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Mobilizing Global Stakeholders in Anti-Corruption Efforts

Posted on the 19 November 2012 by Center For International Private Enterprise @CIPEglobal
Mobilizing Global Stakeholders in Anti-Corruption Efforts

President Dilma Rousseff and other speakers at the 15th IACC in Brasilia

“The world we want can only be built on transparency,” said Brazil’s President Dilma Rousseff in her opening remarks at the 15th International Anti-Corruption Conference (IACC) last week in Brasilia. She highlighted her country’s efforts toward greater transparency, including the recent passage of a freedom of information law and the introduction of e-platforms where citizens can monitor spending by various government agencies. At the same time, she emphasized that the state should not be the sole focus of anti-corruption efforts and that other sectors must strive for transparency and accountability as well.

The President also pointed out the crucial link between transparency, anti-corruption, and democracy.  Speaking from experience, Rousseff (who spent almost three years in jail for taking part in movements against Brazil’s former military regime) noted that “efforts to fight corruption are by their nature pro-democratic. (…) The noise that comes with freedom is preferable to the dead silence of dictatorship.”

This year’s IACC gathered a record number of participants – over 1,900 people from 140 countries – illustrating that the fight against corruption is a key topic of interest to diverse stakeholders worldwide. Participants shared their stories about the destructive impact of corruption on development but also ways to address it.  These are just a few of corruption-related facts discussed at the event that resonated most with me:

  • More than $1 trillion is paid in bribes every year (World Bank Institute)
  • In 2011, corruption prevented 30 percent of all development assistance from reaching its final destination (United Nations) and the amount of money extorted and stolen each year from developing countries is over 10 times the approximately $100 billion in foreign assistance being provided to them by all the governments and civil society organizations in the world (Olga Nazario, “A Strategy Against Corruption,” 2007)
  • $148 billion leaves the African continent every year because of corruption (African Union)
  • Two-thirds of the world’s poor live in resource-rich countries, indicating corrupt handling of natural resource revenues (World Bank)
  • More than 70 percent of small and medium-sized enterprises (SMEs) in transition economies perceive corruption as an impediment to their business (Business Environment and Enterprise Performance Survey, 2000)
  • Over 7 out of 10 young people believe corruption is harming access to education and healthcare (UNESCO)
  • 42 percent of Arab youth say corruption in government and public life is one of the biggest challenges in the Middle East, up from 16% in 2011 (Arab Youth Survey)

These figures point to the intertwined political and economic nature of corruption where weak democratic institutions lead to misappropriation or outright looting of economic resources. As such, corruption is a symptom of deeper underlying governance problems. UNDP Primer on Corruption and Development explains:

“Corruption is principally a governance issue, a challenge to democratic functioning. It is a failure of both institutions and the larger framework of social, judicial, political, and economic checks and balances needed to govern effectively. When these formal and informal institutional systems are severely weakened by corrupt practices, it becomes harder to implement and enforce laws and policies that ensure accountability and transparency. “

As President Rousseff pointed out, it is not enough to try to reform government agencies and political structures to combat corruption. Other societal actors – notably the private sector – must also take steps toward greater transparency and accountability to stem the supply side of corruption.

Elaine Dezenski from the World Economic Forum (WEF) expanded on that point by talking about the importance of anti-corruption from a business perspective. She noted that corruption affects competitiveness: it’s no coincidence that the top ten most competitive countries ranked by WEF are also the least corrupt in indicators such as Transparency International’s Corruption Perceptions Index. CIPE Executive Director John D. Sullivan, in his plenary presentation on corruption in transition countries, further emphasized that corruption is not just a moral problem: it is an institutional one – a matter of the underlying incentive structures that determine why things work the way they do.

There is a growing public discontent over corruption wherever it occurs, bolstered by the legal implications of more vigorous implementation of the U.S. Foreign Corrupt Practices Act and the UK Bribery Act. This means that companies must ensure not only transparency and accountability of their own operations, but also consider the conduct of suppliers and partners throughout their global value chains. Crucially, then, corruption is not just a compliance issue – it’s a matter of strategic enterprise risk, especially in emerging markets.

More and more companies understand that and actively join the fight against corruption. This fight starts with internal measures such as putting in place robust corporate governance mechanisms and ethics standards. It continues with collective action that brings together companies committed to the principles of transparency and accountability. There are many ways to cooperate, ranging from participation in global initiatives such as the UN Global Compact or WEF’s Partnering Against Corruption Initiative to local and sectoral cooperation between like-minded firms. Importantly, effective anti-corruption efforts cannot end with just multinationals or large companies. SMEs also need capacity building and guidance on implementing integrity standards to broaden the culture of integrity.

Making the private sector a key stakeholder in combating corruption is particularly salient for Brazil in the context of the 2014 World Cup and the 2016 Olympic Games. Both will involve massive amounts of public spending (University of Oxford’s research shows that Olympic spending has been 179 percent over budget on average for all games since 1960) and thousands of contracts (according to The Guardian, 2,000 contracts were awarded for the 2012 Olympics in London). Let’s all cross our fingers for Brazil to showcase not just world-class sportsmanship during these two events but also best international anti-corruption practices in preparation for the games. If the enthusiasm of the hosts during the IACC in Brasilia is any indication, they are ready for the challenge.

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