Corruption is the enemy of development

Peter Eigen is Chairman of Transparency International (www.transparency.org), the leading global non-governmental organisation engaged in the fight against corruption. He is a Visiting Scholar at the Carnegie Endowment for International Peace.

Wherever corruption reigns, development aspirations will remain an unattainable dream. That is no longer a view held only by civil society groups. In 1996, World Bank President James Wolfensohn put the fight against corruption centre-stage on the bank's agenda, and the bank now openly declares that it "has identified corruption as the single greatest obstacle to economic and social development".

At the March 2002 UN Conference on Financing for Development in Monterrey, a succession of ministers from donor countries joined World Bank and International Monetary Fund officials in a common judgement: that corruption is the enemy of development. The US Administration's Millennium Challenge aid proposals were presented to Congress in February 2003 with the target of reducing poverty by giving "special attention" to fighting corruption. The mission of Transparency International (TI), now in its tenth year as the world's leading non-governmental organisation engaged in the fight against corruption, is firmly on the global agenda.

Governments, the private sector, and civil society are all crucial to the equilibrium of the national integrity system, and the TI approach to building coalitions was evident in the evolution of the OECD Anti-Bribery Convention. The key to securing support for the Convention, which came into effect in February 1999, was the support of large companies. TI drafted a letter, signed by twenty European companies and sent to their ministers encouraging them to sign the Convention, which outlaws bribery of foreign public officials. We managed to bring business on our side by offering an escape route from the prisoner's dilemma in which they found themselves. Many business people do not want to bribe, but they feel they must to keep up with their competitors.

Bribery will continue unless companies operate on a level playing field. For countries to enforce the Convention, they need to know that their companies will face a level playing field. So all the 35 signatory governments must provide resources to prosecutors, investigators, courts and tax inspectors to make sure the Convention is applied, and to make it clear that companies that bribe will be investigated, charged and blacklisted until they change their ways.

The mood of both governments and the private sector is changing rapidly. Since the Enron, Global Crossing and WorldCom scandals - and now Ahold in Europe - jolted shareholders and pension fund managers into reality, the public no longer has any confidence that a given corporation's books show a true and fair statement of its finances. Trust must be rebuilt.

Campaigns for greater corporate disclosure are beginning to make real headway. On 5 November 2002, the world's main diamond producing and trading countries endorsed the United Nations-backed Kimberley process certification scheme that will trace rough diamonds from their point of origin. From January 2003, without a certificate of origin, diamonds cannot be imported. These measures are designed to stop trade in diamonds from conflict zones, where they have been used to enrich military elites and entrench their interest in prolonging civil war.

TI and Global Witness are now arguing for international regulators such as the Securities and Exchange Commission in the US to require oil, gas and mining companies to publish taxes, fees, royalties and other payments made to each host government as a condition for being listed on international stock exchanges. Relying on voluntary corporate disclosure has failed because companies fear discrimination by host countries. For instance, BP's ambitions to "publish what you pay" in Angola drew threats of concession termination from the Angolan state oil company Sonangol. BP and Shell support mandatory disclosure.

Companies must establish codes of conduct, including detailed rules designed to combat bribery at home or by their subsidiaries abroad. To this end, TI has developed, together with companies including BP, General Electric, Shell and Tata, a set of Business Principles for Countering Bribery. The proposals include training programmes with guidance for all employees to ensure that bribery - direct or indirect - is outlawed. Under the guidelines of another NGO project, the Global Reporting Initiative (GRI), participating companies are asked to describe their policies and procedures for addressing corruption, including how the organisation meets the requirements of the OECD Anti-Bribery Convention.

The OECD estimates that annual budgets for government purchases worldwide run up to $5 trillion. The scope for large sums diverted in bribes is frightening, as are the lost opportunities when public expenditure is diverted away from basic needs such as education, health care and housing. Moreover, if an import licence can be obtained only via bribes and if foreign investors have to negotiate entry regulations, development is further undermined.

The message is clear: governments must work to promote good governance to foster sustainable development. Business leaders must remember their fiduciary role and not misuse the power entrusted to them, so that they report irregularities frankly and promptly, so that they consult other stakeholders - such as the local population as well as town-planners when they want to build a new factory - and so that they have the courage to admit mistakes, and to rectify them without hesitation. In short, what is required is leadership with integrity.

For more information, please contact:

Transparency International

ti@transparency.org

Tel: +49-30 3438 200

www.transparency.org