Speech by Masatsugu Asakawa, President, Asian Development Bank, at the International Anticorruption Conference, 1 December 2020
Thank you, Mr. Lifuka, for your very kind introductions. First of all, I would like to join Kristalina and others in expressing our deep condolences for Mr. Jim Wolfensohn, who passed away quite recently. As everybody knows, he was a great fighter against corruption.
Today, I am extremely grateful for the opportunity to join my esteemed fellow panelists in this discussion.
I. The challenges of corruption for international development
Let me start by saying that the theme of this International Anticorruption Conference reflects well the current challenges facing ADB’s developing members in Asia and the Pacific. Let me highlight three of those challenges.
First, corruption, financial crimes, and the flow of dirty money are a huge drain on developing economies. They deprive governments of the resources they need to meet the needs of their populations to overcome the current crises created by the coronavirus disease (COVID-19) pandemic, and to achieve the Sustainable Development Goals.
Second, corrupt activities erode trust in public institutions. This is especially concerning at a time when governments are grappling with the economic, health, and social impacts of the pandemic. If income inequality continues to rise and ordinary citizens feel that they are carrying a larger financial burden for public services while others benefit from nefarious activities, we can expect a public outcry like what happened after the global financial crisis in 2008.
The third challenge is the “double-edged sword” of digital transformation, which is now accelerating because of the pandemic. The global economy has functioned remarkably efficiently during recent lockdowns because of digital innovations; but unscrupulous actors are also exploiting new technologies to facilitate financial fraud and illegal transactions, and to hide ill-gotten wealth.
II. The role of international financial institutions in promoting truth, trust, and transparency
Let me now discuss three ways multilateral development banks like ADB can promote truth, trust, and transparency as we support our developing members. These align with our roles as catalyzers of finance, knowledge providers, and conveners of partnerships.
First, international financial institutions (IFIs) must lead by example, by strengthening integrity checks and promoting transparency in the operations we finance. We must remain vigilant to ensure that our own projects do not fall victim to corruption, fraud, or illicit financial flows such as money laundering and terrorism financing.
To protect against this, ADB takes proactive steps to strengthen compliance on issues such as procurement and financial management whenever our project reviews identify integrity risks. We will also remove high-risk individuals, entities, or components from project structures. We screen and vigorously investigate any valid complaint of fraud or corruption in our projects.
Despite global lockdown measures, ADB has continued to pursue its investigations efficiently and effectively using digital technology and local investigators in the field. Those who have violated our integrity policies will be sanctioned.
I also believe transparency matters, as it bolsters the effectiveness of these measures by enabling stakeholders to participate and scrutinize. That is why we make project-related documentation publicly available. Because of our commitment in these areas, I am proud to report that ADB retained its top ranking in the Aid Transparency Index of development organizations this year.
Second, IFIs must contribute knowledge solutions that improve governance and strengthen trust in public institutions. This includes applying new technologies that improve data accuracy, transparency, and reporting of suspicious activities.
For example, this year, ADB is financing e-governance reforms to strengthen the anti-money laundering regime in Bhutan; public financial management in West Bengal, India; and artificial intelligence solutions to improve property tax compliance in Nepal.
In addition, ADB’s Trade and Supply Chain Finance Programs are working to strengthen the capacity of partner banks, so that they can better detect and prevent trade-based money laundering, which accounts for more than 80% of illicit financial flows from developing countries annually.
Third, IFIs must use their convening power to promote partnerships that strengthen international standards. Let me reflect here on the importance of international tax cooperation to increase domestic revenues for developing economies, like I mentioned. As you know, tax evaders typically siphon off otherwise taxable income from a country and transfer it to jurisdictions with weak regulations and minimal or zero taxation. Partnership is indispensable to tackling this, and IFIs can play a pivotal role.
I am therefore proud that ADB has recently established a new Regional Hub on Domestic Resource Mobilization and International Tax Cooperation in Asia and the Pacific. One of the objectives of this hub is to promote our developing members’ participation in global tax cooperation initiatives, including increasing the level of transparency and exchange of information needed to fight tax evasion and other illicit financial flows. Our hub will closely coordinate with global standard setters like OECD, the Global Forum, IMF, and World Bank; as well as with other regional tax administration associations and bilateral agencies.
Another example of an effective partnership is the cross-debarment agreement under which ADB and four other major multilateral development banks recognize and enforce each other’s sanctions against entities that have committed wrongdoing.
I am confident that our collective efforts at the national and international levels will successfully advance the values of truth, trust, and transparency. These are values our region very much needs to foster right now in order to overcome the challenges we face and to achieve the Sustainable Development Goals.