Select Committee on International Development Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)




  20. The other end of that same area is, of course, the area where you give money directly to a country such as Malawi, which is in the news at the moment. How can you be certain that the governments are not using the money corruptly, by fungibility, for example? If you give money to Malawi for education programmes or health programmes, this relieves them of putting money into those areas, and then they go and buy 37 Mercedes Benz for ministerial transportation at a huge cost. That is a form of corruption, surely? You must be as concerned about it as I am.
  (Mr Manning) This is worth quite a bit of reflection. We should be equally concerned, in a way, if the Malawi Government bought a series of inappropriate things but if we were not providing any kind of budget support at all. If we were just providing narrowly based projects, let us say, to provide direct assistance to poor Malawians in health and education, I do not think we should be satisfied if we were doing that in an area where the government of the country was systematically allocating its resources the wrong way. However, although you can argue that there is some accountability point in providing programme assistance rather than project assistance, I do not think that really reflects the reality. The reality of the situation is that development will only take place positively in countries if their governments are taking substantive decisions on resource allocations—one of the most important set of decisions that any developing country can take when resources are so constrained. It follows from this that whatever the sort of assistance one is providing, if you are working in an aid dependent country donors should be concerned about the quality of decision making in that country generally and we are working to try and strengthen that. There are now international processes in place which give us more of a lead into this than we have had in the past. For example, we are very strongly promoting in Africa the concept of sound medium-term expenditure frameworks in countries where we are operating, which provide a degree of transparency and predictability to the level of budget support to key sectors. We are working very closely with the international institutions and other donors and countries concerned, to put in place these poverty reduction strategies, which have been called for under HIPC. For all these things, the quality of day-by-day government decision making is absolutely fundamental. So we have to satisfy ourselves, at the end of the day, if we are going to provide any significant assistance in any country, that there is a reasonable basis for doing so. I do not think that we should over-dramatise one particular procurement decision, unwelcome though it may be, but we have to look very carefully at the overall set of decisions that any of our partner governments are taking, as we did in the Kenya case that I brought to your attention, and take decisions ourselves and with our international partners as to whether that country is, broadly speaking, following reasonable strategies and taking sensible government decisions. I will give you another example. There was a lot of concern in the donor community when the Bangladesh Government invested in a significant number of MIG fighter planes, which was not arguably the most important single investment that the Bangladesh Government could make. We have not made any secret of our concern over that decision. One can look at many of our partner governments and pick out cases where they have taken procurement decisions, which we would certainly not wish to support ourselves, but we have to take an overall judgment of the effectiveness of these in considering the levels of future assistance. I welcome the fact that our High Commissioner in Lilongwe made a significant point of this to his interlocutors in Malawi. I am very pleased he has done that. That is what we should be doing, as and when we see decisions which we consider to be inappropriate

  21. You see, Mr Manning, all of us around this table have got to go and justify aid being given to Malawi, and down at our constituency level and on the doorsteps they will ask what are we doing supporting a government which is prepared to buy expensive motor cars, which even our own Ministers do not afford in Britain. We do not afford such expensive motor cars for our Ministers or our officials, yet we know that the Malawian people are starving to death in the fields and farms of Malawi; that they are stricken with AIDS and serious over-population. I think it is extremely difficult to justify, except in the sort of terms you have said, but by the time we begin those explanations our constituents have stopped listening. So we have to be, do we not, much more dramatic than simply making a diplomatic representation to the Government in Malawi?
  (Mr Manning) I am certainly in no way condoning the particular procurement decision that the Government of Malawi took. It does seem to me as inappropriate as it seems to you. I am sure this is why the High Commissioner spoke as he very reasonably did. We are working with the Malawi Government to try and strengthen civil society; to try and work against corrupt practices; although there is no suggestion that any corrupt practice was involved in this decision. It appears to be a bad piece of government decision making, as I read it. I do not think that anybody is suggesting that anybody has paid anybody off as a result of this. It is a matter of poor procurement by one of our key partner countries in Africa. As in all such cases, we will have a dialogue with the Government concerned and this will be one of the many things we factor into future decisions. I do not think that the Committee would seriously want us to up-sticks and leave Malawi because of one procurement decision of this kind. Clearly, if we saw a pattern of inappropriate decision making in Malawi or any other country, we would draw very serious consequences for that. You will again have seen the phrase in the Kenyan paper, that we have been quite ready to talk to African governments in terms of higher and lower case scenarios, depending on how effectively they operate. That applies to the Malawis as it applies to anyone else.

  Chairman: Maybe we will consider that as a form of corruption. It is certainly one that hits the headlines. I think we have to hurry on. We need to give shorter questions and if we could plead for shorter answers we will get through our agenda this morning.

Mr Rowe

  22. I wanted to ask if Mr Manning had seen the US General Accounting Office's report, that the World Bank management has control but strong challenges remain. Some of our evidence has suggested—Take two examples. The Bank has failed to carry out more than rudimentary assessments for the procurement and financial management systems of its top ten borrowers, who have collectively received 62 per cent of the Bank's financing in 1999. Then other studies reveal that auditing of World Bank projects often amount to looking at the books without checking whether the records match reality. I share your enthusiasm for the World Bank's improving stance but there is a lot further to go than your remarks suggested.
  (Mr Manning) This is a never ending story. I will certainly look more carefully at the GAO study to see what we can take from it.

  Chairman: Tony Worthington, could we look at the global action to combat corruption with the international financial institutions and development agencies.

Mr Worthington

  23. Could I ask, first of all, if you can point to any success stories where corruption is significantly decreased because of national donor initiatives.
  (Mr Manning) I think we would take a fairly positive view of progress for example, in Uganda, where there has been certainly strong top-level attention to the issue. I am not going to argue for a moment that any country, including the United Kingdom, is free from corruption. As I say, it is a thing we have to work on all the time. There is evidence in Uganda that Ministers have been sacked and various decisions have been taken, which have tended to improve public accountability. Another very important example is in India where I do believe that certain organisations have been quite effective in holding government to account at local level and the more progressive governments are beginning to see the value of this. Certainly the Government of Andhra Pradesh for example, I am told that if you go to a project in the field, it is stated clearly what the villagers should be receiving. The Government is saying, "This is what you should be getting under this project," and giving the villagers some opportunity to raise points on that. I am sure we will see most programmes, where we have an engaged civil society, being serious about these issues.

  24. Taking that further, it seems to me the issue of corruption has been coming up in the national agenda and the international agenda in terms of development. How have you changed DFID's policy? What is it that you are funding? What do you think is successful? What further developments would you like to see in terms of increasing the profile of anti-corruption measures in development budgets?
  (Mr Manning) I am particularly pleased with the serious collaboration between us and the World Bank Institute, which has some quite interesting programmes for bringing together countries where there is some commitment from the top for doing something about corruption. We have identified 14 countries where we are working with the World Bank Institute. We have also developed good collaboration in this area, particularly with the Governments of Germany, Norway and the Netherlands. This has already led to some collaborative work in one or two countries. It is now to lead to the setting up of a resource centre, which will support this activity. What we are seeing now—which we would not have seen ten years ago—is a much greater willingness to engage with society across the board in these areas. We have realised increasingly in developing countries that we have to work with governments. We have to look beyond governments to help energise civil society, and to work with those who are concerned about these issues, with government and without.

  25. Can you elaborate on that a little bit? What are the major elements in a civil society which you think we have to engage in and how would we fund them? How would we support them?
  (Mr Manning) I am pleased to say that in most countries there are groups concerned about these issues. One has to pay tribute to Transparency International, who have been successful in engaging their southern partners and helping to develop transparency chapters in many countries. We are providing assistance to Transparency International, not least for their new Report on corruption, which will be coming out next year for the first time. In most countries there are some civil societies, whether it is normal NGOs or other associations, who are interested in these areas. There is scope for providing modest financial support for some of their activities.

  26. How far are you going to go with this? As we go around it seems to me that a free press and a free media is crucial, that the judicial system is crucial, that the police are crucial, audit systems are crucial, that the tax revenue systems are crucial. Are we not getting sucked further and further into areas that are directly about governance in those particular countries?
  (Mr Manning) In many ways that is one of the more important things we can potentially do. One has to do it in a very sensitive way. We can only work in such areas where there is a genuine commitment to reform and where there is something we can make a contribution to. To give you an example, the Crown Agents work on customs reform in Mozambique. The Government decided that their Customs Service was so corrupt it had to be done away with, and started from scratch. We funded the Crown Agents over a number of years to put in a brand-new Customs Service in Mozambique, which I believe is delivering very good results. That was only possible because the Government of Mozambique took a rather dramatic decision.

  27. Do you have figures on our expenditure on anti-corruption measures? I know how difficult that must be, because you are unlikely to be funding an anti-corruption initiative or you will be calling it other things.
  (Mr Manning) In the last three years, on average, we think we have spent about £90 million a year of our bilateral programme, which is about one billion, on, broadly speaking, projects on better governance. Many of those would be relevant to corruption, but not all those. We do not have a further breakdown. I would suspect that some of our most valuable anti-corruption work is actually inexpensive, providing the right expertise at the right time. I do not think looking at it in terms of are we doing well because we spent money on it, is necessarily the best way of assessing the success. That is the general order of magnitude.

  28. In our travels around, almost all countries now seem to have anti-corruption bodies of one kind or another. You mentioned Uganda. Intriguingly they named a minister for Ethics and Integrity—a nightmare title. In some places they seem to have conviction and in other places they may be part of the system that you are trying to get rid of. Can you point to good examples of where the anti-corruption measures with our assistance have been working? You mentioned Uganda. Can you think of any other African countries? We were in Zambia and Malawi, for example, and I think, rather oddly, the Malawian system seemed more successful to us than the Zambian one. Can you reflect a bit more on those?
  (Mr Manning) Given what the Chairman said about time, would it be better if I were to send the Committee a letter about some examples?[9] 4

  29. It would be. We need to get into those areas of detail. The final area I would like to cover at the moment is—it is so striking how many donors there are and how many people are coming into countries from different angles—have you seen examples of good collaborative activity on the ground in countries where corruption is seen to be a problem?
  (Mr Manning) I am pleased to say this is increasingly beginning to happen. It is also true to say that some bilateral donors are a bit cautious about getting too engaged in what you have already indicated are very sensitive areas. I would highlight the collaboration between ourselves and the Tanzanian health sector, where part of the work going on is to look at procurement and accountability issues within the health sector, which is an essential precursor to joint financing of the sector programming.

  Chairman: I think we should move on to "Implementing the OECD Convention".

Mr Colman

  30. Perhaps I can widen it out to take account of this great panel before us. To remind everyone, it is the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions we are talking about, signed by the United Kingdom in 1997 and ratified in 1998. We were peer-reviewed by France and the Netherlands earlier this year and they were extremely critical of the United Kingdom Government failing to address all aspects of the Convention. They were unable to determine whether United Kingdom laws were in compliance. The Review, and this is reported, stated, "There is no explicit provision criminalising bribery of foreign public officials. There was a lack of legislation specifically prohibiting bribery of foreign officials. The United Kingdom relied on common law, which does not expressly mention bribery of foreign officials. There was insufficient case law to support the United Kingdom's interpretation of the 1906 Prevention of Corruption Act and there is potential for this Act to clash with the European Convention on Human Rights". That is plainly quite an indictment against the Government. Before I ask whether you think the criticisms are justified, can I ask two factual questions. How many convictions, prosecutions or investigations have there been under the anti-corruption laws in the United Kingdom? Secondly, how many of these relate to the bribery of foreign public officials and how many to the bribery of United Kingdom public officials? The factual answers first, please.
  (Dr Drage) If I may, I will attempt to answer those questions from Mr Colman. As you know, there are three United Kingdom statutes which are most relevant and go back very many years. I cannot give you the figures going all of the way back for convictions within the United Kingdom on those. The Minister for Trade did answer a Parliamentary question in June this year which gave the convictions under those Acts for people within the United Kingdom from 1993 to 1997.[10] I now also have the figures from 1998 and 1999 from the Home Office statistics. It is probably easiest if I make sure the Clerk has copies of those.[11] There are certainly prosecutions and convictions of people for corruption within the United Kingdom. There is one case that I know of, back in 1989, which was certainly a successful prosecution for a foreign public official in the United Kingdom called R. v. Raud. I can give a copy of the details of that case to the Clerk of the Committee.[12] The United Kingdom's view was that although our law was not explicit in the way those in Roman law countries would expect, we took the view when we signed the Convention that United Kingdom law did permit us to prosecute foreign public officials in the United Kingdom for these types of acts. There was one piece of case law to support us on that. I can say that that Government would not have signed the Convention if we did not believe we already complied with it. What the Convention does not require us to do in the text of the law is to apply the corruption tenets of the Convention outside the United Kingdom. It clearly would like, and it is the Government's intention when new legislation is enacted, as you will have seen from the Home Office White Paper, that when the legislation is brought before the House it will include a clause which would allow the United Kingdom Government to extend extra-territoriality to the offence of bribery in the same way that there is already extra-territoriality for issues like murder and for fraud. Extra-territoriality is so rare in United Kingdom law at present that the Government attaches sufficient importance to the area of bribery to say that when the legislation is revised and updated—we hope it will not be long—it will include an extraterritoriality clause within that legislation.

  31. Would you agree that it was a pity, given the endorsement of Transparency International, which was given by Mr Manning in terms of being an independent organisation taking a view on anti-corruption measures in other countries, that when they approached the Government, the DTI and the Home Office, to point out the inadequacy of the current situation, the Government again and again in those Departments refused to accept their view prior to the peer-review done by France and the Netherlands?
  (Dr Drage) Our legal advice at the time was that the law and case law did support the United Kingdom's view and we were already compliant with the Convention. If the Government had not been aware of that we would not have signed the Convention.

  32. Clearly that view has changed following the peer-review?
  (Dr Drage) It is clear that the United Kingdom law is not sufficiently clear and it was also defective in the fact that it did not give extra-territorial powers for the Government to deal with corruption that occurred outside of the United Kingdom, which is something that the Convention encourages, but does not require signatory States to do.


  33. Does it show, Dr Drage, that it is not just on legal advice you should be relying, you should be taking action under the law? The fact that you have only prosecuted, I think, once under the 1906 law indicates that the Department of Trade and Industry is either reluctant or insufficiently staffed to actually take action under the law. Even if we get a load of new law, if you do not take action nothing is going to happen, is it?
  (Dr Drage) The important point is, if there is evidence, then evidence needs to go the police and the police need to take a view as to whether there is a case and that it is justiciable at the time.

  34. Do you think we need a better system than going to the police? Obviously the police advice is that you bring no action.
  (Dr Drage) Under general United Kingdom law the police are always the people who take a decision on the evidence, along with the CPS.

  35. What I am suggesting is that this is inadequate.
  (Dr Drage) I see no reason why bribery, even under a new law, should be treated any differently from a range of other criminal offences.

Mr Colman

  36. You mentioned about a potential Bill that would be coming forward in the Queen's Speech. Would you agree that it would be possible to have a very short Bill which would deal with the matters which we have criticised under the peer-review process, which would be separate from the wider issues that were discussed in the White Paper, "Raising Standards and Upholding Integrity, Prevention of Corruption", which is very broad and covers a whole range of areas which are outside this inquiry? Given that the noble Baroness Chalker of Wallasey has stated clearly to the Government that there would be Conservative support—and I believe that is on the basis of support from William Hague for a short Bill to deal with this problem, and I understand there is Liberal Democratic backing for such a short Bill—do you think it would be a way forward to separate out this issue in terms of corruption on foreign officials from the other areas that are covered in the White Paper?
  (Dr Drage) First of all, can I say, I cannot possibly comment on the Queen's Speech. I cannot necessarily agree with you on that. I know it is an issue. Transparency International have helped prepare a short Bill which is designed to implement the OECD Convention. There is also a Council of Europe Convention on a very similar topic. One of the aims, as you will have seen from the Home Office White Paper, is to implement that Convention as well as a number of other areas we believe are closely related. It remains the Government's intention to try and bring forward a Bill as soon as possible and to implement it in a way that is more comprehensible to other signatories, both the OECD Convention on Bribery and the Council of Europe Convention, and other areas of the law which are closely related to that. The view very much at present is that just to extract from that group the OECD Convention on Bribery and take it forward would not produce a significantly shorter Bill and would not reduce the amount of Parliamentary time required. Consequently, beyond that, were we to do a short Bill it might make it more difficult to do the other legislation in terms of pressure and Parliamentary time. The Government is continuing to have a Bill that puts together implementing the Bribery Convention with the Council of Europe and the other areas covered by the Home Office White Paper, on which we have consulted. I believe the consultation period finished at the end of October.

  37. We may wish to invite the Home Secretary and the Secretary of State for Trade and Industry after the Queen's Speech in terms of this issue. Mr Smith, I understand it, was not mentioned in the peer-review, but is it still the situation that the Tax Inspector's handbook allows, in fact, bribery to be set against pre-tax profits? Is there any intention, in fact, to examine this to see if that could be changed without the need for primary legislation in the coming months?
  (Mr Smith) I have to confess that that is an area I am not particularly expert in. My understanding is that a criminal offence is not something that can be offset against your tax liability. If there was a commission which was, in the eyes of the Revenue, a reasonable commission, commensurate with the size of the contract, that could be offset. That is sometimes portrayed as saying bribery is tax deductable. As far as I am aware, that is not the position, that bribery or any other criminal act is tax deductible. I can clarify that in writing.[13]

  38. Perhaps you can. Given that the United Kingdom was in the dock, can I ask in terms of any of the other peer-reviews that went on, was any other country within the OECD equally criticised?
  (Dr Drage) I am informed that all countries were criticised, but to varying degrees. We were criticised the most severely.

  39. It would useful to know the situation in terms of other countries.[14]
(Ms Harris) I think the issue with the International Convention is that one is dealing on so many different levels. Negotiations are currently taking place in Vienna, leading to an International Organised Crime Convention which will be signed in Palermo in December, and indicate that countries involved are coming from so many different areas it is very difficult to make them of any greater or broader impact than the very specific nature we are dealing with in the Transnational Organised Crime Convention. There was an EU common position on a number of aspects in the Transnational Organised Crime Convention, there was also a G7 position and there was very much an "other countries" position, who were not either part of the EU or the G7 or, indeed, any of the developed world. I think it is very difficult to make everyone go at the same pace in these Conventions as we would like. Indeed, standards and legislative systems are at very different levels. We mentioned the OECD Convention, you mentioned the Council of Europe, the Inter-American Convention against Corruption and the UN International Convention Against Transnational Organised Crime. Is it possible, do you think, to draw together all of the regional agreements under a single UN Convention? What do you believe is the way forward to ensure that participating States within the UN can back up the rhetoric of these Conventions and see some real action on the ground?

9   See Evidence pp. 41-4. Back

10   H.C. Deb, 20 June 2000, cc. 143-4W. Back

11   See Evidence pp. 34-5. Back

12   Not printed. Back

13   See Evidence pp. 32-3. Back

14   See Evidence p. 33. Back

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