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Asian Development Bank's Anti-Corruption Initiatives ¹

Speech by
Marshuk Ali Shah
Country Director
Pakistan Resident Mission
Asian Development Bank

20 August 2003
Islamabad, Pakistan

Introduction

1. Importance of Reducing Corruption for Sustainable Development

Corruption in the Asia-Pacific region can cost up to one-sixth of a country's gross domestic product, robbing its citizens of precious resources that could provide opportunities for the poor to better their lives. The incalculable costs of bribery and other unethical behavior include erosion of the rule of law; trust in government institutions, and political stability.

Corruption is recognized as a problem that can endanger social stability, undermine democracy and morality. Most importantly it threatens the economic development of countries. The uncertainty of being unable to predict the judicial outcomes and being cut out of markets has led the international business community to put pressure for change.

Countries of Asia and the Pacific do not usually fare very well except for Singapore. Corruption in Asia is qualified as endemic and systemic. Yet there are now hopeful signs that the tide is turning against endemic corruption. Ordinary citizens are protesting against the abuse of public power for private gain at all levels, from crooked traffic police to greedy senior officials. Entrepreneurs are more reluctant to compromise their reputation and lose competitiveness by paying under-the-table fees to win contracts. Governments are realizing that corrupt practices undermine their efforts to attract and retain investment.

2. Defining Corruption

Public-sector corruption is not an independent phenomenon. It is a symptom of failed governance at the country level. Corruption depends therefore on factors such as the quality of public sector management, the nature of the accountability relationship between the Government and its citizens, the legal framework for development and the degree to which public sector processes are accompanied by transparency and the dissemination of information. Efforts to address corruption that fail to adequately account for these underlying "drivers" are unlikely to generate profound and sustainable results.

Corruption is Not Monolithic

The literature and field experience suggest at least three broad varieties:

1. "Petty" (Bureaucratic) Corruption
   Many corrupt acts are isolated transactions involving individual public officials who abuse their office by, e.g., demanding bribes and kickbacks, diverting public funds, or awarding favors in return for personal considerations. This is often referred to as "petty" corruption even though, in the aggregate, the amount of public resources involved may be substantial.



2. Grand Corruption
   This involves the theft or misuse of vast amounts of public resources by a relatively small number of state officials who are usually members of, or associated with, the political/administrative elite.



3. "State Capture"
   This involves collusion by private actors with public officials or politicians for their mutual, private benefit. (The private sector "captures" the state apparatus for its own purposes.) The literature suggests that "state capture" co-exists with the conventional (and opposite) view of corruption, in which public officials extort or otherwise exploit the private sector for private ends.

Corruption is Country-Specific

"Blueprint" approaches that apply common principles and tools to a broad range of countries are likely to fail. One needs to understand the local factors that encourage or permit public and private actors to be corrupt. Sometimes, as with petty corruption, much behavior can be explained by individual actors simply weighing the benefits of relatively minor acts of corruption against the risks of being caught, and, if caught, of being punished. But often, and especially in the case of state capture or grand corruption, one must probe deeper. Among other things, it is important to understand not only the motivation of corrupt actors, but also of other actors who do not (or do) act against corruption. Why, for example, are institutions of accountability in some countries unmotivated to act against corruption, or incapable of doing so? Why are some civic groups ineffective (or effective) against corruption? The answers are rooted in the governance environment, which determines how state power is exercised, decisions are made, and accountability is exercised.

3. ADB's Anti-Corruption Initiatives:

ADB's input as an institution to Corruption activities can be summarized under three main headings:

• Good governance in the region is the cornerstone of ADB's poverty interventions. Therefore, a number of ADB's Technical Assistance (TA) activities pay attention to this subject. A well-known initiative is the ADB-OECD Anti Corruption Initiative for Asia and the Pacific. Another example of regional interventions is a TA on Anti Money laundering Activities (AML) in selected countries and helping them with the legal framework.
• In our loans and TAs to Developing Member Countries (DMCs), we stress Corruption as part and parcel of good governance. Most of our governance loans have specific support to oversight institutions with the aim to reduce corruption in the country.
• ADB has also taken some internal institutional measures in order to eliminate corruption within. In that respect we have:
• Strengthened procurement and contracting procedures
• Carry out audits of projects to ensure that rules have been followed
• Strengthening the capacity in resident missions to understand and apply procurement procedures
4. ADB OECD Anti-corruption Initiative

ADB first held an awareness raising conference at its headquarters in 1999 on corruption. ADB did not have adequate capacity at the time and so it partnered with the Organization for Economic Cooperation and Development (OECD) whose various directorates had carried much work on the subject. A second awareness raising conference took place in Seoul in 2000, again in partnership with the OECD. In response, experts of the DMCs, international NGOs, business community and donors got together and prepared a draft Action Plan. The Secretariat of the Initiative established a regional expert group to draft the Anti-Corruption Action Plan for Asia-Pacific. This was motivated from the belief shared by both organizations that even though corruption is a global phenomenon, successful countermeasures have to be designed at national and regional levels taking into account a society's and country's particular economic, historical and cultural characteristics.

When it comes to combating corruption, political level support is key to ensure that the bureaucrats are kept accountable about progress. The Initiative called on experts to represent their government in drafting the Action Plan as an attempt to involve both the political and bureaucratic levels of each country since the experts who were civil servants had to report back to their politically elected government.

5. 3rd ADB-OECD Conference on Anti-Corruption

The Action Plan was formally endorsed at the end of the 3rd annual conference of the ADB/OECD Initiative in Tokyo in 2001. Country senior level representatives attended the meeting. The endorsement is the outcome of an intensive consultation process between regional ADB member countries and representatives of civil society and business organizations from the region and the international donor community. It provides for a comprehensive set of actions which governments are committed to take to develop effective and transparent systems for public service; strengthen anti-bribery actions and promote integrity in business operations; and support active public involvement. The endorsement was also supported by the Initiative's partners, including the Department for International Development of the United Kingdom (DFID), the Pacific Basin Economic Council (PBEC), Transparency International (TI), the United Nations Development Programme (UNDP), and World Bank (WB).

The Action Plan is based on 3 pillars:

Pillar 1: Developing effective and transparent systems for public service Pillar 2: Strengthening anti-bribery actions and promoting integrity in business operations Pillar 3: Supporting active public involvement




6. Medium Term Strategy

The ADB/OECD Anti-Corruption Initiative for Asia-Pacific is now entering its operational phase. Starting from 1999 until the endorsement at the end of 2001, the Initiative focused on knowledge and capacity building, the fostering of regional co-operation, and the development of a concrete framework for action. Since endorsement, the strategic objective of the Initiative is to consolidate the results of the preceding phase by shifting the emphasis towards implementation of concrete anti-corruption reform efforts in the framework of the Action Plan. The Initiative, thus, fosters both regional and country-specific policy reform. This strategy is tailored to policy priorities identified by endorsing countries and provides means by which governments, aid agencies, and other partners of the Initiative can review progress achieved. The policy work of the Initiative focuses on four areas of action:

• Country Ownership
• Regional Co-operation
• Civil Society Involvement and international donor co-ordination
• Enlarging regional participation in the Action Plan.



7. Pakistan and Anti-Corruption Initiative

Pakistan requires a three-pronged approach of enforcement, prevention and awareness to combat corruption. The Anti-corruption body should be independent operationally. In Pakistan, nearly one dozen commissions and committees on corruption failed to solve the issue because the recommendations put forward were not wholly implemented. Corruption affects good governance and repeated dismissal of elected governments were on the charges of corruption. Corruption is now an issue of national concern and there is a strong need for a radical solution. Political will should be involved in combating corruption but intrusion in the system should definitely not be allowed. There is a strong need of initiation of public awareness campaigns, public participation (Pillar 3) which will yield a strengthened corruption complaint mechanism.

• Access to Justice Program Loan
Realizing the dire need for judicial reforms, the ADB approved a US $350 million three-year program loan to the Government of Pakistan for the Access to Justice (AJP) Program in December 2001. The scope of the AJP encompasses judicial policy and administration, delay reduction projects, improved access to justice, judicial training, legal education and strengthening of legal profession, commercial dispute resolution and drafting and amending legislation.

The key development objective of the AJP is to assist the Government to improve access to justice so as to provide security and ensure equal protection under the law to citizens, in particular the poor; secure and sustain entitlements and thereby reduce the poor's vulnerability; strengthen the legitimacy of state institutions; and create conditions conducive to pro-poor growth, especially by fostering investor's confidence.

The Program will contribute to this aim by supporting five inter-related governance objectives:
1. providing a legal basis for judicial, policy, and administrative reforms;
2. improving the efficiency, timeliness, and effectiveness in judicial and police services;
3. supporting greater equity and accessibility in justice services for the vulnerable poor;
4. improving predictability and consistency between fiscal and human resource allocation and the mandates of reformed judicial and police institutions at the federal, provincial and local government levels; and
5. ensuring greater transparency and accountability in the performance of the judiciary, the police and administrative justice institutions.


The AJP is the third phase of a long-term (10-15 year) ADB commitment to support for access to justice reforms. This phase was proceeded by a TA grant-supported diagnostic phase (1998/9), and a TA grant pilot project phase (2001/2). The AJP constitutes a i) a Program Loan of US $330 million over three years, ii) a TA loan of US$20 million, to support Institutional Development for AJP, and iii) a TA grant of $900,000 to support management of the program by the Ministry of Law and other federal and provincial implementing agencies.

The Ministry of Law, Justice, Human Rights and Parliamentary Affairs (MoL) is the Executing Agency. A program management unit (PMU) has been established at MoL. At the Federal level, the Implementing Agencies are
• Law Commission
• Federal Ombudsman
• Federal Judicial Academy and
• Ministry of Interior


At the provincial level, the Province Implementing Agencies are the departments of law and home, with the planning and development department/board playing a coordination role. The provincial implementing agencies will work with:
• Provincial and District Ombudsmen
• High Court and Subordinate Courts
• Public safety commissions and Police Complaint Authorities
• Prosecution Services



• Progress under Access to Justice Program:
Overall, progress under AJP has been marked by slow implementation of the Police reforms, and some promising signs of deepening of judicial reforms, particularly, in the areas of delay reduction and budgetary support. Implementation of new institutions created under the Police Order 2002 and the Local Government Ordinances (2001) concerned with access to justice issues has been slow mainly due to resistance amongst the police and elites at province and local levels to the decentralization reforms. Some progress has been achieved in establishing the District Public Safety Commissions (DPSCs), but this is still patchy and DPSCs are nowhere yet functioning in accordance with the spirit of the Police Order 2002.²

The courts at the tehsil and district level have now assumed many of the functions that previously resided with the executive magistracy, but with only little increase in capacity resulting from the transfer of about a half of the former executive magistrates. There are three promising indications of progress in court practice: i) public access to information about court performance; ii) early evidence on delay reduction and the decline in court case-load; and iii) budgets committed by the federal government to the judiciary, in particular, the lower courts.

In 2002 the Lahore High Court (LHC), for instance, made available to the public its first annual report. This documented disposal of 100,000 cases, against a total of 96,959 new cases instituted. It reported that the LHC has been able to reduce arrears by 4,000, although the pending cases remain at 65,000, a backlog that would take 17 years to clear. At the lower court level, while around 780,000 cases were disposed, over 800,000 were instituted, indicating the scale of the challenge to bring about 'inexpensive and speedy justice to the doorstep'. It is important, however, to note that this kind of public reporting required new kinds of data to be collected by the courts, and that the commitment to make this available for public comment is unprecedented.

Second, where measures have been systematically introduced to reduce delays, positive results have been achieved. In ten subordinate courts (seven civil and three criminal) in three large urban centers (Karachi, Lahore and Peshawar) an ADB-supported pilot project was introduced to test the efficacy of case flow management principles in addressing the long delays and long backlogs endemic to trial courts. From September 1, 2001, through July 31, 2002, these courts reported an overall increase of 53% of disposal rate compared with their performance in the previous years. Four district courts in Karachi staffed with over 110 judges increased the case disposal by an average of 77% in the first half of 2002, compared with the first half of 2001. This pilot project will be scaled up under Loan 1899-PAK.

Third, there is some progress with the vexed issue of providing sufficient budgetary outlays to chronically under-resourced 'access to justice' sectors the police and judiciary. Recently, in addition to normal provincial budgetary provisions, the Federal Government has allocated Rs.1 billion and Rs.100 million for development expenses for AJP implementing agencies at Provincial and Federal levels respectively. During FY 2002-03, budget increases recorded 129.38% on development side and 12.1% on current side, including an increase in provincial non-salary budgets of 19%.³



• Technical Assistance to National Accountability Bureau

  The Government established the National Accountability Bureau (NAB) under the NAB Ordinance 1999 and has provided legal durability for the NAB in recent amendments to the Constitution. NAB requested ADB technical assistance to strengthen the institutional capacity of NAB in the performance of its growing functions and assumption of new responsibilities and in the context of a medium term framework of activities contained in the National Anti-Corruption Strategy (NACS) announced during mid-2002.
  
  The NACS recognises the need for a broader mandate and strategy for the NAB's anti corruption efforts. The enforcement approach was essential in the opening, fire-fighting phase of anti-corruption initiatives. However, controlling corruption on a sustainable basis requires a broader vision and a targeted strategy to deliver that vision, incorporating prevention, monitoring and combating, and designed and implemented by a coalition of the state, civil society and the private sector. In order to address these issues the Government has begun implementing the NACS project with the purpose of creating a coherent corruption prevention strategy, and to propel Pakistan further on the long road to accountability and transparency.
  
  The $150,000 TA will assist NAB, as part of its nation-wide strategy, to restructure and thereby improve the Bureau's investigative, prosecutorial, technical and management capacity, leading to institutional reorganization at federal and provincial levels, better coordination amongst anti corruption agencies and linkage with the Government's access to justice and devolution commitments. The TA will also provide assistance to assess the training needs of NAB and prepare systematic training programs for NAB with an immediate as well as long term view.
  
  The TA is intended to help the government maximize the opportunity of reforming NAB on the basis of recommendations developed through the NACS study. The TA will help in developing effective and creative strategies to enhance NAB performance and address critical, short-term technical and managerial constraints in handling additional responsibilities and complex anticorruption cases.
  
  The TA will complement the ADB supported Access to Justice Program and Decentralization Support Program in strengthening NAB's capacity to implement those parts of these programs which have a direct or indirect impact on prevention of corruption.




• Decentralization Support Program

  Decentralization Support Program (DSP) is a federal program of fiscal restructuring to support the legal, institutional and capacity-building costs of devolution and related reforms with a focus on local government performance, accountability and service delivery. Related reforms include adoption and implementation of national gender reform action plan. Decentralization reform in Pakistan has been underway for almost two years. Political decentralization has been achieved but significant issues remain in this, and even more in implementation of fiscal and administrative decentralization. The DSP is a $300 million ADB-assisted initiative approved in November 2002 to address these problem areas, and consolidate and carry forward decentralization reform. DSP is an innovative, demand-driven and output-oriented program, serving a range of clients at all levels of government. An important objective of DSP is improved representation and accountability, contributing to an enabling environment for service delivery and poverty reduction.
  
  DSP is funded by loans and a grant from ADB:
  
  1. Program loan of $270 million to help meet the costs of decentralization, especially fiscal decentralization. This is to run for three years, disbursed in two tranches of $120 million and $150 million.
  2. Two TA loans: $23 million TA1 to Enhance Local Government Performance and $7 million TA2 to Promote Gender and Governance Mainstreaming. Each will run for four years.
  3. TA Grant for $500,00 for support to implementation of decentralization.
  
  
  

  The executing agency for DSP is the Ministry of Finance. Implementation involves four Federal agencies (NRB, CGA, AGP and MoWD), provincial and local governments. DSP decision-making is through a National Program Steering Committee (NPSC) and four Provincial Program Steering Committees (PPSC's) - the latter with majority local government representation. DSP implementation is through a National Program Support Office (NPSO) and four Provincial Program Support Offices (PPSO's). The PSO's assist clients to access and use DSP support, and help the Steering Committees perform their functions.

  The DSP through its participatory approach will ensure that the elected representatives will be held accountable at the grass root level. It introduces a fiscal system, which guarantee accountable and responsive public resource management. DSP invests in systems like internal audit, public accounts committee and redress of grievances to ensure efficient public resource management.