 |
|
|
|
|
|
|
|
|
|
|
 |
 |
|||||||||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
||||||||||||||||||||||||||||||||
|
Information in: Español - Français - Deutsch - Português - Russian - Japanese - Svenska - Italiano - Suomi |
||||||||||||
|
|
|
Corruption
Mr. Donald Johnston 5 November 2000 Dear Mr. Johnston It is generally accepted that corruption has a massive impact on economic development, social equity and democratic accountability both in the North and South. Globally, the World Bank estimates the amount of "pay-offs" and bribes to reach $ 80 billion a year. Such practices add significant costs to the procurement of goods and services - a surcharge which according to the Asian Development Bank can increase costs by between 20 and 100 per cent. Corruption also distorts the selection of projects and whole sectors for investment. It is thus an important cause of indebtedness and social injustice. Again according to the ADB, corruption diverts "resources away from social sectors and towards defense and major infrastructure projects". Therefore, "the costs of corruption are often borne disproportionately by the poor, while the provision of public goods and services is skewed towards the rich, the powerful and the well connected". Many large infrastructure projects in non-OECD countries are funded or guaranteed by public finance institutions such as multilateral development banks or export credit agencies. In 1997, a World Bank memorandum concluded that between 20 and 30 per cent of Indonesia's development budget, and of World Bank projects in the country, were leaked in the form of bribes. Since the mechanisms analyzed by the memorandum were generic, it must be assumed that the projects of export credit agencies (ECAs) were affected by corruption to the same extent. Case studies from Kenya, Lesotho, Malaysia or Pakistan equally illustrate the involvement of export credit agencies in corrupt projects. (Cf. The Corner House, Underwriting Corruption, Britain's Role in Promoting Corruption, Cronyism and Graft, October 2000.) In February 1999, the OECD Conventionon Combating Bribery of Foreign Public Officials in International Business Transactions, which makes the bribing of all foreign government officials a criminal offence, entered into force. We applaud the enactment of this Convention. We are concerned however that the Convention should have clear and binding consequences on the policies of export credit agencies. A brief survey conducted by NGOs indicates that several ECAs have already adopted policies to combat corruption in the projects they fund. Others are in the process of doing so. About half of all the major export credit agencies which were contacted did not bother to respond to the NGO inquiry. In several respects, existing policies are not sufficient to effectively prevent corruption in ECA projects. And disturbingly, the recent experience in countries such as Indonesia indicates that even where policies exist, agencies often do not seem to implement them in practice. In Indonesia, corruption was particularly rampant in the power sector. "In the go-go years of the Suharto era, building a power plant in Indonesia was one of the best bets going", the Asian edition of the Wall Street Journal commented on 28 July, 1999. And it continued: "Western governments, eager to see their giants get a piece of the Indonesian action, were handing out risk insurance like candy." In many cases, foreign companies offered free shares and other benefits to friends and relatives of General Suharto. In return, they received contracts to build power plants or sell power at sometimes ridiculously high prices, and often for power which the country did not need at all. After the fall of the dictator in May 1998, the state power utility PLN, the national audit commission and the media produced considerable evidence about the corruption involved in several power projects. All of the projects in question had been funded or guaranteed by export credit agencies of OECD countries. The state power utility and Indonesia's attorney-general attempted to investigate the suspected corruption, and to renegotiate the contracts in question. Yet the ECAs, some of which had strict anti-corruption guidelines in force, did not cooperate with the Indonesian authorities in order to overcome the corrupt legacy of the Suharto years. They rather chose to apply harsh political and economic pressure on the government to honor the power contracts regardless of whether they were corrupt or not. (Cf. the enclosed memorandum by the Berne Declaration, Publicly Guaranteed Corruption, Corrupt Power Plant Projects and the Responsibility of Export Credit Agencies in Indonesia, October 2000.) In Lesotho, nine companies, three international consortia and three officials of dam building companies are currently on trial under the charge of bribing the former head of the Lesotho Highlands Water Project to the tune of $ 2 million. In cooperation with South African and Swiss colleagues, magistrates from Lesotho have managed to document bribes which the companies had paid between 1988 and 1998. The World Bank, which has been a catalyst for the funding of the project, is implementing an internal investigation into the matter, even if narrowly restricted to the contracts directly funded through Bank loans. Export credit agencies from several OECD and non-OECD countries have also supported the Lesotho Highlands Water project from the very start. Yet we are not aware that any of them have so far opened an investigation into the matter. They do not seem to be concerned about the coverage of corrupt practices by public credits or guarantees. (Cf. the enclosed report by the Reform the World Bank Campaign, Dams on Trial, The World Bank and the ‚Cancer of Corruption', September 2000.) In order to resolve the problems of corruption and non-productive investments - both as a legacy and an ongoing practice - we propose that the members of the OECD's Export Credit Group adopt the following measures: (1) Exporters applying for official export credits or guarantees should be requested to declare in writing that no illegal payments related to the contract have been made. (2) Export credit agencies should not fund commissions as part of the contracts which they cover. In its Working Paper on ECAs and corruption of February 1999, Transparency International called the practice of underwriting commissions "an indirect encouragement to bribe" and "close to complicity with a criminal offence". (3) If evidence arises that illegal payments related to contracts covered by ECAs have been made, the respective governments should initiate due diligence investigations into the matter. The respective credits and guarantees should be suspended until the investigations have been concluded. (4) If borrowing governments raise suspicions that illegal payments related to ECA projects have been made, the agencies and the creditor governments should not apply any political pressure on borrowers in order to defend the interests of their exporters. Pursuant to article 9 of the Convention, they should rather cooperate fully in order to investigate the matter. (5) If illegal payments related to contracts covered by ECAs are documented, the respective credits should be cancelled and guarantees should be declared void. Pursuant to article 3 of the Convention, the proceeds of a bribery should be seized and confiscated. This sanction is not confined to bribes which have been made after the Convention entered into force. Consequently, no payments should be made for corrupt contracts even if they were concluded before February 1999, and export credit agencies should cancel all respective loans and guarantees. (6) In line with paragraph 24 of the Commentaries on the Convention, companies involved in illegal payments related to ECA projects should be debarred from receiving further export credits or guarantees for a period of five years. (7) Sunlight is the best disinfectant. Providing public access to all information on ECA projects which is not directly linked to commercial interests will allow parliaments, NGOs and other civil society institutions to raise problems of corruption early in the process, and to monitor the use of public credits and guarantees. E.g. information about preliminary applications for all major projects should be made available to the public. These proposals were also reflected in the June 2000 Jakarta Declaration for Reform of Official Export Credit and Investment Insurance Agencies, which was endorsed by more than 350 NGOs from 45 countries and of which you have received a copy. The Export Credit Group will meet on 16/17 November, 2000, in Paris. Dealing with non-productive investments is on the agenda of the meeting. We ask that the members of the ECG adopt the above measures in order to avoid incoherences with the Convention to Combat Corruption in an area which is of great public concern. We also ask that representatives of the undersigned organizations be invited to a consultation by the ECG so that they can have a direct input into the debate. We understand that Transparency International has been invited to make a presentation on the subject on 16 November. Thank you for your interest. Sincerely yours, Peter Bosshard, Berne Declaration, Switzerland cc. Ms. Birgitta Nygren, Chair, Export Credit Group Back to Top This letter is being endorsed by the following 78 NGOs from 33 countries: AUSTRALIA AUSTRIA BANGLADESH BELGIUM BRAZIL CAMEROON CANADA ESTONIA FRANCE FIJI GEORGIA GERMANY HUNGARY INDIA INDONESIA JAPAN ITALY KENYA LATVIA MALAYSIA NETHERLANDS NORWAY PAKISTAN ROMANIA RUSSIA SLOVAK REPUBLIC SOUTH AFRICA SWEDEN SWITZERLAND THAILAND TOGO UNITED KINGDOM URUGUAY USA Related document: |
|
||||||||
|
||||||||||||
|
Home | What
are ECAs? | The Problems | Goals
| Take Action! | Press
Room | About Us
For Questions or Comments, email info_at_eca-watch.org
To report broken links and/or technical difficulties, email webmaster_at_eca-watch.org View our Privacy Statement |
||||||||||||
