Anti corruption presentatioon 28-10-07

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Yusuf MansurThe Envision Consulting Group

Amman, Jordan

October 28 2007

Private Sector Anti-Corruption Measures in Jordan

United Nations Development Program

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- Introduction

- The Jordanian Economy and Reforms

- Corruption and Development

- Anti-Corruption Processes and Policies: The Case of Jordan

- Analysis of Anti-Corruption Efforts in Jordan

- The Private Sector’s Perceptions of Anti-Corruption Processes

- Anti-Corruption Survey 2007

- The Benefits of Adopting Anti-Corruption Processes by the Private Sector

- Case Studies of Examples in Jordan, the Middle East, and Globally on the Use of Anti-Corruption Policies and Processes in the Private Sector

- Recommendations for the Private Sector in Jordan

Table of Contents

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Jordan was one of the first signatories of the United Nations Convention Against Corruption on the 9th of December 2003

In the Transparency International Report (2007), Jordan ranked 53 in the Corruption Perceptions Index (CPI) out of 179

A setback from a rank of 40 out of 163 countries in 2006

Introduction

Principle 10 of the Global Compact Network :“Businesses should work against corruption

in all its forms, including extortion and bribery.”

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Reform programs were initially implemented as a result of an economic crisis suffered during 1988-1989

Six economic adjustment programs (1989-2004) followed under the tutelage of the IMF and the World Bank

The Jordanian Economy and Reforms

Reforms in the public sector enabled the government to reschedule the external debt, enact a new public debt law, stop borrowing from commercial creditor

Simplified procedures, modernized investment promotion legislation, established a one-stop-shop for investors, which helped reduce the registration period

Signed a multitude of liberalizing agreements including the EU- Jordan Assoc. Agreement in 1997 and joined the WTO in 2000

Fully liberalized the interest rate structure, shifted towards indirect monetary controls

Privatization of public enterprises led the region in volume and frequency

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Reform focused on the demand side of the economy


During 2004-2006, the Jordanian economy experienced strong GDP growth rates of 8.4%, 7.2%, and 6.3%

However, the ranking of Jordan in major international indices of economic performance demonstrate decreased competitiveness

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The majority of economic reforms were focused on macroeconomic frameworks, rather than microeconomic adjustments to directly enhance the productivity of labor, capital and entrepreneurship

Competitiveness means enhancing the productivity of the economic factors of production

JV2020 Phase I and the JV2020 Phase II, which was developed in 2006, remain outside the realm of policy creation and implementation

The Jordan National Agenda, was formulated in 2005 as an attempt to draft a national charter for economic development and avoid the sporadic changes in policies by every new ministerial cabinet


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Corruption and Development

Development: “The bottom line of economic development today is about building prosperity—a high and rising standard of living.Productivity and productivity growth are the fundamentaldrivers of prosperity and innovation is the key driver ofproductivity.”

David A. Sampson, Assistant Secretary forEconomic Development, U.S. Department of Commerce

Development: “Long-term process of building a number of interdependent microeconomic capabilities and incentives to support more advanced forms of competition.”

Michael Porter Harvard University

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Several economists supplied support for the view that governments that are controlled by checks and balances create faster growth.

Corruption and DevelopmentFr

om D

emoc

racy

to D

evel

opm

ent

EconomicDevelopment

Sustainable Economic Growth

Equitable Growth

Accountability

Transparency

Democracy

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The literature on economic growth has emphasized the effects of good

institutions on economic growth. Corrupt, undemocratic economies

are the antithesis of development.

“Democracy has complex demands, which certainly include voting and respect for election results, but it also requires the protection of liberties and freedoms, respect for legal entitlements, and the guaranteeing of free discussion and uncensored distribution of news and fair comment.”

Amartya Sen, “Democracy as a Universal Value,”Journal of Democracy 10.3 (1999)


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Such a view does not preclude the emergence of “authoritarian economic development models,” as Carl Gershman, the president of the US National Endowment for Democracy coined it

High growth rates could emerge under such regimes due to surges in the price of natural endowments such as oil, or the availability of cheap labor in a demanding global economy

Authoritarian regimes produce inconsistencies within them that can bring down the economies in the long run

For accountability to be properly practiced, the economy must benefit from transparency, the antagonist of corruption. However, transparency can not truly and effectively emerge without democracy

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Anti-Corruption Processes and Policies: The Case of Jordan

Public Sector Anti-Corruption Initiatives

Anti-Corruption Agencies

- The Higher Committee to Fight Corruption, established 2000

- The Anti Corruption Commission, established 2007

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Public Sector Anti-Corruption Initiatives:

Oversight Institutions

− The Audit Bureau, established 1952

− The Administrative Control and Inspection Bureau, established 1992

− The General Supplies Department, Ministry of Finance, established 1920

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Public Sector Anti-Corruption Initiatives:

Legislation

- Article 172 of the Penal Code of 1970 Penalizes Active Corruption

- The Anti Corruption Law of 2006, lead to the establishment of The Anti Corruption Commission in 2007

- The Asset Disclosure Law passed in 2006

- Anti-Money-Laundering Law (Law No. 46 of the Year 2007)

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- Increasing Political Accountability

- Civil Society Participation --citizen groups, NGOs, trade unions, business associations, think tanks, academia, religious organizations and media

- Competitive Private Sector to ensure that powerful elites influence decision and policy making at this state in a fair, competitive, honest and transparent manner.

- Institution of Restraints on Power

- Public Sector Management

Source: World Bank. 2000. Anticorruption in Transition. A Contribution to the Policy Debate. Washington, D.C., http://go.worldbank.org/7TGAWXYCX0

Analysis of Anti Corruption Efforts in Jordan

Five Pillars of Evaluation: The WB Matrix

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Increasing political accountability

Recommendations:

Encourage the introduction of rival political parties and their introduction into the executive branch of government

Further regulation and monitoring is required

Encourage greater systematic reporting of all public events to enable the public greater knowledge of the workings of government

Need to guarantee freedom of expression

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Civil Society Participation --Citizen groups, NGOs, trade unions, business associations, think tanks, academia, religious organizations and media

Recommendations:More involvement of civil society;

Improvement by government and businesses is needed of civil society

Need to ensure that the press is free to expose corruption in an objective and responsible manner. The level of professionalism and responsibility should be left to the courts to decide, not the discretionary powers of the executive

Ease the process of civil society creation;

Reduce bureaucratic steps; remove constraints on the establishment of civil society, and allow it greater freedom in receiving donor funding

Reduce restraints while maintaining consistent and transparent benchmarks that adhere with international best practice for gauging the performance of all civil society bodies

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Competitive Private Sector to ensure that powerful elites influence decision and policy making in a fair, competitive, honest and transparent manner

Recommendations:

Continue with deregulation and halt the drive fore the advent of price controls

Curtail the introduction of fees and taxes to maintain not only an outwardly but also internally open economy

The Competition Directorate should become an independent regulatory commission with enhanced capacity and oversight to monitor effectively all sectors stipulated in the law

Ensure the independence of regulatory bodies including the judiciary

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Competitive Private Sector to ensure that powerful elites influence decision and policy making in a fair, competitive, honest and transparent manner (cont’d )

Ease company registration and reduce barriers to entry into the formal economy

Reduce the time and cost of dispute settlement and enhance awareness of insider trading and wasta as corrupt practices punishable by law

Enhance and empower business associations to take active role in policy setting

Encourage multi national corporations operating in Jordan to disclose corporate social responsibility that is consistent with international best practice. This will also serve to spread the practice among the private sector in Jordan

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Public Sector Management

Recommendations:

Improve pay of highly skilled civil servants to enable proper selection and competition with the private sector for talent

Introduce laws to counter nepotism and favoritism and ensure competitive-transparent hiring processes

Decrease size of the public sector to enable better pay for those that remain

Efforts to enhance management of the budget have been underway for years; they need to be speeded up.

Need to decrease tax bands, lower taxes to encourage payment, improve tax monitoring and payment.

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Public Sector Management (Cont’d)

Enhance the capacity of the regulatory structure and enable its real independence

Greater decentralization and accountability is required

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Results of the 2007 Anti-Corruption Survey

Are you aware of any transparency enhancing mechanisms in Jordan?

53% said No, 27% said Yes, and 20% said that they had no specific details about these mechanisms.

Has your company attempted to implement any anticorruption mechanisms?

73%, No; 27% complained to the authorities, they had not received any response.

Last year, the government established an Anti-Corruption Commission to fight corruption in the public sector. In your opinion, how successful has it

been so far? And do you foresee considerable success in the near future?

In general, the opinion of all the respondents about the Anti-Corruption Commission was that so far they have not seen or heard any type of publicity or announcement of how it is going to work, nor heard about any results since its implementation.

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Can you provide us with cases of your business facing corruptive practices? What was your response?

53% said that they knew or witnessed some cases and provided examples. The rest either did not know or had no examples

In your opinion, what is the most common form of corruption in Jordan?


The forms of corruption most mentioned by respondents were: - Tenders given to influential people or their acquaintances 60%- Public officials using inside information to benefit themselves or their relatives 60%- Officials giving jobs to family members 47%- Private sector giving bribes to have processes approved 40%- Giving bribes to politicians to receive rights and privileges 27%

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In your view, which of the following professional sectors is most susceptible to corruption?

Government and public officials 100%, Politicians 40%, Private businesses 33%, Police, lawyers and judges 27%

How true is the following statement: Is having to pay bribes to obtain a service or have a problem solved a widespread problem in Jordan?

The statement is somewhat true 60% , the problem is present but not widely spread 7%, Not true at all 20% , Not sure 13%

How often do you hear complaints about corruption?

Always 27%, Frequently 60%, Sometimes 7%, Hardly Ever 7%


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Some suggestions provided by survey participants for anti-corruption measures are:

Establish a computerized accountability and audit database to record and track transactions of government officials

Apply international standards

Inform and educate the public about anti-corruption laws and regulations

Re-educate the population and show the public at large that bribery and wasta are not part of their lives

Establish an effective complaint system and apply the Anti Corruption Law

Raise salaries of public officers in order to help stem corruptive practices that stem from economic need

Identify the main corrupt practices that occur or are likely to occur and address them in a transparent manner

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The Costs of Corrupt Practices by the Private Sector. -Lowers productivity and discourages innovation

-Increases costs of doing business (serves as a tax on business) -Lowers private sector employment levels

-Reduces competition and efficiency -Misallocates resources

-Lowers investment levels -Fosters misguided and unresponsive policies and regulations

-Unclear, complex, and frequently changing laws and regulation -Lack of transparency and accountability

-Lowers public revenue for essential goods and services -Lower economic growth levels

-Undermines the rule of law -Hinders democratic, market oriented reforms

-Increases political instability -Exacerbates poverty and inequality

-Contributes to high crime levels

Source: Center for International Enterprise,“Combating Corruption: Private Sector Perspectives and Solutions”, 2004

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Table 4: Jordan’s Participants in the UNGCParticipant Type Sector Country Date Joined

ARAMEX PJSC CompanyTransportation & Storage

JordanJuly 2007

City of Salt CityNot ApplicableJordanJanuary 2007

Nuqul Group CompanyPaper & Forest Product

JordanJuly 2007

RAZORView Advisors

SMEProfessional, Scientific and Technical Services

JordanDecember 2006

Schema SMEProfessional, Scientific and Technical Services

JordanDecember 2006

Tactix Strategic Consulting

SMEMedia, Communications & Entertainment

JordanJune 2007

PrimusCompanyIT, Software and web Solutions Company

JordanSeptember 2007

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Recommendations for the Private Sector in Jordan:

- Jordanian businesses should follow the basic edicts of

Corporate Governance

- Encourage collective action in combating corruption,

“the power of numbers”

- Work the matrix, businesses should not do it alone!

- Incriminate acts of corruption that are considered

accepted practices such as wasta and insider

information

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Recommendations for the Private Sector in Jordan:

- Empower the media to provoke community action

- Lobby for greater access to information and

transparency

- Become mentors of others, “Big Brother”

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Thank You

Anti corruption presentatioon 28-10-07

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Transcript of Anti corruption presentatioon 28-10-07