Stronger ethical content of professional education

CIOB President calls for stronger ethical content of professional education.

Allan McMullen's reference in his Guildhall dinner speech to what James Wolfensohn, former President of the World Bank, called the cancer of corruption was timely, especially in view of the recent decision of the multilateral development banks to adopt a common approach to the fight against it.

The new agreement has been described as an unprecedented consensus on the broad policies and practices necessary to address both internal and external problems of corruption.

It includes the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Asian Development Bank and the African Development Bank.

Facing up to the destructive influence of corruption however takes much more than legislation and setting up departments with instructions to deal with it.

It needs firm decisions at top level that blatantly dishonest practices should not be tolerated by institutions whose charters oblige them to investigate allegations of wrongdoing and penalise the offenders accordingly.

In the field of international finance, this takes a great deal of courage because of the political pressures that can be applied by the national governments of companies facing prosecution in the courts and possible debarment from access to international sources of project finance.

Paul Wolfowitz, recently appointed to succeed James Wolfensohn, described the difficulties faced by these institutions when he spoke about the struggle within the World Bank over the past ten years to establish effective machinery to root out corruption.

As Mr.McMullen indicated in his speech, the cost inflation imposed on trade and industry worldwide by bribery and corruption is formidable.

But the question is, how can the ingrained tendency to seek favours and rewards in business affairs - indeed in some countries the subject of established custom - be corrected? The United States Senate Foreign Relations Committee took a lead on this nearly two years ago simply by exposing the scale of the problem - for example, cumulative losses in the order of $100 billion by the World Bank, evidence which had previously been discounted as the fantasies of a few maverick and discontented officials.

Almost as, if not more important, was the action of the Senate Committee in rebuking people at top level within the U.S.

administration who were complacently tolerating the leakage of funds and maladministration within the multilateral development banks, even going as far as attempting to protect them from exposure.

The successor to James Wolfensohn came into office with a brief to make sure that the expensive machinery employed by the World Bank to monitor and expose corruption should work effectively, and not content itself with naming a few minor operators in parts of the world where corruption is so endemic that it cannot be ignored.

As Paul Wolfowitz outlined the challenge in conference recently with members of his staff worldwide, he confirmed that real progress in this difficult field depends on the calibre of leadership.

He spoke for example about the change that has come over the World Bank's Office of Institutional Integrity since the appointment of Suzanne Folsom, 'a wonderful lawyer', experienced in the field of corporate ethics.

She was appointed acting director of the INT Office last September, at a time when the directorship had been vacated and the department was desperately in need of leadership.

He said: "I asked Suzanne to step in as acting director of INT and she's done such a fantastic job over the last few months".

"When I compared her to the list that was open in the search [for a successor], I concluded that she was absolutely the right person.

It was very important to have strong leadership there and Suzanne is providing it".

The problem at the time was that the World Bank had no fewer than 387 open cases of alleged corruption under investigation and word got around that most of them concerned accusations of malpractice against members of the Bank's staff.

Paul Wolfowitz put this into perspective by saying that the actual number of staff members under inquiry was 43 involving allegations of fraud and corruption and that very few of them had been established.

Dealing with these problems decisively and energetically, he said, was not a peripheral matter but extremely serious.

Though the Office of Institutional Integrity set up by James Wolfensohn has been in being for some five years, said his successor, "it still new".

It has taken this long to shape this machinery into an effective instrument of regulation.

In short, bribery and corruption is not an easy matter to tackle, nor are there speedy remedies for it.

One thing it cannot survive is exposure.

But as the Lesotho High Court trials over the award of contracts for the Highlands water and power project showed, there was little support for this small kingdom in carrying these proceedings forward against strong opposition from home governments, let alone the initial contemptuous attitude of the companies themselves.

So the CIOB President, who asked people to recognise how susceptible is the construction industry to corruption both in the developed and the developing world, has raised an important issue which the multilateral development banks now under pressure from governments are taking more seriously than ever before.

The United Kingdom has all the right legislative instruments in place to curb corruption which at £3 billion a year as quoted by Allan McMullen means a serious inflation of construction costs.

He is calling for ethical training to become a requirement in professional education for practitioners and clients of construction.

As in the American case, in the United Kingdom the powers are there to deal with it, but it takes courageous leadership to show how damaging corruption can be to industry and wider community.

Lending delayed pending investigation.

Sources in Washington say that recently the World Bank has held up $800 million lending for Indian health projects, has frozen lending to Chad and cancelled 14 road contracts in Bangladesh.

The Bank has also sent a strong message to the Kenyan Government by placing five proposed loans totalling $250 million under investigation.

In the case of Chad, Mr.Wolfowitz explained that the government there has broken its agreement to protect a large share of its oil royalties for the poorest people in the country.

In his discussions with World Bank staff, he spoke of his meeting with a man from the Ivory Coast who told him with sadness and bitterness about how corruption has destroyed his country.

Fortunately the situation in the United Kingdom is nowhere near as bad at that, but as the CIOB President took the opportunity of raising the question in the presence of many leaders of the industry, it has to be recognised as an issue demanding urgent attention by the professional institutions.

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