Could Corruption Sink Uganda’s Development Plan?

Posted in: Anti-Corruption, Blog, Government, In The News by Marco Puccia on May 5, 2010 | No Comments

An interesting article in The Guardian (UK) recently expressed concern over the threat the corruption in Uganda could play in dismantling its otherwise strong National Development Plan. Development experts have commended the plan, but cautioned that its success is strongly predicated on transparency and accountability.

Corruption and the country’s rapid population growth risk hindering the economic growth forecasted in Uganda‘s recent National Development Plan (NDP), according to a report in the Observer newspaper.

The report warns that without proper monitoring and evaluation, the ambitious plan, unveiled earlier this month, would surely fail to deliver.

[...]

“The NDP’s successful implementation will in many ways hinge on the government’s ability to ensure compliance with internal government reporting requirements,” Theophane Nikyema, the United Nations Development Programme (UNDP) resident coordinator, told the Observer.

As a Whistleblower Protection Act (protecting whistleblowers from incrimination and offering 5% of money recovered) makes its way through Parliament, the bill is met with skepticism and a national sentiment that corruption is endemic and a “way of life” in Uganda. A recent World Bank report estimates that $250 million is stolen by government officials every year in Uganda. According to a separate report by the Public Procurement and Disposal of Public Assets Authority, $184 million are lost annually in procurement scams — a number that accounts for approximately 70% of the national budget and more than what the country receives in annual foreign aid!

“Corruption is one of the most serious problems hindering development in Uganda,” says Mukotani Rugyendo, senior advocacy and communications officer, at Uganda Debt Network, an advocacy and lobbying coalition against corruption.

While the Whistleblowers Act above would be a great step in the right direction, the government needs to make a public example that it is willing to prosecute corrupt colleagues. Another necessary step is making sure that villagers know how much money in government contracts was given to build a local school, for example, so that they can account for how the funds are spent. Access to information, a cultural shift in understanding the misdeeds of corruption, the tools for M&E as well as reporting, and the political strength and willpower to prosecute corrupt individuals and institutions are all needed to help stymie corruption in Uganda.

While the goal of the National Development Plan to become a middle-income country in 30 years is reasonably feasible, it could just as reasonably be sunk by the selfish graft and corruption that haunts the country and the continent’s development.

[Photo Credit: Flickr User International Rivers]

Economist: The Corruption Eruption

Posted in: Anti-Corruption, Blog, In The News by Marco Puccia on May 3, 2010 | No Comments

A great article called “The Corruption Eruption” was published in The Economist over the weekend. The article hit on the rising attention around corporate corruption and makes the argument that combating corruption within your organization is not just an ethical issue — it makes strong business sense as well.

The ethical case against corruption is too obvious to need spelling out. But many companies still believe that, in this respect at least, there is a regrettable tension between the dictates of ethics and the logic of business.

False: Bribery Is the Price You Must Pay To Ender Some of the World’s Most Difficult Markets

The article cites the examples of Reebok, Google, Novo Nordisk, and IKEA as Western companies that have successfully prospered in emerging markets without engaging in corruption. In fact, “IKEA has gone to great lengths to fight corruption in Russia, including threatening to halt its expansion in the country, firing managers who pay bribes and buying generators to get around grasping officials holding up grid connections.”

“What is more, Mr Nichols argues, it is misguided to dismiss entire countries as corrupt. Even the greasiest-palmed places are in fact ambivalent about corruption: they invariably have laws against it and frequently produce politicians who campaign against it. Multinationals should help bolster the rules of the game rather than pandering to the most unscrupulous players.”

False: Bribery Can Speed Up The Otherwise Glacial Pace of Bureaucracy

According to a World Bank study by Daniel Kaufmann and Shang-Jin Wei, companies that pay bribes actually end up spending more time negotiating with bureaucrats. Furthermore, the cost of borrowing tends to be much higher for corrupt companies because of regulatory fluctuation.

In fact, standing up against corruption can help speed things along for your organization! The article cites Texaco as a great example of this:

“Texaco, and oil giant now subsumed by Chevron, had such an incorruptible reputation that African border guards were said to wave its jeeps through without engaging in the ritual shakedown”

The Hidden Costs of Corruption

1.) Slippery Slope - Once you give into corruption the first time, more solicitations will invariably follow. Word will quickly spread to others that you are willing to “pay”, and the ingenuity of bribe-takers will quickly come up with new ways to solicit payments. Many corrupt businesses and organizations open themselves up to blackmail.

2.) The Psychological Toll – The article cites Philip Nichols of the Wharton School explaining that “corrupt business people habitually compare their habit to having an affair: no sooner have you given in to temptation than you are trapped in a world of secrecy and guilt.”

Increased Visibility, Legal Pressure Being Applied

With increased methods for rapid and anonymous communication (Blogging, Twitter, E-mail, etc.), more public pressure is being applied to companies and organizations to act in an ethical manner. Corruption is much more difficult to hide these days, and the likelihood of getting caught is much higher today than even just 5-10 years ago.

Legal pressure on pursuing cases of corruption is also on the rise. Legislation such as the Foreign Corrupt Practices Act (FCPA) and Britain’s Bribery Act has been revamped with stricter authorities and increased attention. Legislation has been left open to interpretation, allowing prosecutors to pursue even less-blatant cases of corruption (eg. lavish entertainment). Under the legislation, senior managers can be held personally liable for corruption on their watch — risking both massive fines and prison time.

The Department of Justice is actively pursing 150 FCPA-related cases today, as opposed to only 8 in 2001. 38 countries have signed onto the OECD’s 1997 anti-corruption convention (opening the door for cross-border prosecutions). Several high-profile cases including Britain’s BAE Systems being fined $140m, Daimler paying out $184m in fines, and Seimens being fined $1.6 billion has set a new tone in the fight against corruption.

The Next Steps…

According to a survey of 500 prominent firms by Transparency International, the average company only scored 17 out of a possible 50 points on “anti-corruption practices”. The article reads:

Companies need to develop explicit codes of conduct on corruption, train their staff to handle demands for pay-offs and back them up when they refuse them.

Explicitly standing up against corruption through your organization is not just a piece of “Corporate Social Responsibility” or ethical standards. It can literally strengthen your organization and ability to conduct business in the market you are trying to reach!

Create A Culture Through Action, Not Words

Posted in: Blog, Non-Profits, Power of Transparency by Marco Puccia on May 1, 2010 | No Comments

If you’re an executive, manager, entrepreneur (especially social entrepreneur), you’ve probably thought about “creating cultures”. How do I create a culture of innovation? How do I create a culture of honesty? How do I create a company culture like Google? It’s definitely something I’ve thought about a lot!

I published a blog post the other day quoting an excerpt from the book “Rework” by the founders of 37Signals. Here’s another excerpt that stood out and I think applies to the work that we all do (emphasis added):

You don’t create a culture. It happens. This is why new companies don’t have a culture. Culture is the byproduct of consistent behavior. If you encourage people to share, then sharing will be built into your culture. If you reward trust, then trust will be built in. If you treat customers right, then treating customers right becomes your culture.

Culture isn’t a foosball table or trust falls. It isn’t policy. It isn’t the Christmas party or the company picnic. Those are objects and events, not culture. And it’s not a slogan, either. Culture is action, not words.

As we create the change we want to see, we must lead by example! Stop writing 50-page policies that nobody is going to read, much less embody! Demonstrate through your actions the culture you want to create, and people will follow!

If you haven’t read it yet, check out the book Rework — it’s really great!

Rework Excerpt: Own Your Bad News

Posted in: Blog, Non-Profits, Power of Transparency by Marco Puccia on April 29, 2010 | No Comments

I just finished reading Rework, written by the founders of 37Signals. It’s a brilliant book all about re-thinking how we approach work and business — something I’m passionate about, myself! I read this passage on the bus this morning and wanted to share it with all of you! It’s all about “Owning Your Bad News”:

When something goes wrong, someone is going to tell the story. You’ll be better off if its’s you. Otherwise, you create an opportunity for rumors, hearsay, and false information to spread.

When something bad happens, tell your customers (even if they never noticed in the first place). Don’t think you can just sweek it under the rung. You can’t hide anymore. These days, someone else will call you on it if you don’t do it yourself. They’ll post about it online and everyone will know. There are no more secrets.

People will respect you more if you are open, honest, public, and responsive during a crisis. Don’t hide behind sping or try to Keep your bade news on the down low. You want your customers to be as informed as possible.

[...]

Here are some tips on how you can own the story:

• The message should come from the top. The highest-ranking person available should take control in a forceful way.
• Spread the message far and wide. Use whatever megaphone you have. Don’t try to sweep it under the rug.
• “No comment” is not an option.
• Apologize the way a real person would and explain what happened in detail.
• Honestly be concerned about the fate of your customers — then prove it.

These principles certainly apply to nonprofits and for-profits alike. For nonprofits, sub-out “customers” for “donors” or “stakeholders”. My friend Kjerstin Erickson, who runs a nonprofit called FORGE, has been a strong advocate for what she calls “Radical Transparency” — a term I’ve adopted into my own vocabulary. Check out this cool WSJ excerpt on her story! Transparency and honesty are the brick-stones that pave the way to relationships built on trust – the strongest kind of relationship you can have! When your customers, investors, donors, and/or stakeholders trust you, they will be by your side through thick and thin. There’s nothing better than having an army of loyal supporters!

Do you have a story of how “Radical Transparency” or “Owing Your Bad News” affected your organization? Please share it in the comments below!

TED Video: Peter Eigen, Transparency International

Posted in: Anti-Corruption, Blog, Foreign Assistance, Video by Marco Puccia on April 28, 2010 | 1 Comment

Peter Eigen was one of the very first people to bring the issue of “corruption” to the mainstream. Institutions like the World Bank, his former employer, had policies against interfering in the internal affairs or politics of any member country — and at the time corruption was written off as merely a political issue. But Peter Eigen recognized the deeper social and economic consequences of corruption: It destroys credibility in institutions, tears apart societies, and serves as a barrier to economic growth and a black hole for investment in development projects. Peter Eigen was a trailblazer when he started Transparency International! Check out his TED talk here:

A Common Theme at AfricaGathering: Transparency

Posted in: Blog, Events, Power of Transparency by Marco Puccia on April 26, 2010 | No Comments

I had the privilege of attending AfricaGathering in DC over the weekend, and it quickly topped my list of favorite events! Just the pure passion and energy in the room could have provided continuous electricity for the entire African continent! The lineup of speakers focused heavily on the creative-end of social innovation: technologists, entrepreneurs, and artists. A common theme among the speakers was the power of transparency in creating a force for effective aid, opportunity, and dignity.

Effective Aid: VaxTrac

One of the first speakers of the day was Shawn Sarwar from VaxTrac — an organization that is developing ways to track and maintain medical records and the distribution of vaccinations throughout the developing world. Millions of dollars every year are invested in purchasing medicines and vaccinations for the developing world, but a lack of proper distribution systems and record-keeping lead to a great deal of waste and over-estimation of dosages. According to the VaxTrac website, “For every $100 in new vaccines purchased, $50 will never go into the arm of a child in need.” VaxTrac is seeking to develop automated systems to track and monitor vaccination supply-chains and distribution systems. By created increased transparency, they enabling and environment for more effective aid and greater social impact!

Opportunity: Transparency Sells!

Sean Coetzee is a South African entrepreneur who understands the marketing power of stories and transparency. Sean is the founder of Woodsmoke Africa — a distributor of Made-in-Africa products ranging from wines and coffees to jewelry and textiles. He purchases his products from artisans and farmers in Africa, and associates their individual and personal stories with the product. “We can’t compete on price, so we have to compete on story,” he shared with me at the event. In a very much “If only you could see what I see” fashion, Sean has made his business about the people that inspire him. When you purchase a product made by one of the artists (see featured artist profiles here), you become a part of their lives and their families. This personal and emotional connection not only helps drive additional support for the artisans and their families, but it does wonders for business as well.

Dignity: “You can’t be credible if you are not visible” – Marieme Jamme

I think one of the strongest quotes out of the event that resonated with me was when AfricaGathering organizaer Marieme Jamme said of Africa, “You can’t be credible if you are not visible”. This struck right at the core of why I started Transparency Solutions: to help bring visibility and credibility to the amazing people and organizations already doing amazing things across the continent and around the world. There are artisans, entrepreneurs, and leaders across Africa and around the world who do not have access to certain growth opportunities merely because of where they were born or where they live. This is not just an issue of untapped market potential, but at its core it is an issue of dignity. “Poverty Porn” mischaracterizes Africa and the developing world, and ignores what those who have been or lived in Africa have seen first-hand: the inspirational stories, innovation, opportunities, and potential of the African continent.

We have a responsibility and an obligation to share these stories with the world, because as Marieme said: “You can’t be credible if you are not visible”. And this is an issue of basic dignity.

This is what AfricaGathering is about. This is what Transparency Solutions is about.

It’s Our Money, Where’s It Gone?

Posted in: Anti-Corruption, Blog, Video by Marco Puccia on December 28, 2009 | No Comments

Global Integrity posted this video on their blog, Global Integrity Commons, a while back and I wanted to make sure I share it with our readers as well. The following documentary was put together by The International Budget Partnership and shows how community members in Kenya are standing up to challenge corruption in their district by demanding access to information and conducting their own “social audits”.

This is a process that has been taken up in many countries across the globe, where ordinary citizens or councils of elders are taking charge of holding those with the discretion of spending taxpayer money to account through social/communal audits. It’s an awesome trend to see, and this documentary does a great job of capturing the movement!

International Anti-Corruption Day: Don’t Let Corruption Kill Development

Posted in: Anti-Corruption, Blog, Government by Anand Chandrasekhar on December 10, 2009 | No Comments

December 9^th was marked all over the world as International Anti-corruption Day. The theme for this year was “Don’t let corruption kill development”. An apt theme considering that the World Bank Institute puts the annual loss attributed to corruption around the $1 trillion mark. As the Secretary General of the U.N said in his commemorating speech;

“When public money is stolen for private gain, it means fewer resources to build schools, hospitals, roads and water treatment facilities. When foreign aid is diverted into private bank accounts, major infrastructure projects come to a halt. Corruption enables fake or substandard medicines to be dumped on the market, and hazardous waste to be dumped in landfill sites and in oceans. The vulnerable suffer first and worst.”

International Anti-Corruption day also saw a flurry of demonstrations in societies where corruption is entrenched in daily life. The biggest demonstration was witnessed in Djakarta, Indonesia where 10,000 anti-corruption campaigners turned up in the streets causing the Government to fear the possibility of a citizen coup. Their compatriots in Tengerang locked two entrance gates to Prosecutor’s Office in Tangerang municipality and demanded that the office prosecute ongoing corruption cases. An Indonesian high school student representative made a symbolic statement by presenting the Corruption Eradication Commission with 2 mice in a trap to encourage the Commission to trap more corrupt officials. Whatever the form of protest, the message for the day was best exemplified by the slogan of an anti-corruption rally in Lagos, Nigeria; “See something! Say something! Do something!”

On a more practical level, Transparency International in collaboration with the Feinstein International Centre and the Humanitarian Policy Group provides some guidelines on how to tackle the difficult and delicate issues of corruption in development aid. Based on findings from their study, recommendations to humanitarian agencies include:

• Work to reduce or remove the “taboo” in discussing corruption in humanitarian assistance and promote greater transparency in reporting corrupt abuse of aid, by providing leadership, changing staff incentives and setting up safe and effective complaint mechanisms.

• Communicate to staff that preventing corruption is an important part of the current focus on program quality and accountability, not purely a program-support issue, particularly through incorporating the issue of corruption in induction and training programs.

• Communicate that corruption extends beyond fraudulent financial practices to “nonfinancial corruption” such as nepotism/cronyism, sexual exploitation and abuse, coercion and intimidation of humanitarian staff or aid recipients for personal, social or political gain, manipulation of assessments, targeting and registration to favour particular groups, and diversion of assistance to non-target groups.

• Incorporate corruption risk analysis into emergency preparedness and disaster risk reduction strategies and strengthen surge capacity.

• Ensure that agency policies and procedures that can directly or indirectly mitigate corruption (for example, whistleblower policies) are effectively disseminated and implemented at field level and that standard policies are adapted for emergency contexts.

• Give greater attention to setting up good financial, administrative, procurement and human resources systems from the very beginning of an emergency response, including mechanisms to guard against “burn rate” pressures.

• Improve the overall transparency of information (resource flows, assessments, program elements, targeting criteria, aid recipient lists, entitlements, etc.)

• Allocate greater resources to program monitoring, especially field monitoring.

• Address corruption risks in the selection, monitoring and capacity-building of partners.

• Strengthen downward accountability practices as a way of preventing and detecting corruption.

• Deepen the scope of audits beyond ‘the paper trail’ to include forensic objectives and practices.

• Increase the use of independent external evaluation, including peer review mechanisms.

• Encourage inter-agency coordination at national and international levels for information sharing and for joint action on corruption emanating from the external environment.

Click here to download the whole report…

Rooting Out Corruption in Afghanistan

Posted in: Anti-Corruption, Blog, Government, Video by Marco Puccia on December 7, 2009 | 3 Comments

Corruption in Afghanistan stands to be the largest prospective challenge to overcome in the country’s “nation building” effort. It can be argued that fight against corruption and an illicit underground economy in Afghanistan will be a larger force to combat that both the Taliban and Al Qaeda. Aleksandr Shkolnikov recently published a post on the CIPE Development Blog posing the question, “What is to be done?”

His post included this excellent video from CBS News that I wanted to make sure I share with my readers here:

I left the following comment on his post:

It’s important to distinguish between greed-based corruption and need-based corruption. A lot of corruption at the more disenfranchised levels of society is driven by need and desperation. Cleaning up greed-based corruption at the top-level is one of the first steps toward fixing this (as it opens opportunities for incoming investment that relieves pressure on the rest of society). Another strategy is providing incentives for anti-corruption (eg. direct access to foreign funding that serves to meet certain social needs while relieving the pressures that drive people to corruption). My company, International Transparency Solutions, looks at the cost-benefit relationship that individuals and organizations use when considering corrupt, dishonest, or illicit activity. The key to tackling this problem is providing the proper incentives and opportunities that raise the costs (both actual and opportunity costs) above the point that it makes economic sense.

In addition, I want to share a few key strategies that must be employed to help root-out government corruption:

• The newly established anti-corruption body must be independent and must have prosecutorial powers. If it were my design, prosecution would take place at the International Criminal Court to ensure no malfeasance takes place in the federal judicial system.
• There ought to be a policy requiring arms-length distance between politicians (and their families) and companies receiving foreign investment or acquiring government contracts.
• Going along with the above recommendation, there needs to be a transparent public record documenting the financial holdings of politicians and the families.
• Government procurement system must be transparent, published in local papers. Possibly run by independent body.
• Government services should be automated as much as possible to reduce opportunities for corruption.

These are just a few basic thoughts. What additional measures would you employ?

Non-profit Boards: Lessons for the Gatekeepers

Posted in: Blog, Non-Profits by Anand Chandrasekhar on December 4, 2009 | No Comments

Gone are the days when all that non-profit board members had to do was go through the motions at board meetings and reward themselves with a nice luncheon after. Limited funds and a plethora of NGOs competing for them, has meant that stakeholders (both within and outside non-profits) are increasingly demanding more from their board members. Having a star board member who is renowned and respected is all well and good but NGOs now expect active contribution that goes beyond mere ‘pulling power’.

Don Reynolds, senior vice president of investments for Raymond James & Associates in Fort Worth, U.S.A, has some pointers for current and potential board members of non-profits. He believes that a non-profit board member has a dual role: support of the organization’s purpose, and governance over how it attempts to further that mission. According to Mr. Reynolds, most non-profits could use some help in the following areas from their board members;

Promote Accountability

• Study and review your organisations balance sheet with other board members
• Ensure your organisation meets all legal and compliance requirements with regard to finances
• Make sure that donor reporting needs are being met
• Create a monitoring and evaluation mechanism to review effectiveness  and impacts of projects
• Ensure liability insurance is in place for senior staff

Enhance  Governance Standards

• Use corporate models for developing formal policies on financial reporting, potential conflicts of interest, and internal controls
• Promote voluntary compliance culture on issues such as board member compensation and conflict of interest

Effective Fundraising

• Ensure a diversity of donors to reduce financial vulnerability
• Create an adequate operating reserve to cover day-to-day operations in difficult times
• Appropriately utilise idle funds that need not be spent immediately to the organisation’s advantage

Incorporate Strategic Planning

• Promote investment in attracting talent and retaining leadership
• Create a succession plan for key personnel

For the full text of Mr. Reynolds’ article visit http://www.fwbusinesspress.com/display.php?id=11474