Memorandum submitted by Laurence Cockcroft,
Chairman of Transparency International-UK
This hearing is timely and is strongly welcomed
by TI-UK. The terms of reference which you have issued have indicated
your main areas of concern.
Corruption impacts on the incomes of the poor
by (a) diverting resources from social expenditure and investment
and (b) minimising the effectiveness of education, health and
agricultural services. It impacts on macro-economic performance
by reducing levels of productive investment and facilitating capital
flight. The origins of corruption are complex but "grand
corruption" in the comtemporary world can be safely described
as the result of economic arrangements set up between north and
south, and between the west and the transition economies, which
distorts markets in such a way that they work against rather than
for progressive economic development. But just as corruption can
be seen to worsen in some societies over time (eg Italy since
World war II, Nigeria since 1960), so it can be seen to improve
(the UK in the late nineteenth century, Singapore in the 1970s).
Obviously the fight against corruption must recognise both its
causes and the factors which have led to its "rollback"
in specific circumstances.
Recognition of the phenomenon, and the fight
against it, has major implications for aid policies and process.
Few forms of aid have completely avoided either directly or indirectly
fuelling corruption. Where donors have directly turned a blind
eye to this the consequences have been long term and negative.
On balance and with regret TI-UK has concluded
that where corruption is indeed endemic and a government which
is in receipt of aid displays no real willingness to confront
it, inter governmental aid shoud be suspended. Wherever possible
in these cases most aid should be re-channelled through NGOs and
civil society with a part continuing to be channelled to key institutions
with a role to play in the anti-corruption fight, such as the
offices of Auditors General. In relation to the funds released
through debt relief for the HIPC countries, we welcome the current
emphasis on Poverty Alleviation Frameworks and the involvement
of civil society in monitoring these. Where governments are not
specifically committed to this we question the value of either
debt relief or of the Poverty Alleviation Framework.
Whilst corruption undermines social investment,
whether derived from domestic or donor sources, it frequently
has an equally negative effect on corporate investment. Thus current
surveys from sources as divergent as the World Bank and Worldaware
confirm that, with exceptions, a high level of corruption can
be correlated with a low level of foreign direct investment. Smaller
countries with a rich minerals base are the main exceptions to
this. The implication is that until the additional costs to investors
created by corruption are minimised we will not see significant
increases in flows of FDI to the countries in question.
However, there is an element of cause and effect
in this observation. TI's Bribe Payers' Index, first issued in
1999, and conducted by Gallup in 13 emerging market economies
found that the senior officials polled stated that the civil construction
and arms industries of the major exporting countries were conspicuous
in their willingness to pay bribes. The case of the Lesotho Highlands
Water Project, currently in the High Court in Maseru, illustrates
the problem. Thus whilst corruption may act as a deterrent to
investment, corruption is also frequently generated by the corporate
sector, though an increasing number of large companies are recognising
their responsibility for minimising it.
Can the UK make a difference in rolling back
global corruption? The answer is "yes" abut only if
its response is much better co-ordinated and if the country is
seen to be working in step with other OECD and developing countries
who are active in this process. Aid strategies, whether at the
level of DFID or the IFIs, are only a part of this framework.
The other components concern the UK's contribution to the international
regulatory framework, notably legislation consequent to the OECD
Anti-Bribery Convention arrangements to control money laundering,
effective mutual legal assistance, and conditions associated with
ECGD's export credits.
In relation to the first of these issues, the
UK is currently gravely at fault, to an extent which can be described
as a national disgrace. We have no legislation adequate to deter
overseas bribery (and such bribes remain tax deductible). In relation
to money laundering our nascent Financial Service Authority is
apparently rendered speechless when factual Swiss evidence[4]
confirms that "Know your Client" rules were ignored
by London based banks in the case of the Abacha family. In relation
to effective Mutual Legal Assistance, small Commonwealth countries
may well find their requests for investigative assistance from
the home Office in relation to specific cases so long delayed
or even ignored that the response is meaningless. Only in the
case of ECGD and its recent draft Mission Statement do we have
an example of a UK institution, other than DFID, recognising its
responsibilities in relation to global corruption.
TI-UK submits that there is a great deal more
which the UK could be doing to address these very urgent questions.
Only if anti-corruption policy is prioritised and mainstreamed
through the UK government machine can we lift the cloud of inadequacy—inviting
and frequently attracting the contmept of other OECD countries—which
now envelopes our position.
Mr Laurence Cockroft
Transparency International-UK
14 November 2000
4 From the Swiss Federal Banking Commission, September
2000. Back
| 
