Welcome Remarks at International Anticorruption Day - Takehiko Nakao

Welcome remarks by ADB President Takehiko Nakao at International Anticorruption Day on 9 December 2016 at ADB Headquarters, Manila, Philippines

I. Introduction

Distinguished guests, colleagues both here at ADB Headquarters and in our Resident Missions, ladies and gentlemen: Good afternoon, and welcome to our celebration of International Anticorruption Day.

I wish to extend an especially warm welcome to our keynote speaker, Mr. Gerard Ryle, Director of the International Consortium of Investigative Journalists. Mr. Ryle has been at the forefront of investigative journalism for almost 30 years and has demonstrated an unwavering conviction to the fight against corruption.

II. A retrospective and panoramic look at corruption

ADB’s mission is to support development in Asia and the Pacific, and this includes helping our developing member countries (DMCs) fight corruption. Today, I would like to reflect on ADB’s past efforts to confront and combat corruption and look ahead to our planned next steps.

Public demand for transparency and accountability 

Until the mid-1990s, in developing countries, the public’s tolerance for weak governance and corruption was greater than it is today. Despite the preponderance of corrupt practices in many countries, the media often did not report on it and there was little public debate on corruption.

Starting in the mid-1990s, high-profile corruption began to grab the public’s attention, and many countries experienced political scandals and upheavals. In Asia, driven in part by the response to the 1997 financial crisis, the public began to demand more transparency and accountability from their governments. This is evident in the number of countries to have adopted right to information laws—from just 22 in 1997 to more than 110 in 2016.

ADB’S governance and anticorruption policies

In 1995, ADB became the first international financial institution to adopt a Governance Policy. At the time, some did not see the need for a formal policy. Today, no one doubts its importance, and there is a common view that good governance is a driver of economic reform and growth.

In 1998, ADB introduced its Anticorruption Policy. While certain stakeholders questioned whether fighting corruption was a mandate of multilateral development banks, our policy affirmed ADB’s commitment to a “zero tolerance” approach to fraud and corruption.

"In 1998, ADB introduced its Anticorruption Policy. While certain stakeholders questioned whether fighting corruption was a mandate of multilateral development banks, our policy affirmed ADB’s commitment to a “zero tolerance” approach to fraud and corruption."

Today, ADB’s governance and anticorruption work is an integral part of our development operations. In particular, we are working with our DMCs to help control corruption and mismanagement, with several efforts taken in recent years.

First, ADB is supporting the role of civil society in monitoring development operations. One important example is regarding the rehabilitation and reconstruction of schools under the Seismic Safety Improvement Program in Armenia approved last year. In this case, the Armenian Government approached ADB to help engage civil society organizations.

Second, we are helping the Government of Thailand, under the ADB-OECD Anticorruption Initiative, to implement Transparency International’s Integrity Pacts related to the Construction Sector Transparency Initiative as part of its reforms of public procurement.

Third, we are supporting the work of the Open Government Partnership in Indonesia and Papua New Guinea so that citizens can have access to information. This will help citizens monitor service delivery by governments, including at the local level.

Fourth, we have helped prepare a procurement manual and a medium-term anticorruption action plan for the education sector in Mongolia.

ADB should take pride in these achievements. We are fast gaining a reputation as a partner with integrity. The Washington DC-based Government Accountability Project considered ADB’s administrative order on whistleblower and witness protection as demonstrating best practices. Yet, we still have a long way to go to ensure that development funds deliver results on the ground and are not diverted. 

Corruption – The greatest threat to development

According to the think tank Global Financial Integrity, illegal financial outflows for most of the period 2004 to 2013 exceeded development assistance inflows and investment in all developing countries. In addition, the International Monetary Fund has recently estimated that profit shifting by multinational companies costs developing countries around $213 billion a year, or almost two percent of their national income.

More than ever, the public perceives corruption as a serious issue. According to a 2014 survey in emerging and developing countries by the Pew Research Center, crime and corruption were considered the top problems, followed by health care and poor schools. Our own ADB Perceptions Survey of stakeholders, both governments and nongovernment, consistently shows corruption and poor governance as the greatest threats to development.

Public perception is that corruption has not decreased. Acts of corruption, money laundering, and fraud are increasingly sophisticated given the globalized economy and technological advances. It is also more difficult to catch and penalize the corrupt.

Companies can move themselves and their money around more freely, hide evidence of wrongdoing, and even avoid financial and taxation controls. As our guest speaker will highlight, the secrecy provided by socalled tax havens has assisted companies and individuals in hiding not just  taxable income, but the proceeds of crime as well.

Tax evasion and the misuse of much needed development funds worsen income inequalities, and weaken the ability of governments to provide public services efficiently and effectively. To achieve the Sustainable Development Goals (SDGs), which will require trillions of dollars, we must reduce the amounts lost to these illegal activities, thereby helping countries mobilize greater resources domestically.

These have important implications for ADB’s work when we are scaling up our support for reforms of state-owned enterprises (SOEs). We should take note of the OECD’s findings that bribery involving SOE employees was the highest in cases of transnational corruption between 1999 and 2012.

Also, while we must work to eliminate grand corruption, we should be as mindful of petty corruption, which harms the lives of the poor. This is a point I want us to keep in mind always.

"I want you to remember that our policies on governance and anticorruption can only be effective if each of us is wholeheartedly committed to them."

III. The way forward

ADB will continue to support our DMCs in their fight against corruption and efforts to enhance tax integrity. To do this effectively, I would like us to follow a “One ADB” approach in pursuing the following initiatives.

First, we will take into account issues of tax transparency and integrity when financing non-sovereign transactions. In this regard, our Board of Directors is expected to approve an update to ADB’s Anticorruption Policy. Based on this updated Policy, I will ask the Private Sector Operations Department, Office of Anticorruption and Integrity, and Office of the General Counsel to work closely to mitigate tax integrity risks in our nonsovereign projects. I also ask the Governance Thematic Group and all operational departments to improve the capacity of our DMCs to tackle these problems.

Second, in close cooperation with our co-financiers, donors, and other partners, we will explore innovative and proactive anticorruption initiatives and programs. For this, we will continue working with the OECD, Open Government Partnership, United Nations, and others to ensure that we pool our resources and knowledge to fight corruption.

Third, we commit to helping DMCs meet Goal 17 of the SDGs which focuses on raising resources domestically. Next year, we will establish a multi-donor trust fund to raise the capacity of government officials and ADB staff to deal with international taxation problems. In this process, we also hope to improve domestic resource mobilization in the countries through (1) protection against tax evasion and base erosion and profit shifting, (2) adherence to global taxation standards, and (3) participation in international tax integrity initiatives. ADB is uniquely placed to take on the role of supporting our DMCs in these areas.

Finally, we will continue our efforts under the iACT Campaign to effect change from within ourselves by promoting our individual responsibility to prevent fraud and corruption.

IV. Conclusion

Colleagues, we have set the foundations for good governance and anticorruption in our operations, and we have been working hard on fulfilling their objectives.

I want you to remember that our policies on governance and anticorruption can only be effective if each of us is wholeheartedly committed to them.

I ask all of you to redouble your efforts in the fight against corruption. Our individual and collective commitments will ensure that we deliver on ADB’s development priority to reduce poverty and improve the quality of life of the people we serve.

Thank you.