GA/EF/2928

CORRUPTION, ILLEGAL TRANSFER OF FUNDS AMONG TOPICS DISCUSSED AS SECOND COMMITTEE TAKES UP SECTORAL POLICY QUESTIONS

If corrupt practices and the illegal transfer of funds were not curtailed, the economic interests of all developing countries would be corroded, the representative of China told the Second Committee (Economic and Financial) as it met this morning to consider sectoral policy questions.

He said corruption was a global, social problem, which diverted resources that should be used for development, distorted the economy and hampered normal international aid and trade flows. China was in favour of international actions to combat corruption and bribery, which were based on the principles of sovereignty and non-interference in a country's internal affairs. Such actions should take into account the different levels of development and legal systems of individual countries. The formulation of international agreements should focus on the illegal actions of transnational corporations. Corrupt practices within a government should be handled within the context of domestic laws.

The representative of Pakistan said that the cancer of corruption could shake the foundations of an economy. Corruption was a constant drain on the meager resources of developing countries, making their economies hollow, fragile and debt-ridden. Combating corruption required action at both the national and international levels. The present Government in Pakistan had taken a number of measures to fight corruption. Without firm supportive action at the global level, national measures were not likely to achieve the desired results. The time was now ripe for the elaboration of an international legal instrument on the subject.

The representative of the Russian Federation said that his delegation attached great significance to combating corruption, bribery and unfair competition. To that end, steps were being taken to improve the judicial and procedural system, as well as to prevent cases of illegal transfers of capital abroad and money laundering. Government bodies were vigorous in their efforts to combat corruption within his country. In view of the transborder character of these crimes and the equal responsibility of all countries, the Russian Federation was interested in the comprehensive development of international cooperation.

Speaking on behalf of the "Group of 77" developing countries and China, the representative of Nigeria said that for any meaningful action to combat corruption, there must be sustained action to ensure repatriation of illegal transfer of funds. In an era of rapid integration of the world economy and the radical impact of information technology on international finance and banking, there must be a more coordinated approach to the problem. He called on the Committee to take concrete action for the elaboration of a convention to effectively address corruption in all its manifestations.

Norway's representative said that corruption occurred in all regions of the world, but was particularly harmful to developing countries because they were already the most vulnerable. Corruption diverted scarce resources from development, deterred investment and retarded economic growth. It also undermined democratic political systems and was a barrier to the delivery of basic services to the poor. Primary responsibility for combating corruption belonged to the government, civil society and the private sector of the countries concerned.

After the Committee concluded its discussion of sectoral policy question, the representative of Nigeria, speaking on behalf of the Group of 77, as well as Mexico, introduced a draft proposal on international cooperation to reduce the impact of the El Nino phenomenon.

Statements were also made this morning by the representatives of Antigua and Barbuda (speaking on behalf of CARICOM), Kenya, Japan, France (speaking on behalf of the European Union) and Belarus.

Octavio Maizza-Neto, Assistant Director-General, Executive Office of the Director- General, United Nations Industrial Development Organization (UNIDO), and Susan Brandwayne, Economic Affairs Officer, United Nations Conference on Trade and Development (UNCTAD), introduced the reports before the Committee.

The Committee will meet again on Tuesday, 24 October, at 10 a.m. to consider globalization and interdependence.

Committee Work Programme

The Second Committee (Economic and Financial) met this morning to consider sectoral policy questions, specifically industrial development cooperation and business and development.

The Committee had before it a note by the Secretary-General transmitting the report of the Director-General of the United Nations Industrial Development Organization (document A/55/356). The report provides an overview of efforts underway in the area of industrialization for development, including international cooperation in support of developing countries.

According to the report, the United Nations Industrial Development Organization (UNIDO) has taken on numerous activities in order to support developing countries and economies in transition with industrial development. UNIDO continues to design industrial development programmes for its clients and offers them technical support in putting them into place. It also provides the various actors involved in industrial development with a platform for getting together to tackle some of the major challenges facing developing countries.

The report highlights the meetings, publications and services of UNIDO. By the end of 1999, there were 23 country offices headed by UNIDO representatives. In addition to carrying out its role as a provider of integrated technical cooperation services in the field of industry, UNIDO continues to act as a global forum for the acquisition and dissemination of knowledge related to the industrial development process. To a varying degree, cooperation with other organizations -- both within the United Nations system and elsewhere -- is an integral part of virtually every UNIDO activity.

Also before the Committee was the report of the Secretary-General on prevention of corrupt practices and illegal transfer of funds (document A/55/405). The report contains the responses provided by individual countries, international organizations, groups of countries and non-governmental organizations (NGOs) regarding measures adopted to give effect to General Assembly resolutions 53/176 and 54/205 aimed at the prevention of corrupt practices in international commercial transactions and the illegal transfer of funds.

The body of the report consists of unofficial translations of verbatim responses received by the United Nations Conference on Trade and Development (UNCTAD) in response to their request for measures undertaken by Member States and UNCTAD affiliates to implement resolutions 53/176 and 54/205. The first section of the report contains the measures adopted by individual countries. The second section reproduces the actions adopted by international organizations and groups of States. The third section covers the actions undertaken by NGOs. In most cases, only the most relevant excerpts have been reproduced. The Secretariat can make available the full text of the original submissions upon request.

The Committee also had before it a letter dated 5 May from the Permanent Representative of Nigeria addressed to the President of the General Assembly (document A/55/74) transmitting the Declaration and the Havana Programme of Action adopted by the South Summit of the "Group of 77" developing countries and China, which was held in Havana from 10 to 14 April.

Also before the Committee was a letter dated 28 June from the Permanent Representatives of Egypt and Indonesia to the United Nations addressed to the Secretary-General (document A/55/139) enclosing the text of the joint communique, of the Summit held in Cairo on 19 to 20 June.

The Committee was also expected to hear the introduction of a draft resolution sponsored by Mexico and Nigeria (on behalf of the Group of 77) on international cooperation to reduce the impact of the El Nino phenomenon (document A/C.2/55/L.9). The draft would have the Assembly call on the Secretary-General and the relevant United Nations organs, funds and programmes, particularly those taking part in the International Strategy for Disaster Reduction, and the international community, to adopt the necessary measures for the prompt establishment of the international centre for the study of the El Nino phenomenon in Guayaquil, Ecuador. It would also urge the international community to provide scientific, technical and financial assistance and cooperation for that purpose.

Also, the Assembly would welcome the establishment of the working group on the El Nino/La Nina phenomenon within the framework of the Inter-Agency Task Force of the International Strategy for Disaster Reduction.

Statements

OCTAVIO MAIZZA-NETO, Assistant Director-General, Executive Office of the Director-General, United Nations Industrial Development Organization (UNIDO), introduced the report of the Director-General of UNIDO. The UNIDO had spent the last two years adapting itself to the new processes that were evident today. It had introduced a novel system of matrix operations and the report showed the progress made. The organization had also focused on global forums and intended to organize more of these in the years to come. The UNIDO had been in close contact with civil society, as well as consultant companies.

The goal of the organization was to reach a high level of quality assistance and to identify present trends, he said. Sixty per cent of UNIDO activities had taken place in Africa and 50 per cent of that activity was directed at the least developed countries. The UNIDO had collaborated with organizations within the United Nations system as well as those outside the system, including Oxford University, UNCTAD, the World Trade Organization (WTO), the World Health Organization (WHO), and many other places. Today, UNIDO was leading a process of consultations with high-level heads throughout the world to find the best ways to minimize marginalization. They intended to continue their work, which was supported by donor countries and other United Nations funds.

SUSAN BRANDWAYNE, Economic Affairs Officer, UNCTAD, introduced the report of the Secretary-General on the prevention of corrupt practices and illegal transfer of funds. The report had been prepared in response to the General Assembly resolution 53/176 on action against corruption and bribery in international commercial transactions, as well as General Assembly resolution 54/205 on the prevention of corrupt practices and illegal transfer of funds. It included measures adopted by 47 individual countries, 11 international and multilateral organizations and five NGOs.

JOSTEIN LEIRO (Norway) said that private investment continued to be essential for growth and was also providing a solid financial basis on which the government could rely when fulfilling its obligations. Hence, his Government had suggested in the budget for 2001 a major increase in the capital base for the Norwegian Investment Fund for Developing Countries (NORFUND), which financed both direct joint venture investments and local venture funds. In addition, Norway continued to support a number of developing countries in their efforts to improve their productive sector capacity, through bilateral assistance, the United Nations system, the Bretton Woods institutions and the WTO.

Corruption, he said, occurred in all regions of the world, but was particularly harmful to developing countries because they were already the most vulnerable. Corruption diverted scarce resources from development, deterred investment and retarded economic growth. It also undermined democratic political systems and was a barrier to the delivery of basic services to the poor. Primary responsibility for combating corruption belonged to the government, civil society and the private sector of the countries concerned. A central objective in Norway's bilateral relations was to assist partner countries in fighting and avoiding corruption, for example, by supporting good governance and strengthening administrative structures.

GEORGY PETROV (Russian Federation) said that his delegation attached great significance to the development of business activities, small and medium in particular. In the Russian economy, the private sector accounted for 80 per cent of the gross domestic product (GDP). One of the most important priorities for his Government was the creation of a favorable investment climate. This task was especially imperative after the 1998 financial crises. Efforts were in place to combat corruption, bribery and unfair competition. To that end, steps were being taken to improve the judicial and procedural system, as well as preventing cases of illegal transfer of capital abroad and money laundering.

Government bodies were vigorous in their efforts to combat corruption within his country, he said. As a result, last year more than 20,000 criminal encroachments on the interests of the State had been thwarted. In view of the transborder character of those crimes and the equal responsibility of all countries, the Russian Federation was interested in the comprehensive development of international cooperation. His country had signed the Convention to Fight against Money Laundering of the Council of Europe and intended to ratify it soon.

The Russian Federation was in favour of strengthening and improving the efficiency of the specialized agencies of the United Nations system, and UNIDO in particular. The reforms taken to strengthen the role of that organization were in the interest of all countries. His delegation supported the efforts of UNIDO aimed at facilitating the industrial competitiveness of developing and transition economies in the international markets. Equally important was the fact that UNIDO was linking its activities with other agencies. The Russian Federation supported the Director-General's efforts at reform.

PATRICK A. LEWIS (Antigua and Barbuda), speaking on behalf of the Caribbean Community (CARICOM), said that the recent Millennium Summit had provided an opportunity to review the world's development experience over the past decades and to renew its commitment to development. Discussions had centred around the deepening of poverty in the majority of developing countries, particularly the least developed among them. The eradication of poverty and hunger could not be achieved without discussing the barriers to development. No strategy for development could ignore the crippling burden of debt. The graduation of some Caribbean States based on the narrow criterion of per capita income ignored the constraints and difficulties faced by such States.

Caribbean States had invested in the development of their industrial sector, he said. They had every intention of ensuring that their financial services regime was well regulated and supervised. They continued to object to the efforts by the Organization for Economic Cooperation and Development (OECD) to dictate their tax policy. They could decide for themselves the extent to which they imposed taxes. They could not accept that the OECD had the legal standing to force them to change their tax policies. The OECD Harmful Tax Competition issue affected the attempts by Caribbean States to diversify their economies and were only designed to justify what amounted to a high tax cartel.

While he acknowledged that the developed countries would be at the centre of global decision-making, he emphasized that others also had a right to participate. The Millennium Summit had helped to focus the world's attention on a few key issues, such as freedom, equality, tolerance, respect for, and protection of, nature and shared responsibility.

J.M. MUGADO (Kenya) said that the importance of trade and investment as engines of growth could not be emphasized enough. Most of the developing countries, and particularly sub-Saharan Africa, continued to depend heavily on the agriculture sector, which had proved to be ineffective in triggering the required economic growth levels. An estimated 80 per cent of the population lived in rural areas and depended on agriculture for their livelihood, and 70 per cent depended on agriculture for their employment. Industry had not created strong domestic linkages and, hence, the dynamic deepening effects on the economy were insufficient. Kenya called upon the international community, particularly UNIDO, to extend the necessary assistance.

Kenya further supported regional integration initiatives as a way of expanding markets, he said. While his country had undertaken radical economic reforms, those reforms had not yet yielded the expected levels of economic growth, investment and poverty reduction. His delegation appreciated the efforts being made by UNIDO to improve industrial competitiveness and private sector development. Cooperation between the developed and developing countries needed to be broadened and deepened. The organs, bodies and agencies of the United Nations, such as UNIDO, should be strengthened so they could effectively follow up on their programmes of action.

TETSUO KONDO (Japan) said that the major challenges confronting the developing economies were generating employment opportunities, and increasing income by enhancing the rate of economic growth. Industrial development played a key role in empowering developing economies by enabling them to do both, while also diversifying exports. In assisting developing economies to overcome those challenges, UNIDO should play a leading role, in close collaboration with other multilateral actors, in providing assistance aimed at promoting industrialization.

On the subject of business and development, he said that the role of the private sector in promoting sustainable development was absolutely crucial. Encouraging entrepreneurship, especially by small and medium-sized enterprises as well as assistance from donor partners, for example micro-credit arrangements, should be regarded as matters of priority. In order to ensure an enabling environment for those efforts, a closer look should be taken at the situation of business and investment, including through macroeconomic and fiscal policies, the rule of law, sound judicial procedures, anti-corruption and bribery efforts, and transparent business practices that enhanced efficiency, fairness and competitiveness in international commercial transactions.

SERGE TOMASI (France), speaking on behalf of the European Union, said that industrialization of developing countries had entered a new state. The international community was becoming more and more aware of providing the kind of industrial development that would benefit all countries and respect the environment. The Union had supported the reforms of UNIDO since the adoption of the programme of work in 1997. The UNIDO had a part to play at the local level in order to establish a legal environment that would attract foreign investment. The Union was in favour of increasing its support for the execution of the current programmes rather than taking precious human resources to draft new programmes.

He expressed regret that the report on the prevention of corrupt practices and illegal transfer of funds had been distributed particularly late. Because of that, his delegation had not had enough time to prepare an in-depth response to the report for the present discussion. Nonetheless, he had reservations that the report had been limited to the responses of States and organizations without putting this into perspective or giving it due analysis. The Union wished to encourage cooperation and dialogue in the area of money laundering.

The Union stressed the essential role of the private sector in the process of development, he said. This was not an option -- it was a necessity. The United Nations had to cooperate with the other relevant organizations in this respect. The Union reaffirmed its strong support for the Secretary-General's initiative towards global partnerships.

I.B. MOHAMMED (Nigeria), speaking on behalf of the "Group of 77" developing countries and China, said that despite sustained growth in the world economy, the situation of industrial development in most developing countries remained unchanged. Overall, they continued to face serious challenges. The wide range of reforms which they had undertaken had so far not yielded the desired results in terms of attracting investment to enable them to industrialize up to a level that would allow any meaningful impact on poverty reduction. It had become evident that a large number of latecomers in the industrialization process were increasingly being marginalized, particularly in Africa.

Therefore, he continued, the challenge before the Committee was how to create an environment that would enable developing countries to meet up with the challenges of industrial development. Sustainable industrial development could only be guaranteed if products and commodities from developing countries were provided unfettered access to the markets of developed countries. It was also crucial that industries be linked to agriculture and development in such a way as to provide employment, generate income and create social integration, in order to mobilize popular interest and support.

He said that for any meaningful action to combat corruption, there must be sustained action to ensure repatriation of illegal transfer of funds. Efforts and the various strategies highlighted in the report before the Committee were no doubt steps in the right direction. However, in an era of globalization, rapid integration of the world economy and the radical impact of information technology on international finance and banking, those actions would remain isolated, uncoordinated and of little impact. There was a need for a more coordinated and global approach to the problem. He called on the Committee to take concrete action for the elaboration of a convention to effectively address corruption in all its manifestations.

ANDREI POPOV (Belarus) said that his delegation was grateful to the Director-General for the report of UNIDO. It was natural for UNIDO to take the leading role in the process of encouraging international cooperation for industrial development. The UNIDO had faced a very real crisis in its work and had managed to transform itself into a modern and decent organization. This could become a model of reform for other organizations within the United Nations system.

In a globalizing world, it was important to tailor to the development needs of each country, he said. Recipient States should be able to determine how their path to development proceeded. Belarus stressed that cooperation was important between all of UNIDO's partnership links. It also fully supported the use of the tailor-made approach for countries with transition economies. Their needs must be taken into account. Those countries already had a sound industrial base and, with the necessary support from UNIDO, they could become donor countries. He hoped that the good experience that had been gained would permit the international community to increase its cooperation in the future.

SHAMSHAD AHMAD (Pakistan) said that the inclusion of action-oriented recommendations on the role of the United Nations in the prevention of corrupt practices would have made the report before the Committee more useful and relevant. He hoped next year's report would elaborate possible actions that the United Nations could take to ensure that illegally transferred funds were retrieved and returned to their countries of origin. The cancer of corruption could shake the foundations of an economy. It was a constant drain on the meager resources of developing countries, making those economies hollow, fragile and debt-ridden. At the South Summit in Havana, leaders had emphasized the need for enhanced cooperation at various levels, including by the United Nations, and called on all countries and entities concerned to cooperate in that regard.

Combating corruption required action at both the national and international levels, he continued. The present Government in Pakistan had taken a number of measures to fight corruption. Without firm supportive action at the global level, national measures were not likely to achieve the desired results. The international community must take action in two areas. First, effective mechanisms must be established to repatriate illegally transferred funds to their countries of origin. Second, action must be taken against those indicted for corrupt practices in their home countries and who were residing abroad. The time was now ripe for the elaboration of an international legal instrument on the subject. The United Nations was an appropriate forum for negotiations on a convention on the prevention of corrupt practices and the illegal transfer of funds.

HUANG XUEQI (China) said that corruption was a global, social problem, which diverted resources that should be used for development, distorted the economy and hampered normal international aid and trade flows. If corrupt practices and the illegal transfer of funds were not curtailed, the economic interests of all developing countries would be corroded. China was in favour of international actions to combat corruption and bribery, which were based on the principles of sovereignty and non-interference in a country's internal affairs. Such actions should take into account the different levels of development and legal systems of individual countries. The formulation of international agreements should focus on the illegal actions of transnational corporations. Corrupt practices within a government should be handled within the context of domestic laws.

China had made notable progress in formulating legal regulations with regard to punishing bribery and corruption, he said. In 1996, the Chinese Government had included the formulation of a law against corruption into its ninth five-year plan. In 1997, the Chinese Communist Party had demanded that, within five years, the spread of corruption within the Government and the Party should be curtailed. In the three years since, with the strengthening of education, the legal system and monitoring, the Government had reinforced its commitment to combating corruption. That some high-level officials had been punished also demonstrated the resolution of the Government to address corruption and bribery.

Draft Resolution -- Environment and Sustainable Development

OSITADINMA ANAEDU (Nigeria), speaking on behalf of the "Group of 77" developing countries and China, introduced the draft resolution on international cooperation to reduce the impact of the El Nino phenomenon.

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