Examination of Witness (Questions 300
TUESDAY 12 DECEMBER 2000
300. Is that a feature of referendums?
(Mr Malloch Brown) Yes and of electionsbroke
open because very determined democratic leaders decided even if
the playing field was tilted against them that they would work
within them to broaden democracy. I come at it very much from
that personal experience. What I have done, which I do not think
previous administrators did, was I stopped our co-operation in
the Zimbabwe election and in the Cote D'Ivoire election and pulled
out UNDP in both cases and as we were providing in both cases
the logistical support for the EU, I had to take all the UN decals
off all our vehicles so we could continue to deploy the EU observers
while no longer attaching UN support to the elections. Because
I am having this wonderful pulpit of development agency of developing
countries, I do not think I am doing them any favours by going
along with false election exercises.
Mr Colman: I agree.
Mr Worthington: I think you have answered
the question I have been given, so can I ask my own which follows
on from what Tess was saying. It is this business of if democracy
is to be strong has it always got to be the same style of democracy
everywhere? In developing countries I am struck by a number of
things: one, the number of rich man's parties where the party
is owned by a particular industrialist, it is his party, there
is no fundraising for that party, there is no ownership of the
party. You read all the manifestos and they are all the same,
promising goodness, health, beauty. An enormous amount is paid
for. You pay for people to attend the polling stations. You even
distribute goods, bread, whatever it is.
Chairman: Or rum!
301. I bow to your West Indian experience. There
is no ideology and what you have got as well is usually strong
religious ties or geographical ties or ethnic ties and so on.
When people are saying "vote for me" and people are
saying "why vote for you?" the answer tends to come
back, "I will do this personally for you if you do it."
Where do you see the healthy roots of democracy coming so that
when you are saying "vote for me" it is a vote for some
kind of belief or ideology or something respectable rather than
what is in it for me.
(Mr Malloch Brown) I think that is a very good question.
If I can just borrow for a moment from my consulting years, I
felt like that George Bernard Shaw maxim "If you can, do;
if you cannot, teach." Never having joined you on that side
of the table as a Member of this Parliament I went off to sell
my wares around the world. I was very struck as a consultant by
the sheer democratic vigour of countries in their first post-authoritarian
elections. I worked in every country of Latin America bar Mexico.
I have worked for them all, these first champions of democracy,
and all of us, not just the cynical foreign consultants with pollsters
and focus groups and all the rest of it, including people listening
to us in the rallies felt that this was about big ideas and change.
And I think that is still the case in a lot of elections. Vincente
Fox in Mexico was about big ideas that he won, or President Cardoso
in Brazil. They are over-laying a strong agenda of reform on top
of a creaking party structure which is not fully modernised but
nevertheless they are injecting into it a level of ambition for
change that you rarely hear in United Kingdom or US or European
elections. You do not, thank goodness, have all this technocratic
trying to reach for the middle ground and pretending you are better
managers than the other people. It is still very much more about
big ideas but, you are correct, the other side of it is this terribly
old 19th century "election of brewers" and you have
still got that element of big financiers, big money interests
behind parties. I think that is an evolutionary issue. I have
seen a shift during the time I have been involved in this, from
politicians in developing countries resting initially on organisation
and not understanding that their electorate has doubled in size
and moved from the countryside to the cities and therefore an
old landowner-based approach did not work, to a much more modern,
message-based style of campaigning. It had some terrible consequences
for Fujimori and Chavez where the old parties failed to adapt
to message-based politics and also failed to deliver results in
terms of poverty reduction and make the space for the worst kinds
of populist message-based movements, but at its best I think we
are seeing a very healthy evolution towards a more modern political
system. A number of countries have now been talking about wanting
to introduce corruption legislation specifically dealing with
Chairman: That is a subject for all of
302. You did not use any African examples of
where it is good in terms of the political parties campaigning
for what we would see as big messages.
(Mr Malloch Brown) I think that is right, I did not,
and I think unfortunately in Africa there are less good examples.
What is happening in Africa is a very interesting phenomenon which
is suddenly you have got these guys who for up to 30 years have
been in opposition, the Mitterands of Africa, suddenly coming
into power. President Wade in Senegal, almost certainly on the
second ballot Kufuor in Ghana. There are three or four examples
now of these leaders; indeed, for all its imperfections Gbagbo
in Co®te D'Ivoire. These guys have never been particularly
ideologically at odds with the Governments they have replaced
and suffer in some cases from all the problems of having been
in opposition for 30 years in that they may not necessarily be
the best managers. At least regard in to Wade in Senegal, he was
at the same conference on democracy and closed it with me and
made a brilliant speech about the crisis of democracy in Africa
being the "big chief" phenomenon. It sounds much better
in French than it does in English, but the point is this absolute
power phenomenon, where if you are elected democratically or autocratically
you insist on controlling the whole power equation. The first
step governments in Africa have got to learn is to share power.
This is so clearly the crisis in Zimbabwe and other countries;
a reluctance to share. It does not get us where we want to go.
303. In one of the UNDP's discussion papers
in 1997 you said that "the history of anti-corruption efforts
is filled with programmes that succeeded at first, only to be
undermined by subsequent governments or by economic and political
crises." How does UNDP now ensure the work you are doing
with government is sustainable in developing countries given the
economic and political instability that they inevitably suffer?
(Mr Malloch Brown) I think it is very difficult. The
principal approach is to encourage governments to undertake broad-based,
national, consensus-building activities around their development
agenda which creates some development objectives which outlast
government terms. This is the one thing where I would concede
to authoritarian governmentsthey have been able to show
a greater consistency over the long term around government objectives
than when you have more rapid changes of government. You have
got to build that up so that certain parts of the government agenda
stay as constant as possible through changes of government, and
oppositions recognise that when they are campaigning there is
a national consensus and that it is important to sign on to it.
There is definitely a zigzag and loss of momentum. That is democracy,
but I think we have got to try and minimise it on these issues.
304. I would also like to ask in terms of civil
society how do you determine what civil society is? How do you
ensure that it is truly representative of the people in the countries
where you are working because there can sometimes be a tendency
to go for the easier option of working through NGOs who have got
a framework on the ground to deliver rather than seeking out indigenous
NGOs to work with. Also how do you identify civil society under
authoritarian regimes and ensure that it is not usually para-state
or women's organisations that set themselves up that are filled
with the Government's wives and sisters?
(Mr Malloch Brown) Let me just say on that that I
formed a Civil Society Advisory Committee when I came in because
I was surprised that we did not have very good institutional relations
at global level. Of its 15 members, 13 are southern NGOs which
is a very different inverted relationship to what you would find
in most international organisations. Some of them give the Secretary-General
and myself a constant hard time particularly on our relations
with the private sector accusing us of "blue washing"
the private sector's behaviour in developing countries. We have
sought to reach out. How are they representative? I would say
that in a sense this whole debate about representativeness of
NGOs is going in a false direction. You are never going to have
some representative test based on membership, that is not the
nature of a CSO. A civil society organisation is in some ways
half way between a political party and an editorial writer in
the sense that its real power comes from a message which resonates
with people and they agree and it gains influence. We do not ask
who is the editorial writer on The Times but if it is a
good editorial you shake over your breakfast and think, "God,
questions in the House today and the rest of the newspapers are
going to be on the story tomorrow." If it is not a good editorial,
you do not. It is a bit the same with CSOs. I know the ones which
have influence and the ones that do not and what kind of influence,
and whether it is a young, dynamic group raising new issues of
gender, or minorities, and whether they are glib northerners or
whether they are people with real feet in those communities. It
is instinct but I think we know it. I think our role is not to
select anyway, it is to create the space for them. What the southern
NGOs are always telling me, whether it is a democracy or authoritarian
government is, "Keep on saying that an active civil society
is part of governance, it is part of holding government to account
and push for more space for us." That is essentially what
we doconstantly tell governments that this is part of the
governance equation, as much space for as dynamic a debate and
a strong CSO sector as possible.
305. I am a bit worried about that response.
I accept that there has got to be a space created for NGOs, civil
society groups, but I think a lot of those organisations can have
their own agendas and can declare that they are speaking on behalf
of people, things about good governance and involving communities,
particularly poorer communities, to ensure that they are responsible
or complacent. Do you not have any kind of mechanisms whereby
you can ensure that the leadership of those NGOs do have some
kind of democratic structure or leadership, that there are some
kind of gender balances, equal opportunities, structures within
those indigenous NGOs? Good, progressive, northern NGOs will look
for those qualities in partners that they are work with and there
are standards that can be set.
(Mr Malloch Brown) Let me be clear, in terms of who
we ourselves partner with as partners at the community level,
we apply all those standards. I have some very progressive goals
on the gender issue particularly in terms of local partners. So
I do not want it to be misunderstood in terms of our local partners.
Our view is that we do not try and create a register of good NGOs
at country level. We think the more space the better because the
basic characteristic of government in a poor developing country
is the huge gap between the local officials and the poor, so the
more organisation and community activity there is to bridge that
Ms Kingham: I am not worried now, thank
306. I think you have covered quite a lot of
this already but it would be interesting to hear your views. The
suggestion is that good governance is the principal weapon against
corruption, but are there other factors apart from the institutions
that make developing countries more susceptible to corruption?
(Mr Malloch Brown) Yes. I think that the structure
of their economy has enormous influence particularly if it is
very resource basedthat is a limitationbut also
if it has closed structures. I also think there are some cultural
dimensions but, broadly, I think the cultural argument is a mischief-making
argument in that I do not know countries which genuinely think
that corruption maintains a sense of hierarchy and admirable tradition.
It is perhaps worth saying that there are often some big structural
impediments which are not directly governance in nature but which
are holding a country up which I look at as having to address.
I would not want you to think we just do governance. We have been
talking about the political end, but we also work on mainstreaming
HIV/AIDS as a national development priority. We work on rebuilding
governance after conflict. It is dealing with a broader national
policy agenda that countries must deal with. To give you the most
pressing current example of thisI think if you discovered
afterwards I had not mentioned it you would think I have left
something out todayI have been representing the Secretary-General
in trying to get a land reform programme started and financed
in Zimbabwe. There is a classic obstacle right across the road
in the way of the development of democratic sustainable development
in that country. It is an issue which is completely cancerous
in the political economy of the country in the way it is used
by a government of a country, in the way that it has completely
thrown off track a more sensible political and economic evolution.
We are not afraid of taking on these kinds of issues because we
see them as governance.
307. Corruption takes many forms. I remember
years ago being told that, for example, in The Gambia the Ministry
of Health took on what she regarded as an immoral research programme
because she thought it was quite wrong for half the country's
children to be used as a control group, but she said that it was
quite impossible to refuse because when the programme was finished
all the Land Rovers and all the equipment would be left behind
for her to use, so she had this balance to strike. It seems to
me that The Gambia is rather a good example as far as I can make
out. The current health care systems in The Gambia do not reflect
in any way the amount of money poured in by research organisations.
That is corrupting too. I wonder whether you would like to comment
(Mr Malloch Brown) I would. The United Kingdom in
its White Paper is talking about untying aid which will immediately
cut the costs of that now small portion of the United Kingdom
aid programme by 25 per cent and probably lead to fewer Land Rovers
and a few more Toyotas on these projects, which is not altogether
a good thing. But I think the whole of development is going through
this change from a supply-driven to a demand-driven business.
It comes out of a context where it was a tool of geo-politics
and under that basic umbrella people could engage in every supply-driven
folly they wanted to, experimenting on developing countries with
everything from medical research programmes to infrastructure
which was entirely inappropriate. We are now seeking to reformulate
the model so that it is developing country determined, driven
and owned. I do not think developing countries will be any less
prone to mistakes than the supply drivers of the past, but it
will be a much more wholesome process and hopefully will lead
to less of these kinds of examples. Three-quarters of our staff
are national staff and our international staff, like in DFID or
the World Bank I hope are increasingly culturally attuned to not
pushing their expert solution on people but to listening better
and responding more carefully.
Chairman: Your answer concerning working
with other institutions such as the World Bank leads us to Andrew
308. You are particularly well qualified to
talk about relations with the World Bank. We heard from James
Wolfensohn when he made his anti-corruption speech in 1996 that
before that corruption had almost been a taboo subject in the
World Bank. You have told us that you have had anti-corruption
programmes for over ten years in developing countries so obviously
it has not been at the UNDP but, leading on from that, do you
think there are different roles for the multi-lateral donors and
bilateral donors in tackling corruption and should we be working
(Mr Malloch Brown) We have been doing it for 10 years.
Jim Wolfensohn was a hugely important convert because the sheer
lending power and money power of the World Bank was very important.
It was very brave leadership on his part when he did it because,
perversely, going back to this trusted role the UNDP has, we had
been allowed to talk about corruption for years and nobody thought
it was culturally offensive behaviour by a domineering international
organisation, but whenever the Bank hinted at it everybody cried
foul and said it was "western values" and all the rest.
Behind it lies the serious point that we are a Trojan horse. We
can make a lot of quiet progress on this issue which is our role.
The Bank's role is to clean up its own portfolio and in the economic
restructuring of countries to press for more open systems with
less regulation, and where there is regulation, much more transparent
and open regulation. I think that is a critical area for it to
work in. The British Government's role is certainly to demand
the same things in its own aid programmes and in the sectors where
that aid programme is active in countries, but it is equally to
be robust on these issues at the board of the Bank as well as
the board of UNDP and other organisations, and finally to play
its own role in pushing the issue of corporate responsibility
with British companies. Britain does not have the problem with
its companies that some Europeans have in that British companies
are in general pretty straight, but nevertheless it is important
that British companies recognise the obligations of the OECD guidelines
and respect them.
309. You have already said that developing countries
used to shout foul and talk about western values whenever corruption
might have been mentioned by the World Bank but, historically,
why do you think (it was not just the World Bank) the international
community in general was unwilling to take on the subject of corruption
with developing countries and what has changed?
(Mr Malloch Brown) Up until 1989 the geo-political
nature of aid was that it followed alliances rather than development
performance of countries, which meant that the West had plenty
of embarrassing preferred recipient countries who were front-line
countries in terms of the east/west confrontation in the Horn
of Africa, in South Asia, in the Indian sub-continent, in East
Asia, and other places, to all of whom a blind eye was turned
who were receiving huge, huge assistance amounts which were not
being well spent, and which had a high level of corruption. So
after 1989 the game has totally changed and you have seen corruption
and good governance come on to the agenda as part of the performance
commitment that donors probably want of developing countries in
return for aid. So corruption has come out of the attic and is
now something that is openly discussed.
310. Did the UNDP date its anti-corruption work
from the fall of the Berlin Wall in 1989-90?
(Mr Malloch Brown) I am sure if I had a colleague
with a long enough memory here, they could point to something
prior to that but Michael has an even shorter memory than I. For
us it picked up in the early 1990s in a substantial way.
311. It is as simple as that; the ending of
the Cold War and the collapse of Communism was the pivotal moment?
(Mr Malloch Brown) After that we have moved to a situation
where we have a world population of six billion. In the mid-1980s
before Latin America went back to democracy we had one billion
people in market economies, two billion in democracies. The billion
were the OECD countries, the two billion were the OECD countries
plus India. Today in a world population of six billion we have
five billion plus in market economies and we have four billion
plus in democracies, so the nature of the political economy has
been transformed and with it issues like corruption, which you
did not address in closed, state-owned, authoritarian political
systems, are suddenly very much open debate in countries. I think
what Transparency International would have argued to you, and
which is critical, is the real fight against corruption has to
come from within societies and not be externally imposed. That
is the genius of Transparency International; all these national
chapters of brave professors and public officials and crusading
journalists who are taking on these issues in these new, more
open political and economic environments.
312. That is extremely interesting. Past relations
between the World Bank and the UNDP have not always been good,
although I am sure they are excellent now with your past. What
are the common features and differences between the approaches
now of the World Bank and UNDP in tackling corruption?
(Mr Malloch Brown) Obviously I felt as a former Bank
Vice President that it was incumbent on me to make the relationship
work and it was not easy, you are right, Andrew. There was a history
of tremendous suspicion which basically was rooted in the growing
economic strength of the Bank, the declining fortunes of UNDP
and development systems generally, combined with the Bank's embrace
in the mid-1980s to the mid-1990s of unreconstructed structural
adjustment. The UNDP's response to that, as was UNICEF's, was
to stay outside that and throw bricks from the outside arguing
that it was impoverishing the poor.
313. It could be demonstrated as adding to debt,
(Mr Malloch Brown) Exactly. But it was an unheard
lament and it was seen as the complaint of UN bureaucrats who
had lost touch. Until 1989 we had a period where aid followed
defence spending. It really did. In the United Kingdom or anywhere
they all tracked. Suddenly after 1989 you were supposed to get
a post-Cold War dividend. Military spending plateaued. I am not
talking about the United Kingdom, but generally. Development spending,
which you would have expected to have gone up, plummeted and in
that environment efficiency became the name of the game, plus
who had the most powerful voice. This led to people protecting
their own bilateral programmes and supporting Bretton Woods for
whom the client ministries are chancellors of the exchequer and
ministries of finance, not worthy but politically powerless development
ministers. This is a generic comment, I hasten to say, with no
application to the United Kingdom setting! The UNDP and all the
UN agencies were getting squeezed in terms of financing. We had
a 40 per cent decline in core resources in the 1990s. These all
led to very unharmonious relations. When I was at the Bank in
charge of UN Affairs Jim Wolfensohn and I took the first step
towards peace when we declared that we had realised that structural
adjustment had not worked as expected and the new model was that
structural adjustment had to attend to the social and impoverishment
dimensions and we therefore accepted the UN and NGO critique.
However, we said the UN must recognise that economic stability,
contained public spending, and a well-managed macro-economic environment
is indispensable to growth and therefore to poverty reduction,
and if we accept your social agenda, you accept our macro-economic
one, and that is broadly the new consensus on which progress has
been made. I think I have to make three very quick points to you.
One is that these new poverty reduction papers have led to huge
partnerships at the country level. We are counsel for the defence
in about 30 countries now. We help countries formulate these strategies
and presentations to the World Bank and IMF with the full encouragement
of those two institutions. We help countries make the case that
they should have higher social spending ceilings so that they
can loosen the macro-economic straightjacket. We help them with
the national consultations and to set development objectives.
It is a very important operational partnership around poverty
reduction to improve the instruments and make them more socially
responsible. In countries like Indonesia, on governance it is
full partnership where we will deal with the sensitive, internal
policy issues or sensitive political institutions like strengthening
parliaments or electoral processes. We revamped the whole election
system in Indonesia. Before the elections when the change of power
happened we spent $80 million. The Bank could not have done that;
they are doing more the economic governance dimensions. It is
a strong partnership, but I do have to say that if it stopped
there we would be perceived as a wholly-owned subsidiary of the
Bank which would be a catastrophe for development. We have to
be the loyal opposition offering development choices and alternatives.
I am very anxious to make UNDP a more progressive voice on gender,
on poverty reduction, on other development issues but we have
got into a terrible period where we have said we all agree what
has got to be done in development. It is all about implementation
and how to do it. We absolutely do not. Development is a hugely
high-risk complex issue where policies have unintended consequences.
It is not easy stuff, so there have got to be choices. Finally
our role, which is to be the legitimate, trusted friend of developing
countries, is lost if we become patsies of the Bank. We want to
combine operational partnership with policy and political differentiation.
And it has worked so far very, very well and I think is a bedrock
on which we can build a broader system of UN development co-operation.
314. I think that you have covered most of the
area in terms of co-ordination between the UNDP and the World
Bank, but if I can ask a wider question. Clearly there are other
key stakeholders. You have mentioned parliaments, the IPU, local
government, the International Union of Local Authorities. You
have not mentioned the International Chamber of Commerce, the
World Business Council. There is a whole range of bodies that
need to be co-ordinated in this fight against corruption and push
for good governance. How do you see that co-ordination led by
yourself as chair of the UN Development Group going forward? Is
there a role to bring this up in the CST on financing which is
coming up next April? Do you see this as a major area for the
World Summit on Sustainable Development which was announced last
Thursday will be in Johannesburg. Not one word about this is in
the original Rio Treaty 40 chapters. Should this be a major push
in this culminating conference that will happen in 2002? How do
you see the co-ordinating function of what you are doing into
(Mr Malloch Brown) Let me particularly answer on the
private sector point because it has been underplayed this morning
by me in the answers. You know that the Secretary-General launched
the Global Compact, of which a number of British companies are
very prominent. Groups like the Prince of Wales Business Forum
have been very active in the organisation of British companies
internationally around the issues of corporate social responsibilities.
The Secretary-General's and my view is that an increasing proportion
of the finance for development will come from the private sector.
That is in the nature of the fact that we are moving into market
economies, more private finance and less public finance. How do
we engage the private sector around development goals? There is
one group of purists who say that you do not, you retain a position
of confrontation. For many years in the UN we had a centre on
trans-national corporations, which, indeed, took that view of
the inherent dangers of international catalyst organisations.
The Secretary-General and I are self-confessed pragmatists in
this area, who believe that corporations have a huge stake in
successful democratic sustainable development in the countries
in which they are operating, stakes in the future of their operations
in those countries and stakes globally in terms of their relations
with shareholders, customers and other groups. We all see the
disasters that visited Shell, or others if they are in breach
of this, and the efforts that Shell subsequently made to ensure
that something like that never happens again. Shell is one of
the many strong partners we see ourselves as having. What I am
doing is taking the Secretary-General's Global Compact, which
is the dialogue about human rights, corruption, labour standards
and environmental standards, and taking it local and trying to
create in the first group of pilot countries a national compactwe
will not use the name initiallywhere international business,
domestic business, civil society and government come together
around a dialogue of these issues as they affect them, for example
child labour and labour standards in Asia, and the environment
is likely to dominate in large parts of Latin America, as in parts
of Africa. We are going to work with groups like the ICC and the
Prince of Wales Business Forum supporting us to see if we can
create these forums. We want them to be very unstructured. We
are going to have the representative issue business is going to
feel they are getting trapped into involuntary standards. We feel
if we can get a dialogue going around solutions to problems at
the national level, then out of it will come new relationships,
out of which transactions will flow. When I talked earlier about
the Niger Delta and organising the private sector to contribute
to community development, Bob Sanders and I are thinking of doing
it in this context, of creating a national version of the Secretary-General's
Global Compact, to start talking about the problems of The Delta
as the pilot for talking about the problems of the whole country
around bringing these different constituent actors together. UNDP's
power will never come from its money; its power will come from
its conditioning and its ability to convene.
315. Why do you think Shell is not wanting to
come and talk to us?
(Mr Malloch Brown) I will encourage them to do so.
I do not know, I am surprised. I have a very old-fashioned view
of Parliament I thought once invited you came.
316. You are quite right, of course. We can
command, but the first approach to Shell has been to refuse. We
may have to command. I am interested they should refuse, because
if you are as involved as you say you are with Shell what have
they got to hide from us?
(Mr Malloch Brown) I think they have a lot of progress
to report. They have continuing problems, but they are trying
in a very serious minded way to address them.
317. Is BP in Columbia or is it Shell?
(Mr Malloch Brown) BP is in Columbia.
318. That is another little story.
(Mr Malloch Brown) To be honest, on the CSD one I
think it is soon, I just do not know yet. In the financing for
development we are looking at this as a watershed moment in getting
all of this right. It is a very important set of principles because
it recognises the founding principles for that conference, and
the role of the domestic environment to generate domestic and
international capital flows. We have to get the equation right,
which is that foreign direct investment in developing countries
is five times that of official development assistance. That is
a well known statistic. What is less well known is that on average
the figures are a lot less good. Domestic annual capital formation
is ten times the FDI. The real trick is to create the environment
where domestic capital is formed and kept in countries.
319. Everyone forgets that the formation of
domestic capital is absolutely vital.
(Mr Malloch Brown) This is where the World Bank and
the IMF have an idealogy in this international capital flow. They
are completely blinkered to the fact that the history of international
capital going into countries follows domestic capital returning
and domestic capital being formed.
Chairman: If you can get a trustworthy
banking system going in one of these developing countries, you
draw in this capital flight and that is really the foundation,
as you say, of capital inflow.