ADB/OECD Anti-Corruption Initiative for Asia and the Pacific The Secretariat Anti-Corruption Policies in Asia and the Pacific Self-Assessment Report Nepal Over the last decade, societies have come to realize the extent to which corruption and bribery has undermined their welfare and stability. Governments, the private sector and civil society alike have consequently declared the fight against corruption to be of highest priority. In the Asia-Pacific region, twenty-one countries have expressed their commitment to fight corruption by endorsing an anti-corruption action plan within the framework of the ADB/OECD Anti-Corruption Initiative for Asia and the Pacific, a first-of-its-kind partnership between all stakeholders of Asian and Pacific countries. The Action Plan comprehensively promotes the regions objectives and needs for reform to develop effective and transparent systems for public service, to strengthen anti-bribery initiatives, to promote integrity in business operations, and to support citizens involvement. In order to gain a comprehensive and structured overview of the endorsing countries legal and institutional framework in place to ensure and enhance transparency in the public sector, combat bribery and promote transparency in business operations, and facilitate public involvement in the fight against corruption, endorsing countries of the Action Plan have decided to take stock of their relevant legal and institutional provisions in place. The following report reflects the Anti-Corruption Policies that Nepal has reportedly in place as of October 2003. Organized along the topics of the Anti-Corruption Action Plan for Asia and the Pacific, it outlines the legal and institutional framework governing each of its issues, the respective implementing agencies and recent of planned reforms. Self-assessment reports provided by the other countries that have endorsed the Anti-Corruption Action Plan for Asia-Pacific as well as a summarizing overview of the anti-corruption policies in the region are available at the Initiative s website (www1.oecd.org/daf/asiacom/stocktaking.htm). For further information about the Anti-Corruption Initiative for Asia-Pacific and its work, please refer to www1.oecd.org/daf/asiacom/. Jak Jabes, Director, Governance and Regional Co-operation, ADB jjabes@adb.org phone: +63 2 632 5749, fax: +63 2 636 2193 Frederic Wehrlé, Co-ordinator, Anti-Corruption Initiatives, Anti-Corruption Division, OECD frederic.wehrle@oecd.org phone: +33 1 4524 1855, fax: +33 1 4430 6307
Pillar I: Developing Effective and Transparent Systems for Public Service Action Plan objective Regulatory or legal framework (pls. corresponding Institution in charge of implementation (i.e. ministry, department, independent internal or external Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Integrity in Public Service: Establish systems of government hiring of public officials that assure openness, equity, and efficiency and promote hiring of individuals of the highest levels of competence and integrity through: a) Development of systems for compensation adequate to sustain appropriate livelihood and according to the level of the economy of the country in question Provision regarding reviewing the compensation of civil servants in every two years, in Civil Service Act,1992. Ministry of Finance b) Development of systems for transparent hiring and promotion to help avoid abuses of patronage, nepotism, and favouritism, help foster the creation of an independent civil service; and help promote a proper balance between political and career appointments No civil service position can be filled in without an open and competitive exam conducted by Public Service Commission. Public Service Commission Review of exam procedures c) Development of systems to provide appropriate oversight of discretionary decisions and of personnel with authority to make discretionary decisions Making discretionary decisions with malafide intention or in an autocratic way shall be considered as Abuse Of Authority, according to Article 3(d); Act,1991. is planning to prioritise it's focus on actions against maladministration as a preventive measure to control corruption. d) Development of personnel systems that include regular and timely rotation of assignments to reduce insularity that would foster corruption Provision of timely transfer of Personnel with objective to gain experience in various geographical regions. (Civil Service Act,1992. Related Organizations of the Government and Ministry of General Administration (MGA) Transfer policy is under strict control of MGA for the cases of inter-ministerial transfers. 2
Action Plan objective Regulatory or legal framework (pls. corresponding Institution in charge of implementation (i.e. ministry, department, independent internal or external Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Integrity in Public Service: Establish ethical and administrative codes of conduct that proscribe conflicts of interest, ensure the proper use of public resources, and promote the highest levels of professionalism and integrity through: a) Prohibitions or restrictions governing conflicts of interest Section 7 of Civil Service Act, 1992;section 8 of Health Service Act, 1996 and other legislations related to public service have provisions related to the expected manners and behaviours of public servants. Related Ministries and Departments has already ordered/recommended for departmental/and or other necessary actions against public servants to uphold the code of conduct in last fiscal year (July 2002-July 2003). b) Systems to promote transparency through disclosure and/or monitoring of, for example, personal assets and liabilities Every public servant is bound to disclose one's personal assets annually. MGA Failure to disclose personal assets is made punishable. c) Sound administrative systems which ensure that contact between government officials and business services users, notably in the area of taxation, customs and other corruptionprone areas, are free from undue and improper influence Legislations related to business and revenue, (e.g. Income Tax Act,2001; Revenue Leakage (Investigation and Control ) Act,1995,Value Added Tax Act,1998 etc.) have the comprehensive provisions in these regards. Department of Internal Revenue Department of Custom Introduction of PAN (Personal Account Number) cards are recently made to facilitate the follow-ups and tax administration. d) Promotion of codes of conduct taking due account of the existing relevant international standards as well as each country s traditional cultural standards, and regular education, training and supervision of officials to ensure proper understanding of their responsibilities Section 7 of Civil Service Act, 1992 describes the behaviour to be followed by the public servants. Provision of proper education and training in Civil Service Rules, 1993. Related Ministries and Departments. Code of conduct for business houses is under consideration. 3
Action Plan objective Regulatory or legal framework (pls. corresponding Institution in charge of implementation (i.e. ministry, department, independent internal or external Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. e) Measures which ensure that officials report acts of corruption and which protect the safety and professional status of those who do Article 60 of Anti Corruption Act 2002; Article 30 of Revenue Leakage (Investigation and Control) Act, 1995 ensure that the identity of the reporter shall be kept secret if requested and according to article 35(a) of Act,1991 and article 29 of Revenue Leakage (Investigation and Control)Act,1995 they might be rewarded. Internal Revenue Department Protection of Whistle Blowers' Act is prepared to be laid down before the Parliament. Accountability and Transparency: Safeguard accountability of public service through effective frameworks, management practices, and auditing procedures through a) Measures and systems to promote fiscal transparency Financial procedure Act, 1998 and Rules regarding financial administration, 1999 have directed the procedures of financial transactions aimed to promote financial transparency. Auditor General Comptroller General Amendment to Financial Administration Rules is under consideration. b) Adoption of existing relevant international standards and practices for regulation and supervision of financial institutions According to section 3 of Nepal Rastra Bank Act, 1956, these issues fall into the jurisdiction of Nepal Rastra Bank. Nepal Rastra Bank (NRB) NRB is undertaking the supervision to control fraud and irregularities in financial institutions. c) Appropriate auditing procedures applicable to public administration and the public sector, and measures and systems to provide timely public reporting on performance and decision making According to article 100 of the Constitution of the Kingdom of Nepal, the accounts of constitutional bodies and all other government offices shall be audited by Auditor General in the manner as prescribed by law. The Auditor General submits an annual report of his performance to His Majesty. His Majesty causes such report to be laid before parliament. Auditor General 4
Action Plan objective Regulatory or legal framework (pls. corresponding d) Appropriate transparent procedures for public procurement that promote fair competition and deter corrupt activity, and adequate simplified administration procedures The Procedure of public procurement is directed comprehensively in Financial Procedure Act, 1998 and Rules Regarding the Financial Administration,1999. e) Enhancing institutions for public scrutiny and oversight Public institutions are bound to publish a periodic report on its financial transactions. f) Systems for information availability including on issues such as application processing procedures, funding of political parties and electoral campaigns and expenditure Due to lack of legal provisions related to funding of political parties, it has been out of the reach of public information. However the limit of electoral expenditure is directed by various laws related to election g) Simplification of the regulatory environment by abolishing overlapping, ambiguous or excessive regulations that burden business The promotion of fair business environment is the objective of the government. The government has also welcomed foreign direct investment and whole range of activities have been initiated for this purpose Institution in charge of implementation (i.e. ministry, department, independent internal or external Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Auditor General Comptroller General Unified measure for procurement has been prepared under Public Work Directory (PWD). Provision for complaint box is in existence to report against undue application processing procedures in all public offices. (Less effective) Ministry of Law, Justice and Parliamentary Affairs. A commission for Law Reforms is established to study and recommend about overlapping, ambiguous or excessive regulations. 5
Pillar II: Strengthening Anti-bribery Actions and Promoting Integrity in Business Operations Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Effective Prevention, Investigation and Prosecution: Take effective measures to actively combat bribery by a) Ensuring the existence of legislation with dissuasive sanctions which effectively and actively combat the offence of bribery of public officials is established by article 98 of the constitution to investigate and prosecute the offence of corruption. Act, 1991; Anti Corruption Act, 2002; and other legislations related to public service have the provision of departmental action and prosecution in the court, which are sufficient to combat the offence of bribery of public officials. Parliament has filed 147 corruption cases in the Special Court in the last fiscal year. Similarly, departmental and other actions have been taken against number of civil servants. b) Ensuring the existence and effective enforcement of anti-money laundering legislation that provide for substantial criminal penalties for the laundering of the proceeds of corruption and crime consistent with the law of each country Article 20 of the Anti Corruption Act, 2002 has the Provision that the assets of the civil servants, which do not have the legitimate source of income, shall be considered as collected by corruption. HMG has become a member of the Asia Pacific Group (APG) against money laundering. Antimoney laundering law is being prepared. c) Ensuring the existence and enforcement of rules to ensure that bribery offences are thoroughly investigated and prosecuted by competent authorities; these authorities should be empowered to order that bank, financial or commercial records be made available or be seized and that bank secrecy be lifted Article 97 of the constitution has established as an independent constitutional body in order to investigate and prosecute the offence of corruption. Anti Corruption Act, 2002 has empowered it to ask the bank, financial or commercial records of the accused and if found suspicious, freeze it. Bank secrecy is completely lifted in regard to. has in recent cases used the liberty to access bank, financial and commercial records in some major cases of public interest. 6
d) Strengthening of investigative and prosecutorial capacities by fostering inter-agency co-operation, by ensuring that investigation and prosecution are free from improper influence and have effective means for gathering evidence, by protecting those persons helping the authorities in combating corruption, and by providing appropriate training and financial resources is a Constitutional body out of the reach of undue influence from executive bodies. Having effective legal provisions for gathering evidence, it is free from improper influences. Article 60 of the Anti Corruption Act,2002; Article 30 of the Revenue Leakage (Investigation and Control) Act,1995 ensures the secrecy of the information and informer. According to the article 4(2) of Rules, 2002; it shall organize and run the training programmes in order to increase expertise of the officials involved in investigations. d) Strengthening bi- and multilateral co-operation in investigations and other legal proceedings by developing systems which in accordance with domestic legislation enhance (i) effective exchange of information and evidence, (ii) extradition where expedient, and (iii) co-operation in searching and discovering of forfeitable assets as well as prompt international seizure and repatriation of these forfeitable assets There are no bi- and multilateral treaties ruling the extradition of the accused, charged of corruption. Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. An exhaustive training module is to be designed. Some development partners of Nepal have expressed their intention to assist in this respect. HMG/N Recently the UN convention against corruption is being prepared and Nepal is participating effectively in that preparation. 7
Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Corporate Responsibility and Accountability : Take effective measures to promote corporation responsibility and accountability on the basis of existing relevant international standards through a) Promotion of good corporate governance which would provide for adequate internal company controls such as codes of conduct, the establishment of channels for communication, the protection of employees reporting corruption, and staff training Codes of conduct for corporate bodies are yet to come into existence. For the Protection of employees reporting corruption, there are various provisions in Anti Corruption and legislations. Ministry of Industry b) The existence and the effective enforcement of legislation to eliminate any indirect support of bribery such as tax deductibility of bribes These issues are governed by Revenue Leakage (Investigation and Control) Act, 1995. Tax deductibility for bribery payment is unthinkable. Department of Revenue Investigation. Recently practiced voluntary disclosure of income scheme may indirectly encourage tax deductibility of bribes. (Needs attention in controlling such schemes.) c) The existence and thorough implementation of legislation requiring transparent company accounts and providing for effective, proportionate and dissuasive penalties for omissions and falsifications for the purpose of bribing a public official, or hiding such bribery, in respect of the books, records, accounts and financial statements of companies So far as legal provisions are concerned, they are more or less complete. However, one would find that there is a gap between regulatory regime and the actual practice. Hence, there is a need to enhance the implementation level. Bribing a public official is punishable under Anticorruption ACt Department of Internal Tax Proportionate punishment has already been incorporated in the Anti-corruption Act. 8
Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. d) Review of laws and regulations governing public licenses, government procurement contracts or other public undertakings, so that access to public sector contracts could be denied as a sanction for bribery of public officials According to article 28(a) of Act, 1991; can advise the government to made amendment the legislations governing public licenses, government procurement contracts and any other subjects. under its recommendatory role to suggest review of existing laws and regulations, has forwarded 13 recommendations to concerned authorities in the last fiscal year. Pillar III: Supporting Active Public Involvement Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Public Discussion of Corruption: Take effective measures to encourage public discussion of the issue of corruption through a) Initiation of public awareness campaigns at different levels Article 4(2) of Rules, 2002: shall increase public awareness against corruption. HMG, and INGOs, NGOs. Bulletin, poster, brochures etc. are published to raise the level of public awareness against corruption. b) Support of non-governmental organisations that promote integrity and combat corruption by, for example, raising awareness of corruption and its costs, mobilising citizen support for clean government, and documenting and reporting cases of corruption Article 4(2) and Article 35 of Rules, 2002: shall cooperate with NGOs to promote integrity and combat corruption. TI Nepal, Pro-Public etc. are providing necessary support to 9
Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. c) Preparation and/or implementation of education programs aimed at creating an anti-corruption culture Article 4(2) of Rules, 2002: shall organize and run programmes in order to initiate public awareness against corruption aimed at creating an anti corruption culture. HMG HMG as well as Private schools are working to introduce a curriculum aimed at creating an anticorruption culture Access to information : Ensure that general public and the media have freedom to receive and impart public information and in particular information on corruption matters in accordance with domestic law and in a manner that would not compromise the operational effectiveness of the administration or, in any other way, be detrimental to the interest of governmental agencies and individuals, through a) Establishment of public reporting requirements for justice and other governmental agencies that include disclosure about efforts to promote integrity and accountability and combat corruption Article 23(2) of Act, 1991: may investigate the cases of public importance openly. National Vigilance Centre (NVC) NVC is newly established as an institution to conduct vigilance to the public offices with a view to prevent corruption and maladministration b) Implementation of measures providing for a meaningful public right of access to appropriate information Article 16 of the Constitution of the Kingdom of Nepal ensures that every citizen shall have the right to demand and receive the information on any matter of public importance. However, legal provision is yet to be made to give effect to such constitutional provision. HMG/N A new regulation is currently being prepared to ensure public right to appropriate information. Public participation: Encourage public participation in anti-corruption activities, in particular through a) Co-operative relationships with civil society groups such as chambers of commerce, professional associations, NGOs, labour unions, housing associations, the media, and other organisations According to article 4(2) of Rules, 2002; shall cooperate with civil society and other related organizations. Many interactive sessions/meetings were held to meet such organizations. 10
b) Protection of whistleblowers There is a provision in article 60 of Anti Corruption Act, 1991 that assure the secrecy of the identity of whistleblowers. c) Involvement of NGOs in monitoring of public sector programmes and activities NGOs are free to monitor the public sector programmes on their own. They are also working together with the public sector itself in the implementation of the programmes Relevant recent or planned reforms in this area, i.e. their objectives, implementation stages, outputs and timeframe. Parliament Some discussion at the public forum has taken place for the need of an independent Act. Under consideration of HMG/N. 11