fbpx Building a Community of Integrity Champions: Collaborating with the Private Sector to Secure the Future of Asia and the Pacific - Takehiko Nakao | Asian Development Bank

Building a Community of Integrity Champions: Collaborating with the Private Sector to Secure the Future of Asia and the Pacific - Takehiko Nakao

Speech | 9 December 2019

I. Introduction

Distinguished guests, colleagues, ladies and gentlemen: Good afternoon.

Thank you for joining me to celebrate the International Anticorruption Day.

We are fortunate to have with us today two experts with years of experience on engaging businesses against corruption. I wish to extend a warm welcome to our two keynote speakers, Ms. Yanti Triwadiantini and Mr. Pana Ratanabanangkoon.

They are engaged in anticorruption efforts in Indonesia and Thailand. I believe that the role of CSOs and business communities to voice any sign of corruption and unethical work is central to the good governance of official and private sectors of countries.

II. Policy evolution in ADB’s fight against corruption – a reflection

Ladies and gentlemen, while the needs of Asia and the Pacific are evolving, good governance underpins development effectiveness. Corruption perpetuates poverty and threatens sustainable development, and we must continue to fight it.

Consider for a moment: According to the United Nations, to end poverty and achieve the Sustainable Development Goals (SDGs) by 2030, we need to close a financing gap of $2.5 trillion per year. Meanwhile, according to the World Economic Forum, estimates put the global cost of assets stolen due to corruption at roughly $2.6 trillion per year in stolen assets – almost the same amount needed to finance the SDGs.

Money lost to corruption is development denied to those who need it most. As a development bank, the moral imperative of addressing corruption is clear.

ADB has taken on this challenge, and I believe we can be proud of our contributions.

ADB was the first multilateral development bank (MDB) to adopt a comprehensive policy against corruption and a governance policy approved by a board. ADB also established good governance as one of the pillars of its poverty reduction strategy at the time. These groundbreaking policies addressed the link between governance systems and inclusive development years before international anticorruption efforts were embedded in a global treaty.

In the years since I became President, ADB has continued to refine its policies and practices. We enhanced and standardized integrity due diligence in our nonsovereign operations in 2013 and in 2015. We updated our Anticorruption Policy in 2016 to address tax secrecy, tax evasion, and aggressive forms of tax planning. In 2017, we released a handbook to help nonbanking financial institutions improve compliance in line with international standards on money laundering and the financing of terrorism.

Under ADB’s new long-term corporate strategy, Strategy 2030, the sixth operational priority aims to strengthen governance and improve institutional capacity indeveloping member countries. Good governance, integrity, and anticorruption targets will continue to be part of our vision for the future.

III. The private sector: catalyzing economic development

Let me now turn to the private sector’s role in sustainable development. When good public governance is matched by good corporate governance, the impact of development is magnified, more so because of the substantial abundance of private sector finance over development assistance.

In the coming years, ADB will expand its private sector operations into new and challenging markets, fragile and conflict-affected states, and small island developing countries. By 2024, ADB’s private sector operations will reach one-third of its total operations from less than one-fifth as of April this year.

All these efforts, however, will be undercut if private sector firms are susceptible to corruption. In some Asian countries, recent failures in corporate governance have contributed to  poor investments, and political instability.

Our two speakers today are working to change that. Ms. Yanti Triwadiantini can attest to the efforts of ASEAN corporations in supporting ethical behavior, including saying “No” to corruption and bribery. And Mr. Pana Ratanabanangkoon will speak about an innovative approach to fostering an ethical mindset in private enterprises through a certification program.

Let us support their initiatives because, in a way, their work has made it easier for us to do ours.

IV. What ADB is doing to promote integrity in the private sector

Let me highlight what ADB is doing to promote integrity in the private sector: 

First, the Private Sector Operations Department (PSOD) recently introduced a regional technical assistance  that will support assessments and the development of action plans to strengthen corporate governance. As part of  this, PSOD will provide training and capacity building to directors of companies to which ADB has equity investment. And it would add value to companies by improving good governance practices.

Second, we launched a business integrity network for private sector partners in Asia and the Pacific through our Anticorruption Initiative with OECD.

Third, as a member of the Development Finance Institution (DFI)  Corporate Governance Working Group by multilateral and bilateral financial institutions, ADB contributed to the Corporate Governance Development Framework, a common approach to addressing corporate governance risks and opportunities in their  investment operations.

Fourth, PSOD is developing a corporate governance toolkit and scorecard, together with peer multilateral and bilateral institutions,  that will help  address corporate governance risks, particularly in large scale infrastructure projects.

Fifth, our Trade Finance Program is helping its participating commercial banks  implement anticorruption measures, comply with fiduciary standards, and mitigate fraudulent trade.

Sixth, the number of entities covered by ADB’s integrity due diligence (IDD) grew to more than 700 this year from about 250 in 2013. This Integrity Due Diligence evaluates and minimizes integrity risks for companies which received ADB loans and equity investments. 

Seventh, investigations and audits conducted within ADB and for ADB-financed projects and activities help ensure a level playing field among bidders who want to conduct business with ADB. We should exclude companies who engage in unethical practices. To date, about 2,000 firms and 1,000 individuals have been declared ineligible to participate in ADB-related activities.This punitive approach is complemented by our rehabilitation program, which encourages sanctioned entities to be reinstated after demonstrating improved anti­corruption compliance. As of October, 655 firms and 183 individuals have been successfully reinstated.

V. Conclusion

In closing, I would like to challenge each and every one of our staff and consultants to:

  • Strengthen governance and anticorruption components in projects
  • Strengthen efforts to stem tax evasion and the erosion of domestic tax bases
  • Conduct robust checks on companies and nonsovereign projects
  • Work only with companies that have ethical business practices
  • Support initiatives to fight corruption, such as those by Ms. Yanti Triwadiantini and Mr. Pana Ratanabanangkoon.

Most of all, I would like to encourage  you to renew your individual and collective commitments in the fight against corruption. This will ensure that we deliver on ADB’s operational priorities,  and improve the quality of life for the people we serve, including those furthest behind.

Thank you.