Examination of Witness (Questions 280
TUESDAY 12 DECEMBER 2000
280. Was that Alexandra Jones?
(Mr Malloch Brown) Yes, that is right. She is leading
this project which is focussing on the different elements of good
governance including an anti-corruption drive. You have got strong
commitment from the Indonesian leadership who realise that corruption
was what undid Suharto and compromises the ability to deliver
basic services now. While you have still got a very difficult,
arcane bureaucracy to work through, you have got the basic support.
In Latin America also there is tremendous focus on this issue
from poor countries like Bolivia where we have created a ten-year
national integrity programme, which is a combination of culture
change in government combined with capacity building and decentralisation.
I perhaps should say that we have put great emphasis on decentralisation
because where people see some transparent control over resources
and are able to hold government to account for the delivery of
education and health care to their communities, you see an absolute
transformation in delivery capability. We consider decentralisation
as a major part of the package. Where those are all in place this
thing moves very quickly. In Africa I would say the best examples
at the moment are the work we are getting going in Nigeria, but
it is also a major thrust of programmes in countries such as Uganda
or Ethiopia as well.
281. How can you know whether a government is
serious on anti-corruption or is just giving lip service to it?
(Mr Malloch Brown) I think it is a difficult question
and again this is where that closeness to government which you
refer to is very important because we feel at least that we get
a bit better read and a better feel for what is really going on
at the top ends of these governments than the show that is put
on for the visiting delegation from a bilateral agency or a Bretton
Woods institution. They have a lot less reason to impress us and
a lot more interest in treating us honestly and fairly openly
as their trusted advisers.
282. You mentioned anti-corruption projects
with parliaments and governments. What other anti-corruption work
are you involved in and how do you know any of it works?
(Mr Malloch Brown) Let me put it in a global context.
I wondered, seeing the list of witnesses you have had, from Transparency
International and others, whether anyone else had offered you
this observation. If you go back to when the great press on anti-corruption
began, which coincided with the wave of privatisation in developing
countries, there was an assumption that privatisation was going
to reduce corruption and the argument of the economists was that
it would remove the bottlenecks and choke points by turning over
to the market a greater volume of economic decision-making and
therefore the petty bureaucrat at either local or governmental
level in a country would have much less opportunity to extort
bribes if public enterprises were in private ownership, and if
you cut back on the web of regulation which offered these choke
points. I think that in a decade where we have seen the rise of
Transparency International and a much enhanced international agency
focus, led by Jim Wolfensohn and the Bretton Woods institutions
notably (but I think we have played our part too), there is actually
more corruption today than there was ten years ago. I think the
good news is that it is a corruption bubble. I do not want to
enter into British politics but I cannot help noticing the criticism
going on of railway privatisation in the United Kingdom. If you
think you have got problems, look at the privatisation of utilities
in Latin America, for example, where essentially the same problem
was faced, which is, how do you successfully move a monopoly into
private ownership? Therefore, in some senses accountability has
been reduced over these new enterprises. We are now moving into
a second phase where these privatised entities in telecommunications
and energy have failed to deliver services to consumers, so you
are now getting what you should have had from the start, which
is diversification of supplier, so in telecommunications, the
PTTs are getting displaced by a lot of new cell licence operators,
and in energy you are seeing the failure of the old energy monopolies
now privatised and therefore the creation of a lot more localised
energy production, power production capabilities, so in any big
countryIndia, Brazil, Nigeriayou see no longer just
a national grid but a lot of little private energy companies.
As you get that diversification of ownership you are starting
to see the corruption levels dipping. In that regard I would also
say that what is beginning to bite are the OECD guidelines, which
again I was pleased to see were in the new White Paper endorsed
as something Britain has come into line with because, as I am
sure people have said to you, it takes two to tango when it comes
to corruption. You need a briber as well as a recipient. After
a bubble generated by the imperfections of first generation privatisation
we are now going to see a spread of private ownership and a much
greater strengthening of the institutional frameworks of market
economies in developing countries and a greater transparency,
greater environment law. You will see after a lag time the work
of Transparency International and others really paying off in
that we will now see corruption start to sharply decrease.
283. You have mentioned sectors like power and
telecommunications. What other sectors would you mention as being
(Mr Malloch Brown) Obviously financial services are
always a major target, the whole export/import business of any
goods and services, the granting of any concessions in the natural
resource area, and indeed the granting of concessions generally.
284. Licensing then?
(Mr Malloch Brown) Licensing.
285. What about marketing corporations and so
(Mr Malloch Brown) I think marketing corporations
are a little bit a thing of the past. They are by no means gone
but we are seeing less use of them as companies are able to take
on much more of their own marketing. Whereas five years ago the
argument for having a local partner was that he dealt with this
murky environment, today the argument for a local partner is that
he helps you avoid this murky environment. The international companies
which are doing very well in developing countries and building
honest, respectable businesses which they and their shareholders
can be proud of tend to be ones with strong local partners who
share their sense of business ethics but nevertheless know their
way around the societies in which they are operating and can offer
some political space and protection for the company to operate
in and protect it against these demands.
286. The Nigerian example you gave illustrated
in terms that are crystal clear the direct link between corruption
and poverty. When corruption is so all-consuming where do you
start and how? You have listed some things: leadership, decentralisation,
capacity building. I just wondered, for example, in a country
like Bangladesh, where you were asked a minute ago how do you
know if the Government is serious, there is another question which
is that even when the Government is serious how do you know if
the Government has the ability to deliver? What would your judgment
be of how and where you start tackling corruption?
(Mr Malloch Brown) We do in Bangladesh have a kind
of national corruption audit arrangement with the Government in
which they are trying to expose themselves to new tests of transparency
because they recognise the difficulty they are in. It is for Bangladesh
or any country where there has been a deep history of this to
make a multi-year change and it goes along these two tracks of
institution strengthening and culture change. You cannot do it
without both. Because Nigeria is fresher in my mind than Bangladesh
you will forgive me if I give a specific example from there, particularly
if you are going to see President Obasanjo. The Niger Delta produces,
as you all know, the majority of the oil revenue of the country.
There is an agreement in this vast country where federal state
relations are always difficult that 13 per cent of resource revenue
should flow back to the states that produce it, so 13 per cent
of oil revenue in the case of The Delta should flow back. It is
very frustrating to the oil companies working there, as it is
to ordinary Nigerians, that there is no evidence of that coming
back on that kind of scale in terms of education or health care.
You essentially still have a stand-off between the oil companies
and the people, certainly in Ogoniland. I went down there because
I felt this was one area where we could perhaps be the catalyst
to change things. On the back of that trip and seeing President
Obasanjo we agreed on a rather ambitious approach. Companies like
Shell are spending a lot on community development. They say they
are spending $60 million in the areas of operation in Nigeria,
rather less than they are probably spending on security but a
major amount of money, which does buy you a lot of schools and
clinics in a way, and there are NGOs and others who want to operate.
One part was how could we bring all these players who wanted to
help together to deliver a common model of community development
across as many communities as possible in The Delta through implementing
the partners in which the local communities had trust. We saw
ourselves playing a co-ordinating role in that. The second thing
is that the President rebuffed others who had tried to intervene
on this and it is therefore news that he accepted us playing this
role. The next bit is that if you had the Chairman of Shell in
here he would say to you, "However many schools and clinics
we build, whether or not we do it through community organisations
or with the Shell logo on it, it is not going to fix the basic
political economy problem of The Delta. That will only come when
the citizens of The Delta feel the renewed commitment of the Federal
Government of Nigeria because that government's new democracy
is delivering health and education to them." The analogy
I used to President Obasanjo was that I wanted to build into our
governance programme now a "follow the money" issue
where my Bank friends tell me that they have been able to follow
it from collection point in the oil companies to the federal exchequer
where it gets lost. We want to create a system where we tag it
so that you can see the 13 per cent identified in the federal
budget and then flowing back to the different states that comprise
The Delta, and from there still tag it down to the community level.
We have some very big examples of having done this in Latin America
where we had this phenomenon of very large resources in the Ministry
of Education in Brazil and Argentina supported by even larger
resources from the international financial institutions, the World
Bank, the Inter-American Development Bank, all not getting dispersed
because the money was sclerotic; it got stuck at the capital.
If it got beyond the capital it just got to the state capital
level. In Brazil six out of 10 dollars were not getting to the
classroom and there was a lot of corruption. We innovated a temporary
system where we put in place a direct payment system to the parent
and teacher associations and the headmasters and headmistresses
and for a time we were directly dispersing the education budget
from Brasilia to the schools. This forced decentralisation to
occur, it forced the whole bureaucracy from Brasilia to the classroom
to reorganise itself around the principle that we were going to
employ these guerilla tactics to bypass it. In ten years Brazil
has moved from being a major source of the absence of universal
primary education in the world to enrolment rates of 95 per cent
plus. It was because of this radical decentralisation approach
that we pursued. In other words, where we became the temporary
implementing arm within government, also hiring the consultants
to put in place the long term systems (and that was my proposition
to Obasanjo) we went on two tracks. Get all the community development
money we can but in the meantime restructure the Nigerian Government
to deliver. That is the solution, this really hands-on, sleeves
up, get into these ministries and make the system work approach.
Brasilia does not have quite such a federal state problem as Nigeria
has. There is nothing like the ethnic or other centrifugal tensions
going on. Obasanjo has not let other international organisations
into The Delta until now. That is the fix for corruption but it
comes from our trusted adviser/trusted implementer role.
287. I wanted to ask about what UNDP is doing
to ensure that corruption is addressed in other UN agencies. I
know that there is a problem with lack of co-operation and co-ordination
between the agencies and this may be a very large question. Perhaps
you could tell me what it is doing.
(Mr Malloch Brown) We are trying to get the same programming
tools and administrative procedures at the country level because
we provide a lot of the administrative support to the different
UN agencies and at the country level we are it for many agencies
which do not have a universal field presence. In terms of internal
corruption in the UN we have got a pretty tight handle on that.
I honestly again think that good new managements in most UN organisations
have managed to crack down on internal corruption problems. Again
the issue becomes one of, are we all at one in terms of trying
to force it out of the countries in which we operate? We are all
terribly conscious of the insight that where there is corruption
we do not have poverty reduction and sustainable development,
and there is no way round that basic fact of development. I think
we are all pretty united in fighting corruption wherever we find
288. Is the UNDP the lead on this whole UN family?
(Mr Malloch Brown) Are we the lead? We are the lead
on development and corruption is very much part of that. There
is an enormity of work which is done in various intergovernmental
conferences which other bits of the UN handle: the Department
of Economic and Social Affairs, UNCTAD, but in terms of the operational
country level activities we are the lead, along with, I should
add, the drug control and anti-corruption programme in Vienna
which is doing crime busting. It is organising this conference
in Palermo on money laundering, for example. The global standard
setting is done by others but the operational bit we lead on.
289. In UNDP's Discussion Paper 3, a statement
was made about three years ago that "A state with endemic
corruption can be especially brutal to the very poor, who have
no resource to compete with those willing to pay bribes".
Three questions arise out of this. How in UNDP's experience does
corruption affect the poor? How do governments in countries with
endemic corruption view the problem, and what is their response
to anti-corruption initiatives? How can you tell genuine anti-corruption
initiatives from mere window dressing?
(Mr Malloch Brown) The corruption affects the poor
very directly in terms of lost economic growth in the national
economy, but second, exclusion from basic services because they
cannot afford to pay the very small bribe that is required for
access in many cases. As I reflect on it, the difference between
UNDP and the World Bank is that in a way we see poverty as political
and not economic. We think it is the poor's lack of any political
rights and power, particularly the right to vote, which leads
them to be excluded. Amartya Sen we consider as one of our intellectual
fathers and his observation that there has not been a famine in
India because people make a fuss and go and lobby their local
MP in Delhi to get the food situation resolved we think is an
extraordinarily important dynamic. Therefore we see the promotion
of democracy as one of the critical ways of overcoming corruption
at the level of the poor themselves. They have got to have the
"throw the rascals out" right if they are going to deal
with this. On the issue of governance, taking it seriously, I
acknowledge to you that there are governments who just do it for
form and there are governments who do it substantively. We are
lucky enough (I say it again) because of our particular trusted
role and because we have not got a huge loan book to wave at them,
so we perhaps get a more honest answer from governments and a
better sense of their priorities than often others are able to
get. Where they do respond it becomes an accelerating momentum.
I do not know of governments who have been disappointed by their
involvement with Transparency International in their affairs.
Everybody feels that this is a popular issue, it helps them with
their electorate. Even in China, the one area where the press
in China is very free is reporting corruption by senior officials.
This is a good issue for governments. We are pushing much more
on an open door on this than you might believe.
Mr Khabra: What will be your reaction
if, in a situation like we find in some of the developing countries,
democracy has collapsed because it is corrupt and it has failed
to deliver services to the people and then you have a dictatorship
which is tough on corruption? How would you react?
290. Perhaps that is the point to introduce
Pakistan where you have been working.
(Mr Malloch Brown) I would say first that the Secretary-General
and I were both last week in Benin at an African conference that
we had sponsored on restored democracies. I in my speech there
said that poverty, not colonels, is the great threat to democracy
in Africa. I do not know a country in the world where people do
not look at democracy through the lens of the services it provides
for them. In other words, even British democracy would come under
threat if government was not responding to the desires of people.
That link is critical and we are at a dangerous moment in the
development of democracy because we do have countries which follow
the form, not the substance, of democracy and then fall under
the weight of their failure to deliver basic services to the poor
and because they have allowed their democratic legitimacy to be
undermined by corruption. Obviously Pakistan was the extreme example.
Our view however remains that authoritarianism is never a good
answer to democratic weakness. We just make it clear whenever
asked that in our view, however enlightened the leadership, over
time its lack of democratic accountability to the poor themselves
will lead it to drift away from the priorities it should have.
The Government in Pakistan, while it has actually made some admirable
appointments as ministers reaching into the civil society organisations
and others, over time it is a losing proposition because until
it can meet the democratic test of delivering services and delivering
transparent, honest government to people, the incentives to drift,
make compromises with other forces within society will be impossible
to resist over time.
291. I want to explore this a bit further. Definitions
of good governance and democracy can be fairly subjective. There
can also be the danger of imposing specific models, particularly
certain western role models, on some countries. What kind of definitions
do you use to decide what is democratic and what is not? You have
brought up examples there that service delivery can be very good
in some countries but where the human rights record can be appalling,
so what happens when there is tension between those two needs
in a country?
(Mr Malloch Brown) You may have seen it this year,
our Human Development Report is on human rights and human development,
and this is a short version of it. I am like a stage actor with
the wrong prop! The worst drawing room comedy, I am sorry! What
we argue in this report is that without giving people human rights,
including the right for political power and therefore some degree
of control over the services they get, they never get those services.
That is our view. We do not think there are any good examples
of authoritarian governments delivering services. The Chinese
model, which everybody citesa highly centralised, efficient,
service delivery model without democracyis interesting
because it is one of the most decentralised systems of governments
in the world. It has a smaller tax take at the centre. It is something
like no more than 10 or 11 per cent of GNP is taken in central
taxation. Therefore, most of the transactions between the state
and people in China happen at the local level where there is considerably
more degree of control, not through formal democracy but through
the party and villagers demanding it. Please do not misunderstand
this, we are pushing for an expansion of democracy in China. I
explain that because people always come back and say China proves
the opposite. I do not think it does and if you take China out
of the equation I do not know of a country where the authoritarian
model is delivering better services.
Chairman: China heads the corruption
list. It is the most corrupt country in the world.
292. You spoke in terms of democracy. Do you
mean by that that the model of democracy has to be multi-party
or can other models such as that in Uganda or Eritrea, where there
has not necessarily been a multi-party system, which work on a
(Mr Malloch Brown) It certainly has to be a competitive
system. I think that is critical to it. I think it has also got
to be an evolving system. What I think is a great mistake is to
move everybody to a single cultural model like that. I think people
will always end up in different places but it will be an evolving
process. Again because of our character as the development agency
of developing countries, about eight years ago we started to put
into the Human Development Report political indexes of freedom
and political rights. Huge row, dropped it. We are now coming
back to doing it again in partnership with the Economic Commission
for Africa. We have got 14 countries which have taken a deep breath
and are willing to this. We are going to start building political
indicators on political freedoms. We will try to make them neutral
in that we are not going to have in mind one ideological model
of what the ideal democracy looks like but we do think that a
competitive system, freedom of expression; these are universal
293. Independence of the judiciary?
(Mr Malloch Brown) Independence of the judiciary,
a free press. One thing that is often forgotten by the UN is that
we consider ourselves both an inter-governmental organisation
and the guardians of the Conventions and the Charter, so we have
absolutely no shame in poking our governments in the eye when
we think they are contradicting our basic mission statements.
Mr Colman: Just briefly coming back to
the different performance of democracies and your current experience
of Pakistan where I was earlier this year. General Sharif seems
to be wanting to not allow either of the two political parties
who previously held power there to retain power into the future.
There are the new union and district and regional elections that
start this month where the idea is to have non-party political
people standing. How do you think this is working out? Is this
a new paradigm of introducing competitive democracy at local government
294. Are you working with Nawaz.
(Mr Malloch Brown) Nawaz is in Saudi Arabia.
295. When he was in power?
(Mr Malloch Brown) We were there and, interestingly,
we are there through thick and thin in these countries.
296. Were you doing any anti-corruption work
(Mr Malloch Brown) That is a very good question. It
was before my time as I used to say. Before my time; I do not
know. Let me answer it in a way that may confirm something. I
have just hired to head our Asia bureau somebody who was a minister
under Sharif who is one of the great Asian authorities on poverty,
has written extensively, Hafiz Pasha, who is a technocrat who
was a minister first in the Quereshi Government, a former World
Bank managing director who led that very successful Government
and then served under Sharif. My view, like in so many of these
countries, is that you have got these incredibly honourable ministers
whom you try to find ways to work with and support them in very
difficult periods. To turn to the specifics of the election, we
are supporting the municipal election process. What we do to guard
against the issue of getting too much into bed, is we have an
agreement with the Department of Political Affairs, Kieran Prendergast,
who I am sure some of you know, that he will give us a seal of
approval before we help in an election because I do want that
independent judgment so that we are not guilty in our enthusiasm
of getting ahead of ourselves. I have also done what I think is
a first for UNDP, I have pulled support in the middle of election
campaigns. What we should do is very rarely the observingKieran
Prendergast does thatwhat we do is capacity building so
we have been running training workshops for candidates, we modernise
election registers, we give training to vote count observers.
297. In Pakistan?
(Mr Malloch Brown) In Brazil we introduced the new
voting system which the US is going to emulate.
298. You might have a bit of work to do in Florida!
(Mr Malloch Brown) But the big question will be if
the municipal elections are then followed by national elections
on the same limited model as to whether we would give support
to those. That is an open question at this point.
299. Is this limited model in fact leading to
a new form of democratic base, if you like, which is worth looking
at as an alternative to becoming clan parties, which is what it
(Mr Malloch Brown) Let me say that I think that these
models often end up in places their originators did not mean them
to. I spent 10 years of my life as an international political
consultant working for democratic challenges to authoritarian
governments, the work of Cory Aquino and the No campaign in Chile,
dozens of these, and in each one of them the guys in power by
offering a limited option, like Marcos allowing an election in
1986 or the No campaign being Pinochet's referendum, had no intention
of losing them, but the control system they had