So, I ll sim ply say that he is deeply com m itted to and has won many

Transcription

1 The Road Ahead: Global Transparency for a Sustainable Future 13:30-15:00, 2 Novem ber, 2008 M aster of Ceremonies: This is the final plenary of this conference, entitled The Road Ahead: Global Transparenc y for a Sustainable Future. Please help me to welcome this last panel, which, as you will see, has been changed slightly: Jordan; HRH, Prince El-Hassan bin T alal, Prince of the Hashem ite Kingdom of Gabriel Negatu, Director of the Governance, Economic and Financial Managem ent Department of the African Developm ent Bank ; Richard Sam ans, Managing Director of the Center for Public-Private Partnerships of the W orld Econom ic Forum (W EF); Ingrid Srinat h, Secretary General of CIVICUS; Cobus de Swardt, Managing Director of T ransparenc y International; And m y colleague, Melinda Crane, both a journalist and anchor, who will be the m oderator for this final session. Melinda, you have the floor. M s CRANE (M oderator): Hello and welcom e. It is a great honour to m oderate this panel on The Road Ahead: Global Transparency for a Sustainable Future.

2 Since I agreed to take on this very agreeable and challenging task, events have conspired to turn our subject f rom one of perennial, big picture interest int o a m atter of truly pressing urgency. The global financial crisis has m etastasised into a worldwide econom ic m eltdown. And as usual, it is t he m ost vulnerable and the poor who are paying a heavy price. Som e actors from the private sector, some international and national institutions will not survive the crisis. And the old econom ic order is look ing increasingly unsustainable. W e are hearing cause for a new Bretton W oods system, for a reform ed, global econom ic architecture, even for a new, global green deal. W e are also hearing the heralding of a return of regulation, of a new era in which probity and accountability will replace greed. Nearly everyone agrees that trust and transparenc y are essential, that we m ust restore them if the international econom ic order is to f unction. But of course as usual the challenges in the specifics how, what, which institutions do we need for that? W hat m easures will ensure that the present crisis does not provok e retrenchment but instead reform? Those are som e of the questions that we want to talk about here today with five very distinguished panel m em bers. As you heard, a few changes have been m ade to the line-up. W e have lost two panel mem bers, Ephraïm Inoni and Donald Kaberuk a, but we are very pleased that we have gained one. W e will be hearing from each m ember of the panel for about 10 m inutes. T hen I will ask a few f ollow-up questions to get us started, after which I am look ing forward to hearing f rom the m em bers of the audience.

3 W e would appreciate it if you could ask questions rather than give statem ents, because our tim e will be lim ited. And we would also love to hear who you are and where you re from. And now it is a great honour for me to introduce our first speak er. He is Prince El-Hassan bin Talal of the Hashemite Kingdom of Jordan. He is the President and Patron of the Arab Thought Forum and the Pres ident Em eritus of the W orld Conference of Religions for Peace. And is active in so many organisations and c auses that I would use up half his tim e were I to enumerate them all. So, I ll sim ply say that he is deeply com m itted to and has won many prizes for engagement on behalf of intercultural understanding and the empowerm ent of the poor. PRINCE BIN T AL AL: Melinda, I cam e to the m icrophone early to shorten the journey and m axim ise the ten m inutes at m y disposal. You are so k ind in saying all thos e things about m e I didn t even recognise half of them. You could ask yourself what a Prince is doing here, talk ing about civil society and accountabilit y. I addressed the Nordic Council a couple of years ago in Copenhagen, and I stood up and I said: T here are three categories of people who should not be speaking in a parliamentar y or constitutional setting. The m entally-challenged, felons and m em bers of royal fam ilies. I want t o start t oday by quoting an intellec tual giant of our tim es, who celebrated his 80 t h birthda y a couple of days ago. I am, of course, speak ing about Paul Volcker. He said exactly what you just said, that we are facing the serious problem of restoring trust and confidence during a serious recession. Of course, it is by no m eans comparable to the Great Depression.

4 President Zoellick of the W orld Bank mentioned, the other day, the r- word, reconstruction. He spok e of an International Bank for Reconstruction. I would add to that reconciliation and religion, for those of you who are interested in an ethical approach to som e of the problem s we are addressing toda y. I think that it is im portant to bear in mind that in advoc ating change and I am quot ing Paul Volcker the recitation of particular m arket vulnerabilities, of supervisory lapses, of failure to close gaps or end disagreem ents among regulators is not surprising. T he drum beat, and this is the point of lobbying pressure has not been for more effective supervision. As a m em ber of the kitchen cabinet of ECOSOC (Econom ic and Social Council), the other day I called for the division of ECOSOC into an econom ic and a social council, because I think that the activities relating to social equity and I am a m em ber of the International Commission on Legal Em powerm ent of the Poor have not, unfortunately, been moving to the drum beat of econom ic achievem ent or developm ent. W hen referring to our part of the world, I would like to refer to the McKinsey Report. I spok e at a Global Compact m eeting the other day, or was it a couple of years ago? And Global Com pact, to m y surprise, included governments and the private sector. It did not, however, addres s, other than on the fringes I think we now discard externalities, or k nock -on effects, or collateral or whatever else we don t want to discuss with a pejorative lik e fringes the them e of bringing governments, civil societ y and the private sector together, in the context of an over-arching them atic mission of redirecting m ultilateralism. And that is the them e I want to tr y and address. W hat worried m e about the MENASA R eport is that, whereas today we are seeing the slowdown in Persian Gulf or Arabian Gulf econom ies reverberating in the Middle East, the UAE injected 32 billion into its bank ing s ystem and guaranteed bank deposits, and so the injections of finance

5 continue through every Gulf country. Prime Ministers, from Gordon Brown to other W estern Prim e Ministers, are vis iting Gulf countries. It is interesting t o note in the MENASA Report that there is absolutel y no reference to k ey elem ents of what you would consider geographically to be the Middle East, North Africa and South Asia, that is to say Israel, the Palestinian Territories, Bangladesh, Sri Lanka, Yem en, Syria, Sudan, Iran and Iraq. These countries are geographically a part of the MENASA region, but they have not been included. Presum ably, MENASA, in the eyes of McKinsey, m eans countries that by Heritage Foundation Freedom Rank ings are regarded as serious countries. And unfortunately, m y politics and those of the Herit age Foundation don t necessarily c oincide on a scale of 10. I do want to say, however, that the tim e has com e to recognise the basis of our problem. Different perspectives would be acceptable in a dem ocratic context, but the basis of our problem is, in m y hum ble opinion, that we f ace four sim ultaneous m acroeconomic shock s, all of them relating to hum an dignit y deficits. Firstly, the International Energ y Agenc y, IEA, estim ates that the energy sector needs 22,000 billion US dollars over the next two decades to m eet the rising demand for energy. T he Stern Review says that we m ust spend 14,000 billion US dollars over the next 20 years to cut carbon emissions. Analysts claim that we need an immediate capitalisation of the global bank ing s ystem, to the order of 1,000 billion US dollars, and probably m uch more over the next two decades. The UN indicates that the Millennium Developm ent Goals require 1,100 billion US dollars in prom ised f oreign aid, and another 1,100 billion US dollars in newly-generated funds to end povert y and related problem s over t he next seven years, and then even m ore after And presum ably, all of this, or m uch of it, is going to com e from the m ilk cow of the traditional sources of funds.

6 W e, the people of the region, live in the hinterland of oil. W hen you speak about EITI, what is important to m e is not just the pipelines; what is im portant is the people living in the neighbourhood of the pipelines. I would have lik ed to have s een m y Cam eroonian friend on the panel today, just to remind him of the pipeline that goes from Chad to Cam eroon but presum ably all the fuss about Darfur is not only related to povert y. I was working with lepers in D arfur in 1986, long before anyone had heard of Darfur. I assum e it is also related to the f act that oil will flow from that pipeline, from the Horn of Africa all the way to the Atlantic coast when we are all vaporised b y a nuclear confrontat ion in the region. Financ ing will be im possible without a m ajor, global, m acroeconom ic adjustment, which includes, in m y hum ble opinion, intra-regional com pensation. Intra-regional, ladies and gentlem en. Our region has an Arab League and an OIC, which m eet once a year, if that, to discuss ever ything and nothing. W e have an ESCW A, which I believe is som ewhere between Beirut and Vienna when it isn t being bombed; and apart from that, I don t think that we really have any quarterly m eetings at all. I think that if we tak e on the m acroeconom ic adjustment on the basis of intra-regional governance, that could perhaps end the season of bread and woods, the season of m inisters m eeting and greeting in W ashington and New York, and encourage them to m eet in the region and thereby begin to generate authentic policies for and from the regions we are talking about. The bright side of this crisis is that it provides the world with an opportunity to redefine the relationships between energy, environm ent, anarchy, policy, poverty and perhaps even to undertake a total recalibration of our s ystem. The degree to which energy is related to m onarchy values is seldom realised bec ause oil is priced prim arily in dollars throughout the world and has m ore of a direct influence on the value of currency than any other factor.

7 The dollar is fundamentall y link ed to global crude oil as its de facto reserve base and this has broad im plications. Man y people are now ack nowledging the need to internalise the external costs of environm ental degradation and clim ate change into the m ark et system by setting a real price on carbon em issions. The idea is that as consum ers and businesses are f orced to adjust their practices and lifestyle b y reducing their oil consum ption, that businesses will find investing in efficient alternative energ y cost effective. W illiam Polk wrote a splendid article the other day suggesting that as the English were once known as a nation of shopkeepers, so too have we becom e not shopk eepers, but junkies in terms of our consum er patterns. I would lik e to add to that, as a promoter of DESERTEC solar energy from the Gulf across North Af rica to Europe, and sa y that it is alm ost im possible to talk about greening that part of the world. It would m ean f or example a solar energy power plant on the Egyptian side of the Gaza strip. You can m end a solar panel; you cannot m end a h ydrocarbon station. You mentioned the is sue of greening and I would like to say that Juan Som avia s ent a letter to the G8 calling for green jobs in the region. Of course, even if ever y person and every business in the world were to adopt clean and renewable sources of energy right this m inute, petroleum would remain the most important ingredient of econom ic growth and profit and wage incentives and green businesses would still be dominated b y dollar values link ed directly to oil. So, in other words, there are two lobbies working directly against the greening solution. But we hope that solution will appear som ewhere down the line. The triple bottom line strategy m ade popular b y a grand coalition of environm entalists, politicians and busines s leaders and sim plified with the slogan People. Profit. Planet., proposes that tackling our social, ecological and energy problem s will create a m assive stim ulus f or business and jobs.

8 W hile this form ula gives print prim acy to the econom ic signals of the m arket, it largel y ignores the independent, m onetary driver of energy reserves, currenc y values and interest rates. Ladies and Gentlem en, we have to face the fact that a m oney-system based on debt and com pound interest requires a level of exponential econom ic growth that tests the physical limits of its resource reserve, which in our present system is fossil fuels. Any m ajor m ovem ent by governm ents to price carbon em issions in market terms will result in a dram atic increase in oil prices, creating widespread inflation, a significant increase in interest rates, large fluctuations in exchange rates, upheavals in global capital m ark ets, disruptions in access to credit and m ajor m onetary dis order. Not t o m ention the parallel grey econom y, which is running m ost of our countries anyway. And the extrem ist, for that m atter, who, because of our inabilit y to reach people, to reach our own people, is becom ing increasingly successful in filling vacuum s. Greening all the world s businesses, through the econom ic signals of the mark etplace, will not change the energy base of civilisations from fossil fuels to solar or other renewable energy s ources, as long as the reserve standard of the dom inant global currenc y rem ains tied to fossil f uels. Ultim ately, the external cost of global povert y, clim ate change and geopolitical securit y, m ust be adjusted. I would lik e to suggest alternative sources of funding, such as global, common transaction taxes and an expansion of the special drawing rights of the IMF. But also by m eans of an adjustment of the world reserve currency s ys tem. Global currenc y values should be determ ined according to priorities and according to the sustainabilit y of global energy resources as m onetary reserves, not by their price in the m ark et base, which is based on economic productivit y and growth.

9 Is it perhaps also the question of whet her we are interested in protecting oil in situ? Are we interested in protecting the hinterland? Are we interested in protecting the strategic waterways? In that regard, if we are going to talk about the protection of oil, are we interested in the IDPs (internally displaced persons), the DPs (displaced persons), the stat eless persons, the refugees, the m ass m igrations of people that have caused the real upheaval in our part of the world? If these m atters are of interest to us, then when are we going to create a cohesion fund, as Paul Volcker suggested, for the sym m etric empowerm ent of the poor? If terms of cultural s olutions, I am pleased to say that our call for a fetwa, a legal injunction, was answered, c alling for 20% of the profits of oil to be spent on the em powerm ent of the poor, zakat. That would m ean 1/5 of the ties. T hat would m ost certainly c hange the war on terror to a war or a struggle for hum an dignit y. I think we have done enough fighting against this and that. W alter Sisulu f rom one hemisphere and Yehudi Menuhin from another ask ed wh y we don t work for som ething. I would therefore like to conclude by asking why we don t work for a global social charter, a legal covenant for the just distribution of resources and human security? You have an opportunit y on Decem ber the 15 t h to do just that. I hope Joseph Stiglitz will help edit the input of the 500 NGOs at that conference. But even Joseph Stiglit z is not a m iracle worker. The m ain thing is that we start a process of calling for real change:

10 A global water energy and clean air authorit y that ensures the availability of sufficient and affordable flows of water and energy to curb carbon em issions. A global m onetary council to oversee capital m arkets through public consent generating capital f orm ation of the goal of econom ic growth and developm ent rather than basic trading. A global transparency agenc y that generates fees from the sale of rights to common resources and ensures that they are spent f or the common good. I am a Prince, but I don t do business. I don t even do m onk ey business. So I am still in the trees really. I would like to conclude by saying that the lesson we are learning from the financial crisis is that we cannot borrow ourselves into wealth. Thank you for your kind attention. M s CRANE (M oderator): Thank you very m uch, Your Highness. And with those last words, it is quite fitting that we will now hear from an institution that lends, nam ely the African Developm ent Bank. W e are very pleased that Gabriel Negatu could jum p in f or Donald Kaberuk a who could not be with us today. Mr Negatu is the Director of Governance, Economic and Financial Management at the African Developm ent Bank. Thank you very m uch for being with us, Mr Negatu. M r NEGAT U:

11 Thank you very m uch, Melinda, and let m e begin by apologising on behalf of Donald Kaberuka, who unfortunately could not join us today due t o unforeseen circum stances. But I bring you his greetings and well wishes. Let me also thank T I for the opportunity to present m y comments during this closing s ession, as we reflect on what has been s aid over the past few da ys and contem plate the Road Ahead. I would like to share some perspectives from the African Developm ent Bank s side, vis-à-vis the im plications for Africa. In order t o put things into context, I would lik e to begin b y saying, with regard to what is happening with the fight against corruption, or to put it m ore positivel y as the Prince just did, the prom otion of integrity and accountabilit y and transparency, that we can safely conclude that, as a whole, Africa is increasingly dem onstrating the political will required to prom ote transparency and accountabilit y. One can see that today, there is a profound shift towards the better in Africa. Institutional corruption, b y and large, is on the decline and protransparenc y and accountabilit y institutions are beginning to receive the necessary credibility and becom e m ore effective. This is underscored by t he fact that over 80% of the 23 countries that have now endorsed EIT I are from Africa. I think this sends out a clear m essage to anyone who m ay for a second think this is a western-driven agenda: the dem and f or this k ind of accountabilit y and transparency is com ing from Africa with the support of our partners. It is not only a state-driven action. I think m ost of you k now that NGOs from 23 Af rican countries have now joined the Publish W hat You Pay Initiative with a view to prom oting full transparenc y of the revenues accrued by these resource-rich countries. But thes e are all just indicative figures.

12 I should also m ention the African Peer Review Mechanism which is an African-led initiative to prom ote good governance in Africa. 29 out of Africa s 53 countries have now signed on to this initiative, and yes, im plem entation m ay be s low, but I think we can take heart from the fact that countries have signed on to the initiative. The k ey m essage is that Africa is on the m ove. T he direction we are travelling in is encouraging. The trajectory is positive. Nevertheless, we should be m indful of the fact that there is still a lot m ore work to be done. Despite the fact that institutions of accountabilit y and transparency are taking root, they still remain fragile, extrem ely f ragile in fact. T hey are characterised b y weak capacity and negative incentives, which lead to higher occurrences of corruption and poor growth. As a result, form al institutions in m any African countries are being c ircumvented by corrupt practices and m istrust. The poor are therefore getting their services through secondary m eans, instead of state institutions. A recent study by the IMF found that out of the 53 Af rican countries, about 37 have weak public financial m anagem ent institutions, especially as regards financial control, procurem ent and external audits. This highlights the fact that despite the progress m ade, institutions are fragile and susceptible to reversal. If one disaggregates the issue of institutional fragilit y further, one discovers that m ost post-conflict, fragile and resource-rich countries have the m ost fragile institutions. One also discovers that the relationship between corruption and institutional fragilit y is c yclical. T hat is to say, dom estic and external shocks that affect corruption also contribute to conflict. In return, corruption contributes and prolongs that sam e conflict that leads to corruption, so there is, if you will, a s ymbiotic t ype of relationship

13 between institutions and fragile states, resources and corruption. Fragile states often have weak institutions that are tailored t o serve sm all, elite groups that prom ote rent-seeking activities and that serve the narrow interests of the few. Corruption dam ages institutions both directly and indirectly in fragile states and it rem oves incentives. This is som e of the general back ground information that one expects an audience lik e this to k now. It s not surprising that som e of the m ost fragile states in Africa Som alia, Chad, Sudan, DRC, and so on are also rank ed am ong the top ten worst corrupt countries by Transparency International. I think the relationship is clear for all t o see. Conversel y, countries in Africa with strong institutions, like Botswana or Mauritius, are rank ed am ong the top ten countries in the T I Index. The link between institutions and corruption is therefore well establis hed. W e at the African Developm ent Bank are doing a lot to address these issues. I will save you the propaganda about what we are doing, but I will say that we are working with a governanc e and stat e-building strategy that look s at building institutions of public financial m anagem ent, specifically in the econom ic and financial sector, focused on institutions with an auditor general, accountant general, inspector general, and national procurem ent boards. T hese are institutions based on integrit y and accountabilit y that work to prevent corruption. W e are also supporting and work ing towards strengthening the dem and side in the fight against corruption, b y working through parliam entary public accounts committees and civil societ y. But let m e use the rem ainder of m y tim e to look ahead, at the road ahead. Based on t he discussions we have heard over the past few days, it seems a few key points have em erged on achieving global transparency for a sustainable future.

14 The m essage we can tak e hom e with us from this event, the m essage we seem to be promoting, is that a sustainable future m ust be built on trust and m utual accountabilit y between Africa and its partners. T his m ust be underpinned by m utual commitm ent to three k ey priorities, namel y: improved leadership, strengthened institutions and enhanced capacit y. Leadership, institutions and capacity. I think these are the bedrocks of the fight against corruption for a sustainable future. T hey are critical and central to achieving a sustainable future. In Africa, achieving global transparenc y for a sustainable future dem ands that we act in tandem in these priorit y areas. Let m e item ise the three ver y quick ly. Leadership. W e are seeing progress in this area; but Africa m ust also becom e a leader, an owner of its own issues and challenges and tak e responsibilit y for them, as well as work through African-led partnership initiatives, such as the NEPAD, APRM, the Africa Partnership Forum, the Africa-Asia Partnership, and so forth. T hese are political forums, bilateral and multilateral forums that prom ote the issue of leadership in the cont inent. The second k ey idea is that of building sustainable and trans parent institutions. That brings about and manages shared econom ic and hum an growth. I cannot emphasise the issue of institutions enough. Institutions m atter, because they are the underlying bedrock, the foundation of ever ything that we do. I will share with you a very short anecdote as to whether instit utions or leadership m atter the m ost. President Kaberuk a was addres sing a group like this, and highlighted the issue of institutions and leadership. Som eone from the audience raised his hand and said Leadership m atters m ore than institutions. The debate went back and forth for a while, with a group of

15 about a hundred people. Eventuall y, Mr Kaberuka gently asked the group, W ell, if leadership m atters more, how many of you in this group k now who the leader of Switzerland is?. I am not going to ask you to ans wer the question; I am m erely tr ying to show that yes, leadership m atters, but institutions m atter more. I don t think there was a single person in that audience that could name the President of Switzerland; and yet, Switzerland has one of the best institutions f or dem ocratic governance. So the m essage is clear: institutions matter. Leadership is im portant, but instit utions m atter m ore. Thirdly, we have the issue of capacit y. I think beyond political will and functioning institutions, national capacit y is vital to ensure a sustainable fight against corruption. The efforts made to build leadership, institutions and capac ity m ust be underpinned by m utual accountabilit y, by Africa and its partners. Mutual accountabilit y, I believe, is the bridge that brings us together around a shared vision. The recently concluded, high-level forum in Accra identified the three prerequisites for m utual accountability. They are: m utual confidence, m utual commitm ent and m utual trust, between developm ent partners and their northern partners and OECD countries. I think that if the fight against corruption is to be sustainable, then OECD countries have to fulfil their commitm ents and show a consistent form of leadership that translates commitm ent into practice. Allow m e to share som e figures with you, figures that most of you already know: over 65% of all African countries have ratified the UNCAC, while only 45% of OECD countries have ratified the Convention. And its im plem entation rem ains slow and incons istent.

16 I know that discussions have been held on this m atter during this forum, but OECD c ountries m ust show leadership in this regard. It is im perative that the y do so. According to the 2008 T I Report, of the 37 states parties to the OECD Convention against Briber y, only 16 have shown significant im plem entation and upholding of the Convention. That is less than 50% of the states parties. Unless there is leadership and commitm ent towards m utual accountabilit y, then the fight against corruption cannot be a southern initiative led by countries in the south. Incidentally, and I k now there was a session on this, the recent example of the Britis h government s dec ision to suspend invest igations int o the BAE system yet again was a dam aging setback, and it set a dangerous precedent that could push back the collective efforts of all of us. I think you are all well aware of this, so I am preaching to the converted. But I will add that the ques t for global transparenc y and a sustainable future, through enhanced leadership, institutions and capacit y, is a sound idea, whose time for implementation has com e. As has the tim e for us to act together. Thank you for your tim e and patience. M s CRANE (M oderator): Thank you very m uch, Gabriel Negatu. W e have heard two impassioned calls for intra-regional initiatives on transparenc y and sustainability to m ove forward. Let us now hear from Richard Sam ans, who is with a global initiat ive. He is with the W orld Econom ic Forum, its Center for Public-Privat e Partnerships, and is also Managing Director. He has very extensive

17 econom ic experience, having work ed both in the US private financial sector, well before the current crisis, and also having served as Economic Advisor, both to the Clinton adm inistration and to the Council on Economic Advisors, and in Congress. Richard Sam ans. M r SAM ANS: Thank you ver y much, Melinda. I am quite pleased to be here this afternoon. I want to complim ent and congratulate the organisers on what have been som e very fruitful few days here. I particularl y want to signal m y appreciation to Trans parenc y International, Huguette Labelle and Cobus de Swardt, Jerm yn Brooks and Peter Eigen, the founder f or playing such an im portant role over the years in driving this issue forward. I ll spend m y tim e on a couple of different aspects of this topic. I would first lik e to speak about the m eta-level. I k now there have been a lot of discussions in the halls over the last few da ys about the connection between the global financial crisis and this particular issue, anticorruption fighting efforts. But I also want to get back to the question you posed at the start of the panel session, about how global integrit y and transparenc y building m easures and s ystems could fit into a new econom ic architecture, which is of course going to be the focus of discussions in a few weeks time in W ashington, as leaders of the Group of 20 countries com e together. And although I don't think they will be m aking any concrete decis ions, I think they are going to set a process in m otion to try to introduce som e reforms in the financial architecture.

18 So first, some reflections on the connection between what has been happening in the past year or so in the financial mark ets and the anticorruption challenges we all face, in all quarters of the world. I think that t here m ay be a tendency to attribute the failures in the financial world to greed, to ethical com prom ises and problems and what not. And surely there was an am ple am ount of that. But I think it would be f acile, philosophically, to la y it all at the doorstep of greed and ethical failings. I think it s a much m ore deeply-rooted problem. The real culprit here, I think, is com placenc y; negligence on the part of polic ym akers, m isaligned incentives, an incentive fram ework that has both a privat e-sector element as well as a public-sector elem ent. T here is an ecos ystem, if you will, that consists of both formal regulations, considerations and laws on the one hand, and informal custom ary practic es, industry practices, etc., on the other, that com bine to create an environm ent of pure negligence with respect to financ ial m ark et regulation and supervision. I think that s the real culprit here. The blam e is m ore diffuse than if we just identified particular people who engaged in selling financial products to people who could not afford them and could not afford to m anage the risk. I really do believe that is an im portant lesson that we need to draw f rom the problem. If you take that as a prem ise and you may or m ay not agree with me then it follows that the issue here, the response, should not be fundam entally on a philosophical level of saying W ell, the governm ent s role was too sm all; therefore we need a m uch larger government role, although clearly there needs to be a large governm ent role in the area. The lesson is not that we have had too little state involvem ent and now it s tim e to move away from laissez-faire. W e need to swing the pendulum from one end to the

19 other. It is about and this picks up on the point that our colleague just m ade understanding m uch better what it m eans for a m arket econom y to globalise, to integrate across boundaries. W hat is required to ensure that the allocation of capital and other resources is done in a way that not only leads to what I call t op-line growth, which is the econom ic growth stat istics you see in countries, but also what I would consider to be bottom -line growth, is a real m easure of success for an econom ic polic y. And that real m easure of success is the rate of progress in m edium living st andards and broad base living standards. That is the ultim ate barometer f or how successful a societ y is in the econom ic sphere. If you adopt that broader perspective, the conclusion you can draw from this f inancial crisis is that we have basically pursued, in our policies and in our mindsets, top-line growth. W e pursued de-regulation and efficiency-enhancing m easures, which are the sine qua non of hum an progress. But the story does not end there. There needs to be a com plem entary focus on institution building, as our colleague said earlier. The institution-enabling environm ent in fact becom es even m ore critical when you deregulate, because that institution-enabling environm ent sets the underlying fram ework for how efficient t he allocation of resources is from the stand point of bottom -line growt h, for how broadly societ y becom es involved in the benefits of the growth that is created by enhanced efficiency, created by greater trade, greater integration of m ark ets, etc. The world is now c hallenged to focus on institutional deepening problem s, institution-enabling problem s, both at global governance level and at national level. These cut across a range of domains that have a very strong bearing on how widel y societ y gains from the growth, the econom ic growth that takes place. This is financial, institutional deepening, and b y that I m ean not just banking supervision but also a whole range of regulations and custom ary

20 practices that determine how well capital is allocated to the real econom y, as opposed to speculative or financial assets, corporate governance, accounting, auditing principals, m inorit y shareholder rights, etc. It goes to labour, institutional deepening, that is to s ay not only core labour standards, laws and fram eworks, but also the enforcem ent capacity in societ y to execute and implem ent it. Because giving work ers the abilit y t o bargain in the m ark et place for their fair share of the pie is a fundam ental aspect of how well a society does translate top-line growth, econom ic growt h, into broad-based schemes and living standards. It goes to environm ental institution building, it goes to consum er protection institution building, as the world has witnessed over the past year in particular. And it goes to a broad range in investor protections. There is another area to be considered and that is the area t hat we are all work ing in: ethical, anti-corruption f ram eworks. Another area of the institution-enabling environm ent that needs to be developed hand in hand with the integration of m ark ets, because if you don t do that well, as we all k now, you m erely increase the opportunities for resource m isallocat ion. And that is not only crim inal in the traditional sense; it is an enormous opportunity c ost; it is a deadweight loss for societ y. I view this issue, anti-corruption, in a m uch broader context. Over the past generation, the world has work ed on the deregulatory aspect deregulation is not a dirty word, it enhances efficiency, it is important for growth but has failed to recognise that as you deregulate you need to spend even more time m aking sure that the institution-enabling environm ent in labour, environm ent, investor protections, customer protections, and anticorruption f ram ework s is built up. That is the solution if you want to avoid a horrible m isallocation of resources, which is what we have seen in the past few decades and whic h has now come to floor with the financ ial crisis.

21 You have all been work ing in the anti-corruption area for a long tim e and you k now how much of the m isallocation of resources has unfolded as a result of the failure to tak e to heart, at both global and national level, efforts to strengthen institutional capacity, to enforce, not only build, but als o adm inister and enforce fram eworks. In my view, that is the fundam ental link between the world financial crisis that we are dealing with right now and the agenda of this part icular gathering here today. So m uch f or the high level analysis. Let me now speak a bit m ore specifically on your question, Melinda, on how int egrit y and transparenc y s ystems can be built into a new architecture that moves forward, in m ore concrete term s. From my point of view, institution-enabling environm ents, institutionbuilding in this space, cannot be of an official sector, that is to say a government enterprise. T his issue fundam entally requires a public and private sector or even m ulti-sector approach, because of the very nature of the problem we are dealing with. If we want to develop architectural pieces and solutions for this issue, then the y need to have a very strong public /private dimension. There is a dem and side, which the governm ent community spends m uch of its time focusing on, but there is also a supply s ide, and we need to build up an institution-enabling environment in the private sector that can becom e a better partner to the dem and side of the problem, so as to solve this problem. That is wh y I am sitting here. A few years ago, the W orld Ec onom ic Forum, through its partnership with T ransparenc y International and the Basel Institute, tried to s ee if it could help use its network s and convening capability in the private sector to build a more robust, supply-side piece of the story.

22 W e have done so, by means of an initiative called The Partnering against Corruption Initiative (PACI). It is a fram ework for helping com panies im plem ent whatever principals they have agreed to sign on to, whether it be volunt ary principals of TI, whether it be Global Com pact s high level principals, whether it be the International Cham ber of Commerce principals, and so f orth. W hat our partnership focuses on is the im plem entation aspect here. T o build up a protocol, a m anagement s ystem s protocol, if you will, that can be attached to whatever set of principals the m anagement wants to adhere to. W e have our own principals as well. But basicall y, we help the com pany institutionalise its commitm ent against briber y, through a few dim ensions, including self-evaluation, a Transparency International m ethodology that has been developed and which we are applying, a benchm ark ing process which we have elaborated, experience sharing, providing a forum for quiet, off the record, candid conversations am ong corporate executives working at the front lines of this issue and sharing their stories from dealing with such problem s. In a few days, we will be holding a m eeting in Saint Petersburg where the executives of the firms will come together for exactly this type of experience sharing. In term s of development, we are now working with the Big Four on a third part y verification tool, fram ework, common practice, that can m ove from inside the com pany s ystem to an external verif ication assurance syst em, which will be helpful to boards and pos sibly even shareholders and the public. Our approach has been to tr y to rem ove the competitiveness argum ent from the debate b y focusing on trying to get leading com panies in certain industrial sectors to jum p at once, to take collective action, to commit at CEO level, to not engage in briber y and to drive such an im plem entation policy through their c om panies.

23 This im plem entation piece of institutional capacit y is, in m y view, in our view really, ready to be scaled m ore broadly and connected to the dem and side of the question. T his brings us back to the point about institutional deepening once m ore. I will leave you with two suggestions as to how the architecture can be built with m ore specific and m ore robust pieces of public/private elem ents. The first is that having built the fram ework with our part ners, I think what is now needed is an expanded application of it. The only way that can happen is through additional inst itut ional c apacit y. T hat can be done, in the best way possible, with public sector partners. A com bination of the two can provide the staff capacit y, the outreach capacity to apply these private sector f ram eworks in a m uch m ore robust fashion. And therefore com plem ent all the demand-side efforts that inter-governm ental processes are trying to work through. T hat is the first one. Num ber two. W e k now from our work in different regions of the world that there are countries where the business community is look ing to get engaged in a m uch deeper and m ore structured fashion with the official sector, and would appreciate the opportunity to take a global best practice and tr y to apply it in a national setting through the accum ulation of a critical m ass of the leading business figures in the country. That calls for an additional public-private ef fort to be combined with the intergovernm ental processes that are going on. This is another elem ent where the architecture could be advanced quite considerably by adding a public-private dim ension to it. Let m e close by saying that I think it is important for this issue not t o get lost in all the focus on wealth being destroyed around the world right now. I do think it is part of this m uch broader stor y about how we better m anage the inter-dependence of the world econom y, t han we have over the

24 last few decades, by removing regulations and allowing capital and labour and technology to flow m ore freely. If we work together to m ak e sure that the response is not fixed only on financial issues, then it may prove to be a ver y interesting opportunit y f or the issue to be advanced m uch further. Thank you. M s CRANE (M oderator): Thank you very m uch, Richard Sam ans. I would now lik e to turn to Ingrid Srinath. Ms Srinath is the Secretary General of CIVI CUS, which is a global network of organisations dedicated t o enforcing and enhancing citizen participation and civil societ y. She is also on the Board of the INGO Accountability Charter, and work s with the W orld Econom ic Forum on NGO advisory issues. Ingrid. M s SRINAT H: Thank you. I agree with Richard that if we are going to be talk ing about a sustainable future, we are going to have to use a m uch broader definition of corruption than its strict technical sense of criminality or fraud or the abuse of power. To m e, what the recent financial crisis actually revealed was that this k ind of corruption is only the tip of a very vast, ver y deepl y flawed iceberg. In a sense, the financial cris is split that iceberg wide open, and allowed us to see the underpinning infrastructure. W hat I saw there, and what all of us saw, I hope, was best described by m y countrym an Mahatma Gandhi well over 70 years ago. He described a

25 world of wealth without work, pleasure without conscience, k nowledge without character, c ommerce without m oralit y, science without hum anit y, worship without sacrifice and polit ics without principles. That is what we saw when the financ ial crisis split the iceberg wide open. W hether we look at the m ost micro level of the problem, at a child in a little African village or a little Indian village or anywhere in the world, in the South Bronx for that matter, who is deprived of her right to education, or an indigenous community that has been displaced because of a power project or a biofuel plantation, or whether we look at our global institut ions of governance on the other end, the UN, the W TO, the W orld Bank, the IMF pick your acron ym what we see is the sam e underlying issue. It is not corruption of the fraud k ind alone; it is corruption of the very notions of justice, of dem ocrac y and of citizenship. W hat we are facing is not just a transparenc y deficit. W e are facing a deficit of legitim ac y, a deficit of hum an rights in the wider sense of that word. In each of these institutions, at each of these levels, we have tolerated, for various reasons, institutions which, whether the y are econom ic, political, social or cultural, are not based on principles of equity, principles of justice. W e are talk ing about the poor, or wom en, or m arginalised communities, or, as you clim b up the pyram id, poor countries, including t he whole continent of Africa, who are sim ply not at the tables where decisions that affect their futures are m ade, decisions which, f or them, are a matter of life and death. And because the y are not at the table, they are basically on the menu. The consequences of the global architecture, if you will, of governance, and not just of accountability or transparency, are very evident. Eight years into the Millennium Developm ent Goals, we now have m ore poor people on the planet than when we started. The W orld Bank redefined the

26 definition of povert y recently, from people living with 1 dollar a day to people earning 1.25 dollars a day. So you are no longer poor if you have 1/3 of the lifestyle of a European cow. This pattern is reflected across all areas. The rem edies that we hear being advocated to com bat clim ate change, once you wade through the alphabet soup of acronyms, really seem, to m e, to be as useful as trying to cure obes ity by buying larger clothes. W hether it is food or energ y, water or the clim ate, aid or trade, debt, race or gender, education or health, livelihoods or conflict, the pattern is the sam e. The people who have the m ost to gain and the m ost to lose, in each of these situations, have no voice in the decisions that are being m ade about them. Transparenc y is a word I have heard a lot over the last few days. A close second is probably the phrase civil society. W hether we were talk ing about wom en s em powerm ent or clim ate justice, whether we were talk ing about global governance or som ething else, the catch-all panacea that was being presented was som e sort of aware, empowered c ivil societ y that was going to m ak e this entire s ystem accountable. W e know this. It is self-evident. It s a no-brainer. W e k now that the single m ost effective, efficient, sustainable antidote to corrupt ion, whether in its narrow sense or its broader sense, is an aware and empowered citizenship. There is no other effective antidote. W e k now that civil societ y, and not just NGOs but trade unions, faith-based organisations, independent m edia, is really key t o creating that awareness and to being able to channel that voice into the corridors of power. Yet, when it comes to investing, to making such a civil society happen, there is no commitm ent. W hether it is global institutions, the privat e sector, states, m ark ets or even civil society itself, we are reluctant to mak e

27 the investm ent needed in hum an resources, in tim e and in mone y, and in skill building that will allow for a vibrant, diverse and independent civil society. Not only are we not proactively investing in civil society, but civil society is indeed, in m any ways, under threat. CIVICUS runs a program called Civil Society W atch, and in the last year alone we identified 87 countries that passed legislation on new policies that actively constrained the freedom of civil society. Eighty-seven countries. T hat s 45% of the m em bership of the UN. W e are not talking about som e rogue dictatorship here or som e authoritarian regim e there. W e are talking about half the countries that are m embers of the UN. The war on terror in particular, the so-called war on t error, has been used as an excuse for much of this legislative change. I fear that the current crisis will yet again be used to m arginalise the voic es of the people who m atter the most, by using either urgenc y or technical com plexity, or som e other ploy as a justification. But som ewhere in its severit y, in its global nature, this crisis m ay very well provide us with a huge opportunity, our biggest opportunit y yet, t o achieve fundam ental structural change. Not just new regulatory bodies, not just better vigilance, not just better reporting or transparenc y, but structural change that allows ordinary people everywhere to have a say in the decisions that m atter, that affect their future. Thanks to this crisis, ordinary people, whether the y live in the Am erican Midwest or on a Pacific island som ewhere or in a small village in Africa, Latin Am erica or Asia, will finally get it. They will get what our corporate leadership and our political leadership and our institutional leadership seem s to be in denial about, and that is that the s ystem is fundam entally broken. And that there is no band-aid solution f or the problem.

28 They will get the fact that we cannot trust mark et m echanism s, or people elected by the power of m oney, or m edia controlled b y the powerful, by the elite, to m ak e decisions that are in the interests of m any. It is at this crossroad that we will realise, if of course we are going to take the m atter seriously, that only one road does not lead to a tipping point of planetary proportions. T hat road requires us to first adm it that the system is brok en; it requires us to adm it that quick f ixes are not a solution; it requires us to adm it that what we have is a s ystem ic failure of democratic governance. Once we have adm itted that, we need to start to put our heads together across sectors, across nations, ac ross regions and across them atic areas, to redefine the paradigm s of governance. W e need to reject a paradigm that is based entirely on econom ic and m ilitary power, in our new role as arbiters of access and dec ision-m ak ing rights. W e need to build a paradigm, starting with the UN, that is based on the values of justice, equit y and hum an rights, where we use our collective power not just as voters, but as shareholders, as shoppers, as employees, as entrepreneurs, to actually create inst itut ions at ever y level, from the family to the communit y to the organisation to national governm ent, and finally to global governance, ensuring that they are the true embodiment of dem ocratic values and hum an rights. W e need to invest in civil societ y in partic ular, because civil society is the vaccine that im munises us, if you will, against these k inds of global m eltdowns that threaten our survival. Not just our economic survival, but our survival as a species too. I would lik e, if I m ay, to go a little further and say that change starts with m e, and with you, and you, and you. Until we adm it to ourselves our own failings, and until we adm it to ourselves that we somehow are com plicit