Select Committee on International Development Fourth Report


1. In the White Paper, 'Eliminating World Poverty: A Challenge for the 21st Century' economic growth is recognised as "the prime means of creating income and employment opportunities"[1] and the private sector as "the main impetus of economic growth".[2] It became clear to us, as a result of a seminar we held on the role of the private sector in development, that corruption was the single most important single factor which discouraged both domestic capital formation and foreign direct investment in poor countries. It was also clear that it is the poor who disproportionately pay for corruption. Therefore, the Committee decided it was essential to investigate the nature of corruption and ways in which corruption could be at least reduced if not eliminated altogether. Tackling corruption is an essential part of development work if that work is to be sustainable, and for the benefit of everyone in a country, especially the poor.

2. Mark Malloch Brown, Administrator of the United Nations Development Programme (UNDP), told the Committee that historically aid had tended to follow geo­political alliances.[3] Anglo American noted that, prior to the end of the Cold War, donor countries often turned a blind eye where large amounts of aid were being misspent or subject to high levels of corruption. With the end of the Cold War, corruption and good governance started to be openly discussed, as old alliances became less important.[4] In 1996, James Wolfensohn, President of the World Bank, made his 'cancer of corruption' speech raising awareness, both inside and outside the Bank, of corruption. Prior to his speech, corruption had been a taboo subject in the World Bank. Despite efforts to tackle corruption, it continues to present a significant barrier to development and good governance.[5] Today, developed and developing countries are both placing a much greater emphasis on the need to tackle corruption.

3. Whilst this is the first time the Committee has examined the subject of corruption in detail, we have, in various Reports throughout the Parliament, emphasised the importance of good governance and anti-corruption measures. In the Committee's Report on the Development White Paper[6], we welcomed the White Paper's emphasis on good governance and the Government's determination to fight corruption. In our Report on Conflict Prevention and Post-Conflict Reconstruction,[7] we noted that corruption invariably led to higher prices, fewer employment opportunities, the diversion of scarce resources away from poverty elimination, constraints to growth due to the uncertainty and unpredictability of costs to prospective investors, reduced representation for the poor and the perpetuation of elites.[8] We went on to recommend that the Government bring in legislation to criminalise the bribery of foreign public officials and cease the tax deductibility of such bribes. We also expected businesses dealing with the developing world to have in place clear and regularly monitored anti-corruption standards. We return to both of these issues in this Report and discuss them at length below.

4. Our inquiry had wide terms of reference and covered a large number of issues. Given the complexity of the subject, we are conscious that such an inquiry can only begin to scratch the surface of what are formidable development issues. A general election is imminent and uncertainty over its exact timing has curtailed the time available to us to analyse and consider all the matters raised by this inquiry. In this Report, the Committee does not intend to provide a comprehensive, in-depth analysis of every issue. However, we will cover a number of the important questions raised and highlight the concerns we have about the way corruption is being addressed, particularly by the United Kingdom Government. Over the course of the Inquiry the Committee has received evidence relating to the late General Sani Abacha and attempts by the Nigerian Government to recover the funds looted during the former president's time in office. Much of the evidence relates to matters that are sub judice and it would be inappropriate to comment on them in this Report. However, the Committee has deduced a number of general points from the specific evidence, particularly in relation to the controls on money laundering and the freezing of assets, and these are included in the Report.

5. In Section 1, this Report will examine the nature of corruption before going on to look at its causes in Section 2. We assess the impact of corruption on development in Section 3, before considering how developing countries are tackling corruption in Section 4. Section 5 examines the ways in which development assistance can be protected from corrupt practices, while Section 6 deals with the actions needed in the UK to curb our contribution to corruption in developing countries. George Staple, Clifford Chance, said in his evidence to the Committee, "You have received, of course, a huge amount of evidence, from a wide range of experts, throughout your hearings, and, reading through it, I find it difficult to find anything really that had not been touched upon in the course of the hearings".[9] The evidence taken by the Committee is appended to this Report and we hope that this will provide a useful resource for policy makers and researchers alike.

6. During the course of the inquiry, the subject of corruption has rarely been out of the news. President Estrada has been forced from office in the Philippines following allegations of corruption; President Wahid of Indonesia has been accused of corruption; aid to Kenya has been suspended after the Kenya Anti-Corruption Commission was ruled unconstitutional and the Nigerian Government has been trying to recover funds looted by the Abacha regime. During our recent visit to Vietnam and Cambodia, corruption was an issue that came up on numerous occasions. No corner of the world is untouched, with reports of corruption scandals from China to Peru. Corruption is not only an issue for developing countries but continues to impact on most, if not all, developed countries in some way.

1  Eliminating World Poverty: A Challenge for the 21st Century, White Paper on International Development, DFID, Cm 3789, p.31 Back

2  Ibid., p.17 Back

3  Q.313 Back

4  Q.309 Back

5  Evidence, p.335 Back

6  Second Report from the International Development Committee, Session 1997-98, The Development White Paper, HC330 Back

7   Sixth Report from the International Development Committee, Session 1998-99, Conflict Prevention and Post Conflict Reconstruction, HC 55-I Back

8  Ibid., para.115 Back

9  Q.590 Back

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Prepared 4 April 2001