at the Anticorruption Summit 2000
September 22, 2000
John A. Zemko

I'm pleased to be with you here today to discuss the partnerships CIPE has formed to alleviate the problem of corruption.

Brief overview of CIPE as an institution:

• Since 1983, CIPE has conducted about 600 projects in over 70 countries.
• CIPE is a core institute of the National Endowment for Democracy
• CIPE is an affiliate of the US Chamber of Commerce

OECD Washington Conference, February 1999:

• CIPE is proud to have been a cosponsor of the OECD Washington Conference on Corruption that was held February last year. Our chairman, John Bohn, and the chairman of the National Endowment for Democracy, John Brademas, both had the opportunity to address the conference participants in keynote speeches.
• A number of our partner organizations from Ukraine, Colombia, Ecuador, India and several other countries were able to attend the conference, as well. They have reported back to us on how important this conference was to them as a venue for discussing their own experiences in combating corruption.
• These partner organizations have long formed the framework of CIPE's ongoing program efforts around the world and certainly form an important network of partnerships we have built to effectively fight corruption in a host of ways.

I'm going to speak briefly today about three different partnerships we have formed with different private sector groups since the OECD conference. We have actually worked on many more. But rather than inundate you with information here I will let you know that this is all available on our Web site, which I will give you more details about later on. I must give credit to one of our partner organizations in Bulgaria for helping to conceptualize this presentation. The Center for the Study of Democracy has been an exceptional partner for us in the effort to develop training programs in corporate governance in Central and Eastern Europe. We have since adapted their experience for conferences we have developed in Asia and elsewhere.

It's helpful to group CIPE's partnerships into two separate areas for discussion purposes. In the one group are those initiatives designed to address the demand side of corruption and in the other group are initiatives that work at controlling the supply side of corruption. As you probably know, in the lucrative world of public-private transactions, these initiatives must work to both steer private companies in the direction of sound and honest business practices and also reform government policies that allow corruption to breed in the marketplace.

"Demand" Side of Corruption

• Some policy initiatives that are important to address on the demand side of corruption include:
• Sound procurement codes, particularly for large government procurement processes;
• Third party monitoring on these large procurements;
• Independent audits;
• Rationalizing tax schedules and collection systems;
• Paying civil servants a living wage; and finally
• Simplifying systems of law by creating sound systems of recording them and eliminating duplicative regulations that provide opportunities for corruption.
• On this last theme—and as an illustration for you—we have formed a partnership with the National Association of Entrepreneurs in Ecuador—or ANDE as we call them—that will improve the system of law in that country.

ANDE has been the recipient of great praise in Ecuador for its all-encompassing approach to eradicating corruption. They have issued recommendations on new legal reforms through a series of sessions with government officials, leaders of the business and NGO communities, and even the Catholic Church. Their focus has not been to blame past corruption on any one particular group but rather to initiate reforms that will change the direction of business and institute clean practices. Their studies have found that since the Republic of Ecuador was founded 168 years ago some 92,250 legal norms have been created of which 52,774 were in force in 1997. The sheer number of overlapping, unclear, and contradictory laws has created an environment of legal chaos and leaves the application and enforcement of laws to the discretion of bureaucrats. Several recommendations to clarify the system put forward by ANDE have been included in Ecuador’s new constitution that went into affect last year.

Specifically, ANDE targeted six priority areas where corruption was the most pervasive including the administration of justice, public procurement and contracting, customs practices, privatization, social security, and transparency in financial management of the public budget. For example, ANDE recommended several policy reforms within the administration of justice including:

• Eliminating the susceptibility of the judicial system to outside influences;
• Installing a commission of distinguished jurists to codify standards and laws; and
• Amending subsidiary and procedural codes to eliminate double standards being used by public officials.

These recommendations were included in the new constitution, which established an independent seven-member commission under the authority of the National Congress that is supposed to codify and publish laws. The committee will also compile and systematically organize Ecuador’s 53,000 laws to eliminate duplication and contradictions and lessen the discretionary authority of public officials.

"Supply" Side of Corruption

• Let me talk for a few minutes about policy initiatives that are important for addressing the supply side of corruption and some of CIPE's work in that area. On this side we can talk about efforts like:
• The recent OECD Anti-Bribery Convention which is surely one of the most important international efforts underway to curtail the pipeline of corrupt funds moving from international corporations into the hands of public officials;
• We can also talk about instituting Internationally Accepted Accounting Standards as a fundamental institutional reform effort.
• Teaching the importance of sound corporate governance has been one of CIPE's cornerstone initiatives on the supply side of the equation and I would like to pause here to speak again about the fine work of our partner in Bulgaria, the Center for the Study of Democracy. CSD introduced shareholder registries to the government of Bulgaria as a fundamental policy reform initiative and was responsible for the passing and implementation of legislation that required their use. These shareholder registries decipher the ownership of companies and protect minority shareholders by ensuring that their shares are registered as a matter of public record, thus eliminating one of the leading causes of corruption in Central and Eastern Europe.

CSD has also spearheaded a corporate governance education program aimed at the key players in the privatization process, as well as educating interested members of the general public. The program consists of study visits to transition economies, workshops for key private sector representatives, town hall meetings for the general public, and public education campaigns through articles and radio and TV presentations.

• Finally, in another supply side initiative, CIPE has undertaken broad efforts to upgrade the role journalists play as independent watchdogs for corruption. One of our most recent efforts in this regard is our partnership with the Trust for the Americas to train journalists throughout Latin America on how to uncover and report on corrupt practices. Last April, we sponsored the first of three regional conferences on this topic in San José, Costa Rica. We are now planning the second one, which will take place in Cartagena, Colombia in November. The third is scheduled to take place in Buenos Aires, Argentina early next year before the Summit of the Americas. At each conference some 50 young journalists are brought to a training program that teaches them the fundamentals of investigative journalism.

Journalists Against Corruption

• A second key component of this training program is the electronic journalist network we have created in partnership with an El Salvador based nonprofit group that produces "Revista Probidad"—an electronic anticorruption bulletin for Central America. This network takes advantage of information technology's edge in breaking down barriers to freedom of information that in many countries allows corruption to continue unchecked. This initiative is brand new and we are excited about the overwhelmingly positive response we are getting from journalists throughout Latin America to what is essentially a community building effort among journalists to wage war against corruption.
• If you read Spanish and have access to the Internet you can take a look at the Web site for this journalist network by logging on to CIPE's Web site—the Forum on Economic Freedom at www.cipe.org. Just look for "Periodistas frente a la Corrupción" on our home page. From there you can also access the huge amount of information the Forum provides on different topics related to economic reform and democratic development. Be sure to click on our special "Combating Corruption" discussion area where you will find numerous speeches, articles from our policy journal Economic Reform Today and other useful links to anticorruption efforts like the OECD Washington Conference. In this area you will find more detailed descriptions of the projects I've described today as well as our Anticorruption Policy Toolkit that I've drawn on for this presentation.

It's been a pleasure to be with you today—thank you for your time and I look forward to any questions you have.