ANNEX 1: PRESENTATIONS FROM PLENARY SESSION 1 Monitoring Anti-Corruption Efforts in Europe Mr. Drago Kos, President, GRECO; Chairman, Commission for Prevention of Corruption, Slovenia Slide 1 Monitoring anti-corruption efforts in Europe Anti-Corruption Network for Eastern Europe and Central Asia Tbilisi, 25-27 June 2008 Drago KOS President of GRECO Chairman of the C. for the Prevention of Corruption Slovenia Slide 2 International anticorruption standards The Twenty Guiding Principles for the Fight against Corruption (1997) The Criminal Law Convention on Corruption (1999) The Civil Law Convention on Corruption (1999) Codes of Conduct for Public Officials (2000) Funding of Political Parties (2003) Convention on the fight against corruption involving officials of the EC or officials of Member States of the European Union Convention on the protection of the EC financial interests + protocols OECD Convention on combating bribery of foreign public officials in international business transactions UN Convention against corruption (UNCAC, 2003) 53
Slide 3 The 20 Guiding Principles for the Fight against Corruption A catalogue of measures to be included in comprehensive national strategies against corruption : Awareness of corruption, transparency in public administration, independence and specialisation of authorities, criminalisation of corruption, proceeds of corruption, legal persons, immunity, media, research etc. Monitoring: GRECO Slide 4 Criminal Law Convention on Corruption Wide scope to combat corrupt practices through criminal law Provides for : - co-ordinated criminalisation of a wide range of corruption related offences; including private corruption, trading in influence and acccounting offences - complementary criminal law measures, including corporate s liability - international co-operation Monitoring: GRECO Slide 5 Civil Law Convention on Corruption Civil remedies, compensation for damage resulting from corruption Validity of contracts Civil law measures Protection of whistleblowers Monitoring: GRECO 54
Slide 6 Model Code of Conduct for Public Officials Ethical climate in public administration Ethical conduct expected from public officials Information to the public on conduct to be expected Monitoring: GRECO Slide 7 Recommendation 2003/4 on common rules against corruption in the funding of political parties and electoral campaigns Transparency Supervision Sanctions Monitoring: GRECO Slide 8 Group of States against Corruption (GRECO) Partial and Enlarged Agreement of the Council of Europe 55
Slide 9 GRECO Group of States against Corruption International monitoring mechanism Established in 1999 by the Council of Europe 46 members (without Liechtenstein, San Marino, Belarus) Open to member and non-member States of the Council of Europe TASK: - Monitoring the observance of Council of Europe s international legal instruments on corruption Slide 10 GRECO Working methods Mutual evaluation and peer pressure Follow-up mechanism Slide 11 GRECO Evaluations Procedure: Evaluation rounds Specific provisions selected Questionnaire Evaluation teams Country visits Evaluation reports Recommendations Compliance procedure Publication 56
Slide 12 GRECO First Evaluation Round 1 January 2000-31 December 2002 Evaluation themes: - Principle 3 : independence and autonomy of persons in charge of the prevention, investigation, prosecution and adjudication of corruption offences - Principle 6 : to limit immunity from investigation, prosecution or adjudication of corruption offences - Principle 7 : promotion of the specialisation of persons or bodies in charge of fighting corruption ( 20 Guiding Principles ) Slide 13 GRECO findings of the first evaluation round Three main fields of necessary improvements: substantive law implementation of adopted legislation general topics important for the fight against corruption Slide 14 GRECO Second Evaluation Round 1 January 2003 31 Dec. 2006 Evaluation themes: - Proceeds of Corruption - Public Administration and Corruption - Legal Persons and Corruption ( 20 Guiding Principles and Criminal Law Convention on Corruption) 57
Slide 15 GRECO findings of the second evaluation round Main fields of necessary improvements: Effectivenes of ML mechanisms Conflicts of interest Pantouflage/revolving doors Whistleblowers protection Responsibility of legal persons Slide 16 GRECO Third Evaluation Round 1 January 2007 31 Dec. 2009 Evaluation themes: - Criminalisation of corruption (ETS 173, 191) - Transparency of party funding (Rec.2003/4) Slide 17 GRECO findings of the third evaluation round? 58
The UN Convention against Corruption and its Review Mechanism in the Making Mr. Giovanni Gallo, Anti-Corruption Expert, UNODC Slide 1 The United Nations Convention against Corruption and its review mechanism in the making 7 th Meeting of the Anti-Corruption Network for Eastern Europe and Central Asia Tbilisi, Georgia, 25-27 June 2008 Slide 2 Status of ratification Adopted by General Assembly Resolution 58/4 of 31 October 2003 Entered into force on 14 December 2005 117 Parties, 140 Signatories 140 120 117 100 80 60 14 December 2005 30 ratification entry into force 54 80 93 108 40 20 0 Dec-03 Mar-04 Jun-04 Sep-04 2 Dec-04 Mar-05 13 24 Jun-05 Sep-05 Dec-05 37 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 2 59
Slide 3 Group of Latin American and Caribbean States: 23 (20%) Status of ratification by region (total: 117) Western European and other States: 16 (14%) Group of African States: 38 (32%) Group of Eastern Europe States: 19 (16%) Group of Asian States: 21 (18%) 3 Slide 4 The Conference of the States Parties COSP 3 2009 Qatar Meetings of the Working Groups on: Technical assistance Asset Recovery Review of Implementation COSP 2 28/1 1/2/2008, Indonesia COSP 1 10-14/12/2006, Jordan 4 Slide 5 1st Conference of the States Parties The first session of the CoSP held in Jordan in December 2006, adopted 8 resolutions and 1 decision. Review of Implementation mechanism necessary Information Gathering self-assessment checklist Amman, Jordan December 2006 Asset Recovery Technical Assistance 5 I would like to focus on what emerged as the three key areas at the Conference: which were Review of Implementation, Asset Recovery and Technical Assistance. Related to these, the Conference also adopted a resolution on how it wants the Secretariat to gather information both on the implementation of the Convention and on technical assistance needs. 60
Slide 6 2 nd Conference of the States Parties Review of implementation parameters of the review mechanism Asset recovery Technical assistance Appeal to implement provisions of UNCAC Bribery of officials of public international organizations Venue of COSP 3 6 Slide 7 Towards the establishment the UNCAC review mechanism A two-pronged approach: The horizontal review - all States Parties The pilot review programme - 28 volunteer countries 7 Slide 8 The horizontal review UNCAC self-assessment checklist strong emphasis on technical assistance needs and donors coordination Prevention (art. 5, 6, 9) Asset Recovery (art. 52, 53, 54, 55, 57) Horizontal review covering all chapters Criminalization (art. 15, 16, 17, 23, 25) International Cooperation (art. 44, 46) As a tool to facilitate the provision of information, the Conference decided to use a self-assessment checklist. It requested the Secretariat to finalize and distribute the selfassessment checklist which was done by 15 June. The checklist is aimed at a horizontal review of the Convention, covering provisions from all chapters of the Convention. 8 61
Slide 9 Response to the UNCAC self-assessment checklist Reporting parties Reporting signatories Non reporting parties 30 12 1 2 8 9 7 4 1 15 16 1 4 4 12 African Group Asian Group Eastern European Group GRULAC WEOG 9 Slide 10 ACN participating countries Signatories 1 UNCAC adherence by ACN members Not signed 3 UNCAC self-assessment reports submitted by No ACN members 3 Parties 16 Yes 13 10 Slide 11 The voluntary pilot review programme 28 participating Countries: Argentina, Austria, Bolivia, Burkina Faso, Colombia, Croatia, Dominican Republic, Fiji, Finland, France, Greece, Indonesia, Jordan, Mexico, Mongolia, the Netherlands, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Serbia, Sweden, Tanzania, the UK, USA Main features: Strictly voluntary Limited in scope Limited in duration 16 countries representing all geographical regions are participating in this pilot programme. The main features of the programme are that it is: strictly voluntary, limited in scope - it reviews 8 articles from all chapters of the Convention, and it is limited in duration for the time being its first phase is expected to end with the report back to the 2 nd session of the Conference. 11 62
Slide 12 Voluntary pilot programme: strategy Methodology combined self-assessment / group / expert review method identify implementation gaps and needs for technical assistance recommend concrete measures to implement the Convention Aims and expected outcomes assist participating countries test effectiveness and efficiency of the approach provide information to the CoSP on lessons learnt and experience gained suggest possible elements of a full-fledged review mechanisms facilitate decision on the review mechanism at 3rd session of the Conference 12 Slide 13 CoSP 2, the review mechanism should Assist States parties in their implementation efforts Be transparent, efficient, non-intrusive, non-adversarial, nonpunitive, inclusive and impartial Not produce any form of ranking Provide opportunities to share good practices and promote collaboration Complement existing international and regional review mechanisms, cooperate with them and avoid duplication of efforts 13 Slide 14 Relevant decisions by the Conference Working Group on Review of Implementation to hold 4 meetings, prepare TOR for a review mechanism for consideration, action and possible adoption by CoSP3 UNODC to assist Group by submitting background information, incl. TORs of existing review mechanisms and States to submit proposals for TOR for consideration by Group UNODC to continue pilot review programme UNODC to expand and States to complete the self-assessment checklist, to create a comprehensive information-gathering tool 14 63
Slide 15 Road to Doha 2009 likelihood of review mechanism and Extended Pilot Review Programme Implement other resolution adopted by CoSP2 Expanded self-assessment checklist Education, awareness raising play fair in sports & life Parliamentarians, private sector, media 15 Slide 16 For further information: United Nations Office on Drugs and Crime Vienna International Centre PO Box 500, A-1400 Vienna, Austria Tel: +43-1-26060-5179 Fax: +43-1-26060-7 5179 http://www.unodc.org/unodc/en/crime_ convention_corruption.html giovanni.gallo@unodc.org THANK YOU FOR YOUR ATTENTION 16 64
ANNEX 2: PRESENTATIONS FROM PLENARY SESSION 3 Role of Business in Fighting Corruption Mr. Francois Vincke, Chairman, Anti-Corruption Commission, ICC Slide 1 Member of the Brussels Bar Chairman of the ICC Anti-Corruption Commission Tbilisi, Georgia, June 26, 2008 Slide 2 Program (I) PART I : A.- Introduction Corporate development and ethical goals, are they opposed? A business case against corruption Corporate action B.- Ethical organization : the people Ethics officers Ethical standing/reporting 65
Slide 3 Program (II) C.- The documents Self regulation Who carries the colors? D.- The processes Reporting /Whistle-blowing Helping with dilemma s Slide 4 Program (III) PART II : PRACTICE A.- Availability of Ethics Officers B.- Basic Reflexes C.- Tone from the top Slide 5 1.- Corporate development and ethical goals, are they opposed? Is there a conflict between enhancing a corporation s development and pursuing ethical goals? There are dilemma s: for a business person a non-ethical solution may appear as a way out, but to where? Maybe, if one is lucky, it works in the short term In the medium and long term, experience shows that fraud - and in particular bribery - runs against corporate efficiency and corporate prosperity There is a business case against corruption 66
Slide 6 2.- A business case for not bribing (I).- Eight good reasons for not bribing. 1. A bribe may be totally inefficient What is the capacity of the (candidate) bribee? Will he ever reach the goal you have in mind Shareholders money well spent? Risk assessment/risk management problem 2. The bribe market is opaque Paying too much or too little? There are no listed prices or quotations Costing/purchasing/pricing problem Slide 7 3.- A business case for not bribing (II).- 3. Your accountant s nightmare How do you enter a bribe in your accounts? No entry or a false entry: false accounting, false reporting Accounting policy problem Financial reporting problem 4. Your lawyer s headache The bribery contract is either unwritten, or, if written, is null and void It cannot serve as evidence in court One cannot uphold the contract in arbitration Slide 8 4.- A business case for not bribing (III).- 5. Hidden treasures in the islands Slush funds in far away countries No or limited knowledge by the executives Money laundering risk Control policy problem 6. Thou shalt not serve two masters Bribee (often) makes kickbacks Divided loyalties among co-workers Corporate governance problem/hr problem 67
Slide 9 5.- A business case for not bribing (IV).- 7. Bribery undermines free competition, based on fair pricing, quality of goods and services, motivation of staff, expertise, talent, continuous research and development and is based merely on the generosity of obscure payments 8. Criminal/civil law risk: 1. high fines, jail sentences 2. debarment 3. civil damages Slide 10 6.- Corporate Action Many companies have resorted to self regulation and self discipline They define their values and establish their norms The corporate codes of conduct are then translated into integrity programs Directors, executives, managers and employees are to contribute, each in their capacity, to the implementation substantiation of the integrity program Slide 11 7.- Ethical organization: the people Endorsement and review by top-level (Audit Committee) An adequate and adapted compliance structure is the backbone of an ethical organization: Guarantee of continuity and consistency in compliance Availability should be such that no ethical question remains unanswered Monitoring of the respect for the corporate values and compliance with the corporate rules For SME s: same objectives but through appropriate means 68
Slide 12 8.- Ethical standing: reporting Professional investors assess ethical standing (i) either to include only corporations qualified as ethical (e.g. the ethical funds) (ii) to exclude companies with a negative integrity record (e.g. Norwegian Pension Fund) or (iii) to integrate integrity performance in their ratings Ethical reporting to stakeholders: projecting an image of ethical performance (e.g. Global Reporting Initiative or GRI) Ethical standing is essential to be considered investment grade (bench marking, certification) Slide 13 9.- The documents Self regulation: some reference documents International Chamber of Commerce Business Principles of TI Business Principles of PACI (WEF) Tenth Principle of the UN Global Compact Who carries the colors? Those who can cause reputational damage Employees, subsidiaries, affiliates, joint venture partners, agents and intermediaries, subcontractors Slide 14 10.- The processes Training and information Not a one time shot, but a continuous process Information to be relevant Dissemination of the code of conduct (also to the outside world) Sensitive processes Selection and remuneration of agents Reporting of (other) sensitive agreements Request for advice/whistle-blowing? Answering all ethical and other questions Good faith blowing of the whistle with protection of anonymity and job Whistle blowing is efficient ICC Guidelines 69
Slide 15 12.- In practical terms Availability of Ethics Officers Listen carefully to even the silly questions and give good answers Give directions for solving the ethical dilemma s Be fair, consistent and rational One should convince and not bully Tone from the top Rules applicable to the simple soldiers as well as to the generals When there is a rule, there should be no exception, unless duly and formally motivated Transparency and business secrecy Appropriate sanctions in case of infringement Alleviations for companies with a genuine integrity program 70
ABB Group - 2-25-Aug-08 ABB Group - 1-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia ABB - to the straight and narrow Mr. Gunnar Björkenor, Senior Vice President and General Counsel, ABB Slide 1 Gunnar Björkenor Tblisi June 26, 2008 ABB - to the straight and narrow Anti-Corruption Network for Eastern Europe and Central Asia Slide 2 Outline Introduction Compliance - why? Common values Tone at the top Resources Training of employees Screening of business partners Business Ethics Hotline Enforcing our rules 71
ABB Group - 5-25-Aug-08 ABB Group - 4-25-Aug-08 ABB Group - 3-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 3 Presentation Gunnar Björkenor General Counsel ABB Sweden Regional Counsel ABB Northern Europe Slide 4 ABB Group Power & Automation Orders received 2007: 34 BUSD (+27%) EBIT: 4.000 MUSD (+57%) Employees: 112.000 Slide 5 Compliance focus WHY? 72
ABB Group - 8-25-Aug-08 ABB Group - 7-25-Aug-08 ABB Group - 6-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 6 ABB:s track record Slide 7 Compliance focus We had reason to act due to own history We had reason to act due to new legislation We had reason to act when legislation was enforced Slide 8 Common values Code of Conduct (Oct 2006) 73
ABB Group - 11-25-Aug-08 ABB Group - 10-25-Aug-08 ABB Group - 9-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 9 Code of conduct Slide 10 Code of conduct Slide 11 Code of conduct 74
ABB Group - 14-25-Aug-08 ABB Group - 13-25-Aug-08 ABB Group - 12-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 12 List of Code of Conduct translations Arabic Bulgarian Chinese Croatian Czech Danish Dutch English Estonian Finnish French German Greek Hebrew Hungarian Indian languages: Gujarati, Hindi, Kannada, Marathi Italian Japanese Kiswahili (for Tanzania and Kenya) Korean Latvian Lithuanian Macedonian Norwegian Polish Portuguese Romanian Russian Slovakian Slovenian Spanish Swedish Thai Turkish Vietnamese etc Slide 13 The tone at the top The Message from the CEO: 1. We don t want unethical business behavior at ABB 2. We don t need unethical business behavior at ABB 3. Unethical business behavior is illegal 4. Unethical business behavior does not pay - it is highly uneconomical Slide 14 75
ABB Group - 17-25-Aug-08 ABB Group - 16-25-Aug-08 ABB Group - 15-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 15 Slide 16 Slide 17 Resources Accept that compliance activities take time Acknowledge that compliance work costs Identify the costs of the compliance workc Allocate monetary resources in budgets 76
ABB Group - 20-25-Aug-08 ABB Group - 19-25-Aug-08 ABB Group - 18-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 18 Training of Employees 2006-2007 E-learning/Face to face Code of Conduct (all) OECD Anti Bribery (all LN-users) FCPA (all, face to face) Working with Agents & Intermediaries (selected) Global Competition (selected) Slide 19 Training of Employees 2008-2009 Integrity Leadership (all managers) Conflict of Interest (all employees) Financial Integrity (selected employees) Code of Conduct refresher (all employees) E-compliance (all employees) Slide 20 Training of new employees All new employees receives Code of Conduct together with employment contract All new employees automatically enrolled in training programme, receives e-learning on Code of Conduct upon receipt of e-mail address Receives rest of e-learnings periodically 77
ABB Group - 23-25-Aug-08 ABB Group - 22-25-Aug-08 ABB Group - 21-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 21 Screening of business partners DD on new JV partners Compliance Certification from JV partners and JV itself DD on consortium partners DD on certain suppliers DD on business structures Slide 22 Business Ethics Hotline Hotline and Web submission report All stakeholders with a business relationship with ABB are able to make a report by telephoning the ABB stakeholder hotline or submitting a Web report Telephone the ABB stakeholder hotline on + 41 43 317 33 67 This service is provided by an independent third party and is available 24 hours a day, 7 days a week Make a Web submission report Click on the following link to submit a Web report. Once the report is received by the ABB Group compliance office, you will receive an e-mail response to confirm receipt Slide 23 Enforcing our rules We investigate We follow up We terminate people for non compliant behaviour Incentivise compliant behaviour 78
ABB Group - 25-25-Aug-08 ABB Group - 24-25-Aug-08 Anti-Corruption Network for Eastern Europe and Central Asia Slide 24 Enforcing our rules ZERO TOLERANCE Slide 25 Enforcing our rules Everyday compliance is not a project Everyday compliance is a way of life Slide 26 79
Applying International Standards to Private Sector Operations Mr. Michael Davey, Director for Caucasus, Moldova & Belarus, EBRD Slide 1 European Bank for Reconstruction and Development Applying International Standards to Private Sector Operations Michael Davey Director for Caucasus, Moldova & Belarus Slide 2 What are the EBRD s objectives? To promote transition to market economies by investing mainly in the private sector To mobilise significant foreign direct investment To support privatisation, restructuring and better municipal services to improve people s lives To encourage environmentally sound and sustainable development 80
Slide 3 Office of the Chief Compliance Officer Independent from banking operations Responsible for promoting integrity and business ethics in EBRD and in EBRD financed projects Focal point for anti-corruption work Slide 4 Prevention Integrity procedures and approvals Robust integrity due diligence Independent integrity investigations Slide 5 Integrity Due Diligence Procedures Red flag checklists (Integrity and ML) Integrity concerns brought to Credit and CCO Integrity Investigators (outside firms) Discussion in Operations Committee 81
Slide 6 Integrity Guidelines New guidelines adopted in June 2005 Criteria to assist banking teams Promotes greater transparency and consistency Does not substitute for exercise of judgement Slide 7 Avoid Convicted Criminals.and those under criminal investigation However, take account of whether investigations or convictions are politically motivated or commercially driven Tax convictions and investigations often misused Slide 8 Check Blacklists only take account of internationally recognised checklists Look especially to MDB blacklists (avoid reputational risk) World check good source If previously on list, when and why removed? 82
Slide 9 Past vs. Present Credible evidence linking to current ties to organised crime or criminal activities What is credible evidence? Tax evasion or tax avoidance? Slide 10 Risk Based Approach: PEPs Identify PEP Get senior management approval Determine source of wealth Determine level of risk Ensure continuous monitoring Slide 11 EBRD s AML framework Principles / Policies / Procedures and Guidance Notes in place Training and awareness raising seminars delivered (approximately five per annum) Banking and Credit (Risk Management) departments conduct specific screening on a project by project basis 83
Slide 12 EBRD s AML measures (1) Know your customer Know your customer Full responsibility of project teams Graduated response based on perceived risks Completion of Red Flag Integrity and Anti-Money Laundering Checklists Retained in Project files Concerns raised with Credit (Risk Management) and Chief Compliance Officer Slide 13 Public Procurement Application of Bank s Procurement Rules and Procedures Preventing abuses through open tenders Addressing fraud and corruption in procurement in EBRD funded projects Slide 14 International Co-operation In the fight against corruption, the EBRD works with and supports: IOs such as OECD and Council of Europe Extractive Industries Transparency Initiative Financial Action Task Force IFI Task Force and MDB Investigators Forum Transparency International 84
Slide 15 Conclusions EBRD long experience for working in challenging environments Our fraud and corruption policies are based on this experience but continue to evolve Need to be part of international standard setting Need to be lock-step with other MDBs 85
Going Beyond Compliance in Relationship with Government Mr. Archil Bakuradze, Deputy Secretary General, International Association of Business and Parliament (London), Chairman, Anti-Corruption Commission of the International Chamber of Commerce Georgia Chairman, Ladies and Gentlemen, It is a great delight to attend and to be able to speak at this international meeting which brings together exceptionally wide range of expertise on the subject of anti-corruption. Objective of my presentation is to introduce two practical initiatives from Georgia, which will illustrate the role of business in reducing, or to be more precise, preventing corruption, which is the main focus of this session. Yesterday we have heard a lot about fighting corruption, identifying and persecuting corruption-related crime, whereas this session will be more about preventing corruption and what business can do in this direction. I was thinking what should I call this speech and I decided it should be: GOING BEYOND COMPLIANCE IN RELATIONSHIP WITH GOVERNMENT. In this speech I will try to answer the following questions: What companies can do about preventing corruption is it enough just not to pay bribes, facilitation payments, kickbacks etc.? How good governance determines the operating framework for companies and at what degree it reduces the risk? What are the mechanisms which ensure transparency and effectiveness in public private dialogue? How this dialogue creates a basis to identify and tackle potential problems of corruption? First example of business initiative which is oriented on anti-corruption is about the ICC Georgia. The objective of the Anti-Corruption Commission, which has been created just two months ago, is to contribute towards the achievement of ICC-Georgia s goal to create a corrupt-free business environment in Georgia. Main directions are: Regular assessment of the state of corruption and identification of policy areas, legislation and gaps in public administration which contribute towards corruption; Elaboration of recommendations on anti-corruption initiatives for the Government and private sector; Development of the Anti-corruption Code and Guidelines Using international best practice from ICC to increase awareness among ICC Members and wider business community on anti-bribery instruments, prevention, integrity programmes, ethical reporting by companies and ways to resist various extortion scenarios. Support in ratification of the UN Convention against Corruption. 86
The role and responsibility of business community is immense. The challenge is making the business active, engaged and interested in the issues of common concern, before these particular problems affect the business itself. In Georgia we are observing a process of changing the business culture where companies increasingly assume their share of responsibility in the policy dialogue. Of course the dialogue is a two way process and commitment of both parties is important. It is worthwhile to mention that there is also a crucial political will on the side of the Georgian Government to improve economic governance and policy dialogue with businesses. There is a good realisation that economy should grow to be able to sustain the achievements and current momentum of reforms. But it is not always easy to translate this good will on the top of political establishment into the coherent action of entire body of public administrators, however drastically you reduce their number and size. It is like a big ship. If you turn the wheel it takes miles upon miles to change a course. Therefore, it is not an easy task to introduce changes at this level and it certainly takes time. The role of business is to act collectively on the issues of common concern and be an equal partner with government in implementing reforms. Another initiative which is a good example of transparent and effective pubic-private dialogue in Georgia is the work conducted by International Association of Business and Parliament. Economic legislation is becoming complex. It is not an easy task to legislate for rapidly changing economies which are not only complex due to new areas of business and development of technology but also interdependent in result of globalisation. Government has a task to be ahead of competition and develop a policy which will be beneficial for economy and had minimum unintended consequences for other groups in society. They should also have to take into consideration employment, social, environmental and many other aspects of their decisions. On top of it government should make decisions very quickly as there are big and rising pressures from voters, which are never satisfied as well as pressures from interest groups and international community to reform at a very high speed. In this situation for Government it is important to listen and communicate with these groups, including the business. This is not an easy task as it requires professional, systemic communication as well as resources, people and a planning of the efforts. There is another hurdle which both government and business should think about. This is a public perception that any dialogue or cooperation between business and politicians is corrupt. Therefore the dialogue should take place within the platforms or with the help of mechanisms which have a strong element of transparency to ensure enough safeguards and insurance policies for both government and businesses against such suspicions. 87
By their nature politicians not always see business from business point of view and due to their lack of experience do not understand the business realities. Although we have number of prominent politicians in Georgia who came from successful business career one can hardly agree that whole government, civil service, Parliament and judiciary knows modern business and have full understanding of challenges confronted by companies. From another side, businesses do not fully understand how government works while dealing with very distinct expectations from different groups in society. In result, there is a degree of alienation, distrust and misconceptions towards one another. Majority of politicians think of business in terms of tax payers without fully appreciating other dimensions of it. Soviet legacy of administrative command economy is unfortunately still has an impact even 17 years after the collapse of the Soviet Union. Therefore it is obvious that new mechanisms are needed to ensure continuous, effective and transparent policy dialogue between business and Government. Without this cooperation the anticorruption and many other policies will not be developed and effectively implemented. The question is: How we achieve such a dialogue and ensure transparency and integrity of it? Before I answer this question I would like to highlight another aspect of governance, which has crucial importance for young democracies like Georgia. I would like to elaborate on the division of power between branches of government and namely between executive and the legislature. This division, greater autonomy of Parliament from executive and institutional strength has still to come. Parliaments as elected bodies have responsibility to legislate on behalf of voters and various interest groups in society. Also Parliaments are there to oversee the work of executive. This is a powerful mechanism within the constitution for the system of checks and balances. Sometimes we try to reach accountability and transparency of government by many other mechanisms, ignoring a significant one which is right there, in the Constitution. Parliaments have their unique role in governance including in the area of fight against corruption. Unfortunately Parliaments are always perceived as too political, sometimes too incompetent, very short-term oriented and unreliable. International development assistance has traditionally marginalised Parliaments and usually cooperation has been implemented more in executive to executive mode. Yet, Parliaments are elected bodies which on behalf of society oversee the actions of the executive and should be the guarantors of the integrity and effectiveness in executive. However successful the government is, if system of checks and balances is absent, we cannot claim that government has achieved its goals. There is a need in greater accountability and openness within the system of government first of all towards the Parliament. 88
Businesses should also understand better the role of Parliament, utilise its powers, learn about its culture and how it operates. This mutual understanding is the basis on which the effective policy dialogue can be built on. Business knows all about the shareholder value, employee relations, community investment and even global warming. Yet businesses frequently ignore or do not do anything about a very important stakeholder the government and Parliament, which can overnight change entire operating environment for the business. That s why there is a need for business to be pro-active and engage in a regular, transparent and long term relationship with government and Parliament. Coming back to the questions How to achieve such dialogue and ensure transparency and integrity of it? I would like to tell you more about the business and Parliament concept. It is essentially an integrity exercise which allows the effective and transparent platform for dialogue between businesses and Parliament. On the basis of this cooperation it is possible inter alia to eliminate areas of policy, legislation or deficiencies in public administration which are conducive to corruption. The business and Parliament concept was devised 30 years ago in the UK Parliament. Now it operates within 15 national Parliaments as well as the European Parliament. IABP fosters transparent and effective relationships between businesses and legislators to address all considerations I have mentioned earlier. The Code of Principles guides all activities implemented within our national Business and Parliament Schemes. It defines the scheme as being neutral, independent, non-lobbying, nonsectoral and apolitical. There are structures, policies and processes which ensures the integrity of the operation. The role of the International Association is to accredit on the annual basis the national business and Parliament schemes, help them through exchange of knowledge and information and support creation of new schemes worldwide. Georgia was the first country among emerging democracies which adopted the concept and makes a good use of this mechanism even today. IABP Georgia play significant role in maintaining a transparent and productive dialogue between businesses and the legislature. This model also successfully operates in Armenia and Moldova. In conclusion, it is worthwhile mentioning that good governance and corrupt-free business climate cannot come with one policy or a single structure installed within the government. It should come from the variety of initiatives both from government as well as a business community. The work of ICC and the International Association of Business and Parliament in Georgia are good examples of such successful initiatives. Thank you very much for your attention! 89
Fighting Corruption Through Collective Action Mr. Michael Jarvis, Business, Competitiveness, and Development Programme, World Bank Institute Slide 1 Fighting Corruption Through Collective Action Aim of this PPT is to give introduction to topic. Focus is to highlight big picture and why corruption matters for everyone. Slide 2 Corruption remains a significant problem for business (2005) Ukr Rom Mol Mac Geo Cro Bul BiH Arm EU-comp 0 10 20 30 40 50 60 70 80 90 100 Question: Can you tell me how problematic are these different factors for the operation and growth of your business. Percentage of firm managers who answered corruption is a moderate or major problem. Source: Anticorruption in Transition 3 Who is Succeeding and Why? (Washington, DC: The World Bank, 2007) 90
state capture index Anti-Corruption Network for Eastern Europe and Central Asia Slide 3 State capture by private interests 4 3 State Capture, 2002-2005 State Capture Index measures the extent to which private payments/gifts to parliamentarians to affect their votes, or to government officials, to affect the content of government decrees, had a direct impact on their business. 2 1 0 Geo Ukr Cro Rom Bul Mol SAM Mac Alb BiH Source: Anticorruption in Transition 3 Who is Succeeding and Why? (Washington, DC: The World Bank, 2007) Slide 4 Key elements of World Bank s GAC strategy Instruments for Private Sector Role Country Level Project Level Global Level Helping countries build more capable & accountable states Combating corruption in World Bank Group operations Working with development partners, sharing experience & addressing transnational issues Key Instruments: Investment climate Engaging private sector on anticorruption Demand-side CORE SLIDE Key Instruments: Risk mapping Procurement INT Investigations Debarring corrupt firms Key Instruments: Support global conventions (OECD, UNCAC) StAR Key messages: the strategy is not only about anticorruption in Bank projects it is about helping countries strengthen governance to enable development as well as transnational issues, such as asset recovery and the role of multinationals from developed countries in corruption 91
Slide 5 Helping countries improve governance Different entry points across countries Private Sector Competitive investment climate Responsible private sector Public Management Public financial management & procurement Administrative & civil service reform Civil Society, Media & Oversight Institutions State oversight institutions (parliament, judiciary, SAI) Transparency & participation (right to information, user participation) Civil society & media Local Governance Community-driven development Local government transparency Downward accountability Governance & Service Delivery Transparency, participation, accountability in service provision (health, education, transport) Sector-level corruption issues (EITI, forestry) CORE SLIDE Coalition building across stakeholders Key messages: to clarify that there are many entry points for governance reform, and the choice depends on country context while there are many examples of good work in all these areas, the Bank has historically focused within governance primarily on public management The Bank wants to scale up work in the other four areas, as appropriate and in partnership with other donors: these are the frontiers building multistakeholder constituencies for reform are a critical aspect of managing the reform process Slide 6 Fighting corruption collectively with all stakeholders increases the impact of individual action Key characteristic Collective action usually involves various stakeholders Companies Collective Action Collective Action : Is a collaborative and sustained process of cooperation between stakeholders. Increases the impact and credibility of individual action. Brings vulnerable individual players into an alliance of like-minded organizations. Levels the playing field among competitors. May complement, or temporarily substitute for and strengthen, weak local laws and anti-corruption practices. Civil society Government BUT: Collective Action is not easy or quick, and requires patience, hard work and expertise. Why should companies also engage against corruption collectively - as well as individually? Collective action is a proven method of fighting corruption. Mexico, Indonesia, Ecuador and Germany (among many others) are locations where business and other stakeholders presently use various forms of collective action. It is used in: variety of industry sectors 92
conditions (emerging and developed markets) variety of different forms from project-specific integrity pacts to long term business initiatives Operationally, collective action can be incorporated into a company s project management, corporate risk management, and compliance activities. Strategically, using collective action is a tangible demonstration of a company s commitment to many of the principles underlying corporate social responsibility and effective compliance program activities. Slide 7 Implementing collective action: options Applications Degree enforcement Project / transaction based agreement Ethical commitment Anti-corruption declaration Anti-corruption principles bind signatories to not engage in corruption during project Public commitment leads to enforcement 'by honor' and peer pressure External enforcement Integrity pact Formal, written contract between customer and bidding companies Bidding and implementation processes monitored by external monitor Sanctions apply in case of violations Long-term initiative Business coalition Independent Company facilitator A Company Organization C A Principle-based initiative Ethical principles bind signatories to not engage in corruption in the daily business Public commitment leads to enforcement 'by honor Initiative can advocate anticorruption with government Collective Action Certifying business coalition Compliance-related prerequisites for membership Adoption of membership requirements checked by external audits Members get certified or will be excluded There are different types of anti-corruption collective action programs and while they all help achieve a common goal lower levels of corruption each works differently depending on the country environment, human and financial resources available, etc. Within the guide, we outline four different types of initiative it doesn t mean there aren t others but these four capture the essence of what collective action against is all about. The four types of programs are: Transparency International s Integrity pacts Anti-corruption declarations Certifying business coalitions Principles-based initiatives This web portal provides additional resources on how these different initiatives work, and helps users to determine which might be most applicable to their situations. 93
Slide 8 Selected success stories Customer / Principal Project description Main achievements Pakistan International Airlines (PIA) Code of Pharmaceutical Manufacturers Paraguqy Pacto Etico Commercial Integrity pact MOU between PIA and TI-P for transparency in procurement systems under recommendation of Government of Pakistan Sectorial code of conduct for members of IFPMA* Includes more restrictive provisions on travel, gifts and events, code complaint procedure and code compliance network Certifying business coalition Business principles, ethics principles, quality management Includes certification process, random audits, and trainings/workshops. Development of PIA "Procurement Manual" for all SBD's on procurement of works, goods and services based on international standards and recommendations by the National Accountability Bureau Best practice model for anticorruption initiatives across Asia Anti-corruption declaration can be created in a sector-wide effort Brings together companies from developed and developing countries 150 members signed pact, currently 100 applicants PEC seal is becoming a branding tool in Paraguay which is perceived to be one of the most corrupt countries in LAC * International Federation of Pharmaceutical Manufacturers and Associations Notes on each case example in guide book Slide 9 Demand for tools and guidance Joint effort of Companies, NGOs and Multi-laterals; Guide and Portal on Collective Action; 25 case studies, 50 country profiles, 15 industry profiles; Implementation guidelines. Joint effort of: World Bank Institute; United Nations Global Compact; Center for International Private Enterprise; Global Advice Network; Grant Thornton; Siemens; Transparency International. To help companies design and implement collective action initiatives, WBI together with a coalition of companies, NGOs and multilaterals developed implementation resources to give companies an impetus to make real change as to how they go about doing business in high risk environments. Specifically, we developed a guide and accompanying interactive web portal that provide business leaders with multiple tools to combat corporate corruption that have already been piloted in different countries including Mexico, Ecuador, Pakistan and Germany. With the guide and portal we are not trying to reinvent the wheel many anti-corruption tools already exist that business leaders can consult -, but we are trying to give companies better understanding of the value of collective approaches and how to access these existing tools and select those that are most appropriate for their specific needs. We did not start with the proposition to develop a tool and then match it to a problem. Rather, with the guide and portal we are trying to help you to identify your problem and based on your problem, we help you to chose the 94
Integrity Pact / Anti-corruption declaration Decision tree 1 Are tender documents Is customer willing to Yes No 1.1 already finalized fight corruption 2) / released? Does your company perceive corruption as major barrier to do business in respective country? 1) No No need for collective action consider other ways to continue doing business with integrity Yes Are third parties available to influence customer? (e.g. anti-corruption offices of government, multilateral donors) 1.2 Involve third party to promote collective action to customer 1) Decision has to be made by internal compliance / risk assessment team in headquarters. Various sources for country specific assessment are given on slides 81-83 2) For details: see slide 87 Page 39 January 2008 No Yes Promote collective Prerequisites for project-related collective action not met go to decision tree 2 to evaluate possibility of principle based / Certified association No Yes action to customer via facilitator Principle-based initiative 2.1 Initiate business coalition (1/2) Company 3 1 2 Facilitator (NGO / IO) IO: International Organization Source: Interviews Page 52 January 2008 4 4 Certifying business coalition 1 2 3 4 Establish contacts to Create concept Identify appropriate facilitator Create list of potential partners Companies NGOs Religious groups MDBs Prioritize: which companies / other stakeholders need to take part to ensure sufficient attention / credibility? MDB: Multilateral Development Bank facilitator 1st meeting with facilitator Present company profile, compliance policy and concept for collective action (one may use material from chapter 4 of this manual) Ask for feedback / recommendations Approach government Assess the potential oversight role of government (e.g. anti-corruption bureaus) Concept note Conduct workshop to evaluate business situation, risk of corruption, benefits of anti-corruption activities and best practice examples Summarize intention and objective of initiative in concept note Facilitator to send out concept note to potential partners and follow-up For details please refer to slide 55 Integrity Pact contract examples IP: Integrity Pact Source: Internet, Interviews Page 83 January 2008 IP template from Transparency International Specifically designed for contracts in the defense industry IP contract used by ONGC India Based on contract of Berlin airport IP from project "Berlin airport" Seen as best practice example Available in German only IP contract from project "Hydroelectric power plant", Ecuador (English translation) No "Social Witness" Detailed description of Arbitration Tribunal Anti-Corruption Network for Eastern Europe and Central Asia right tool to solve your problem. We have been lucky to have been able to work with leading companies and business-oriented NGO and multilaterals representing crucial expertise in this process: UN Global Compact, Center for International Private Enterprise, Global Advice Network, Transparency International, Grant Thornton and Siemens. Many of our partners from this initiative are here with us today and I will introduce them later. Furthermore, the guide was reviewed by many companies and business groups, such as BDI (Bundesverband der Deutschen Industrie e.v., Germany), Haylide Chemicals (India), Microsoft (US), Pacto Etico Comercial (Paraguay), Sanlam Limited (South Africa), the Prince of Wales International Business Leaders Forum (UK), and ThyssenKrupp AG (Germany). Slide 10 Of course, we also could not have developed these resources without the help of our colleagues here in the Bank. This is a true World Bank GROUP product, as we received input from PREM, SDN, IFC, INT and several regional departments. Guide: Fighting Corruption through Collective Action Find the right approach for your situation Follow detailed process steps Benefit from various real life examples and templates Decision tree 1 helps to design the approach for project related collective actions How to get started? Four Integrity Pact contract examples provided however contracts have to be adjusted to specific prerequisites of country and project Examples Classification and definition of Collective Action Decision trees Process steps Highlighted topics and issues to consider (e.g. anti-trust) Contract templates Profiles of initiatives Contact list Basis Definition of corruption, dangers of corruption Overview on various ways to fight corruption XXXX ProjectName MM/YY FileName.ppt As already mentioned, our fighting corruption through collective action resources consist of two parts, a guide and accompanying web portal. The guide helps business leaders to better identify the corruption challenges and to select, adapt and implement a collective action tools that fits their specific problem. Catering to our main target group, companies, we tried to make the guide and portal as business friendly as possible hence the familiar Power Point format. 95