Addis Ababa financing for development conference Action Agenda: Fighting corruption in its many forms

Introduction      

 

Hypothesis: Paradigm shift

 

The hypothesis that has been under consideration in my July columns thus far, is that international best practices in the area of financing for development are undergoing a paradigm shift, which is partly reflected in mounting global efforts to incorporate “recovery of stolen public assets” (StPAR) as a central feature of domestic resource mobilization, particularly for developing countries. To date such efforts have been mainly fuelled by the growing empirical data across all regions that reveal an explosive growth of corruption.

At the very least this has been serving as a significant drag on global growth and development. Indeed I have provided in support, estimates of this phenomenon for Guyana in the areas of procurement fraud, illicit financial flows and the tax-avoiding underground economy. I have provided in this regard extensive, and for that matter repeated, commentary on the data sources and methods of estimation I have utilized in this ongoing series of columns that began twelve weeks ago (May 3, 2015).

20131103cliveAs I have sought to demonstrate global efforts to improve best practices have been concentrated in the three summit-level financing conferences on financing for development.

These have preceded the United Nations’ adoption of its proposed global development agendas. Thus, as readers are aware, similar to the first (Monterrey, Mexico) and second (Doha) financing for development conferences, the third recently concluded Addis Ababa Confer-ence is the precursor to the upcoming September United Nations Summit on its proposed post – 2015 Development Agenda and the accompanying 2015-2030 Sustainable Development Goals (SDGs).

To be quite clear, the paradigm shift referenced in these columns is not represented here as if it were a disinterested moral advance taking place in the global community.

To the contrary, the targeting of recovery of stolen public assets by the Development Assistance Community (DAC) envisages two self-serving outcomes for these countries. First, they anticipate some significant reduction in the global demand for official development assistance (ODA) from them, because this measure pushes for greater reliance on generating self-financing and therefore less on redistribution. Second, this measure publicly addresses, in some measure, the political and economic constraints revenue raising presently faces in rich capitalist states.

Two major best-practice advances

Target-setting

As indicated in my earlier columns, the very first international financing conference had introduced target-setting pledges for the ODA to be provided by the DAC countries. Regrettably, as is well known, these pledges had not been met, but the second conference re-committed to these pledged targets, albeit with some variations. During the recently held third conference the pledged targets were not met again.

In these circumstances one feared that the DAC countries would seek protection by arguing that their slow recovery from the Great Recession was the cause, and that this still prevents them from realistically making ambitious pledges going forward.

However, in the main this did not happen. Countries owned up to their failures and indeed re-endorsed their commitment to provide ODA equal to the long-standing UN target of 0.7 per cent of their Gross National Income, GNI, going to developing countries, with the least developed countries, LDC, guaranteed 0.15 to 0.20 per cent.

This admission of fault and re-commitment to quantitative targets I believe warrants recognition as one of the two best-practice advances coming out of the Addis Ababa Conference.

Corruption in many forms

Because of the significance of the second best practice advance to the hypothesis that I am advancing I will present evidence of it in this section by way of a series of more or less direct quotations from the Addis Ababa Action Agenda (AAAA) so that readers would get a clearer insight into the significance of the paradigm shift.

First, the AAAA unequivocally committed to “redouble efforts to substantially reduce illicit financial flows (IFF) by 2030, with a view to eventually eliminate them, including by combatting tax evasion and corruption through strengthened national regulation and increased international cooperation.” This is a specific quantitative target, which is a major breakthrough in the area of financing for development.

Second, the Conference explicitly acknowledged the “Report of the High Level Panel on Illicit Financial Flows (IFFs) from Africa and stressed its important contribution to our common understanding of the challenges posed by these flows.”

As a consequence it went on to “invite other regions to carry out similar exercises…and to fight these illicit flows.” It also “invited the IMF and the World Bank to assist both source and destination countries in combatting IFF”, and called on “appropriate international institutions and regional organizations to publish estimates of IFF volume and composition.”

Third, in order to consolidate these efforts, the AAAA urged “all countries that have not yet done so to ratify and accede to the UN Convention against Corruption (UNCAC) and encourage parties to review its implementation”.

Indeed he Conference committed “to making UNCAC an effective instrument to deter, detect, prevent, and counter corruption and bribery, prosecute those involved in corrupt activities, and recover and return stolen assets to their country of origin.”

Fourth the AAAA promises to “encourage the international community to develop good practices on asset return… indicating its support for the Stolen Asset Recovery Initiative of the United Nations and the World Bank, and other international initiatives that support the recovery of stolen assets.”

Finally, the AAAA called for all existing regional conventions against corruption to be updated and ratified, pledging that it would work to eliminate safe havens which incentivize the illicit transfer of stolen public assets and illicit financial flows.

In so doing it committed the global community to work for strengthened regulatory frameworks at all levels to further increase transparency and accountability of financial institutions, the corporate sector, and public administrations.

The key to all these endeavours is better international cooperation and stronger national institutions and next week I shall wrap up this discussion.