Finance

Building a Cleaner World Economy

 

Opening Remarks by Angel Gurría, OECD Secretary-General, at the Global Forum on Public Governance

Paris, 4 May 2009

 

Ladies and Gentlemen:

Thank you for joining us at this Global Forum on Public Governance. Thank you to the Government of the Netherlands for their support and sponsorship. This is a unique opportunity to raise the paramount importance of fostering a culture of integrity.

Weak governance is at the core of the current global crisis. Weak regulation and regulatory capture, coupled with deficiencies of oversight and financial disclosure, are root causes of the financial turmoil and uncertainty. The search for short-term dividends and greed were ready to make the most of these vacuums. In many ways, the current economic meltdown is the offspring of a crisis of integrity.

Fostering a culture of integrity is a major global challenge. We all know this is work in progress, both in OECD and developing countries. So I am not going to spend time preaching to the converted. Instead, I would like to turn to this Global Forum and invite you to join forces for the development of higher standards for a “cleaner” market economy.

 

1. Integrity: the cement for stronger economies

Fostering integrity and preventing corruption are key elements in the equation for prosperity. They are essential ingredients to restore confidence in the financial markets, confidence in regulators, confidence in governments and public decision making. Progress on these areas is the only way to restore confidence in globalisation.

To build a stronger global economy we need to think of a cleaner global economy. A crisis of confidence lies at the heart of this financial and economic downturn. To regain trust and avoid future crises, it is essential to face up to “the dark side of globalisation”; activities like fighting corruption, combating tax evasion and money laundering. The crisis demands tough decisions on all these fronts.

The OECD is fully committed to step up its contribution to a cleaner global economy.  The OECD, together with the WTO, ILO, IMF and the WB, assists the leaders of the largest economies of the world, within the G8 and the G20, in shaping a new set of instruments which will represent the ‘founding principles’ of this cleaner global economy. 

They include a Global Standard on integrity, propriety and transparency in business and a Charter on global sustainable activity.  The Italian Presidency of the G8 and the head of the German Government herself are at the forefront of this common effort and the OECD is closely cooperating with them. The OECD can indeed build on its existing instruments.

Our Anti-bribery Convention is the leading instrument helping governments to stop bribery of public officials in pursuit of business around the world. Since its implementation in 1997, the Convention has resulted in more than 150 investigations; more than 60 individuals and companies have been sanctioned for committing foreign bribery and related offences.

Transparency International (TI), the leading international NGO in the fight against corruption, chose OECD Working Group on Bribery Chair, Mark Pieth, as one of two recipients of its annual Integrity Awards. We will continue to take the lead in setting and promoting international anti-corruption standards and principles, and monitoring their implementation.

Tax havens and lack of adequate cooperation among countries in the tax area did not cause the crisis, but they certainly helped to fuel it. Transparency in the areas of taxation will thus play a very important role in solving it.  The OECD advocates a level playing field in the application of tax rules and the exchange of information between tax authorities to fight tax evasion. We have made historic progress in the fight against this problem. In fact, we have made more progress in the last two months than in the 10 years before that.

The Financial Action Task Force, housed in the OECD, engages a worldwide network on its recommendations against money laundering.

A crackdown in all these areas will benefit not only OECD countries. It will also provide emerging economies with extra fiscal means to support their recovery programmes and, in the longer term, their development.

This is the gravest economic crisis of our lifetimes. But this is also the opportunity of our lifetimes to build a stronger, cleaner and fairer global economy. It is therefore essential that we put our heads together to generate a strong global impulse in favour of integrity; especially now that countries are implementing the largest fiscal stimulus in world history.

 

2. Mapping risks of corruption: the essence of a clean recovery

We are witnessing a rapid expansion of the role and scope of government across some OECD countries. This is occurring when governments are rapidly reshaping regulations, when they become owners of financial institutions or when they are asked to bail out selected private concerns through a quick and massive infusion of funds.

Governments nowadays provide huge fiscal stimulus programmes and scale up committed aid packages to our partners in developing countries. Current global estimates of disbursed and planned bailout funds, together with cumulative global plans for fiscal stimulus now total several trillions of dollars.
There are governance and corruption risks. Perhaps most visible are the lobbyists knocking on the door of governments asking for their sectors to be included in stimulus packages!

The OECD has been a pioneer in reviewing risks of corruption at the interface between the public and private sector. We also developed policy instruments – principles, guidelines – practical tools, and identified good practices to counter corruption risks. I would like to highlight three examples:

  • Public procurement is the government activity most vulnerable to corruption. On a global scale, governments spend around 4 trillion dollars each year on procurement and an estimated 400 billion dollars is lost annually to corruption. The OECD developed the first international instrument to foster integrity in the whole procurement cycle, from definition of needs to bidding, contract management and payment. The OECD Principles for Integrity in Public Procurement are an integral part of our multidisciplinary approach, uniting efforts of competition authorities, donor agencies and anti-corruption experts with the private sector.
  • Conflict of interest is major risk area both in the public and private sectors. The 2003 OECD Guidelines for Managing Conflict of Interest in the Public Service provides the first international instrument for policy design and implementation. In the context of the financial crisis, the so-called “revolving door” that shuffles employees between the public and the regulated sector is an emerging concern that inspires governments to rethink regulations in order to safeguard the public interest. A paper for this Global Forum reveals that the “revolving door” phenomenon is a common practice of the 116 finance corporations listed in the most recent edition of the Fortune 500.
  • Lobbying is a daily reality in modern democracies.  However, undue influence-peddling and concerns that “vocal vested interests” are favored over the public interest pushed lobbying up on the political agenda. In countries with profound inequalities, lobbying can turn to be an anti-democratic tool. The OECD reviewed legislations to support fact-based policy debate on how to enhance transparency and accountability in lobbying.

We have been told many times that increasing transparency in lobbying is key, but that it is not in the interest of lobbyists.  However, a recent OECD survey based on the largest ever sample of lobbyists revealed that 76% agree that transparency in their activities would help alleviate the negative perception of inappropriate influence-peddling. Moreover, 61% of lobbyists surveyed would welcome mandatory disclosure of their activities to increase transparency.

These are three areas where OECD is making a significant contribution to build a stronger and cleaner global economy and which could be included in the current initiatives within the G8 and G20 context. We are making a constant effort to learn from our experiences through the work of our committees and Forums, to provide governments with state of the art policy tools and analysis that can help them anchor a culture of integrity in public service.

The policy instruments and tools that the OECD develops are alive. We test the relevance of OECD pro-integrity instruments and tools through peer reviews. Assessment of risk areas, in particular public procurement, and the implementation of the integrity framework are integral parts of comprehensive public management reviews in Greece and Mexico, for example. We also work together with countries outside the OECD community through a series of Joint Learning Studies. These studies already support reform integrity and corruption prevention efforts in Morocco, Jordan and Yemen.

Corruption is the cancer of globalisation. It undermines democracy, public policy and social capital; and it has a disproportionate impact on the poor. Social disappointment is the most dangerous soil, where fear and calls for authoritarian government and economic nationalism can grow. The results of the 2009 Edelman Trust Barometer reveal that trust in business, media and government is half-empty now. This can be translated into an irreversible damage.

We need to respond bluntly to this collapse in global trust. The size and complexity of this challenge demands a co-ordinated anti-corruption global partnership among national governments, international organisations, the corporate sector and civil society. OECD is very well placed to help. But we are also conscious that all our work and policy tools, generated through the constant exchange between our experts and people like you, are still not enough to win the battle. The crisis has exposed the rotten pipelines, the necessary amendments, the needed reforms. We cannot afford to fail this time. This is a major systemic failure. Let’s put our brains together and get it right; for there is much at stake and no way back to business as usual.

Have a most productive and enjoyable Forum.

Thank you very much.

 

 

 

Countries list

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  • Seychelles
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