House of Commons - International Development

Select Committee on International Development Fourth Report

SECTION 4: TACKLING CORRUPTION IN DEVELOPING COUNTRIES

40. It is the governments in developing countries who must take the lead responsibility for addressing corruption in their countries. They should be supported in developing policy and building institutions, by the international development agencies. Donors should be seeking to build the capacity of the state, civil society and the private sector to address corruption.[104] Anglo American said "Whilst over the last decade, there has been a welcome increase in the emphasis given to good governance by the aid donor community there is a great deal more which could and should be done to combat corruption in emerging markets".[105] There are lessons to be learnt from our own history, especially with regard to efforts to clean up the civil service, about the kind of remedies that are needed in developing countries.[106] Of course, it only makes sense to do this if developed countries are reducing their own contribution to international corruption and working to constrain money laundering. The following discussion must be seen in that context.

41. In this Section of the Report we will examine DFID's anti-corruption strategy, look at commonly employed anti-corruption measures, consider the sustainability of the work, and examine how DFID works with governments from developing countries, and with NGOs, civil society and other donors.

DFID's Anti-corruption Strategy

42. DFID spends about £90 million a year of its bilateral programme (in total about £1.3 billion) on better governance. There is no way to identify within this what is spent specifically on corruption. Such a figure may be meaningless in the context of anti-corruption work that is mainstreamed through other programmes. Within the spend specifically on governance, some of the projects are directly relevant to corruption but not all. Some of the most valuable anticorruption work is actually about providing the right expertise, in the right place at the right time and is relatively inexpensive.[107]

43. Civil society groups and other donors hold DFID's work in this area in high regard. Its contribution on governance is widely acknowledged as being important and useful. A number of witnesses spoke of the positive contribution DFID is making. Transparency International said they were "extremely impressed by what DFID is doing in attempting to deal with the corruption issue".[108] Laurence Cockcroft, Transparency International (UK), said "I think it is important to note that DFID is doing a lot and a lot of that is well thought out and quite imaginative".[109] We were also impressed by the high regard that other donors, whom we met on our visit to Vietnam and Cambodia, had for the work DFID was undertaking.

44. On measuring the success of the DFID anti-corruption strategy, Clare Short said "The success or failure overall is the success of the development effort in a country. More effective government systems deliver more health care, more education, better management of banks, better economic growth".[110] International Development Targets are a very blunt instruments for measuring the success or failure of anti-corruption strategies. While we do not argue that ultimately the success or failure of strategies will be shown in the International Development Targets, there is scope for the development of more specific targets and measures relating to particular projects and programmes.

45. DFID should consider publishing an anti-corruption strategy that demonstrates how the excellent work that is being done will be mainstreamed. The strategy should consider the split between central and regional funding, set out criteria for allocating funds and describe how DFID will handle requests for assistance from countries. DFID should ensure that in mainstreaming anti-corruption activities through all of its programmes these are built into programme design and not bolted on at the last minute.

46. DFID has indicated its willingness to help governments committed to tackling corruption and DFID country strategy papers already include an assessment of the scale and nature of corruption, as well as an assessment of a government's willingness to tackle it.[111] Tackling corruption often requires action and reform across a broad sweep of policies and institutions including civil service reform, transparency in government accounting, strengthening the independence of the judiciary, improving the effectiveness and resourcing of law enforcement agencies, supporting the development of civil society groups and fostering a free press.[112]

47. DFID should encourage developing countries to develop comprehensive anti-corruption strategies. It should support developing countries engaged in developing such strategies, encouraging them to make a full assessment of corruption. DFID should promote a participatory approach to the development of anti-corruption strategies in developing counties. DFID could support the use of social audits, and participatory poverty assessments in determining the scale and nature of corruption, and should encourage the active participation of civil society and the private sector in the development of any strategy to tackle corruption. It should also encourage developing countries to insist that donors coordinate their activity to provide effective backing for the implementation of the strategy.

Anticorruption Strategies Currently in Use

48. Improving governance and building better institutions is a theme running through much of the work described in this Report. This is because the focus of much of the current development activity has been around the creation of "government systems which more effectively deliver services, provide appropriate regulation and impartial law enforcement".[113] DFID recognises three main elements[114] in strategies for tackling corruption effectively:

curbing the discretionary powers of politicians and officials and thereby reducing their opportunities for corruption;
reinforcing the positive incentives for higher standards of integrity and professionalism in politics, government and the private sector and eliminating the incentives for corrupt behaviour such as poor pay;
increasing the constraints on corrupt behaviour by holding corrupt individuals and institutions to account, by strengthening public and political pressure for such action and by strengthening anti-corruption laws and the state institutions responsible for investigating and prosecuting cases of corruption.

49. Redesigning and re-engineering systems, procedures and institutions is the principal way to limit the scope for officials and ministers to engage in corrupt practice. DFID has recognised that policy and institutional reforms can be useful in limiting both the discretion in decision-making of officials and ministers and more simply the number of facetoface interactions where previously bribes could be sought.[115] We have seen from the evidence presented by CIET that victims of corruption often have to see a number of people before getting a service, simply to increase the number of opportunities to extract more money. David Phillips, Crown Agents, said that designing out corruption had been one of their main strategies in reforming the customs service in Mozambique. This involved not only strategies to ensure the operating procedures, systems, internal audit, external audit, and facilities for whistle blowing were all in place but also to limit discretionary powers and face-to-face interactions.[116] The process of designing out corruption should apply not only to corruption and public sector reform programmes but should also be mainstreamed into all the sectors where DFID is active including health and education. An analysis of how corruption might affect a project or programme and consideration of the steps necessary to limit corruption should be part of every design process. Bids for funding where there is no evidence that these matters have been considered should be deferred until either evidence is provided or these issues are fully considered.

50. Measures to combat corruption are covered extensively in a number of excellent resources available via the Internet and in a large number of printed publications. We do not intend needlessly to repeat the material here and the following is not an exhaustive analysis of all possible methods for tackling corruption. It simply examines a few that have been drawn to our attention during the inquiry.

POVERTY REDUCTION STRATEGIES

51. The preparation of a full poverty reduction strategy (PRS) is led by governments with the active participation of the private sector and civil society.[117] It provides an opportunity to consider the kind of long term view that must be built into any anti-corruption strategy. We were encouraged to find during our visit to Vietnam and Cambodia that corruption was addressed in the interim poverty reduction strategies of both countries. It is vital that vehicles such as the Poverty Reduction Strategies are used to address corruption. DFID should work with the IMF and the World Bank to ensure that the guidance on the development of a full Poverty Reduction Strategy makes clear that the PRS must include an assessment of corruption and must set out action being taken to tackle the problem. Parliament, civil society and the private sector should all be involved in developing this part of the PRS and should be engaged in monitoring any anti-corruption strategy that emerges from the PRS planning process. This work should begin immediately while there is still scope for corruption to be drawn into some of the interim PRS that are currently being developed.

ANTI-CORRUPTION COMMISSIONS

52. DFID indicated that it was working to strengthen anticorruption laws and establish independent anticorruption commissions in a number of countries. It noted that to be successful these bodies needed "...real political commitment, administrative autonomy, independence from the police, adequate financial resources, power to investigate and prosecute, power to recruit directly, relevant laws and a functioning judicial system".[118] The willingness of a government to dismiss and prosecute corrupt government ministers and senior officials is seen as a key test of a government's commitment to tackling corruption.[119] Anti-corruption commissions have a part to play in educating state institutions on anti-corruption techniques, detecting and investigating instances of corruption and prosecuting corrupt officials and ministers.[120] Laurence Cockcroft suggested that reform of the judiciary and technical support to offices, such as the AuditorGeneral's, were reasonably practical measures that donors could support.[121] There was experience to show that strengthening oversight and sanctions through Auditors-General or independent bodies such as anti-corruption commissions could reduce corruption. We have already seen that corruption often affects all aspects of the criminal justice system and cleaning up the law enforcement must be a priority if anti-corruption commissions are going to be able to work effectively.[122] Laurence Cockcroft, Transparency International(UK), said the independence of the judiciary was something that donors could address.[123]

53. Transparency International argued that backing from the highest levels of government was necessary if anti-corruption commissions and bureaux were to make progress. There are a number of examples of bad practice such as Kenya where the Kenya Anti-corruption Authority was found to be unconstitutional, Zimbabwe where the Anti Corruption Act specifically excludes investigation of the president or South Africa where operational independence is limited by a need to get presidential approval before investigations can begin. Equally there are examples of good practice such as Hong Kong which demonstrated what could be achieved when the interest of the public was stimulated and harnessed.[124] Transparency International felt that such bodies should have the power to freeze assets, to seize travel documents and, importantly, to protect whistleblowers. Concerns regarding the criminal justice systems in many developing countries have been discussed earlier in this Report and it is important for any anti-corruption commission that there is a non-corrupt and independent criminal justice system to support its operation.

54. DFID needs to ensure that its own preconditions are met before anti-corruption commissions and bureaux are funded. Where such conditions do not exist anti-corruption and governance assistance should be directed to creating the necessary conditions "within the context of a programme for strengthening judicial integrity and accountability".[125]

TACKLING CORRUPTION IN POLITICS

55. Corruption carries heavy economic and social costs but as well as undermining development corruption also distorts democratic processes and rational decisionmaking.[126] Corruption in politics is commonplace in countries with endemic corruption. DFID said "Much corruption in poorer countries (and some developed countries) has its origins in politics. Vote buying is commonplace, either directly or through projects apparently funded by the local politician".[127] This poses a real threat to development and democracy. Mark Malloch Brown noted that there was a fundamental difference between the approach of the World Bank, who saw poverty as an economic issue, and the UNDP who saw it as a political one. He explained that it was "the poor's lack of any political rights and power, particularly the right to vote, which leads them to be excluded".[128] He felt that the promotion of democracy was one of the critical ways of overcoming corruption at the level of the poor themselves. But vote buying and corruption in politics have the ability to distort and undermine democracy. Mark Malloch Brown concluded that "...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".[129]

56. Corruption has a direct impact on the relationship between individuals and the state. A failure to address corruption may impact on the legitimacy of a government. Corruption can become an issue that gives rise to political instability and revolution where the relationship between the state and individuals breaks down as taxpayers and citizens begin to feel unfairly treated when they pay for services and benefits in both taxes and in bribes. There is concern about the issue of contributions to political parties in developing countries by foreign companies. Clare Short said that this was something that we had only just begun to deal with in the UK.[130] It was one of the issues that had been left out of the negotiations on the OECD Convention on the Bribery of Foreign Public Officials. Roger Wilson, DFID, confirmed that this was something that the OECD was currently looking at.[131] DFID should examine the scope for work that supports the development of democracy to contribute to wider anti-corruption and better governance strategies. In his memorandum to the Committee, John Williams, Chair of the House of Commons Standing Committee on Public Accounts in Canada, said parliamentarians had a responsibility to ensure that governments were open, transparent, honest and effective. He called on parliamentarians to form regional groupings, such as the African Parliamentarians Network Against Corruption.[132] DFID should examine what support and assistance needs to be given to help parliamentarians in developing countries tackle corruption. It should also look at what support regional groups of parliamentarians would need to be an effective focus for anti-corruption work.

PRIVATISATION AND LIBERALISATION

57. We have already seen that centralised state owned enterprises and high levels of bureaucracy are often associated with high levels of corruption. DFID has said that the break up of state monopolies, liberalisation and privatisation, removal of tax exemptions, and streamlining of business licensing requirements were all changes that are required to limit and reduce opportunities for corruption.[133] However, the process of privatisation needs to be planned and handled carefully in order to avoid creating new opportunities for corruption. Transparency International indicated that privatisation had provided opportunities for corrupt deals often based on "insider cabals" surrounding corrupt officials or ministers engaged in deals that maximised personal enrichment rather than the return to the state.[134] Mark Malloch Brown said that when the anti-corruption drive first began there had been an assumption that privatisation would reduce corruption by introducing decision making driven by market forces rather than by the discretionary powers of local and central government officials.[135] The first wave of privatisations were often associated with allegations of corruption and in some ways privatisation reduced the accountability of new enterprises. Many of the early privatisations also created organisations that failed to deliver services, particularly in the telecommunications and energy sectors. He was encouraged that this was now driving a diversification of supplier[136] and hoped that this increased competition would drive improvements in efficiency and thereby reduce corruption (as corrupt systems tend to allocate resources inefficiently). Mark Malloch Brown was hopeful that "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".[137]

PROVISION OF TECHNICAL ASSISTANCE THROUGH TWINNING AND MENTORING

58. Jeremy Carver, Clifford Chance, recognised that there were a wide range of actions that could be taken to "increase the flow of technical assistance to other parts of the world, and there is a great deal that we can learn and bring back here to improve our systems".[138] He spoke positively of the role that DFID was playing in building capacity in the judiciary and criminal law in developing countries. He was more critical of the role of the Foreign and Commonwealth Office suggesting that there was little evidence that they recognised corruption as an issue.[139] Philip Thorpe, Financial Services Authority, said that confidentiality requirements in existing legislation prevented them from simply passing information on to third parties. He was encouraged that new legislation would allow them to deal directly with authorities in other jurisdictions and to provide them with some information.[140] Both the Serious Fraud Office (SFO) and the Metropolitan Police also noted that they had worked with or assisted organisations and individuals from a number of developing countries.[141] There is a great deal of scope for greater use of mentoring and twinning arrangements so that public sector institutions and professional bodies in the UK can directly help similar organisations in developing countries to build stronger institutions. This is already happening but could be done on a more systematic basis. DFID could provide support to coordinate and facilitate such activity.

INVOLVING LOCAL PEOPLE AND DECENTRALISING POWER

59. Anne Cockcroft, CIET, said people were vulnerable to corrupt practice because they had a lack of knowledge about how systems worked and what their entitlement was.[142] Clare Short said "With very highly centralised systems you get a real problem because someone is running the system at the centre, but no one at the local level knows what they are entitled to".[143] A lack of knowledge and information may be one of the reasons that corruption is so difficult to tackle in the judiciary, which is usually a complex system. Anne Cockcroft suggested that by telling people what to expect, what they need to pay for, what they do not need to pay for, and highlighting the fact that paying a bribe did not actually buy a better service, people's vulnerability could be reduced. It is important to involve ordinary people in tackling petty corruption. They often have views on what can be done to tackle corruption and should be consulted in developing solutions.[144] When asked how best to tackle corruption local people often raise the monitoring and control of services.[145]

60. The decentralisation of service delivery provides an opportunity for improving local accountability and transparency. Mark Malloch Brown said that the UNDP puts "... 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".[146] However, decentralisation needs to be managed so that it does not simply add another layer of bureaucracy, and another opportunity for corrupt practices.[147] There are valid questions about the capacity of regional and local government institutions to plan, deliver and manage services in some developing countries. In this respect, we welcome the efforts of the Commonwealth Local Government Forum which has sought to strengthen the capacity of local government through training schemes, information exchange, and through the pooling of professional and administrative know-how.[148] There is certainly the scope for donors to start looking at the kinds of capacity building activities that will be needed to support effective decentralisation of services once the institutions of central government have been reformed and strengthened.

EXTERNAL MONITORING AND EVALUATION

61. The external evaluation of projects is important if mismanagement and corruption are to be controlled. Anne Cockcroft gave an example of a World Bank agriculture extension project where internal evaluation showed 75 per cent of farmers in the project were visited by an extension worker while CIET's evaluation, which happened to geographically overlap the same area, showed only 10 per cent of farmers were visited.[149] She argued that donors needed to be more sceptical and a little tougher about actually monitoring projects on the ground and not always to rely on the internal evaluation of projects. Good management and some kind of external monitoring arrangement are vital if service reforms, which are going to be effective in reducing corruption, are to be delivered.[150] Local people should be involved in the external monitoring of projects and programmes through social audits, participatory assessments of services and service delivery. Local communities can usefully be involved in directly monitoring services.

USING THE MEDIA

62. Sometimes corruption is not hidden and occurs quite openly. When in Bangladesh, the Committee were told by Transparency International (Bangladesh) that transparency was not in itself a solution to the problem of corruption since in Bangladesh corruption took place perfectly transparently. Incidents of corruption were reported regularly in newspapers but there was little, if any, follow up. Transparency International research suggested that in 60 per cent of cases reported in newspapers there had been no followup. Donors need to consider how best to support the development of a free but responsible media that is appropriately trained in the techniques of investigative journalism.

CIVIL REMEDIES

63. Transparency International have emphasised the possibility of civil remedy as an alternative to criminal proceedings for those who wish to see assets frozen or recovered.[151] They believe that work can be done to raise awareness of civil remedies in victim countries.[152] Kenya provides a good example with the Law Society taking civil action in the Goldenberg scandal. (The Goldenberg scandal arose from a scheme whereby the Kenyan Government paid exporters as an incentive to export gold and diamonds. Billions of dollars were lost through fraudulent exports; in one instance, Swiss customs officials discovered that a shipment of gold jewellery turned out to be sand). Where DFID has programmes that are seeking to build anti-corruption coalitions with civil society groups, civil action should be put forward as one means of raising awareness of corruption and providing some form of redress where the criminal justice system is failing.

INTERNATIONAL CONVENTIONS AND OTHER ANTICORRUPTION INITIATIVES IN DEVELOPING COUNTRIES

64. The Corner House noted that much of what was written about corruption dwelt on developing countries as bribe takers rather than the industrial countries as the bribe makers.[153] The focus of the various conventions to tackle corruption is very much on developed countries. Table 1 compares a number of the current anti-corruption initiatives.

Table 1: Anti Corruption Initiatives (Conventions and Protocols as of January 2000)

	1997 OECD Convention on Bribery of Foreign Public Officials	Inter-American Convention Against Corruption (OAS)	Council of Europe Criminal Law Convention	European Union
Basic Information
Type of Initiative	Convention	Convention	Convention	Convention and Protocols
Entry into Force	15 Feb. 99	6 Mar. 97	No	No
Opened for signature	17. Dec. 97	29 Mar. 96	27 Jan. 99
Signatories/Parties*	34/20	26/17	31/1	15 signatories
Supply Side
Foreign/Domestic	Foreign Only	Foreign and Domestic	Foreign and Domestic	Protocols call for the criminalisation of certain types of active (supply) and passive (demand) bribery of EU or member state officials
Public/Private	Public Only	Public Only	Public and Private
Purposes Covered	Obtain/retain international business	Domestic - Any Purpose Foreign - Any economic or commercial transaction	Any Purpose
Demand Side
Foreign/Domestic	Not Covered	Domestic Only	Foreign and Domestic
Public/Private	Not Covered	Public Only	Public and Private
Purposes Covered		Any Purpose	Any Purpose
Monitoring
System in Place?	Yes	No	Yes
Status?	Ongoing	Considering Mechanism	Monitoring Beginning	No regularised system in place
Peer Review?	Yes	No	Yes

* Parties are countries that have signed and ratified the respective instruments

Source: No Longer Business as Usual, OECD, 2000

65. The importance of international conventions in tackling bribery is not doubted. We agree with DFID that they provide a useful function in condemning corruption by the states which are party to them and highlight the importance of halting the practice of companies offering bribes to win business abroad.[154] However, we see little evidence of steps being taken by the development community as a whole to extend the reach of these conventions to cover developing and transitional economies. The support for the development of regional conventions by DFID is welcome[155] but we feel that there is much more that can be done in this regard. It is unlikely that a multinational enterprise is going to want to take account of a large number of regional conventions which may all end up with slightly differing contents. The extension of existing conventions may achieve a more harmonised approach to tackling corruption than the initiation of many regional conventions. Unilever said "There is a risk here of 'code fatigue' as governments, multinational organisations, and NGOs produce separate initiatives designed to tackle the same series of problems. For that reason we would not support the idea of a single overarching global code on corruption unless it incorporated and replaced the best provisions of existing initiatives. Otherwise, there would simply be an increase in the incoherence which already exists".[156]

The Sustainability of Efforts to Tackle Corruption

66. Corruption is unlikely to be overcome in the short term. The changes required to combat corruption are complex and their implications may not yet be fully understood (as was the case with the first round of privatisations that were tried as a panacea for corruption in state owned enterprises). Laurence Cockcroft said "The key thing is to recognise that one needs a longterm perspective and what one is really doing is trying to support local change agents".[157] It is essential that DFID, along with other donors, take a long term view in the battle against corruption.

67. The UNDP discussion paper on good governance said "...the history of anticorruption efforts is filled with programmes that succeeded at first, only to be undermined by subsequent governments or by economic and political crises".[158] There are questions about the sustainability of specific anti-corruption and good governance projects and programmes as well as the sustainability of the work in general. Sustainability was raised as a key issue within The US General Accounting Office Report on the World Bank. This said that the 1998 Annual Review of Development Effectiveness (World Bank 1999) found that only 40 per cent of projects had a substantial impact on institutional development and that institution building in the financial sector was likely to be sustainable in only 50 per cent of countries. DFID and other donors need to look very carefully at the work that has proved to be unsustainable in the past and determine what lessons can be learned for the future. DFID should also review its current anti-corruption and governance work to determine the sustainability of the work. The political stability of a country is likely to have an impact on sustainability. Engaging in long term institution-building in an environment that is politically volatile will mean there is some risk to taxpayers money but we recognise that development of this nature is important.

Working with Governments in Developing Countries

68. Economic growth and successfully reducing poverty are both dependent on good governance.[159] Clare Short said "You cannot do development without dealing with corruption if you are operating in countries that have got corruption problems".[160] She stressed that a holistic approach was needed to governance issues,[161] saying that improving governance was about creating efficient modern states that had removed inefficiency and corrupt practice through the whole of the government system.[162] It is apparent that in many developing countries tax and customs revenues are well below the levels needed to support basic government services in social sectors like health and education. This was evident to the Committee when it visited Vietnam and Cambodia. Corruption may distort the pattern of revenue collection (as people pay bribes to avoid tax and excise duty and as the rich can afford bribes the poor are taxed disproportionately) and further reduce state revenues (as tax collected is diverted for private benefit or people pay bribes to obtain reductions in their liability).[163] A stable and sustainable revenue base is essential for development but is undermined by corruption. DFID should build anti-corruption measures into any programmes for reform of public finances, tax and revenue collection systems.

GOVERNMENT COMMITMENT

69. Mark Malloch Brown said "First, as an absolute precondition to be effective against corruption you have to have a leadership who believes in the fight against corruption".[164] Corruption cannot be tackled without political will, leadership and a genuine commitment to reform. No reform programme will be successful without support from a country's political and economic elite.[165] There was evidence that such a high level commitment can deliver results.[166] Tackling governance successfully requires a commitment to reform and re-engineer current systems and processes. Such change is traumatic, will involve confronting vested interest and is resource intensive. DFID stated that it was ready to support governments that were committed to tackling corruption where governments have translated that commitment into a wellarticulated anticorruption strategy.[167] Donors are very keen to push governments on issues of governance and much support is conditional on a government making progress on governance issues. There is a danger that this can create an incentive for governments to make public statements about their level of commitment to reform that are not backed by real political will. Transparency International said "Assistance through aid mechanisms can only be effective when it is actively sought by the Government in question and is not simply a response to donor pressure for governance programmes".[168] Bilateral donors, the World Bank and the EU have agreed to make good governance a condition for their continued support. Mark Malloch Brown cautioned that this created a massive incentive to pay lip service to governance issues without a genuine commitment to deliver the necessary changes. Donors must take account of the fact that as they better coordinate their efforts to tackle corruption and harmonise their conditionalities on assistance, the incentive to pay lip service to demands for improvements in governance is likely to increase.

70. It is important that donors test a government's commitment to reform. The IMF and the World Bank are withholding financial aid to Kenya because the government has failed to keep its promise to implement anticorruption measures. The Kenyan Government had promised that the AntiCorruption and Economics Crimes Bill and the Code of Ethics Bill, would be passed by the last session of parliament, but this did not happen. DFID, in its Kenya Country Strategy Paper stated that "Priority actions to improve governance include making anti-corruption measures operational and effective". In this respect, the Kenyan Anti Corruption Authority (KACA) was seen as an important element in Kenya's anti-corruption drive and was funded by the government and donors to the tune of more than US$ 4 million. However, on 22 December 2000, the KACA was ruled 'unconstitutional'[169] by Kenya's High Court because, amongst other things, it was considered a breach of the doctrine of the separation of powers for the Authority to be presided over by a serving judge. It was also found that the KACA undermined the powers and authority of the Attorney-General and the Commissioner of Police as conferred on them by the constitution.[170]

71. Richard Manning, DFID, said "We can only work ... where there is a genuine commitment to reform and where there is something we can make a contribution to".[171] A genuine commitment to reform is a prerequisite for effectively tackling corruption. DFID will need to test carefully the commitment of recipient governments on a regular basis to avoid a situation like that in Kenya. DFID should seek to use the leverage of other donors and particularly the UNDP in pressing governments where commitment to address governance is weak. Mark Malloch Brown was clear that no matter how often they were rebuffed and how unpalatable the message, the UNDP was committed to pushing governance and corruption issues. The UNDP's unique position as the developing countries' development agency makes such a commitment very important.[172]

FUNDING THROUGH GOVERNMENTS

72. Clare Short stressed the importance of building sustainable, effective systems of government with transparency in the management of public finances - "That is the work that will enable countries to have the effective modern state that brings health care and education to all their people; and create a climate for a private sector that will grow and improve their economy. That is the real answer to corruption - systems".[173]

73. In corrupt states, working outside government systems may be a good way to protect development funds from corruption but it is unlikely to be sustainable.[174] Clare Short said that DFID and its predecessor used to run high quality projects that had their own financial and accounting systems. These systems were a good way of preventing corruption but led to no improvements in the systems of the countries where DFID was active.[175] She saw working with governments as key. She said that funding through NGOs rather than through governments was "a method of avoiding corruption but it weakened an already weak state".[176] Richard Manning, DFID, made a similar point when he noted that there was a danger of undermining local accountability in countries that were highly aid dependent and where aid money was not subject to some kind of oversight or scrutiny.[177]

74. Richard Manning, DFID, said it was important aid was provided transparently and that it was subject, as much as possible, to democratic scrutiny through the parliamentary and civil society processes of the recipient country.[178] Sector wide approaches force developing countries to put in place systems to manage the money coming from donors. This effectively means that they have the systems that enable them to account to their own people for all the state revenues, not only those provided by donors.[179] Many donors, including DFID, make the development of effective anticorruption programmes and the existence of accountable financial systems a precondition for sector wide and budgetary support. DFID uses special project and audit arrangements to safeguard UK taxpayers' resources and ensure they are used for their intended purpose.[180] In preparing its Country Strategy Paper for Kenya, DFID developed high and low case funding scenarios depending on the level of commitment to tackling corruption demonstrated by the Kenya Government. This allowed DFID to allocate significantly different levels of funding depending on the commitment demonstrated by the Kenya government. If a long-term development partnership was established the high case scenario would deliver increased funding through sector wide approaches. In the absence of such a partnership the low case scenario would deliver reduced funding mainly through NGOs. Governance was one of six impact areas used to test the strength of the commitment by the Kenya Government.[181]

75. Donors are faced with difficult choices when governments are unwilling to make the commitment required to address corruption or renege on previous commitments. DFID told us that where this is the case the level of development assistance provided is reduced. They continued to support the programmes that benefited the poor by channelling support through NGOs, local government and other agencies but recognised that such support cannot lead to improvements in economic performance or in government systems.[182] Clare Short said "In a country where you cannot work with government systems because they are corrupt or do not care about people or are not focussed on the needs of the poor, you can find some NGOs and that is better than nothing but it is not systemic change...".[183]

76. Laurence Cockcroft, Transparency International (UK), argued that "there is a strong case for tapering aid to countries which are endemically corrupt and where governments show no sign of changing their position".[184] He felt money should be channelled through civil society and NGOs. He was concerned that key government institutions in such countries, like offices of auditors-general, should not be ignored.[185] He did acknowledge that there was a danger that cutting off aid where corruption was rife could increase the extent to which political leaders would resort to criminal activity to maintain their financial position.[186]

77. Clare Short confirmed that DFID would work through civil society and NGOs in difficult countries. It was important to maintain some presence in those countries as the feedback from people on the ground was important to DFID's understanding of what was happening in a country.[187] Mark Malloch Brown said that in Myanmar, because of corruption and broader concerns about the political legitimacy of the government, the UNDP had adopted a community based development approach which bypassed government. He said that similarly a power system project in northern Iraq was being funded entirely outside government channels. Mark Malloch Brown went on to say "We will resort to direct execution as very much a second best but where our concerns about corruption or political concerns about legitimacy of government mean that it is that or suspending the programme".[188] Clare Short said that humanitarian assistance was given anywhere and everywhere under any kind of government - "No people should go hungry because they have a rotten government".[189]

78. We recognise that this is a complex issue. The response from donors to corruption must be flexible. We are encouraged that DFID have demonstrated such a flexible approach - the development of high and low funding scenarios, a desire to work with governments committed to change, a willingness to work outside government where there is little option are all positive moves. We agree that Sector Wide Approaches have the capacity to offer long-term sustainable development on a country-wide scale but we have very real concerns about the willingness of some governments to change. We support DFID in adopting a flexible approach to funding. We would be keen to see that key institutions in the fight against corruption such as the offices of Auditors-General and anti-corruption commissions continue to receive support and technical assistance even where DFID is unable to move to sector wide or budgetary support. DFID should also support parliamentary scrutiny and oversight and ensure parliaments have knowledge of donor funding to governments and NGOs in the country.

79. In addition to working through NGOs, DFID has worked with regional government in some countries although there were questions about the sustainability of this work.[190] Clare Short gave the example of a country where they work with local government to get books into schools. She raised some concerns about the lack of appropriate skills and institutions at a local level. She said "When you move from highly centralised systems in weak states with poor administrative capacity, to decentralise you sometimes get an upsurge of corruption because you have even weaker systems at local level".[191] We have already seen that decentralisation is one of the successful ways accountability and transparency can be improved adding urgency to the need for donors to address the strength of regional and local institutions. Donors must look at the need to build capacity and strengthen institutions at a regional and local level in addition to the work they are doing with central governments.

Working with Civil Society

80. Mark Malloch Brown spoke of the important role civil society had to play in tackling corruption.[192] The Corner House said anticorruption drives by civil society and governments in developing countries had exposed many instances of corruption involving UK companies.[193] Transparency International lists a number of ways in which civil society can be active in the fight against corruption including raising awareness, political lobbying, prosecution or legal representation on corruption issues, civic education and monitoring the anti-corruption aspects of growth and poverty alleviation programmes.[194] Manzoor Hasan, Transparency International (Bangladesh), stressed the importance of citizens' participation in tackling corruption and described how Transparency International were working with groups of citizens who had come together to act as a watchdog body for local services.[195] There is scope for civil society to be involved in monitoring the anti-corruption elements contained in Poverty Reduction Strategies. Laurence Cockcroft noted that donors used aid conditionalities as an incentive for change in developing countries but said he was keen to see civil society become an equally, if not more, important source of change. He felt that conditionalities were a shortterm solution for donors and that civil society within each country should be encouraged and enabled to fight corruption domestically.[196]

81. We are concerned that the role of civil society, including NGOs, in tackling corruption should not be overlooked and that even where DFID is able to work through a government, some support should continue to be provided to those building support for tackling corruption outside government as mobilising community support is an important part of the battle against corruption. We are also concerned that NGOs supported by DFID are themselves transparent, honest and open to investigation. We were pleased to note that DFID had recognised this when Richard Manning, DFID, said "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".[197]

Working with Multilateral and Other Bilateral Donors in Developing Countries

82. Clare Short explained that it was impossible to tackle corruption successfully with lots of small anti-corruption initiatives being pushed by different donors.[198] A systematic approach is needed in building good legal systems and effective modern states. It was clear that cooperation with the multilateral and bilateral donors was the key to successfully tackling governance issues. Crown Agents complained of a lack of donor coordination in tackling corruption.[199] DFID conceded that "The effectiveness of support for anticorruption programmes would be substantially enhanced by better coordination between development agencies".[200] DFID has been cooperating with members of the Utstein Group (Netherlands, Norway, Germany and UK) to reduce the effects of corruption on development. DFID has agreed an action plan with the Utstein group[201] and told us that together they planned to develop a resource centre dedicated to anti-corruption and money laundering expertise.[202]

83. DFID should take a lead in sharing information on past, present and future work as a means of avoiding duplication of effort by donors. It would provide a useful resource on successful and unsuccessful strategies if evaluation was to be included. We welcome the development of a common resource centre with the Utstein partners and look forward to seeing this.[203]

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