Remarks: James Spinner
Spinner, James, Law and Policy in International Business
Thank you, Dean Gustafson. Let me start by thanking the Department of Legal Cooperation of the Organization of American States and the Georgetown University Law Center for inviting me to participate in this conference today. I am particularly pleased that it is at Georgetown. Both my wife and I are 1976 graduates of the Law Center. The Law Center is justly proud of its alumni and very loyal to its alumni. I am assuming that is why, in his introduction, Dean Gustafson promoted me to the position of general counsel at the bank. I am actually the deputy general counsel at the Inter-American Development Bank.
I am also particularly pleased that this event is held here in the Moot Courtroom. This room has two very strong memories for me, one at the beginning of my law school days here and one at the end of my law school days.
At the beginning, during the first year orientation sessions that were held here, the then dean of the law school, Adrian Fisher, welcomed all of us frightened first year law students by sharing a story that frightened us even further--although it was told to reassure us and show us the changes that had taken place in legal education systems from the time that he was a student.
As I recall, he told us that when he was welcomed at his orientation, he had been requested to look around at the three people sitting closest to him and to study them. He was then told to ponder this. Statistics showed that out of every four law students at that time, one would fail his first year in law school; the second would fail at some point during the three years of law school, and only two would complete the law school career. One of those would go on to a successful career. The other one would go on to a not so successful career; presumably under the definitions back then, a not so successful career would have included a law professor, working in government, or working for a multilateral organization or an NGO!
My second memory here is much better, and that was this is the room in which I was sworn into the District of Columbia bar.
Of particular concern also, as I speak here on a beautiful fall afternoon, Friday after lunch, is that the place was also well known for good naps. It was good to nap in between classes, and it was great for good naps as we took the bar exam preparatory course here. I will try not to induce the same behavior. There will be other opportunities to nap in the Moot Courtroom.
Over the last two years, on behalf of the bank, I have attended many panels and conferences dealing with good governance and anticorruption efforts in the hemisphere. I must say that in addressing corruption, I have rarely seen as accurate and as interesting a title for a panel discussion as the one that this panel has: The Law, Expectations and Reality in the Marketplace.
I view that title as a recognition by implication of one of the basic issues in dealing with corruption and governance, which is the disconnect that exists between the reality and the expectation of how governments and civil society have dealt with this issue. There is an expectation --as over the years people in the hemisphere have become more acutely aware of the issues of governance, civil law reform and other reforms of the state--there is an expectation in dealing with corruption that new laws, new regulations, and new legislation will deal with the problem. Let us legislate it out of existence, or by legislation, let us minimize its existence and its impact.
The reality is that, in many countries, the laws, processes and mechanisms exist, to one degree or another, to deal with good governance and to deal with the issue of public and private sector corruption. But in many places there is a failure of political will and a failure to solidly look at processes and determine how the laws, the rules can be implemented.
That is not to say that there is not a need for legislation in many countries, and that an agreement like the recently approved Inter-American Convention Against Corruption is not a critical tool in this area. But lacking political will, it is difficult to get anywhere with this.
This discussion on transparency and corruption free governance is a natural outcome of the development process that has taken place in the hemisphere over the recent years. If you look back, you see the change that is taking place from systems of closed economies, national preferences, trade barriers, disincentives to foreign investment, omnipotent states and closed political processes. Now, by and large, there is a liberalization of markets, an opening of investment opportunities, a lowering or elimination of trade barriers, a movement away from a model of protectionist economies with an invitation to foreign investment to come in, a shrinking state with a redefined role, privatization and sales of states' assets, deregulation and free elections in a political process that is taking hold in most of the hemisphere.
It is natural, then I think, that with these changes that have taken place, the focus has increasingly gone to issues of governance and, inevitably, to issues of corruption.
By governance--we had some discussion this morning on that issue--I mean the way that national authorities and civil society conduct their affairs. What are the processes for decision making? What is the participation of society in government functions and decisions?
The current political leadership in many countries has pointed out this disconnect that I referred to earlier, and the needs that exist--the need for a commitment to the cornerstones of good governance and the rule of law, and new processes of transparency, efficiency and accountability that will ensure good governance and minimize opportunities for corruption.
To support good governance and minimize these opportunities, I believe there are four real needs. These are areas that the Inter-American Development Bank has been working on extensively over the last decade. First, the need for respect for the rule of law. Those of you who were here this morning heard Doug Webb speak on behalf of the World Bank, on some of the efforts on the judiciary and the legislative process. We at the Inter-American Development Bank have been doing this as well. Our program actually in the hemisphere is somewhat larger than theirs, and we have been supportive of: changes to the legislative processes; judiciary reform; the elimination of a heritage of bureaucratic processes, paperwork and formalisms; and a recognition that systems need to be changed to gain the respect, both internally, within civil society, the government, and for foreign investors.
Second, transparency. As I referred to earlier, is critical. Here, for many years, we have been looking at and financing efforts in many countries that open up the processes of the budget, for example, in governments and in nations--central bank actions, fiscal and monetary function--how that is determined, and establishment of priorities for government investment and for government decision making and rule making. What we have financed there is the opening up of that process, civil society participating more extensively and also dealing with government accounts.
Third, accountability. The public sector needs to be responsible for its actions, and there must be consequences if the public sector does not fulfill its responsibilities. Here again, political will is necessary, but certainly, the participation of civil society is critical.
Last, efficiency. By this we mean the elimination of discretion in the rule making process, clearer rules for all.
This kind of discussion, this kind of financing that we have been doing over the last few years has legitimately led to a further discussion on corruption. In fact in many ways I think that this initiation of discussion on corruption issues among the multilateral development banks and within the governments and the hemisphere over the last 2 or 3 years has been almost an easier step to take than the initial steps of a decade ago of looking into governance and opening up the hemisphere for trade and other economic reform. I view the move into discussing corruption and looking at what can be done on a multilateral front as a natural outcome of these discussions.
Corruption destroys confidence in the legitimacy of the state and the public institutions. It results in the inefficient use of human resources of the state, and this morning we heard as well some of the consequences of corruption in the judiciary, for example, and in the legislative process. It affects all of society, and I think it would be a mistake to forget that it affects all countries.
Who are the actors who are going to be involved here and that we are participating with as a multilateral development bank? Let us not forget that the political leaders put it on the agenda in the 1996 Summit of the Americas.
Occasionally, perhaps in a little bit of smugness and perhaps a little bit of arrogance, we tend to think that these pressures need to come from the outside. While it is important, of course, that there is a move from the outside, it is critical that there is a political will, as I mentioned earlier, within the countries, and that we have seen in many of the countries of the hemisphere.
On a national level, we are looking at the leaders of these shrinking, redefined governments for them to take initiatives, and to civil society --which would include business, household associations, civic associations, the church in many countries. We are looking at domestic NGOs and at international NGOs, including some like Transparency International, whose U.S. managing director is sitting next to me, which has set up very effective local branches in many of the countries.
In the multilateral organizations, such as the World Bank, my own institution, and the other regional development banks, it was taboo to speak of corruption until a few years ago. We were entities that were financing projects and were lending only to the sovereign. We are now entities that finance, to some degree or other, the private sector as well, and we are concerned because it is our shareholders who brought to our attention the need to address the issues of corruption and fraud.
We have been very active in sector lending for quite some time, in addition to project finance. We have been looking at sectors such as the financial sector, banking, regulatory, judicial sectors and government reform. Over the last couple of years with the other organizations, we have been focusing in on these new areas of fraud and corruption. There is an extent of mutual consultation and contact that never existed before. Acknowledgment that public funds need to be used correctly has made sure that we keep in touch with each other and see what we are doing. In the context of the World Bank and IMF annual meeting a couple of weeks ago, my bank hosted a meeting of the heads of the multilateral financial organizations--which included all of the major development banks--as well as other specific multilateral funding entities, such as the OPEC Fund and others. The item of corruption was on the agenda. All of the entities participated in the discussion, and all of them described what they were doing.
I have to say that it was item number two on the agenda. Item number one, of course, was the financial crisis that is affecting the hemisphere, through no fault of its own, and that comes really from other sources, but is a matter of international concern. It is understandable, of course, that there was a greater discussion of that point.
The IMF as well is getting involved in some of these areas. There is an increased role in governance issues, moving away from its traditional role, and conditionality has been implemented, dealing with corruption areas and governance areas in its lending and providing of resources. At the bank, I have described some of the efforts we have been involved in with respect to sector lending.
I want to mention a few other things specifically dealing with anti-corruption, and that some of the papers that have been distributed have discussed. All of us have amended our procurement rules. It is essential as we provide resources for project finance, that we ensure that what has always been available to us is made more explicit. Specifically, that is the right to stop disbursements and to take actions when corporations that win procurement on projects that we finance are engaged in fraudulent corporate practices--that we can intervene, investigate, withhold disbursements, and take action against the entities that are involved in any kind of fraud.
In addition, we have been doing more on ensuring that the item is included in our dialogue with our borrowers. We have had a couple of activities recently with the Organization of American States that I wanted to briefly mention. One of them is with the OAS' Comision Interamericana para el Control del Abuso de Drogas (CICAD) [Inter-American Drug Abuse Control Commission], in which we are financing a pilot project on money laundering activities, which has now gotten underway, and where we are funding the training of the banking supervisory entities and also the regulated entities, the banks themselves, in detecting money laundering.
We shortly will be signing an agreement with the OAS in which we are going to be participating in funding some activities related to the Inter-American Convention Against Corruption.
Of particular interest to us are those countries where the convention has been ratified, but where the national legislation has not been fully changed to incorporate all of the changes that are required by the convention, to see if that can be facilitated.
We are also looking at additional training to detect fraud in our disbursement function. I am sure there are additional avenues, and I would like to mention two. One where I think that more needs to be done is looking at the links between the private sector and the public sector in the area of corruption. A lot of the activities that we have done and that other multilaterals have done have dealt with public sector corruption, and I think that the link between the private and public sector is something that needs to be looked at, as well as researched more. It is difficult to get numbers and to get statistics and further data on the issue, and to the extent that we can fund some of those activities, we would be very interested in doing that. With the office of the Chief Economist at our bank, we are in fact now looking at the health sector and providing public health facilities. Any corruption and how it plays a role in that is something we are looking into.
Let me close by saying that this is a subject that really has come to the forefront over the last couple of years, and the bank as well as the other multilaterals are of course very interested in following up. What is critical, of course, is the political will within the countries to take action on this, and that is where we hope the next steps will lead us with more concrete actions and the desire to work on this in the member countries.
Thanks very much. You have been a surprisingly attentive audience on a Friday afternoon after lunch, and I thank you for that.
JAMES SPINNER, Deputy General Counsel, Inter-American Development Bank.…
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Publication information: Article title: Remarks: James Spinner. Contributors: Spinner, James - Author. Journal title: Law and Policy in International Business. Publication date: Summer 1999. Page number: 47. © Georgetown University Law Center Fall 1997. COPYRIGHT 1999 Gale Group.
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