP DE BEKE

6. Anticorruption Initiativesof the World Bank .......................................................... 261BERNARD FUNCK

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESviii

7. Developing Effective Approachesto Implement Anticorruptions Strategies:A Summary of the Breakout Discussions ................... 265

Epiloque

Recovering Rage ................................................................... 275SHEILA S. CORONEL

Participants

Contributors .......................................................................... 283

Delegates ............................................................................... 288

Abbreviations .............................................................................. 305

ix

Foreword

Measures to curb bribery and corruption are now firmlyon the international agenda. Thirty-four signatory

countries, including all the world’s biggest economies, havesigned the Organisation for Economic Co-operation andDevelopment (OECD) Convention on Combating Briberyof Foreign Public Officials in International Business Trans-actions, and are now implementing tough new legislationagainst transnational bribery. Regional banks such as theAsian Development Bank (ADB) are now prepared to with-hold financial backing from governments and companiesaccused of corruption. Other international organizationssuch as the United Nations are undertaking major initia-tives against international graft. Nongovernment organi-zations and bilateral aid agencies are also participating inthe efforts of national governments and international or-ganizations to combat and curb corruption.

In a bid to counter the malign influence of corruptionin the Asia-Pacific region, ADB and OECD sponsored aworkshop on Combating Corruption in Asian and PacificEconomies held at the ADB headquarters in Manila, Phil-ippines, from 29 September to 1 October 1999. The meet-ing provided a forum for participants—senior policymakersand government officials and leading representatives fromthe business sector and civil society in ADB and OECDmember countries—to share their views on and experiencesin fighting corruption on the national and internationallevels.

Convinced that bribery in international trade and in-vestment is widespread and has many harmful repercus-sions, and that an effective worldwide policy is best suited

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESx

to fight corruption, OECD has been a leader in the globalfight against bribery and corruption in international busi-ness practices. Making use of OECD Secretariat-wide ex-pertise and cultivating synergies with other internationalinitiatives—both public and private—OECD has provideda unified and comprehensive front against corruption. Itaddresses corruption from the perspective of both the re-cipients of illicit payments, through work on public ser-vice ethics, and the providers of illicit payments, by takingactions against bribe givers.

ADB has long been aware of the dangers of corrup-tion for Asia-Pacific governments and economies. In July1998, the ADB Board unanimously adopted a tough anti-corruption policy targeted at ensuring sustainable andequitable development. ADB’s objective is to combat cor-ruption through its general work on market liberalizationand public sector reform by providing explicit support forselective anticorruption initiatives and by ensuring thatits own staff and projects adhere to the highest levels ofintegrity.

This publication covers a broad set of issues rangingfrom corruption as a challenge to good governance andeconomic development to anticorruption actions at na-tional, regional, and international levels. It providespolicymakers, businesses, civil-society organizations, andother stakeholders with an assessment of specific anticor-ruption strategies already in place and explores new ap-proaches. Moreover, it serves as a key element in the net-work building and information sharing which is essentialto successful coordination and cooperation among key play-ers in the reform effort.

ADB and OECD believe that this publication willbroaden the debate on anticorruption strategies and con-tribute to strengthening initiatives to improve integrity andtransparency in public governance and corporate behav-ior. Both organizations wish to express their gratitude to

Foreword xi

the authors and conference participants for their excellentcontributions, without which this publication would nothave been possible. They also wish to express their thanksto the partner organizations: the Konrad-Adenauer-Stiftung, the Pacific Basin Economic Council, Transpar-ency International, the United Nations DevelopmentProgramme, the United States Agency for InternationalDevelopment, and the World Bank Institute. These keyplayers in the international fight against corruption con-tributed valuable insights gained from practical, hands-onexperience in assisting countries in developing credible an-ticorruption programs.

The project was directed and coordinated by Robert P.Beschel, formerly ADB strategy and policy officer and nowsenior public sector management specialist for the SouthAsian region at the World Bank, and Frédéric A. Wehrlé,coordinator for Anti-Corruption Outreach Activities in theOECD Anti-Corruption Unit of the Directorate for Finan-cial, Fiscal, and Enterprise Affairs. Copy editing by AnnetteGoh, under contract to OECD, and Muriel S. Ordoñez, un-der contract to ADB, and research and editorial assistanceby Marilyn Pizarro, are gratefully acknowledged. Lorna delRosario, ADB, and Wendy Prince-Lagoutte, OECD, handledthe logistical arrangements of the workshop on which thisvolume is based.

The views expressed in this publication do not neces-sarily reflect those of the ADB Board and member coun-tries or of OECD and its member countries. It is publishedon the responsibility of the director, Strategy and PolicyDepartment, ADB, and the director, Directorate for Finan-cial, Fiscal and Enterprise Affairs, OECD.

SHOJI NISHIMOTO WILLIAM WITHERELLDirector, Strategy Director, Directorateand Policy Department for Financial, FiscalADB and Enterprise Affairs

OECD

xiii

Executive Summary

Bribery and corruption are damaging the Asia-Pacific re-gion, undermining the political process, hampering eco-

nomic and legal reforms, distorting the allocation of re-sources and undermining fair competition in the market-place. In a bid to counter the malign influence of corrup-tion in the region, the Asian Development Bank (ADB) andthe Organisation for Economic Co-operation and Devel-opment (OECD) organized a workshop on “CombatingCorruption in Asian and Pacific Economies” in Manila, Phil-ippines, from 29 September to 1 October 1999.

The workshop was sponsored by ADB, the OECD Cen-tre for Co-operation with Non-Members, the OECD Anti-Corruption Unit of the Directorate for Financial, Fiscal andEnterprise Affairs (DAFFE), and the OECD Public Manage-ment Service. Associated partners in the workshop includedthe Konrad-Adenauer-Stiftung, the Pacific Basin EconomicCouncil, Transparency International, the United NationsDevelopment Programme (UNDP), the United StatesAgency for International Development (USAID), and theWorld Bank Institute. These key players in the internationalfight against corruption contributed valuable insightsgained from practical, hands-on experience in assistingcountries in developing credible anticorruption programs.

A STRONG CONSENSUS TO FIGHT CORRUPTION

The workshop sought to raise awareness of the serious-ness of the corruption problem and to identify effectiveanticorruption strategies. Participants from more than 35ADB and OECD countries1 discussed ways to (i) improve

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxiv

integrity and transparency in government, (ii) combat cor-ruption and bribery in international business transactions,and (iii) mobilize the mass media and the civil society tojoin in these efforts.

The workshop revealed a strong consensus to fightcorruption. There is an urgent need for an effective pro-gram to combat corruption, involving the public and pri-vate sectors, the mass media, and civil society. In the pub-lic sector, stronger law enforcement and greater integrityand clarity in the structures of state administration arecalled for. Regulatory reforms should remove bureaucraticobstacles and reduce administrative delays in order to curbthe discretionary authority available to government offi-cials and provide for competitive public procurement pro-cedures in order to improve the investment climate. In theprivate sector, further efforts should be made to developand implement business ethics programs and codes of con-duct, with a view to encouraging self-regulation. The massmedia and civil society should implement education pro-grams aimed at (i) fostering an anticorruption culture, (ii)establishing informal partnerships to monitor good publicgovernance, and (iii) enabling the mass media to effectivelyexercise public scrutiny.

Keynote addresses were made by the vice president ofregion east and chairman of ADB’s anticorruption task forcePeter Sullivan and by OECD deputy director Rainer Gei-ger. In session one, participants reviewed anticorruptionprograms in selected Asian and Pacific Economies as illus-trative of the general issues involved in combating corrup-tion and discussed international instruments developed indifferent international forums to support national effortsto combat corruption and other illicit transactions. The sec-ond session was organized around three main themes: (i)integrity, accountability, and transparency in public gover-nance; (ii) transparency and integrity in business operations;and (iii) civic participation in the fight against corruption.

Executive Summary xv

During the third session, strategies and effective approachesto implement anticorruption programs were examined. Atthe final session, participants identified and discussed mea-sures conducive to a sustained effort to stamp out briberyand corruption.

REGIONAL STRATEGIES AND INTERNATIONAL INSTRUMENTSTO FIGHT CORRUPTION

Today, corruption is internationally recognized as a majorproblem that is capable of endangering social stability andsecurity; undermining democracy and morality; and threat-ening social, economic, and political development. With thegrowing globalization of markets, services, goods, andpeople, accompanied by the internationalization of illegalactivities, the international dimension of corruption gainsin significance. As a result, reducing corruption has becomea priority both nationally and internationally.

Regional Anticorruption Strategies

The book’s first section discusses the anticorruptionprograms in India, Philippines, and Papua New Guinea asillustrative of the general issues involved in fighting cor-ruption. Although these programs are mainly concernedwith public sector corruption, the essays also highlight theimportance of private sector involvement.

The scope of corruption, qualified as endemic and sys-temic in many Asian countries, is underlined. In many cases,anticorruption measures are ineffective, especially thoseinvolving public officials, and elected officials who are notaccountable to a statutory party. Since corruption has be-come a well-organized activity, government or administra-tion measures must be comprehensive and able to addresscorruption committed by public servants as well as by high-level politicians.

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxvi

Comprehensive measures include organizing an anti-corruption system and increasing transparency throughreforms in public sector management and the legal system.For instance, it is necessary to introduce new laws in pro-curement, foreclosure, and bankruptcy, and new regulationsfor central banks. In the Republic of Korea, some of thesereforms were introduced after the Asian financial crisis,since corruption is believed to have provoked it. However,deep-rooted changes in the Korean legal system requiretraining and the establishment of an incentive structure forjudges, whose existing number is not even sufficient to dealwith corruption issues.

Apart from establishing or enabling a legal framework,the creation of a special anticorruption organization is nec-essary for putting in place an efficient anticorruption strat-egy. Such an organization can play a key role in carryingout anticorruption activities. This is evident, for example,in Papua New Guinea. In India, Parliament is the most ef-fective guardian of such an anticorruption institution.

Another effective anticorruption strategy is the decen-tralization of the decision-making process in procurementor licensing. However, dismantling the power of the cen-tral Government and breaking up the bureaucracy shouldbe accompanied by training of local officials, who are ex-pected to be scrutinized by the people. Scrutiny is consid-ered an expression of civil society’s involvement in anti-corruption activities, and is essential for the creation of ananticorruption environment. Such involvement must besupported by independent mass media. Both decentrali-zation and privatization have positive effects in the fightagainst corruption.

The anticorruption campaign is not confined to indi-vidual countries but has spilled over into the internationalcommunity. International organizations such as the WorldBank, ADB, and OECD should provide technical assistance

Executive Summary xvii

apart from financial assistance in the development of anti-corruption mechanisms. It is important to coordinate anti-corruption legislation and to strengthen international linksto prevent cross-border bribery as corruption in Asian de-veloping countries is boosted by the opportunities providedby developed economies that induce spiraling borrowing.

International Instruments to Fight Corruption

In recent years, several anticorruption instrumentshave been developed in different international forums tocombat bribery and other corrupt activities. These instru-ments vary in their scope and content and in how they canbe applied in the Asian and Pacific Economies. A key pointis that corruption is not confined to a particular part of theworld or to countries at one stage or another of develop-ment. It is clear that corruption most affects the world’spoorest by making people pay for government services towhich they may be entitled free of charge (e.g., education,health). Corruption denies the least advantaged opportu-nities for improved prosperity.

The OECD Convention on Combating Bribery of For-eign Public Officials in International Business Transactionswas adopted in December 1997. The convention obligesparties to adopt wide-ranging rules:

• National legislation should make bribery of foreignpublic officials a crime.

• “Bribery” and “foreign public officials” should bedefined broadly to take account of the fact that func-tions exercised by the State vary from country tocountry.

• Penalties must be “effective, proportionate, and dis-suasive,” comparable to penalties applicable to do-mestic public officials (including prison terms).

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxviii

• Territorial jurisdiction should be interpreted broadlyand national jurisdiction established if this accordswith national legal principles.

• Where there is no criminal liability of companies,countries should impose dissuasive noncriminalsanctions, including monetary fines.

• Accounting and auditing standards are required toprohibit the establishment of off-the-book accountsand other techniques for hiding bribery.

• Mutual legal assistance must be provided inconnection with criminal investigations and otherproceedings.

• “Bank secrecy” may not be asserted to deny mutuallegal assistance.

• Extradition should be provided for.

The legislation adopted by countries to implement theconvention is subject to a rigorous monitoring process toensure that it meets the standards set by the convention.

Although the convention is the centerpiece of effortsto promote good corporate behavior in international busi-ness, it is not the only anticorruption instrument available.Signatories of the convention are also committed to imple-menting the 1997 Revised Recommendation on Combat-ing Bribery in International Business Transactions, whichimposes significant additional requirements aimed at mo-tivating corporations to change their attitude.

The 1997 Recommendation also incorporates the 1996Recommendation on Anticorruption Proposals for BilateralAid Procurement, according to which signatory countriesof the convention should do the following:

• Require anticorruption provisions in bilateral aid-funded procurement.

• Promote the proper implementation of anticorruptionprovisions in international development institutions.

Executive Summary xix

• Work closely with development partners to combatcorruption in all development cooperation efforts.

Parties to the convention also pledge to abide by the1996 Recommendation aimed at ending the tax deductibil-ity of bribes to foreign public officials.

While the OECD convention and related instrumentsmake it clear that the international business communityplays a key role in the fight against bribery, the correspond-ing responsibility of governments in the prevention of so-licitation of bribes is not ignored. The 1998 Recommen-dation on Improving Ethical Conduct in the Public Ser-vice provides an instrument—a set of management prin-ciples—for governments to check their national institutionalcircumstances.

Other international instruments include the Councilof Europe’s legal instruments: the Criminal Law Conven-tion of 1998 and the Civil Law Convention on Corruptionof 1999. These conventions differ from the OECD approachin that their definition of the offense refers to the countryof the recipient on essential points, whereas OECD’s definesthe official and the breach of duty in an autonomous way.

The European Union (EU) has adopted three main in-struments against corruption:

• the Treaty on the Protection of Financial Interests ofthe Community of 1995, which is the basis for theFirst Protocol of 1996, focusing on criminalizationof transnational bribery in Europe, which, however,is limited to bribery endangering EU’s interests andto its geographical area;

• the Supranational Law against corruption that dealswith the tax treatment of bribes and rules on account-ing and auditing; and

• the draft instrument on transnational and suprana-tional bribery in the context of EU, which aims to

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxx

unify criminal law and could eventually developinto a unified core criminal code for EU.

Addressing the issue of money laundering of illicitproceeds, the 1988 United Nations Convention Against Il-licit Traffic in Narcotic Drugs contains provisions for sig-natory states to criminalize money laundering from drugtrafficking, and for mutual legal assistance and extraditionto be applicable to money laundering. Other instrumentsare the following:

• the 1990 Council of Europe Convention on Laun-dering, Search, Seizure and Confiscation of the Pro-ceeds from Crime;

• the June 1991 Council of European CommunitiesDirective on Prevention of the Use of the FinancialSystem for the Purpose of Money Laundering; and

• the 1992 Resolution and Report of the InternationalOrganisation of Securities Commissions (IOSCO),which encourages members to take measures tocurtail money laundering in securities and futuresmarkets.

The Financial Action Task Force (FATF) was establishedin 1989 and plays a key role in combating internationalmoney laundering. Caribbean countries have establishedthe Caribbean FATF, and countries in the Asia-Pacific re-gion have established the Asia/Pacific Group on MoneyLaundering. Both structures provide participating countries(i) information, (ii) assistance in drafting workable laws,and (iii) assistance in training investigators and prosecutors.

The business community and nongovernment organi-zations (NGOs) advocate establishing a system to raise theprofile of the anticorruption struggle. NGOs and businessassociations can perform a vital role by putting pressureon governments to take action against corruption in com-

Executive Summary xxi

pliance with international instruments. Professional asso-ciations such as those of accountants or auditors can helpenforce international standards.

MEASURES TO COMBAT AND PREVENT CORRUPTION

Comprehensive legal systems that address corruption andbribery are key in the fight against corruption but are notenough to eradicate it. Integrity, transparency, and account-ability in the awarding of government contracts and per-mits, in regulatory matters, and in judicial and legislativeproceedings are necessary elements for a productiveeconomy and an open and predictable trade and invest-ment climate.

Integrity, Transparency, and Accountability in Governance

The book’s second part addresses issues related to ef-ficient, effective, accountable, and transparent public insti-tutions. It discusses in particular how public and privateefforts may strengthen information systems and the capac-ity of governments to monitor their (i) expenditures, (ii)public sector reforms (such as making procurement rulesand deregulation more transparent), and (iii) efforts to (a)improve the capacity of parliamentary institutions such assupreme audit agencies and (b) enhance the independenceand professionalism of the judiciary.

Reforming Government Processes and Procedures

The papers on key regional problems and solutionsare by experts from the public and private sectors. TheBureau of Customs in the Philippines is presented as a casestudy of an agency that has streamlined its operations andsignificantly reduced the opportunity for corruption. A sec-ond case study presented by a procurement attorney high-

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxii

lights the framework and experiences of countries that havedeveloped a sound public procurement system and suc-cessfully used procurement procedures built around thissystem. International initiatives to help ensure integrity inprocurement actions, including anti-bribery pacts amongcompetitors, as well as international activities promotingbetter procurement regimes, are also presented in relationto the actual public procurement legislation, rules, andmethods in Asia-Pacific countries. The key role of the pri-vate sector in curbing corruption in procurement is alsoaddressed.

Strengthening Public Institutions and Enforcing Laws

With legal and institutional reform in the public sec-tor, and complementary actions by private enterprise andindividuals, a tipping point against corruption can bereached. This section deals with current efforts in selectedcountries of the region in containing corruption throughlegal and institutional reform. A paper written by an inter-national expert on the region presents a general surveyof the costs and consequences of corruption, as well asspecific observations about the value of public-privatepartnerships. By addressing the nexus of the public andprivate sectors and the important role of civil society incombating corruption, the paper provides the frameworkfor the remaining discussion of the effectiveness of vari-ous accountability mechanisms such as anticorruptionagencies, supreme audit institutions, and ombudsmenoffices. The role of such institutions in promoting efficiencyand cost effectiveness and in preventing corruption arehighlighted in the other papers, including a discussion oninternational initiatives to help ensure accountability andtransparency in relation to the actual needs of the coun-tries in the region.

Executive Summary xxiii

Promoting Disclosure, Transparency,and Integrity in Business Operations

The OECD Convention on Combating Bribery of For-eign Public Officials in International Business Transactionsrequires corporations to (i) maintain adequate accountingrecords and internal company controls, (ii) undergo exter-nal audits, and (iii) adopt effective codes and complianceprograms. In addition, to promote good corporate gover-nance and discourage bribery, provisions have been devel-oped in the framework of the convention to rule out bribesas business expenses. The OECD convention and otheranticorruption initiatives by treaty makers and legislatorsare thus important steps in the movement to discipline cor-porate behavior in the sensitive area of international cor-ruption. However, it is equally important that corporationstake a proactive role in complementing and reinforcing in-ternational instruments and government regulations. En-terprises have a pivotal role in ensuring the integrity ofbusiness conduct.

This part deals with both the requirements imposedby the OECD convention on corporations and initiativesdeveloped within or between enterprises in encouraginggood corporate behavior and promoting business integrity.It also examines how trade unions—which have a majorstake in the fight against and corruption—can promotegood corporate behavior and ensure basic workers’ andtrade union rights.

Denying Tax Deductibility of Bribesand Promoting Disclosure of Corporate Operations

The tax treatment of bribes can make a major differ-ence in corporate behavior. When the tax laws treat bribesas tax-deductible business expenses, the message is thatbribes are considered a legitimate business expense. While

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxiv

deductibility encourages bribery and further distorts com-petition, disallowing deductibility of bribes discouragesbribery and serves as a strong and politically visible sym-bol of the common international commitment to combatbribery, especially if combined with the criminalization ofsuch action. Tight accounting, auditing, and financial con-trols can also make a major difference in preventing illegalbribe payments. This section addresses the tax treatmentof bribes and the tightening of accounting requirements,concentrating on rules and policies in two OECD countries(Republic of Korea and the United Kingdom). It also ad-dresses company and business accounting requirementsand practices, external audit and internal controls, and le-gal sanctions for violations of these requirements.

Encouraging Good Corporate Behavior

The interest of governments is not to prosecute indi-viduals or companies for bribery, but rather to create anenvironment that will stimulate companies to take the nec-essary measures to ensure that officers or employees donot engage in bribery. Thus, the role of ethical standards,compliance programs, and other initiatives developed bythe business community to improve the functioning ofmarkets and to strengthen competitive forces and curtailrents will also be examined. This section addresses the roleof rules of conduct and charters of standards for transac-tions between business and government developed by busi-ness organizations such as the International Chamber ofCommerce as means to fight corruption. Companies’ self-regulatory measures to combat fraud and promote integ-rity are presented. The development of these measures aimsto complement government actions. The role of organizedlabor and trade unions in exerting pressure on businessesis also discussed.

Executive Summary xxv

Raising Public Awarenessand Promoting Civic Participation

Corruption is a global problem concerning not onlypublic servants but also society as whole. It is thereforenecessary to raise public awareness and promote civic parti-cipation in the fight against corruption. The experience ofsome developing countries illustrates how action-orientedcivic organizations can be effective in raising publicawareness.

For example, a survey carried out in India measuredpublic satisfaction with public services delivery, focusingon its quality and accountability. Citizens’ feedback, simi-lar to market signals, was used as a grading system to stimu-late competition. Thanks to the survey, which was sup-ported by the cities’ mayors, the usually substandard ser-vices improved. Unfortunately, it appeared that improv-ing the quality of services did not diminish corruption.However, the survey encouraged citizens’ participation andmade them aware and sensitive to problems caused by cor-ruption. It demonstrated that civil society, provided withresearch and analytical methods, can be involved in moni-toring public works projects, usually considered too sophis-ticated for simple citizens. The development of these meth-ods can actually empower civic action.

Independent, professional mass media are valuabletools in raising civil-society awareness about corruption.The local press can be effective in stirring interest in localcorruption cases. However, the media themselves must befree of corruption. Nongovernment organizations couldassist the media, but few in the region work directly on cor-ruption. The Indonesian experience, for example, indicatesthat the press lacks investigative reporting skills and theability to do the thorough research that is necessary to al-low the public to fully understand corruption.

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxvi

In some Asian societies, eradicating corruption mayinvolve cultural reform. Public awareness may be raisedthrough the educational system, by introducing studentsto new values and making them sensitive to corruption andabuse of authority. A low literacy level is a serious problemin some Asian societies and requires remedial measures.

DEVELOPING ANTICORRUPTION STRATEGIES

Fighting corruption is by no means an easy task. It uncov-ers many sensitive issues, and countries may lack the po-litical will to address the problem. Problems also exist inrelation to the absence of proper structures and incentives;resources, both human and financial; and the knowledgerequired to develop anticorruption strategies.

There is no one sure approach to eliminating or reduc-ing corruption. Over the years, different strategies havebeen implemented under different conditions with vary-ing success. One conclusion is that a multi-pronged andsustained approach is essential. This chapter presents threecomprehensive strategies developed and implemented bycountries in the Asia-Pacific region as well as some regionalinitiatives developed by donor institutions. It addresses thequestion of how to develop anticorruption strategies andhow to best implement and execute them.

A Review of National Anticorruption Strategies

In Hong Kong, China, the history of the fight againstcorruption is closely associated with the Independent Com-mission Against Corruption (ICAC), which started operat-ing in 1974. ICAC concentrated on the following:

• investigation, by encouraging people’s voluntaryreporting of corruption and guaranteeing the confi-dentiality of the reports;

Executive Summary xxvii

• prevention, by simplifying procedures; and• community education, which was the most impor-

tant measure in the long run, by using the massmedia (television and the internet), with special at-tention paid to young people, businesspersons,newly arrived immigrants, and civil servants.

ICAC also launched a newspaper to encourage fur-ther public participation. It was concerned with all levelsof officials as well as private sector corruption. The Pre-vention of Bribery Ordinance was used effectively to (i)encourage companies to adopt codes of conduct, (ii) setup the Hong Kong Ethics Development Centre, and (iii)carry out surveys on ethics and the public’s perceptions ofcorruption.

Pakistan focused on preventing corruption by reduc-ing opportunities in the judiciary. The importance of lawsand conventions was emphasized (e.g., on drug traffickingand money laundering), as well as international coopera-tion. However, political, commercial, and bureaucratic cor-ruption still seems to be widespread in Pakistan since itlacks a professional investigative force and principles ofgood governance at the Government level. The Pakistanstrategy is also hampered by the lack of freedom of infor-mation, deficient administrative procedures, lack of ac-countability in the public sector, and the absence of dia-logue between society and the bureaucracy. All these fac-tors diminish the effectiveness of the laws. There is, fur-thermore, a need to publish annual reports on performanceand evaluation and to underline the responsibility of donororganizations in providing technical advice, training, etc.

In the Republic of Korea (henceforth, Korea), despitethe introduction of such measures as public service ethicslaws, disclosure of information by public agencies, and theprotection of confidentiality, anticorruption efforts are stillnot efficient enough, concentrating too much on punish-

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxviii

ment without sufficient prevention measures and politicalwill. However, after the financial crisis of the late 1990s,which was provoked in part by corruption, a preventiveinfrastructure was set up, including the special committeethat will evaluate the implementation of Government poli-cies and support the anticorruption efforts of domestic andinternational nongovernment organizations (NGOs). Spe-cial investigation headquarters were also set up within theSupreme Public Prosecutor’s Office. The reforms seek toraise the awareness of civil society through the mass me-dia. Citizens are being encouraged to participate in Gov-ernment commissions and committees. Korea hopes thatits involvement in the OECD anti-bribery convention willcontribute to fighting corruption. The Korean experiencehighlights the necessity of strong political leadershipsupported by activities of NGOs such as TransparencyInternational.

The “Asian particularity” and the attitude toward giftsas an expression of personal gratitude were alluded to asone of the possible reasons of flourishing corruption in theregion. This is why it is necessary to make a precise legaldistinction between what is bribery and what is not. It wasemphasized that leadership itself is not sufficient and thatanticorruption efforts should be systemized and institution-alized (e.g., through ICAC). Despite the sensitivity and com-plexity of the corruption problem, significant progress hasbeen made. This kind of conference, for example, wouldhave been impossible five years ago. Asian societies are alsonow more prepared and open to dealing with the issue ofcorruption in their midst.

Regional and Donor Anticorruption Initiatives

The United Nations Development Programme devel-oped the Paragon Regional Governance Programme to pro-mote sustainable human development through three inter-

Executive Summary xxix

related components: (i) rights and development; (ii) publicand private sector accountability; and (iii) decentralizationand local empowerment. As part of this program, partici-pating countries will take actions in three stages: (i) policyanalysis and advocacy; (ii) implementation support to in-novative projects; and (iii) learning experiences. The tar-geted public of this program consists of parliamentarians,media personnel and State officials, civil society, and theprivate sector.

Since the 1990s, International Monetary Fund (IMF)guidelines have promoted “good governance in all its as-pects, including ensuring the rule of law, improving theefficiency and accountability of the public sector, and tack-ling corruption.” The guidelines, however, are limited tothe economic aspects of governance. As regards individualinstances of corruption, IMF will continue raising them withthe authorities where they could have significant macro-economic implications. In practice, IMF does address cor-ruption issues in its policy advice in the context of its sur-veillance activities and technical assistance, and in the con-ditionality attached to its programs, as in Korea, Thailand,and Indonesia. In this respect, financial assistance could besuspended or withheld unless corrective measures aretaken. The other instances of corruption, which do not meetthis threshold, are best addressed through IMF’s efforts topromote transparency.

The World Bank’s anticorruption work consists of four“pillars.” The first is preventing corruption in World Bankprojects. The second involves helping countries that requestassistance from the World Bank in curbing corruption atthe national level. For example, the World Bank helped thePeople’s Republic of China to develop a bidding law andPapua New Guinea to create the Independent CommissionAgainst Corruption. The third involves integrating anticor-ruption concerns in the World Bank’s country assistancestrategies. Indonesia, the Philippines, and Thailand are

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxx

among the countries in the region where current assistancestrategies specifically mention anticorruption as objectivesof the World Bank’s assistance. The fourth pillar concernssupporting international efforts such as the OECD anti-brib-ery convention and other initiatives.

The USAID has long been active in the fight againstcorruption by devising aid programs that encourage eco-nomic restructuring, the rule of law, open and accountablegovernment, free media, and civil society. In the Philippines,its work focuses on policy and regulatory reforms to re-duce the scope for discretionary decisions on the part ofofficials in areas where corruption incentives have tradi-tionally been strong: (i) abuses in public procurements; (ii)unfair taxation and customs; (iii) inefficient regulation ofkey infrastructure and general business; (iv) nonfunction-ing and incompetent judiciary; and (v) contested local elec-tions. USAID was influential in supporting the reform tostrengthen customs operating systems and controls to pro-vide cost-effective and efficient services.

Developing Effective Approachesto Implementing Anticorruption Strategies

Actions by the Public Sector

A key objective in any anticorruption strategy is topromote good governance in the public sector, where cor-ruption is often seen as a political, economic, and moralquestion closely related to education. The fight against cor-ruption therefore requires a holistic approach and a collec-tive effort at both domestic and international levels. Inter-national cooperation is indispensable as transnational cor-ruption becomes more and more frequent. Domestically, itis imperative to introduce law-enforcement mechanisms,with a special role for the judiciary. Witness protection pro-grams are also required to encourage reports of wrongdo-

Executive Summary xxxi

ing. Transparency can be enhanced by establishing com-petitive public procurement procedures and encouragingadoption of relevant international rules. Simplification ofgovernment procedures can help improve the conditionsfor international investment.

Actions by the Private Sector

From a business perspective, the cost of corruption forcompanies far outweighs the benefits of one short-term re-sult. In the private sector as elsewhere, there are no one-shot solutions; corruption on the part of both the recipientsand providers of illicit payments must be attacked. Actionshould be taken on many fronts by doing the following:

• Encourage private sector initiatives, such as corpo-rate codes of conduct, and stricter accounting, au-diting, and corporate disclosure rules.

• Make bribery of foreign officials a crime, in accor-dance with the OECD anti-bribery convention, andby more effectively enforcing existing laws prohib-iting bribery of domestic officials.

• Fully support government efforts to end tax deduct-ibility of bribes.

• Support public sector reform, such as making pro-curement rules more transparent.

• Actively engage civil society and business organi-zations and thereby require greater accountabilityfrom public officials and the business community.

Actions by Civil Society

Mobilizing NGOs and the mass media is critical to rais-ing public awareness. Civil society needs to assume greaterresponsibility for monitoring good governance and integ-rity in business operations. Regional and national networks

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxxii

for civil society as well as increased cooperation with in-ternational organizations can help prevent the abuse of theinternational financial system. These networks should beaccessible by parliaments and the judiciary.

Donor institutions, NGOs, the private sector, and gov-ernments need to share the burden of the anticorruptioneffort. In individual countries, the focus must be on actionat the national level; nevertheless, international organiza-tions have an important supporting function. Comprehen-sive information on actions to fight corruption should bewidely disseminated, including success stories. The publi-cation of best practices illustrating strategies used to fightcorruption would be very useful for practitioners. Proac-tive measures to prevent corruption should focus on im-proving education as well as training investigators and en-forcement agents to fight criminal activities. Fostering ananticorruption culture could also include actions that im-prove professional standards for journalists and promotetraining in investigative journalism.

ENSURING THE SUCCESS OF ANTICORRUPTION STRATEGIES

Corruption has many pernicious effects. It erodes confi-dence in political institutions and endangers public sectorreforms. It exacts a disproportionate cost on the poor, whomay be deprived of basic public services. It distorts the al-location of resources and undermines competition in themarketplace. Even more seriously, it results in a deteriora-tion of the ethical standards in society and in the loss ofcitizens’ confidence in government, business, and demo-cratic institutions.

Workshop discussions culminated in the adoption ofan action plan for follow-up activities at both the nationaland regional levels.

Executive Summary xxxiii

Strategy

Workshop participants did the following:

• Agreed on the necessity to fight all types of corrup-tion at all levels and recognized the progress madein some countries in developing effective anticor-ruption programs.

• Recognized the need to address the internationaldimension of corruption, organized crime, andmoney laundering.

• Identified priority measures to fight corruption, in-cluding the following:– strengthening State institutions by improving en-

forcement and monitoring;– providing for transparency and accountability;– enabling independent investigative and judiciary

bodies;– building public-private partnerships and net-

works to monitor anticorruption activities andunderpin reform efforts;

– establishing participatory and proactive strategiesto enhance all anticorruption efforts;

– empowering civil society and the mass media togalvanize community action, generate politicalcommitment, and create a pattern of honesty inbusiness transactions; and

– improving basic education and literacy levels, andeducating society on the costs of corruption;

• Agreed that anticorruption programs must be sup-ported by political will and that building private-public sector coalitions is critical to developing andsustaining reform measures.

• Noted the need to change the business environmentbecause corruption interferes with competition on

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxxiv

the basis of price, quality, and service, and erodesthe integrity of managers and employees.

• Stressed the importance of promoting ethical stan-dards in business and good corporate governance.

• Recognized the value of international instrumentsto encourage and strengthen anticorruption pro-grams at national and regional levels and to providea benchmark of best practices.

• Encouraged donor organizations to develop syner-gies in program design and implementation on thebasis of long-term partnership.

Implementation Strategies

To promote action at the country level, participantsagreed on the need for a three-pronged approach consist-ing of actions taken by (i) Asia-Pacific governments, (ii) theprivate sector, and (iii) the mass media and civil society. Indiscussing possible follow-up activities, they called uponthe conference organizers, partner institutions, and otherdonors and/or interested parties to organize a regular fo-rum on anticorruption activities in Asia and the Pacific.

The Public Sector

Participants reached consensus on the need to do thefollowing:

• Develop comprehensive national strategies for com-bating corruption.

• Strengthen law enforcement mechanisms and therole of the judiciary, and provide witness protectionprograms.

• Increase transparency by establishing competitivepublic procurement procedures and encouraging theadoption of international rules in this area.

Executive Summary xxxv

• Improve conditions for international investment bysimplifying government procedures.

• Improve transparency and accountability in budgetpreparation, execution, and oversight of expendi-ture.

• Develop codes of ethics in public administration tobe enforced by strong sanctions.

• Strengthen procedures for an effective and merit-based civil service, particularly recruitment, promo-tion, and pay.

• Adopt “freedom of information” laws and provideaccess to public information.

• Strengthen parliamentary oversight, independentaudit, and investigative bodies to be backed by suf-ficient human and financial resources.

The Private Sector

Workshop participants stressed the need to do thefollowing:

• Establish public-private partnerships to developanticorruption strategies, goals, and processes.

• Promote good corporate governance on the basis ofinternational standards and principles.

• Elicit the strong commitment by top management ofcompanies to implement anticorruption strategies.

• Develop and implement codes of ethical conduct andensure their effectiveness through internal controlmechanisms, training of personnel, and sanctions.

• Have accounting and auditing rules and standardsto ensure transparency in business transactions.

• Build coalitions for business integrity, includingbusiness-ethics centers.

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxxvi

International Organizations and Donors Community

Given the importance of corruption in the region, therole of international organizations and the donor com-munity in combating it is crucial. Participants did thefollowing:

• Recognized the value of international instrumentsto encourage and strengthen anticorruption pro-grams at national and regional levels and to providea benchmark of best practices.

• Urged international organizations and donororganizations to develop synergies in programdesign and implementation on the basis of long-termpartnership.

• Called upon the conference organizers, partner in-stitutions, and other donors and/or interested par-ties to consider ways for advancing a regional anti-corruption agenda.

The Mass Media and Civil Society

Participants recognized the urgent necessity to do thefollowing:

• Mobilize civil society (mass media, NGOs, business,labor, and professional associations) to monitor goodgovernance.

• Create an anticorruption network of NGOs to shareinformation on regional and country anticorruptioninitiatives.

• Conduct surveys of businesses, consumers, and pub-lic opinion to provide feedback for delivery of pub-lic services and fostering competition.

• Implement education programs aimed at fosteringan anticorruption culture in society.

Executive Summary xxxvii

• Enable the mass media to effectively exercise publicscrutiny.

• Improve ethical and professional standards ofjournalists and promoting training in investigativejournalism.

Follow-up Activities

Participants called upon the conference organizers,partner institutions, and other donors and/or interestedparties to consider ways of advancing a regional anticor-ruption agenda, including the possibility of organizing aregular forum on anticorruption activities in Asia and thePacific. The forum would do the following:

• Exchange information and experience on national,regional, and international programs to measureprogress and encourage further actions.

• Analyze issues relating to anticorruption activitiesand develop recommendations.

• Monitor the progress achieved in the implementa-tion of the recommendations.

Participants urged that another meeting be held withinone year to review progress on the basis of country reports.

The participants also urged the conference organizers,partner institutions, and other donors and/or interestedparties to actively pursue bilateral contacts, strategies, andprograms of mutual assistance for advancing integrity andcombating corruption.

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIESxxxviii

NOTE

1. Australia; Bangladesh; Bhutan; Cambodia; Canada;People’s Republic of China; Taipei,China; Czech Republic; Fiji;Finland; France, Hong Kong, China; India; Indonesia; Japan;Kazakstan; Republic of Korea; Kyrgyz Republic; Malaysia;Maldives; Mexico; Mongolia; Nepal; Netherlands; Pakistan;Papua New Guinea; Philippines; Singapore; Sri Lanka; Switzer-land; Thailand; United Kingdom; United States; and Viet Nam.

1

Keynote AddressPETER H. SULLIVAN

Future historians will no doubt view the Organisationfor Economic Co-operation and Development (OECD)

Convention on Combating Bribery of Public Officials in In-ternational Business Transactions as a watershed in thestruggle against corruption and as a major step toward ad-dressing the “giving side” of the corruption equation. We’redelighted to be able to work with OECD in exploring therelevance of the treaty for Asia and in considering a host ofother measures that can help reduce corrupt and illicit be-havior. Until recently, many were relaxed in their attitudestoward corruption in Asia, a region used to high levels ofgrowth, where corrupt or illicit behavior has been toler-ated or even justified as a so-called lubricant for economicgrowth.

However, few would now deny that it is not a lubri-cant, but rather a heavy cost dragging down economicgrowth. Two developments have forced a radical reassess-ment of corruption:

• the Asian financial crisis and the fact that corrup-tion, cronyism, and nepotism greatly contributed tothe currency turmoil in the region’s stock markets;and

• the rapid expansion of solid analytical work on theconsequences of corruption, which underscores justhow costly, widespread, and systematic corruptioncan be.

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIES2

Various studies have shown that corruption can add20-100 percent to the cost of procurement of goods and ser-vices. It has cost governments as much as 50 percent of theirtax revenues. Estimated losses due to corruption can totalmore than a country’s foreign debt. Corruption diverts for-eign investment. Reduced expenditure on social servicessuch as health and education in favor of the military orlarge capital projects shortens asset life. Corruption under-mines the creation of a professional merit-based civil ser-vice. It is a highly regressive tax, as its burden falls dispro-portionately upon the poor. Reducing it will therefore helpthe Asian Development Bank (ADB) achieve its own goalof poverty reduction.

As a number of recent tragedies have revealed, the costof corruption is not only measured in terms of dollars, butalso in terms of human lives. Behind the thousands andthousands of lives lost each year to fires, landslides, col-lapsed infrastructure, and ferry sinkings, there are oftenassorted tales of building codes violated or safety standardsoverlooked by officials willing to turn the other way. Andin extreme cases, corruption can contribute to political in-stability and the collapse of regimes. Corruption is indeeda cancer.

Over the past three decades, ADB has become a majorcatalyst in promoting development in the world’s mostpopulous and fastest-growing region. It seeks to combatgraft and corruption as part of its broader work on gover-nance and capacity building. Its board of directors unani-mously approved an anticorruption policy on 2 July 1998.The policy has three objectives:

• Support competitive markets and efficient, effective,accountable, transparent public administration, aspreventive measures will ultimately be the most ef-fective in the long run.

SULLIVAN • Keynote Address 3

• Support promising anticorruption efforts on a case-by-case basis and improve the quality of ADB’s dia-logue with its developing member countries on arange of governance issues, including corruption.

• Ensure that ADB’s projects and staff adhere to thehighest ethical standards.

We are now working hard to implement the anticor-ruption policy. I chair a task force responsible for oversee-ing its execution. Yoshihiro Iwasaki, who will be chairingthe first session today, is the task force’s secretary. We haveformulated new staff guidelines, which have been presentedto the ADB President and should be effective shortly. Wehave changed our procurement guidelines to allow forstricter rules on loan cancellation, blacklisting of firms orindividuals, and the right to audit in connection with pos-sible instances of corruption. We have set up an internalunit within the Office of the General Auditor to investigatecases of fraud and corruption, and a hotline that peoplecan contact with information about corruption in ADB op-erations.

A D B has long supported measures to enhance trans-parency, predictability, and accountability in our lendingtechnical assistance operations. We are now giving manyof these initiatives a stronger anticorruption emphasis. Letme cite just a few examples. Our $1.5-billion financial gov-ernance loan to Indonesia, approved in mid-1998, has anumber of key anticorruption provisions that were workedout in consultation with the Government. These includethe strengthening of the audit agency and revisingIndonesia’s anticorruption legislation. Our loan to the In-dian state of Gujarat has sought to improve public procure-ment and financial management and to level the playingfield for the private sector. Our public sector loan to theRepublic of the Marshall Islands envisions the creation of

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIES4

an ombudsman’s office to mediate citizens’ complaints,including those related to corruption.

We are now moving to address anticorruption issuesin country programming and to improve project monitor-ing and supervision, which are difficult and complicatedtasks. It’s easy to initiate them, but it’s hard to do themwell and make sure that they are effective. But we are com-mitted to moving forward and ensuring that our deedsmatch our words. To this end, collaboration with other in-ternational financial institutions, particularly the WorldBank, has been a valuable asset. We look forward to host-ing the next Multilateral Development Bank WorkingGroup on Governance, Corruption, and Capacity Buildingin Manila in November 1999.

ADB is concerned about the unholy alliance that oftenexists between corrupt officials and corrupt foreign firms,many of which are based in ADB’s donor countries. Ourpolicy requires ADB to focus on both the bribe givers andthe bribe takers. In this context, our collaboration withOECD takes on particular relevance. OECD has been thedriving force behind efforts to end tax deductibility of bribesand to criminalize the bribery of foreign officials—effortsthat culminated in the signing of the OECD anti-briberyconvention in Paris in December 1997. No other organiza-tion has done more to halt the flow of corrupt money fromindividuals and corporations in the developed world to thedeveloping world.

Not all are convinced that the convention is applicableto the Asian context, and we recognize that individualmember governments must decide for themselves whetheror not to ratify the convention. However, we believestrongly in the need to explore the relevance of the con-vention for our Asian developing member countries, andthe ways in which it can be adapted to Asian circumstances.It is to this end that we are delighted to collaborate withOECD in hosting this workshop.

SULLIVAN • Keynote Address 5

I would like to conclude with an offer of partnership.As the multilateral development bank community movesto address questions of corruption more comprehensively,we are discovering that we know much less about the topicthan we thought we did. There are many proposals on howto combat corruption. The participants at this gathering willno doubt put forward a number of excellent suggestions,but one finds a relative lack of solid, empirically groundedresearch that can help donors such as ADB prioritize theirinterventions to ensure that scarce anticorruption resourcesare utilized to best advantage. We are currently collaborat-ing with other donors in supporting research on topics suchas strengthening accountability mechanisms and improv-ing public expenditure management. We welcome the op-portunity to exchange information and findings in forumssuch as this, so that we can advance our collective knowl-edge about how best to combat corruption.

We look forward to working closely with many of you,particularly with officials from our developing membercountries, and to strengthening your anticorruption efforts.As I noted earlier, we strongly believe in prevention, andwe have been active in areas of market liberalization andpublic administration reform for some time. We are alsonow beginning to work on explicitly anticorruption issuessuch as the crafting of anticorruption legislation and thestrengthening of audit institutions.

We recognize all too well that the struggle will be dif-ficult. Corruption has a long history in Asia. For over twomillenniums, Hinduism, Confucianism, and Buddhismhave warned of the dangers of corruption and bribery. Yethistory also provides reason for hope: Singapore and HongKong, China, for example, demonstrate that much can bedone if the proper legal and administrative systems are inplace. We should not conclude that corruption is an inher-ent part of Asian values. With improved professionalismin the public sector and enhanced accountability, transpar-

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIES6

ency, and predictability, countries can be transformed tothe point where incidents of corruption are no longer wide-spread but rather isolated and rare. It is to this task—soimportant to the future economic health of both Asia andthe world—that this conference is dedicated.

We are particularly grateful to the OECD Directoratefor Financial, Fiscal, and Enterprise Affairs and to the OECDPublic Management Administration Directorate for theirhard work and substantive inputs in helping to organizethe conference. We are also thankful for the assistance ofour many partner organizations. The Konrad AdenauerStiftung played an important role in putting together thesessions on the media and civil society. The Pacific BasinEconomic Council provided invaluable assistance in iden-tifying appropriate private sector participants. Other do-nors and nongovernment organizations, including Trans-parency International, the United Nations DevelopmentProgramme, the United States Agency for International De-velopment, and the World Bank Institute also provided as-sistance and advice.

We are pleased to provide a forum for consideringanticorruption issues in greater detail and for advancingour common objective of ensuring that, while the problemof corruption may indeed always be with us, it need not bean overwhelming concern. With improved transparencyand accountability, and strong pressure on both those whowould give and receive bribes, we hope that the future willwitness greater public and private sector integrity than thatwhich exists today. With guarded optimism, I am delightedto join and start these proceedings.

7

Opening RemarksRAINER GEIGER

The Organisation for Economic Co-operation and Devel-opment (OECD) is engaged in a wide-ranging dialogue

with emerging market economies on issues of economicand financial cooperation, investment, and trade. Gover-nance, both public and corporate, is an important part ofthis dialogue.

This conference brings together OECD and Asia-Pacific countries, governments, business, and civil societyfor a discussion on a wide range of issues related to na-tional and international anticorruption programs. We hopeto develop recommendations for our continued coopera-tion in the fight against corruption not just in the region,but also throughout the world.

Corruption is a cancer that destroys society, democ-racy, and the market economy. Many empirical studies dem-onstrate that it is a serious impediment to economic devel-opment and an obstacle to economic reform. The recentinternational financial crisis that hit Asia-Pacific demon-strates the devastating effect of corruption on investmentand growth. The region’s countries, which depend greatlyon trade and foreign direct investment, have much to gainfrom cooperating against corruption.

Corruption is much debated and attracts a great dealof media attention. A couple of years ago, I read a cartoonwhere a bureaucrat receives a big envelope full of cash froma businessman and says, “Well, I’m against corruption. Ishould not have accepted this money, but corruption is aglobal phenomenon.” How can we prevent countries from

COMBATING CORRUPTION IN ASIAN AND PACIFIC ECONOMIES8

competing to see who can most violate business and gov-ernment ethics? How can we break the vicious circle ofcrime, corruption, and money laundering? The simple an-swer is, say no. To those who tell you that there is no alter-native to corruption, and that corruption is deeply rootedin socioeconomic and cultural patterns, say no. To thosewho tell you that corruption is indispensable for success inbusiness, say no. To those who pretend that corruption isinevitable and acceptable in poor and underdeveloped so-cieties, say no. To government officials soliciting bribes, sayno. To companies offering bribes to compete for markets,say no. And to those who attempt to silence the mass me-dia and to put a lid on investigative journalism, say no.

We can do three things to encourage people to take astand against bribery and corruption: (i) level the playingfield; (ii) act comprehensively; and (iii) build coalitions.

Leveling the playing field is precisely what the OECDanticorruption instruments attempt to do. The OECD anti-bribery convention, for example, addresses corruption ininternational business. It is designed to (i) deal with thesupply side of corruption, (ii) dry up the sources of corrup-tion, and (iii) set an example among industrialized coun-tries accounting for a large share of international trade andinvestment. It aims to (i) harmonize anti-bribery lawsamong signatory countries on the basis of functional equiva-lence of these laws, (ii) promote effective enforcement pro-cedures against bribery and corruption, and (iii) lift ob-stacles to mutual legal assistance.

Implementation and monitoring are essential featuresof OECD instruments. They are open to all countries,whether OECD members or not, that are willing and ableto accept the instruments’ obligations and to participate inthe monitoring process. However, criminal law enforcementis not enough. Action must be taken on a much broaderagenda:

GEIGER • Opening Remarks 9

• Make business operations transparent.• Make corporations more accountable.• Make public procurement rules transparent.• Prohibit tax deductibility of bribes.• Streamline licensing and registration procedures,which are often a source of and temptation for en-gaging in corruption.

• Include anticorruption clauses in project contractsfunded by official development sources.

We must also continue to build coalitions among de-veloped and developing countries; business leaders;governments, business, and civil society (including citizens’groups and investigative journalists); and internationalorganizations, which can coordinate action againstcorruption.

We have taken the initial, important steps, but this isjust the beginning. The war has not yet been won. This con-ference demonstrates a strong commitment to move for-ward. It shows how organizations can join forces for a com-mon objective. The outcome of this conference can be a sus-tained and continuous effort within a structured programfor exchange of information, coordinated action, and moni-toring of progress. I’m confident that Manila will be a land-mark in this continuous and sustained effort.