By Peter Eigen and - -
BERLIN, Mar 1 2005 (IPS)

When the new Iraqi government takes office in the coming weeks it will face the daunting task of reversing decades of state-sponsored looting, writes Peter Eigen, Chairman of Transparency International, a non-profit organisation dedicated to the fight against corruption. Transparency International\’s Global Corruption Report 2005 (www.globalcorruptionreport.org), released March 16, features a special section on post-war reconstruction. In this article, the author writes that infrastructure development has suffered greatly at the whims of dictatorship, the scheming of the Oil-for-Food programme, and the opaque contracts of the Coalition Provisional Authority, which doled out billions of dollars worth of construction and engineering contracts at break-neck speed in the aftermath of the war. The potential for abuse remains immense. The safety and prosperity of future generations, and by extension the success of peace and democracy, will rest, literally, on the foundations built today. It is indispensable that Iraqis see the new government as legitimate and accountable. The scene unfolding, however, does not bode well. The government should decentralise aid and reconstruction projects where possible, shortening reporting lines and strengthening a sense of ownership. A strong and independent local media is also vital to keep a watchful eye on those in power. Competitive and transparent bidding must be ensured. With unprecedented sums earmarked by the US government for Iraqi reconstruction and an oil industry and infrastructure still in tatters, the opportunities and the risks are immense. If urgent steps are not taken, Iraq will not become the emblem of democracy that many of us hope for; it will become the mother of all corruption scandals.

When the new Iraqi government takes office in the coming weeks it will face the daunting task of reversing decades of state-sponsored looting. This legacy is problematic, to say the least. In particular, infrastructure development – oil, water, electricity, and road works – have suffered at the whims of dictatorship, the scheming of the Oil-for-Food programme, and the opaque contracts of the Coalition Provisional Authority, which doled out billions of dollars worth of construction and engineering contracts at a break-neck pace in the aftermath of the war. The potential for abuse remains immense.

It’s no surprise that countries recovering from armed conflicts are among the most vulnerable to corruption. Basic institutions have been decimated, and warring parties often use corruption as a means to further their goals, justifying their behavior in the context of war. Citizens are driven to extreme measures to get by, relying on the black market as the legitimate economy evaporates. When the dust clears, former combatants may be tapped to fill government posts. And in the case of today’s Iraq, corruption could be funding insurgents and criminal networks. Add the billions of aid dollars that come tumbling in and you have a potentially toxic brew.

The safety and prosperity of future generations, and by extension the success of peace and democracy, will rest, literally, on the foundations built today. It is indispensable that Iraqis see the new government as legitimate and accountable. The scene unfolding, however, does not bode well. Political factions occupy opulent villas vacated by Saddam’s henchmen after the dictator’s fall, and the hundreds of SUVs that once served as the status symbol of Saddam’s secret agents now ferry officers of Iraq’s new political parties to their appointments around Baghdad.

In Iraq, public institutions are still struggling to find out how many employees they have on their payrolls. Obvious safeguards are still missing, and ministries and state companies lack effective inventory systems. When no one knows how much money is flowing in and oil flowing out of the country, it is hard to control for corruption. It is in this climate that the US has spent an estimated USD 5.2 billion on reconstruction, with USD 18.9 billion yet to be spent (as of December 2004).

In matters of contracting, the Coalition Provisional Authority (CPA) hardly set a good example for the emerging sovereign state. The most appalling cases include an apparent no-bid contract for the Ministry of Electricity worth more than USD 339 million, uncovered by KPMG Bahrain in a 2004 audit, and the granting of the Orwellian-sounding ‘Indefinite Delivery Indefinite Quantity’ contracts, which allow the government to award an unspecified amount of future work to approved contractors. Regardless of these debatable practices, much of the anticipated expenditure on building contracts has yet to begin.

Measures have to be taken starting today. For one, the government should decentralise aid and reconstruction projects where possible, shortening reporting lines and strengthening a sense of ownership. A strong and independent local media is also vital to keep a watchful eye on those in power. Competitive and transparent bidding must be ensured. There must be decent pay and supervision for any government staff involved in procurement.

With unprecedented sums earmarked by the US government for Iraqi reconstruction and an oil industry and infrastructure still in tatters, the opportunities and the risks are immense. If urgent steps are not taken, Iraq will not become the emblem of democracy that many of us hope for; it will become the mother of all corruption scandals. (END/COPYRIGHT IPS)

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By Peter Eigen and - -
BERLIN, Dec 6 2004 (IPS)

December 9 is UN International Anti-Corruption Day, in recognition of the first signing ceremony of the UN Convention against Corruption in Merida, Mexico, on 9 December 2003. Since then, 113 countries have signed the Convention, a milestone in international efforts to curb corruption, writes Peter Eigen, Chairman of Transparency International. Nepotism, patronage, and corruption do not just block development and deepen poverty, Eigen writes in this column. They also hold back the development of a private sector in developing countries, and deprive a new generation of the education and healthcare they need to be able to participate in economic development. Corruption not only diverts public funds into the pockets of well-connected individuals. It also deepens a country\’s indebtedness for generations to come: estimates put the cost of corrupt projects in developing countries at more than one-third of the debt burden of the developing world. Corruption robs children of their future, it breeds conflict, mistrust and even war. Corruption kills.

The decision to launch Anti-Corruption Day, a long-cherished wish of Transparency International (TI), was another important event in the anti-corruption movement’s efforts to heighten awareness about the problem of corruption and the fact that it is preventable through systemic reform combined with political will.

More and more governments around the world, the World Bank and the UN, now realise that the Millennium Development Goal of halving the number of people living in extreme poverty by 2015 is attainable only if governments seriously tackle corruption.

Nepotism, patronage, and corruption do not just block development and deepen poverty. They also hold back the development of a private sector in developing countries, and deprive a new generation of the education and healthcare they need to be able to participate in economic development.

Corruption not only diverts public funds into the pockets of well-connected individuals. It also deepens a country’s indebtedness for generations to come: estimates put the cost of corrupt projects in developing countries at more than one-third of the debt burden of the developing world. Wasteful projects generate recurring costs, and are often poorly implemented because tenders are allocated to bidders who pay kickbacks instead of those offering quality and value for money.

The Organisation for Economic Cooperation and Development (OECD) puts government expenditure on procurement at USD 3.5 trillion worldwide. A conservative estimate puts the amount lost due to bribery in government procurement at USD 400 billion worldwide.

That is why Transparency International’s chapters around the world will be marking Anti-Corruption Day by raising awareness about the dangers of corruption and launching debates on how to implement anti-corruption strategies. They will urge their governments to sign and ratify the UN Convention, as well as key regional conventions such as the African Union Convention on Preventing and Combating Corruption. In addition, TI is urging OECD member governments to ensure that the resources are made available to enforce the OECD Anti-Bribery Convention, which outlaws bribery of foreign public officials and came into force in 1999.

As confirmed by the Transparency International Global Corruption Barometer, a new survey to be published on 9 December, citizens around the world are exasperated at the depth of political corruption the world over, and at the extent to which corruption distorts the political decision-making process in developed and developing countries alike.

As citizens have shown in Georgia and Indonesia over the past 12 months, and indeed in Ukraine now, a new consensus has grown out of the increasing realisation that corruption diverts funds away from essential public services, such as health and education, and thwarts the development of honest businesses. In so doing, corruption robs children of their future, it breeds conflict, mistrust and even war. Corruption kills.

It is a priority for an increasing number of new governments around the world, even though enormous challenges persist. As this year’s Nobel Peace prize winner, Wangari Matthai, says, it is now clearer than ever that the challenge facing much of Africa is to move from an age of conflict, hunger, and corruption to one of good governance and economic development.

Developed countries and multinational corporations bear a major responsibility. Until the OECD Anti-Bribery Convention came into force in 1999, the political and commercial elites of the developed world condoned active bribery by their exporters abroad. In some countries, indeed, bribes were tax-deductible.

The UN Convention provides new scope for effecting mutual legal assistance between countries — making it easier in particular to facilitate the return of assets stolen by corrupt leaders. This complements the African Union Convention on Preventing and Combating Corruption, adopted in July 2003, which also provides for greater co-operation on the return of stolen assets.

John Githongo, Permanent Secretary for Governance and Ethics in the office of Kenyan President Mwai Kibaki, says that in searching for assets stolen by corrupt elites, Kenya’s new government has already traced roughly USD 1 billion believed to have been stolen from the country.

Increased global awareness of the impact of corruption has created a climate ripe for action. International business and civil society organisations have united around a global consensus, reflected in the adoption in June this year of an anti-corruption principle by the more than 1,500 corporations worldwide who are signatories to Kofi Annan’s UN Global Compact.

If we fight corruption together, we can make a difference. (END/COPYRIGHT IPS)

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By Peter Eigen and - -
BERLIN, May 1 2004 (IPS)

In election campaigns this year in Indonesia and the Philippines –countries that have been impoverished by the greed of successive corrupt leaders– the presidential candidates have battled one another for the anti-corruption mantle, writes Peter Eigen, Chairman of Transparency International. In this analysis for IPS, Eigen writes that both countries are case studies in how corrupt leaders who take advantage of immense personal power and immunity from prosecution can devastate their populations by systematically plundering their wealth. The recent adoption of the United Nations Convention against Corruption is an important step towards the repatriation of money siphoned off by nefarious leaders. The first-ever UN International Anti-Corruption Day will be held on 9 December to pressure governments to ratify the Convention so that stolen assets can be returned to their rightful owners. Thirty ratifications are needed before the Convention comes into force. Citizens have a right to know what happens to the money managed by public officials in the developed and developing worlds, and to insist that donor and other government funds reach the intended recipients – the people.

In election campaigns this year in Indonesia and the Philippines –countries that have been impoverished by the greed of successive corrupt leaders– the presidential candidates have battled one another for the anti-corruption mantle.

The two countries are case studies in how corrupt heads of state who take advantage of a combination of immense personal power and immunity from prosecution can devastate their populations by systematically plundering their wealth. And both provide sorry tales of legal loopholes and a lack of political will that time and time again prevent money secreted into offshore accounts, pet projects, and unnamed bank deposits from being returned to its rightful owners, the people of the respective countries.

A glance at the figures involved, highlighted in Transparency International’s Global Corruption Report 2004, shows how urgent the problem is. Three of the most notorious leaders of the past two decades –former presidents Mohamed Suharto of Indonesia, Ferdinand Marcos of the Philippines, and Mobutu Sese Seko of Zaire (now Democratic Republic of Congo, DRC)– allegedly embezzled between 25 and 50 billion dollars from their respective countries, where, it should be noted, the average income is less than a thousand dollars per year. In DRC, it works out to a mere 27 cents per day.

Much of the money that ended up in the pockets of such leaders came from northern governments, multilateral lenders, and donor agencies. Zaire under Mobutu Sese Seko received more than USD12 billion in aid, mainly from the World Bank. Estimates –it is almost impossible to know the real figure– put the sum Mobutu diverted at around USD5 billion. His actions not only denied the population schools, teachers, hospitals, and medicines, but left the country burdened with a crippling debt.

Corruption has impoverished the populations of some of the countries richest in natural resources. In Nigeria, the amount that General Sani Abacha allegedly looted between 1993 and 1998 –as much as USD5 billion– represents about 10 percent of the country’s income from oil over his five years in power. According to a recent report by Human Rights Watch, more than USD4 billion in state oil revenue disappeared from Angolan government coffers from 1997 to 2002, roughly equal to total government spending on social programmes in the same period.

Efforts to repatriate the money stolen by former corrupt leaders have all too often been thwarted by loopholes in the international legal and financial system, or by a lack of political will on the part of the successor government. Significant headway has been made by the Swiss authorities to remedy the first of these problems. Legal action taken on behalf of the Holocaust victims in the late 1990s helped peel back strict banking secrecy in the country. The successes of resolute prosecuting judges, like Carla del Ponte and Bernard Bertossa, in disclosing and freezing assets, have turned Switzerland into a leader in the fight against money laundering.

In late 2003, Swiss authorities agreed to repatriate to Nigeria the USD618 million that was reportedly embezzled by Abacha. But more than this amount remains frozen in other jurisdictions, including Britain, where court action to retrieve an estimated USD1.3 billion has stalled.

The lack of political will can prove an even greater obstacle than the legal loopholes. The day before Mobutu was toppled in May 1997, Swiss authorities ordered all 406 Swiss banks to search for Mobutu’s accounts. They found just USD4 million. They then wrote to the new government in Kinshasa asking for clarification of ownership of the funds. Two years later, however, there was still no reply from President Laurent Kabila.

In this context, the recent adoption of the United Nations Convention against Corruption is an important step towards the repatriation of money siphoned off by nefarious leaders. The Convention commits signatories to enhanced co-operation and mutual legal assistance in the return of assets. It also aims to get states to require domestic financial institutions to adopt stringent ”know your customer” procedures. If every country were to adopt and enforce such measures to curb abuse of office, lax banking controls, and the use of offshore banks, opportunities for looting would be radically reduced.

Another important provision of the Convention is that it requires authorities to take action to freeze assets on the basis of ‘reasonable belief’ when asked by the competent authorities in the requesting countries. This eliminates the requirement of obtaining a court order from the requesting country, a process that is often cumbersome enough to give the malefactor time to move funds elsewhere.

Transparency International will be working towards the first-ever UN International Anti-Corruption Day on 9 December to pressure governments to ratify the Convention so that stolen assets can be returned to their rightful owners. Thirty ratifications are needed before the Convention comes into force. Kenya and Sri Lanka have taken the lead in ratifying it, and South Africa, Nigeria, and Cameroon are expected to follow.

Citizens have a right to know what happens to the money managed by public officials in the developed and developing worlds, and to insist that donor and other government funds reach the intended recipients — the ordinary people who have suffered so much at the hands of tyrants. (END/COPYRIGHT IPS)

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