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TI-UK Annual Anti-Corruption Lecture Delivered by John Githongo, 6 December 2012

CROSSROADS IN THE FIGHT AGAINST CORRUPTION Ladies and Gentlemen, Distinguished Guests, all protocols observed… I should like to take this opportunity to thank Transparency International UK for honouring me with the invitation to make this address today. I should also like to thank Clifford Chance for affording me this occasion, at this time of heady events around the world, to visit their wonderful venue. As an African who has been involved off and on, sometimes inside and outside Kenya, in the fight against corruption it is especially an honour to be making an address on corruption, here inside the One Mile Square of the City of London. Thank you for that, Transparency International and Clifford Chance. I shall take every advantage of this opportunity, ladies and gentlemen, without abusing it too liberally. Today we are witnessing a unique convergence of potentially positive developments in the fight against corruption – one that has not existed since the end of the Cold War. Of course I emphasise the word “potentially” because often the darkest hour is before dawn. Here’s why: Until the Berlin Wall fell, corruption was an essential tool of geopolitical management of elites during the Cold War. The wind of change that blew across most of Europe, much of Africa and some of Asia saw the opening up of democratic space, liberalization of economies and, generally speaking, a far greater emphasis on

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transparency, accountability, anti-corruption, and good governance etc. On the corruption front, this peaked in 2003, with the signing of the United Nations Convention against Corruption (UNCAC). We learned, often painfully, that corruption leads to distortions that ensure nations and peoples did not enjoy a level playing field in business and commerce. This is true between and within nations. Some of the unfortunate implications of this are being witnessed around the world. In particular, I should like to argue, the fact that inequality has over-taken poverty per se as the single most pressing development problem of our age. We have also learned that actually corruption starts as conflict of interest, which is often born out of regulatory loopholes that allow outright lies or mutually beneficial private arrangements whose cost is borne by the public. I stand here, in the hallowed One-Mile City, where one can argue an important element of this battle will be won or lost. It has not escaped our attention in the developing world that there does not appear to be a huge appetite for the prosecution of corruption, even here in the West, after the banking crisis of 2007-8. It is clear, therefore, that we are now in a different phase of the anticorruption fight. The past few years have seen the following developments which potentially significantly shift the ground under our feet. 1. The 2007 – 2008 financial crisis in the West continues to reverberate across the world to this day. Its effects are still being strongly felt in the US and much of Europe, impacting their trading partners. You will forgive me if I sound a tad insensitive, but let us remember that significant bank collapses 2


happened every eight years or so in many African countries and the rest of the developing world. The investment of public resources in these failed institutions was initially a common occurrence - we called them parastatals. They were, and always have been, particularly unpopular with the IMF and the World Bank.

Their

creation

here,

is,

of

course

entirely

understandable, but we continue to wait for the frying of “the big fish� responsible for the crisis. Generally speaking, when conflict of interest, financial hubris, greed, or out-and-out corruption that starts off as conflict of interest takes place, we expect someone to pay the price. We have come to learn as well, that despite UNCAC, the OECD Convention against Corruption, and a range of other international,

regional

and

national

anti-corruption

instruments, we have witnessed incidents that demonstrate the continuing reality of systematised corruption, for example, with regard to Siemens, BAE, HSBC, Standard Chartered etc. The case of Siemens was particularly instructive in that it revealed that between 2001 and 2007, a specific bribery/slush fund of 1.3 billion Euros had been created to lobby the winning of contracts. The legal, corporate and personal engineering required to create such a fund implied relationships that allowed essentials to go unwritten, and ultimately corruption to be normalised and dignified. 2. In July this year the Chinese president Hu Jintao emphasised while speaking at the 90th anniversary celebrations of the Chinese Communist party that corruption threatened the party,

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and that its very survival and popular support depended on the integrity of local officials. One cannot over-state the significance of this statement and its potential implications. For too long, its international competitors argued that the Chinese approach of non-interference in the internal affairs of its trading and investment partners and total conformity to local business practices, no matter how far removed from the principles

of

the

United

Nations

Convention

against

Corruption, meant high tolerance of corruption. One would like to think that we are beginning to see the beginning of a change to this. 3. Across the Arab World even more recently, we have seen what can be described as democratic convulsions, or let me say, revolutionary explosions in the quest for greater basic freedoms. These have been strongly informed by a youthful exhaustion and anger with long-serving corrupt, authoritarian regimes led by elites given to conspicuous consumption that combines with a globalised youth demographic whose expression of that hunger for freedom is as significant in this age as the fall of the Berlin Wall was in 1999. So too, India, the world’s largest democracy, last year saw the organic coalescing of

a

bottom-up youth-heavy

mass

movement

against

corruption. It was starkly illustrated by the protest hunger strikes of Anna (Kisan Baburao) Hazare and Swami Ramder, seeking the repatriation of “black money� laundered overseas. In the United States and other parts of the West too - including Russia - movements like Occupy Wall Street have served to

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express a generalised exhaustion and exasperation with the fact that it would appear that Main Street has bailed out a Wall Street that smells, sounds and walks as if it is corrupt. These examples of largely non-partisan, non-violent, civil resistance, heavily reliant on the youth demographic and their use of social media tell us something about the future of the fight against corruption. All these developments have caused us to question off-shore banking centres such as the City of London and the fact that proceeds of money-laundering, drugs, people-trafficking, mainstream corruption (which has now become boring – issues like corruption on the procurement of roads and dams just raises a yawn now) transfer pricing by multi-nationals among other trends have revealed the weakness of national governments and international institutions to manage these contradictions. This is why the work that the G8 is going to do around transfer pricing and off-shore centres and the very existence of the G20 working group on corruption (and its upcoming meeting in St. Petersburg) is extremely important at this point in time. The financial crisis in the West woke us up in Africa to a new perspective of corruption. It became a matter of concerted interest among Africa’s chattering classes, long accustomed to Western lectures on corruption, that this is not a uniquely African or even Third World thing - an “integral part of the African DNA “ - so to speak. To this day, questions continue to be asked as to how it is that some of the top bankers, the “Lords of the Universe” responsible for such a global economic catastrophe – with the exception of Bernie

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Maddof – have not been prosecuted. It is notable and laudable that we now have some whistle-blowers beginning to emerge out of hallowed institutions of which the slightest whiff of scandal would have been unimaginable in the not-too-distant past. These bastions of honour, discretion, professionalism and honesty, were once held up as the gold-standard role models defining the values of the global financial world; today they have gradually but inexorably been exposed as the heart of the rot that threatens the might of the global economy as surely as more familiar forms of corruption have long crippled African economies. This has led me to new considerations with regard to corruption. First, I would like to suggest that part of our problem in Africa has been a question of defining our own narrative. What constitutes the abuse of private authority for private gain? To many ordinary citizens, the term “corruption” does not carry the same weight that “theft” does. For example, if in Kenya, you talk about “wizi” – theft -in discussing the misappropriation of public resources and label those responsible wezi – thieves, people will respond more to you than if you use the term ufisadi - corruption. We are somehow less indignant at the thought of public officials or leaders being corrupt, than we are about them being thieves. One who might wink or shrug resignedly at rumours of a public personality being corrupt is more likely to frown, protest, or demand some form of action if the same person is accused of stealing public money. I would go as far as argue that the process of abstracting theft into corruption is similar to the process of abstracting the monetisation of risk into indescribable derivatives. We have to pay attention to the language we use in talking about this

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issue, and how culturally it allows corrupt individuals to hide under the guise of a form of respectability, that on closer examination, is revealed to be no more noble than the actions of those villains we all love to hate. Secondly, I have discovered, to my dismay, that all over the world, political competition is too often paid for by corruption, conflict of interest and the proceeds of crime - even in what are considered the world’s most vibrant democracies. This is not a uniquely African disease, even though Africa forms the reference point for global discourse on politically-influenced corruption. Personally, having returned to Kenya about four years ago, I find myself in the middle of a contradiction that attends to many African countries. Africa is growing, the future is Africa, Africa is attracting unprecedented amounts of foreign direct investment. However, at the same time, what can be described as corruption or primitive accumulation has been normalised. Indeed, I have come to discover that cases of grand economic crimes have a life expectancy of twenty-five years, while those of human rights abuses remain in the public imagination sometimes for hundreds of years. I also realised, as I have said before, that at the beginning I was fighting an abstraction called corruption that the ordinary masses understood very differently from me: “Corruption by someone of my ethnicity is tolerable so long as she or he shares it with me and our kith and kin. Theft on the other hand is not.� In many communities, if you are branded a thief, you cannot marry, but if you are called corrupt, you are elected to parliament. Thirdly, the current convergence of global, regional and national

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realities provides us with unique opportunity to tackle corruption in unprecedented collective ways. For example, the work being done by the G8 under the leadership of the UK, and the G20, especially with its working group on corruption, can and should establish the principle of beneficial ownership of corporate entities in a manner that introduces transparency and reduces corruption. This is married together with transfer pricing, off-shore centres, and the unholy cauldron they comprise of laundered corruption, drugs, sex trafficking and other criminal proceeds. Naturally, this will mean greater scrutiny vis Ă vis the regulatory environment that attends to multi-jurisdictional service centre entities, especially banks, law firms and auditing firms. It is also important for the corporate and wider legal regimes that apply to whistle-blowing be normalised. Too often, whistle blowing is criminalised. Finally, as developed countries look at how to spend their little remaining development money, more needs to go to institutions like the Metropolitan Police, the City of London Police, Serious Fraud Office, and other anti-corruption agencies. I will close by saying that the moment is unique, in part because the wider population, especially the youth, are demanding this already. The financial crisis has led to perhaps a clearer understanding of the meaning and cost of corruption. I take this opportunity to thank you once again, Transparency International UK and Clifford Chance for inviting me here today. Asante sana. John Githongo, 6 December 2012

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2012 Anti-Corruption Lecture: John Githongo