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Corruption Perceptions Index 2004 score:2.1 (129th out of 146 countries)

Conventions:AU Convention on the Prevention and Combating of Corruption (signed December 2003;not yet ratified)UN Convention against Corruption (ratified December 2003)UN Convention against Transnational Organized Crime (acceded June 2004)

Legal and institutional changes

The Public Officer Ethics Act, passed in May 2003, lays down a code of conduct forpublic officers. Its main thrust is wealth declaration: public officials are legally obligated

to declare their assets. Critics say that while it is laudable to require public officials todeclare their wealth, doing so in secret as stipulated in the act an October 2003 deadlinewas silently observed surely defeats the purpose. No government official has beenprosecuted in connection with the legislation, and it has been difficult for the media orany other independent agency to access information.

Several bodies established under the Anti-Corruption and Economic Crimes Act passedby parliament in May 2003 became operational in 200304. The main investigating bodyfor economic crime, the Kenya Anti-Corruption Commission, has powers to investigatecorruption but not to prosecute. The Public Complaints Office, established under thesame legislation, functions as an Ombudsmans office. The Public Service IntegrityProgramme aims to establish an anti-corruption prevention plan within every publicinstitution. It creates the position of an integrity assurance officer in each public bodyto act as an in-house watchdog.

In May 2004 the government launched a National Anti-Corruption Steering Committeeto run a country-wide anti-corruption awareness-raising campaign. The committee iscomposed of representatives from government, civil society and the private sector.

The ministry of justice and constitutional affairs has established several tribunals andcommissions to hear allegations into past economic crimes. The two most significantexamples are the Goldenberg Commission and the judicial tribunals (see below).

Kenya

Fresh scandals show that corrupt

networks persistIn May 2004 a Kenyan daily newspaper ranan article with the headline: Five cabinetministers face corruption probe. The article,quoting the chairman of parliamentspublic accounts committee, alleged thatone cabinet minister irregularly acquired astaggering Ksh 800 million [US $10 million]which he has stashed in banks both in the

country and abroad. A day earlier, thesame paper printed a large photograph ofanother cabinet minister alongside an articleentitled Overnight millionaire? This storyalleged that the minister used his cabinetposition to acquire government contractsfor an insurance company in which he isa director.

While the minister denied the allegations,the story demonstrated that Kenya is in a stateof flux. As a new order struggles to establish

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itself, the old order fights to retain its oldconstituencies patronage networks thatcontinue to exist both within and outsidemainstream politics and the bureaucracy.

Credibilities are being questioned, and it isdifficult to determine where the truth lies.The articles cited above, for example, werepublished in the East African Standard, anewspaper controlled by former presidentDaniel arap Moi. Similarly, the most populartelevision and radio stations are owned byindividuals allegedly connected to the oldregime. Rumours abound, and they arefuelled by a flourishing and increasinglyinfluential yellow press that establisheditself as a force in the latter years of Mois

rule. Many of these informal publications aresaid to have been sponsored by politiciansconnected to Moi, although it has beendifficult to ascertain ownership. The newregime has been slow to communicateits agenda in what is turning out to be apropaganda war.

At this writing, the National RainbowCoalition (NARC) government, had beenin power for 18 months. In December 2002this grouping of key opposition figures anddisgruntled elements of the Moi regime wona historic general election by a two-thirdsmajority. They defeated the KANU (KenyaAfrican National Union) regime, which hadheld on to power by virtue of an intricatepatronage system financed by the proceedsof official corruption. NARCs platformwas anti-corruption and for constitutionalreform. Today, the question on the mindsof many Kenyans is whether the country isreturning to the bad old days of KANU.

Anti-corruption investigations:smokescreen or resurrection?

To the new governments credit, moribundwatchdog institutions have been revived,not least the parliaments Public AccountsCommittee (PAC) and the office of theauditor and controller general. Whereasunder the KANU government the two bodieswould routinely submit reports years late

with recommendations that were oftenignored in the first few months of 2004both the PAC and the auditor generals officeacted swiftly on new cases of corruption.

At the same time, the permanent secretaryof governance and ethics, the presidentsspecial adviser on corruption, on a numberof occasions moved quickly to preventemerging cases of corruption.

The PAC played a particularly prominentrole investigating the so-called Anglo-Leasingscandal that broke in April 2004. According tothe press, this passport-procurement scandalcost the state almost Ksh 2.7 billion (US $34million). The storm broke when it emergedthat a routine upgrade of Kenyan passports

that should have cost about US $10 millionhad ballooned to three times that amount.Opposition legislator Maoka Maore namedin parliament several prominent individualsin connection with the scandal, includingthe vice-president, the minister of finance,two permanent secretaries and senior civilservants, in addition to a Swiss company.The president acted swiftly, suspending bothof the permanent secretaries involved. A PACinvestigation was launched, and it is likelythat heads will roll as the PAC investigation

proceeds. None of the public officialsinitially named had been exonerated at thetime of writing.

A possibly worrying aspect of the scandalis that, while the president was quick tosuspend senior government officials, hedid not punish the sitting cabinet ministersimplicated. This may suggest that, like theKANU regime before him, the president iscontent with sacrificing the small fry but isreluctant to give up the big fish. Whetheror not this is the case, the damage done to

the new regimes credibility by these andother highly-publicised scandals has beenconsiderable. Public confidence in the NARCgovernment has fallen as a result of the returnof official corruption, internal wranglesbetween the two main coalition partnersand, most importantly, the governmentsfoot-dragging on constitutional reform.

The governments ambivalence regardingconstitutional reform has meant that the

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powers of the presidency by far the biggeststicking point during the constitutionalreview debate remain largely intact.While the president has remained largely

above direct criticism on this matter, hiscircle of supporters has been criticised forperpetuating the KANU legacy of arbitraryand partisan appointments of individuals topublic institutions. In Kenya, this has alwaysbeen a sure route to accessing state largesseand personal capital accumulation. It is thepresidents so-called kitchen cabinet thatis rumoured to be at the centre of many ofthe corruption scandals currently besiegingthe government.

Progress on the judiciary andrepatriation of stolen assets

Nevertheless, there is little doubt that manywithin the government are committedto the fight against corruption. There isno shortage of anti-corruption rhetoric,and the rhetoric has been backed by realaction. Two cases in particular demonstratethis: the clean-up of the judiciary and theappointment of a permanent secretary for

governance and ethics.One of the new governments firstpopular victories came on the judicial frontwith the dismissal in February 2003 of thechief justice, Bernard Chunga. Chunga wasviewed by many as one of the most cynicalappointments made by former PresidentMoi. During Chungas tenure, there was ahuge backlog of cases and justice was upfor sale as judges, magistrates and judicialofficers were routinely bribed.

Chungas replacement, Chief Justice Evans

Gicheru, immediately ordered an inquiryinto corruption in the judiciary. Releasedin September 2003, the report named 23judges and 82 magistrates, all of whom wereaccused of participating in various acts ofcorruption and incompetence. All were giventhe option of either resigning or respondingto the charges through a judicial tribunal.Most opted to resign, although, significantly,a number of judges have recently sued

the judiciary for wrongful termination ofemployment. Two judges opted to facetribunals, and the cases are ongoing.

Public expectations of the new

governments commitment to fightingcorruption were raised a notch higher bythe appointment in January 2003 of JohnGithongo as the presidents special adviseron corruption. John Githongo, a prominentanti-corruption activist, was one of anumber of civil society leaders from the pre-NARC era appointed to a senior position ingovernment. His efforts since taking officehave brought largely positive results. In200304 his biggest achievement was toidentify the location of US $1 billion stashed

away in foreign accounts by individualsclose to the Moi regime, though there hadbeen no news of progress in recovering thefunds at the time of writing. In addition, hestopped at least two irregular procurementdeals before they went ahead.

Mixed results from the GoldenbergCommission

While the new government has been unable

to shake off criticisms that it is not doingenough to fight corruption within its ranks, ithas taken major steps to deal with economiccrimes of the past. In addition to the shake-upof the judiciary, another significant examplehas been the governments handling ofthe Goldenberg case, the biggest financialscandal in Kenyas history.

Ten years ago, a young gold trader some-how convinced the government that there wasenough gold in Kenya for export. As a result,parliament passed an export-compensation

bill (in a single afternoon) exclusively forthis purpose. It soon emerged that KamleshPattni, the gold trader, was falsifying goldexports actually not exporting gold at all but still claiming export compensation.The Goldenberg scandal cost the countryan estimated US $1 billion.

One of the first actions of the newgovernment was to set up a public tribunal toinvestigate the allegations. The Goldenberg

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Parselelo Kantai (TI Kenya)

Further reading

TI Kenya: www.tikenya.org

Corruption Perceptions Index 2004 score: 4.0 (57th out of 146 countries)

Conventions:Council of Europe Civil Law Convention on Corruption (signed February 2004; not yetratified)

tribunal has no prosecutory powers butis widely expected to recommend thearrest and prosecutions of many of thoseimplicated. More than 1,000 individuals

have been informed by the chairmanof the Goldenberg Commission, JusticeSamuel Bosire, that they will be adverselymentioned at the commission. Among themost prominent are former president Danielarap Moi, former vice-president and Ministerof Education George Saitoti, former financeminister Musalia Mudavadi, two governorsof Kenyas central bank and numerous seniorcivil servants.

However, at the time of writing there hadbeen little sign of real progress. After sitting

for close to one year, the legitimacy andimpartiality of the Goldenberg Commissionhad been repeatedly questioned. Indeed, inmid-2004 cross-examination of KamleshPattni pointed to the possibility of improperactions within the commission itself.Questions were asked about the veracityof his testimony, with allegations that hemay have cut a deal to keep prominentmembers of the NARC government out ofhis testimony.

Playing to the donors

While the government has appeared to befighting corruption both past and present the publics diminishing confidence has

dented its credibility. Where the governmenthas institutionalised the fight againstcorruption, it has been accused of doingso principally for the benefit of donors.

In February 2003 the president recalledparliament early, primarily to pass twobills: the Anti-Corruption and EconomicCrimes Act and the Public Officer EthicsAct (see above). The intent of both is toinstitutionalise the fight against corruption,in the former, mainly by establishing aconstitutionally protected independentanti-corruption body and, in the latter, bymaking it a statutory requirement for publicofficers to declare their wealth. Both billswere passed in record time. The passing of

anti-corruption legislation was a key factorin securing large donor-aid commitments inDecember 2003, which had been suspendedsince 1991.

By mid-2004, however, it was clear thatthe governmentdonor relationship hadbegun to unravel, precisely on the issue ofcorruption. Many observers, for example,questioned the effectiveness of the PublicOfficer Ethics Act. In July 2004, the BritishHigh Commissioner, Edward Clay, who had

carved himself a niche as a negotiator betweenthe warring factions in the governmentcoalition, launched a scathing attack oncorruption in the government. While thegovernment reacted angrily, his remarks weremet with widespread public support.

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Council of Europe Criminal Law Convention on Corruption (ratified February 2001)UN Convention against Corruption (not yet signed)UN Convention against Transnational Organized Crime (ratified December 2001)


Adopted by the government in March 2004, the National Anti-Corruption Strategyis Latvias first ever umbrella strategy on corruption. The strategy is complementedby the updated National Corruption Prevention Programme, first created in 1998.More than 100 operations and institutions are included in the programme for 200408.The strategy is intended to strengthen financial control over political parties, improvecriminal investigations and anti-money-laundering procedures, provide transparent publicbudgeting and protect whistleblowers. Many of the initiatives are concerned with raisingawareness of legal responsibilities among public officials and the wider public.

Amendments to the law governing the financing of political parties were adopted inFebruary 2004 (see below). This reform sets limits on the overall campaign expenditureof political parties, prohibits corporate donations, and provides for comprehensivereporting requirements and control mechanisms. The law is one of the most progressivein the region.

Amendments to the public procurement law came into force in April 2004 in accordancewith conditions set by the European Commission (EC) for Latvian entry into the EuropeanUnion (EU). However, the new provisions actually reduce transparency and accountability.Prior to this legislation, pressure from civil society had led the then prime minister,Einars Repe, to implement measures making all public tender information available tothe public, including the final agreement with the winner. The EC, however, requiredthat public access to tender agreements be denied. They also required the withdrawal ofa clause allowing a public institution to request information concerning the real owners

of a company, which could be used, for example, if an offshore company was applying totender. The EC argued that the changes would prevent violation of general EU regulationson free competition and protection of commercial secrets.

Parliament appointed a new head of the Anti-Corruption Bureau in May 2004. Thebureau, which during its two years in operation had already seen one fully appointedand three acting heads, had been undermined by lack of permanent leadership. A civilsociety consultation council for the bureau was created which includes public interestNGOs, business associations, a council of foreign investors and organisations representingdoctors and patients, construction workers and bankers.

A supervisory body at the Data Protection Inspectorate was set up in January 2004 tooversee the implementation of the 1998 Law on Freedom of Information. Despite

long-term criticism from research and civil society bodies, the supervisory mechanismfor this crucial law remains severely under-resourced.

Amendments to party finance lawtrigger change of government

Following the 2002 parliamentary electionsthere was increasing public disquiet aboutthe fierce competition between political

parties to collect ever greater donationsto finance media campaigns with littlepolitical content.1 Since 1995, when thelaw requiring regular reporting by politicalparties was first introduced, election costshave quadrupled.2

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In consequence, amendments to the lawgoverning the financing of political partieswere adopted in February 2004 allowingeach party to spend no more than 0.20 lats

(US $0.35) per voter around US $550,000in total. The new law also places tightercontrols on the income side, a proposal ofthe new Anti-Corruption Bureau. Followingfrom their work on disclosure forms in 2003,the bureau estimated that false, or so-calledthird-party donations (in which a falsedonor serves as a proxy for another donorwho has used up his/her donation limit),comprised more than half of all declareddonors during the 2002 elections. However,according to its then acting head, Juta

Str-ke,3 the bureau lacked the means toprove such donors had lied.

Under the new legislation individuals areentitled to donate US $17,000 (reduced fromUS $46,000), but will only be allowed todonate money from their legally declared andtaxable income of the previous three years.These changes will improve the chancesof proving that funds from one donor arenot being spread over several, technicallyunconnected, entities. The amended lawalso bans corporate donations.4

Even given the difficulty in establishingthird party donations, the Anti-CorruptionBureau was able to prove that the 13biggest parties had received illegal funds ofroughly US $230,000.5 Faced with the firstever external examination of their partyaccounts, the Greens and Farmers Union(the party of the prime minister since March2004, Indulis Emsis, and the parliamentaryspeaker, Ingr-da U

dre) have initiated legal

action to establish whether administrativepenalties are applicable. The case is still

pending.6Prior to the 2004 elections, changing the

political party finance law was a priority forboth the newly established Anti-CorruptionBureau and the then prime minister andleader of the New Era party, Einars Repe.He also had the backing of three othergovernment coalition parties. At the lastreading of the amendment, however, theFirst party suddenly opposed the change,

protesting against setting the same limits toparty membership and admission fees as forother donations.

The conflict between the prime minister

and First Party leader (and deputy primeminister), Ainars lesers, led to a majorrupture between the two leading parties andwas the official reason for the governmentsresignation in February 2004. The New Eraparty, however, gained political momentumbecause it was expected to form the newgovernment, and managed to put pressureon parliament to pass the party financebill.

Up to the 2002 elections, Latvianpolitical policies were largely dictated bybehind the scenes donations. This hasled to favourable privatisation deals, lawsfavouring certain businesses, the writing-off of debts, employment patronage andthe dubious awards of public contracts.While the amended law seems well placedto address these issues, the real test for thenew legislation will be its ability to controlthe income and expenditure limits for thelocal elections in March 2005.

Finding a head for the Anti-Corruption Bureau

The Ant i -Corrupt ion Bureau hascomprehensive reach and powers, but toomuch of its independence and efficiency canbe determined by the individual at its head.Manoeuvrings within the Latvian politicalsystem have led to leadership battles at thebureau which have thrown serious doubton the ability of the office to remain clear

of political influence.In the summer of 2003, Prime Minister

Repe launched an open competitionto find a leader for the Anti-CorruptionBureau, attracting 58 candidates for thejob. A special selection commission led bythe prime minister and composed of theprosecutor general, the auditor general,representatives of the state chancellery andseveral ministers, and monitored by civil

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Inese Voika (TI Latvia)

Further reading

GRECO,Evaluation Report on Latvia (Council of Europe, 2004), www.greco.coe.intValts Kalnins and Lolita Cigane, On the Road Toward a More Honest Society: The Latest Trends

in Anti-Corruption Policy in Latvia (Riga: Latvian Institute of International Affairs, 2003),www.policy.lv

TI Latvia: www.delna.lv

Notes

1. Public Survey Opinion, SKDS company, February 2003.2. Analysis of Campaign Finance of the 2002 Parliamentary Elections (TI Latvia, Delna and the

Soros Foundation, 2003).3. Presentation by the bureau head, Juta Str-ke, at the round table Party Financing What are

We Going to Change? (2003), www.politika.lv/index.php?id=107578&lang=lv4. Diena (Latvia), 2 February 2004.

society, unanimously voted for a 33-year-oldsecurity police officer, Juta Str-ke.

However, opposition groups withinparliament, widely believed to be associated

with the Greens and Farmers Union, twiceblocked Str-kes appointment.7 Reperesponded by using his powers under theCivil Service Act to appoint Str-ke as thedeputy head of the bureau and then toappoint her as acting head of the bureau.Despite heavy criticism for this action fromcoalition partners, opposition parties andcivil society organisations, Str-ke continuedworking for 10 months without the approvalof parliament and gathered widespreadpopular support.

Following the change in administrationin early 2004, and in just his secondweek as prime minister, Indulis Emsis(Greens and Farmers Union) unilaterallyannounced a new candidate as head of theAnti-Corruption Bureau, despite Str-kespopularity and his own verbal support forher. However, the candidate refused to runafter receiving heavy criticism from themedia and civil society. Only after this didthe prime minister open another publiccompetition for the post.

A similar selection commission to theprevious one voted in favour of Str-ke by

three out of six votes. The prime minister,however, refused to put forward her namealone to the cabinet of ministers, and insteadnominated three candidates. During the

open cabinet meeting, but without properexplanation, ministers voted unanimouslyfor Aleksejs Loskutovs.

When Aleksejs Loskutovs appointmentwas confirmed by parliament for a termof five years in May 2004, the reactionfrom anti-corruption experts was generallypositive. Widely considered to be of the newgeneration, he was a lecturer in criminologyand criminal law. Loskutovs told the media:I do not owe anything to politicians for thisvote,8 and promised to run the bureau in an

independent and professional manner.However, the independence of the bureauhas yet to be proved. Sections of the mediahave suggested that the cabinet selectedLoskutovs because he was opposed to Str-ke,a useful thing for the cabinets own politicalinterests.9 Indeed, one of Loskutovs firststeps in the job has been to launch aninternal investigation into the work ofStr-ke. A high level of media and civil societyattention may prevent Loskutovs from firingStr-ke this time, but it is alleged that political

players behind the scenes are hoping thathe will.10

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5. Diena (Latvia), 22 November 2003.6. Diena (Latvia), 2 July 2004.7. NRA, Deputati dievojas: balsojui par. Str-ki neapstiprina (2004).8. LETA news service (Latvia), 27 May 2004.9. Diena (Latvia), 26 May 2004.

10. Diena (Latvia), 29 July 2004.


Conventions:OAS Inter-American Convention against Corruption (ratified March 1999)UN Convention against Corruption (signed December 2003; not yet ratified)UN Convention against Transnational Organized Crime (ratified September 2002)


Since late 2002, but more markedly in the first six months of 2004, the ruling PartidoLiberal Constitucionalista (PLC) presented a series of bills whose sole aim was to free formerpresident Arnoldo Alemn, who was jailed for 20 years in 2003 for money laundering,fraud and embezzlement. The PLCs efforts, which had all failed at the time of writing,led to a political crisis that effectively paralysed the national assembly; not a single lawwas adopted in the first five months of the year.1 Among the proposed PLC-led bills were:an amnesty covering all acts of administrative corruption by public officials from 1997to 2001; an attempt in January 2004 to put forward a new interpretation of the law on

money laundering (under which Alemn was principally condemned) that would havelimited its application to crimes connected to drug trafficking; an attempt in March 2004to modify the penal code so that ex-presidents serve out their prison sentences underhouse arrest; a law that safeguards state property, which the executive is promoting in thecontext of a conflict between the opposition Sandinistas and the state-owned nationalinsurance and reinsurance institute, Instituto Nicaragense de Seguros y Reaseguros(INISER); and a bill to reform the judiciary (see below for a fuller discussion).

In June 2004 the government signed a Compact to Promote Transparency and CombatCorruption with the G8 countries, which pledged to provide technical assistance inthe areas of public budgets and financial management, including revenues, expenditures,government procurement and the letting of public concessions.

The ministry of finance and public credit and the Integrated Financial Management System(SIGFA) have increased budget transparency by posting national budget allocations andspending on the Internet.2 The NGO Coordinadora Civil, which has been analysing thebudget since it was presented in October 2003, found hidden government spendingallocations in the budget amounting to almost US $80 million.

In July 2003 the national assembly elected five new supreme court judges out of a totalof 16, in a move that some analysts say has increased the bodys already high level ofpolitical polarisation. For more than six months, the court failed to choose its president ormake the appointments for which it has responsibility. In this period, the judges openly

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considered the benefits of an agreement to alternate the presidency of the supreme courtbetween the main political parties on an annual basis.

Challenges in establishing ajudicial career law

The Consultative Group for Nicaragua, madeup of 12 governments, bilateral donors,the World Bank and the Inter-AmericanDevelopment Bank, met in September 2003in Managua to reiterate what national andinternational organisations had long beensaying: institutional reform, particularlyin the judiciary, is crucial to the countrysdevelopment. The current judicial system is

criticised for its sluggishness and excessivepoliticisation. The supreme court submitteda draft judicial career law to the nationalassembly at the end of 2003.3 In its Juneevaluation of corruption in Nicaragua, the G8cited the bill as an important component ofthe administrations anti-corruption agenda,but described its chances of passing in thecurrent political climate as moderate.

Several versions of the bill were discussedby the national assembly, but no law hadbeen approved at the time of writing. Thereasons for this failure reflect the lack ofpolitical will from parties with an interestin blocking the bills two main reforms: theprofessionalisation of the judiciary throughtransparent and competitive appointments;and the fostering of its external andinternal independence, which wouldrequire the supreme court to relinquishits current responsibility for administeringappointments and salaries.

The supreme courts proposal addressedthe lack of merit-based mechanisms forhiring and promotion, but continued togive itself control over the administrationof judicial careers. Experts criticised it forfailing to separate the administrative andjudicial functions of the judiciary and,therefore, not addressing the issue ofinternal independence.

There are three main views of the proposedlegislation in the national assembly. The PLC which does not have a sufficiently large

majority to pass laws on its own arguesthat the judiciary sympathises with theFrente Sandinista, Nicaraguas second largestparty, since the majority of its members wereappointed in the Sandinista revolutionaryperiod. Because of this, and the fact thatthe current judiciary imprisoned formerpresident Alemn on corruption charges,the PLC wants to use the new law to replacejudicial officials.

The Frente Sandinista rejects the bill, citingthe constitution which grants the supreme

court authority over the administrationof justice. They argue that this guaranteecannot be altered by any law adoptedunder normal procedures, but would needa qualified majority of parliamentarians toamend the constitution. In the past fewyears they have found allies in a number ofjudges, nervous about the loss of power andpolitical relevance that the proposed judicialcareer law might entail.

A third faction is headed by PresidentEnrique Bolaos, whose aim is to depoliticise

the judicial system. This was a campaignpromise and it is widely seen as key toNicaraguas economic development.

Given that the majority required forconstitutional reform is impossible withoutthe support of the Frente Sandinista, it willbe difficult to win approval for the proposedlaw. This political logjam highlights thebarriers confronting any attempt to instigateinstitutional reform in Nicaragua.

Accusations of corruption againstthe president highlight the need forelectoral reform

When President Bolaos announced in 2002that charges had been filed against Alemnfor corruption that had cost the state at leastUS $100 million, he could scarcely haveimagined his action would lead to furthercharges related to his own use of funds,allegedly embezzled by Alemn.

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Roberto Courtney (Grupo Cvico Etica y Transparencia, Nicaragua)

The money embezzled and laundered byAlemn allegedly ended up in three differentplaces: the pockets of the officials involved;monthly under-the-table payments to 500

officials from the executive, legislative andjudicial branches of government; and thecoffers of the PLC election effort, includingEnrique Bolaos campaign.

It appears that no legal consequences willfollow the use of these funds to pay PLCofficials, including Bolaos, who has notdenied that as vice-president at the time hereceived US $500,000 of the total. There isalso concern that the president and his circleallegedly failed to register the payments andevaded taxes.

Nevertheless, in condemning Alemn to20 years in prison, Judge Juana Mndez leftopen the possibility that charges for electoralcrimes might one day be brought againstPresident Bolaos and his closest campaignadvisers. Nicaraguas electoral law forbidsthe misuse of state funds (whether direct orindirect) in electoral campaigns.

Nicaraguas current legislation is far frombeing a model of political finance regulation.The law does, however, dictate that themisuse of state funds is a clear violationof the law, and implicates both the partyinvolved and all who knew about the originsof the funds.

Initially President Bolaos publiclyrenounced his immunity to face thecharges, though he signally failed to keepthe promise to cooperate with the prosecu-tion, the general comptrollers office andeven the presiding judge. Meanwhile, theevidence of unreported funds entering hiselection campaign accounts continues togrow, though there is no proof that he waspersonally aware of their possibly illicitorigins.

There is concern that rather than beinghandled transparently, the case will continueto be used as a bargaining chip by the FrenteSandinista and the PLC, since the two partiesbetween them have enough votes to strip thepresident of his immunity and force him into

court. The courts themselves have shownno sign of being either willing or able toprosecute him without political approval.

The crisis serves to underscore the need

for reform of the electoral law. Since thelast reform took place in 2000, Nicaraguaselectoral system has proved to be one ofthe most expensive in the world in percapita terms. Another defect is the excessivepoliticisation of the authority responsiblefor overseeing elections. National andinternational election observers have calledfor root-and-branch reforms.

Following a study by the NGO GrupoCvico Etica y Transparencia (TIs chapter inNicaragua), a group that includes electoralobservers, human rights groups and smallpolitical parties tried in 200304 to comeup with a draft bill to reform the electoralprocess in the hope that it would receivethe endorsement of President Bolaos, whocampaigned for electoral reform. The billaims to reduce the cost of elections, regulateparty financing, improve the internaldemocratic processes of political partiesand reduce the influence of individualpolitical parties over the bodies responsible

for overseeing the elections. The proponentsof the bill want to present it to the nationalassembly, where the two leading politicalparties are well aware of the deficiencies inthe electoral law, but are torn between theloss of political credibility if they ignorethem and a potential loss of power if theyback reform. This last point will be criticaland might water down any genuine attemptat reform.

Grupo Cvico Etica y Transparencia hasseparately called for private financing tobe eliminated or at least monitored asinternational observers recommend, tolimit escalating costs and make electionsmore equitable. Private and public financingneed to be transparent and subject to propercontrols if elections are to be fair, andsanctions need to be imposed for infractionsand applied fairly by a legitimate authority.

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Further reading

Grupo Cvico Etica y Transparencia (TI Nicaragua): www.eyt.org.ni

Notes

1. Other bills that would have had a positive impact on corruption were presented in the reportingperiod but either not discussed or not approved. They include a bill on the judicial careerstructure and a bill protecting state property.

2. Although making budget information available on the Internet is a positive step, a relatedand unresolved problem is that the budget does not include full information on tax revenue.The NGO network Coordinadora Civil has complained about this failure for two consecutiveyears.

3. The supreme court is able to submit draft laws to the legislature about judicial matters.


Conventions:Council of Europe Civil Law Convention on Corruption (signed November 1999; not yetratified)Council of Europe Criminal Law Convention on Corruption (ratified March 2004)OECD Anti-Bribery Convention (ratified December 1998)UN Convention against Corruption (signed December 2003; not yet ratified)UN Convention against Transnational Organized Crime (ratified September 2003)


Parliament enacted three new sections of the civil penal code in July 2003. The provisionsare stricter than the ones they replace and comply with the Council of Europe CriminalLaw Convention on Corruption, but in some respects they go further than required. Theyintroduce the concept of improper advantage, a standard whose scope will eventuallybe determined by case law. The jurisdiction of the rules is universal, applying withinNorway, as well as to Norwegian nationals acting abroad. Section 276(a) stipulates thatany person actively supplying, or passively accepting, an offer of improper advantage inconnection with a post, office or commission will be punishable by fines or imprisonmentup to three years. Section 276(b) criminalises gross corruption with sentences of up to

10 years. Police investigative powers will increase when gross corruption is suspected,with courts empowered to sanction the surveillance of communications. Section 276(c)criminalises trading in influence.

Some of the recommendations made in 2002 by the Council of Europes evaluation body,GRECO, have yet to be implemented, including legal clarification of the right or dutyof public servants to report unlawful, improper or unethical behaviour, or behaviourinvolving maladministration. This lack of clarity means not all allegations of improprietyin the public sector are reported to the police or prosecutors office. In June 2004 thegovernment announced it would review the issue. It also announced new quarantine

Norway

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regulations for public servants, such as a prohibition of re-employment in the privatesector for a period of time, to prevent conflicts of interest.

The government announced in June 2004 that it would ensure greater transparency incorporate payments to foreign states. It plans to make itmandatory for companies to

publish in their accounts to which states they have transferred payments. A new law on the Office of the Auditor General (OAG) entered into force in July 2004,

following a much-needed review of the regulatory framework for cooperation between theOAG, the police, the National Authority for Investigation and Prosecution of Economicand Environmental Crime (kokrim) and other law enforcement bodies. The OAG is nowallowed to report any suspicions to the police/kokrim immediately and confidentiallyupon discovery while a public audit is ongoing. The audited office does not have tobe informed of the suspicion. When police initiate a criminal investigation, the OAGmay disclose to them documentation from its audit, irrespective of any obligations ofconfidentiality regarding information of a personal nature or concerning trade secrets.This reform came in response to a specific GRECO recommendation in 2002.

In May 2004 the government published a White Paper, Fighting Poverty Together, inresponse to the challenges posed by the UN Millennium Development Goals. Thedocument acknowledged that development assistance may contribute to corruption whendonors close their eyes to its illegitimate use. The document outlined the governmentsanti-corruption policy in development assistance. The government intends to focus onanti-corruption in its bilateral dialogue with countries receiving aid, and to encourageother states to ratify the UN Convention against Corruption. The government also statedthat it will pursue a dialogue with the Norwegian private sector to increase the awarenessof how to counter corruption, support the Extractive Industries Transparency Initiative,and support asset recovery initiatives. The government has not yet specified the resourcesavailable for implementation nor outlined benchmarks for monitoring progress, makingit difficult to hold the government accountable for the proposals.

Norwegian corruption comes home

Allegations of corporate corruption receivedsubstantial media attention in 200304,but it was the StatoilHorton affair thatmade the biggest headlines. State-ownedStatoil is Norways largest company. In

June 2002 Statoil signed a 10-year, US $15million consulting agreement with HortonInvestments to exploit Irans oil and natural

gas. Horton Investments, a company ownedby exiled Iranian Abbas Yazdi, was alsoallegedly a financial intermediary for MehdiHashemi Rafsanjani, son of Irans formerpresident, director of the National IranianOil Company (NIOC) and an influentialfigure in the countrys energy sector.

In autumn 2002 Statoil was awardedoperational control of South Pars, the worldslargest offshore gas field, in partnership with

a NIOC subsidiary. Statoil committed tospending US $300 million to construct threeproduction platforms and a pipeline. Aftercompletion, control of South Pars revertsto NIOC and Statoil will recover its projectcosts and a share of NIOC sales.

In September 2003 Statoils internalauditors reportedly questioned a US $5.2million payment to Horton Investmentsaccount in the Turks and Caicos Islands,

leading to an investigation by kokrim,Norways economic crime unit. Statoilschairman Leif Terje Lddesl and CEO OlavFjell both resigned. kokrim concludedthat the payment was an offer of improperadvantages in return for influence insecuring the Iran deal. In June 2004 kokrimissued penalty notices against Statoil andthe former director of its internationaldepartment, Richard Hubbard. A NOK 20

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million (US $2.9 million) fine was imposedon Statoil.

Statoil was also under investigation by theUS Security and Exchange Commission for

breaching the US Foreign Corrupt PracticesAct, which is applicable because of thecompanys listing on the New York StockExchange. The Iranian parliament lookedinto the allegations against Statoil, whileSwiss authorities investigated Abbas Yazdi foralleged money laundering. A major delayingfactor in the inquiry was Rafsanjanisrefusal to submit to interrogation, therebyunderlining the procedural obstacles facinginvestigators who seek to enforce anti-corruption legislation beyond their domestic

jurisdiction.Another high-profile case involved the

construction concern Veidekke, the leadcompany in the consortium contractedto build the Bujagali hydropower plantin Uganda. In 2002 it was alleged that thecompany had made a payment to Ugandasenergy minister, Richard Kaijuka, less than ayear before the contract was awarded to theVeidekke consortium without competitivebidding. Veidekkes British subsidiary, Nor-icil Ltd, allegedly transferred US $10,000 to a

London bank account held by Kaijuka. Afterthe World Bank Group halted financingfor the scheme, kokrim launched aninvestigation, but the case was dismissedin 2003 due to lack of evidence.

These and other cases involvingquestionable practices abroad raised theprofile of corruption issues in Norway.One key question was whether Norwegiancompanies applied different standards intheir dealings at home and abroad. Anotherdebate was when and how to apply zero-tolerance policies. But recent surveys suggestthat corruption by Norwegian companiesis still higher than they admit. While amajority of Norwegian business leadersthink that some bribery is necessary to wincontracts in developing countries, mostdo not acknowledge that their companiesencounter corruption in internationalbusiness transactions.

Norways annus horribilis

A survey by Norways largest insurancecompany, Gjensidige NOR, showed 25 per

cent of business leaders now believe thatcorruption exists in their own industrysector, though only 10 per cent admittedit affected their company.1 Perhaps thesurveys most important message, however,was that Norwegians no longer considercorruption an exclusively foreign, ordeveloping-country issue. More businessleaders recognise the domestic dimensionof the problem. Gjensidige NORs surveyfollowed press coverage of a string of casesinvolving alleged private sector corruption

and conflicts of interest.At the time of writing four large

construction companies were underinvestigation for price fixing, collusivetendering and market sharing in bothpublic and private works contracts. A cartelthat included Veidekke, Selmer Skanska,NCC Construction and Reinertsen Anleggwas taken to court in February 2003 bythe Norwegian Competition Authorityfor alleged illegalities encompassing theconstruction of industrial developments,power plants, bridges, docks and Osloairport. NCC Construction admitted toillegal cooperation with its competitors,issuing false invoices and compensatingcompetitors who lost the tender. Veidekke,Selmer Skanska and NCC Construction werealso under investigation for cartel activity inthe concrete market.

Finance Credit, a financial servicescompany, was under criminal investigationat the time of writing, accused of siphoning

off funds it borrowed from six Norwegianbanks to offshore tax havens. The chargesinvolved fraud worth US $200 million andfalse and misleading accounting. FinanceCredits public relations company, Madland& Wara, allegedly attempted to buy aninvestigative journalist to silence him.2

An external consultant hired by theinternational classification and certificationcompany, Det Norske Veritas, to assess the

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Jan Borgen, Henrik Makoto Inadomi and Gro Skaaren-Fystro (TI Norway)

need for a new IT system was convicted inMay 2004 of soliciting bribes by demandinga 10 per cent kickback from UNISYS inreturn for recommending procurement.3

In a case that was ongoing at the time ofwriting, a former finance director of theNorwegian Red Cross and his two brotherswere on trial for allegedly embezzling US$1 million during the rehabilitation of theRed Cross headquarters and bribing anindependent building inspector to approvefalse invoices.4 The trial was postponed untilSeptember 2004.

Cases like these have been characterised

in the Norwegian media as symptoms of a

business community that has lost its virtue.

This is a new phenomenon in Norway and thepublic debate has been as lively as it has been

mixed. Most have welcomed the new focus

on corruption, the media revelations and the

enhanced debate about ethics and corporate

responsibility. But shallow and rosy declara-

tions about zero tolerance, and a lack of public

recognition of corruption in everyday practice

do not make for a convincing anti-corruption

strategy or promote genuine corporate

progress. While companies recognise the

need to strengthen protective measures and

internal controls, they have yet to acquire theknowledge and tools to implement effective

anti-corruption policies.

Fiduciary duties in the health sector

Norways public administration purchasesone quarter of all mainland investmentand employs one third of the labour force.It is currently undergoing deep structuralchange. Public responsibilities are beingoutsourced, privatised and exposed to

market forces, reorganisation and demandsfor efficiency improvements. An increasingnumber of private businesses now dependwholly or partially on public budgets,tenders, loans, regulations, relocations andprivatisation projects. The sums involvedin public procurement pose challenges tothe integrity of the individuals responsiblefor administering them. Current safeguards

in procurement practice do not constitutea sufficient deterrent against illegalityand corruption, especially in districts andmunicipalities.

Part icular re la t ionships in themanagement of public funds foster groundsfor potential conflicts of interests. A case inpoint concerned the Research Council ofNorway (RCN), a national funding agencyfor research and innovation. In 200304the media exposed allegations of externaladvisers hired by RCN who reportedly, aftersubmitting and accepting their own fundingapplications, rejected applications fromother researchers. Following an independentinquiry into its procedures, the RCN issued

new guidelines in 2004 that compel itsexternal advisers to absent themselves fromproceedings where they have a conflict ofinterests.

Another example concerned the nexusbetween government funding of publicmedication and pharmaceutical companiesefforts to convince doctors and hospitalsto procure and prescribe their products.Pharmaceutical companies finance medicalcongresses and courses, and commissionmedical research, bringing undeniable

benefits to the participants. But the fact thatthe government covers most medicationcosts through a rights-based approach toeach patient could constitute an incentivefor doctors to disregard both the patientsand the governments interests.

Sending costs to the government createsa situation in which the controlling andfunding entity is distant from the decision-making process, resulting in the possibleprescription of prejudiced, unnecessary orcostly medications. To counter increasedcorruption, 250 doctors signed a petition in2004 that called for greater transparency andmore control measures in the profession,as well as regulations to govern relationsbetween the pharmaceutical industry andmedical personnel. They proposed a duty toinform on doctors who participate in testingand approval procedures for new drugs.

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Further reading

TI Norway: www.transparency.no

Notes

1. Dagens Nringsliv(Norway), 14 April 2004.2. odin.dep.no/odin/engelsk/nytt/nyheter/032091-210355/index-dok000-n-n-a.html3. www.okokrim.no4. Ibid.



A draft law dealing with unlawful gains passed its second reading in the PalestinianLegislative Council (PLC) and was referred to the Council of Ministers in April 2004. Ifenacted, this law will require government officials to account for property and fundsacquired during their term of office.

A draft law dealing with the functioning ofthe administrative and financial monitoringoffice passed its second reading in the PLC and was referred to the Council of Ministersin April 2004. The office is currently accountable only to the president of the PalestinianAuthority (PA), who has power to appoint the director. Under the proposed provisions,

the appointment of the director will be subject to the approval of the PLC which, alongwith the head of the executive, will also receive reports from the office. If enacted thelaw will have far-reaching consequences for the public monitoring of all governmentactivities.

Private sector monopolies have been a huge source of corruption in the PA, giving riseto widespread allegations of bribery of government officials to secure control of lucrativemarkets. A draft law giving incentives to competition and prohibiting monopolies passedits first reading in the PLC in April 2004.

A draft law concerning the powers of the constitutional court passed through thestage of general discussion in the PLC in December 2003. If enacted, it will weaken thefar-reaching powers of the executive. A clear separation of powers can make corrupt

ministers or high officials accountable in a court of law, without being able to rely on theprotection of the head of the executive (the president), as has happened in the past.

Palestinian Authority

The reform agenda

Reform has dominated the public discourseof Palestinian civil society and businesssectors since the mid-1990s, with allegationsof corruption forming a common thread.

The eruption of the second intifada inSeptember 2000, however, raised questionsabout reform priorities, particularly whetherreform should retain priority over resistanceto the Israeli occupation. This issue hasbecome increasingly urgent as the economic

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and security situation has deteriorated andas the PA has become unable to provide basicservices amid spiralling unemployment.

Although the reforms contained in

the so-called Road Map (for example, theappointment of an empowered primeminister, the drafting of a constitution andholding elections), which were adoptedby the Quartet plus Four,1 reflected theconcerns of many Palestinians, the factthat the reform agenda was presentedby external parties raised questions formany about the real motives behind thereforms. Nevertheless, popular support forreform and for the fight against corruptionremained strong. Following the resignation

of the government of Mahmoud Abbas inSeptember 2003, Prime Minister AhmedQureis government sought much-neededpopular legitimacy through the formationof a civil society coordinating committeefor reform,2 and its representation in theNational Reform Committee (NRC).

By the time of writing, the NRC had metthree times since the formation of Qureisgovernment and a number of reformmeasures had already been taken. Theprime minister and the council of ministers

presented quarterly reports of their activities in accordance with the amended Basic Law to the president of the PA, and to the PLC(it should be noted, however, that the powerto pass and amend key legislation remainsin the hands of the president).

Increasing financial transparency is seenas particularly important. Measures havebeen taken to unify and integrate all thePAs financial operations and to establishthe Palestinian Investment Fund as anindependent legal entity. The PLC and civil

society institutions view the governmentspunctual presentation of the draft budget tothe PLC for the last two financial years as apositive development.

The ministry of finance has been able tomake an inventory of all the PAs investments,to apply the principle of a unified budget,and to unify the treasury of the West Bankwith that of the Gaza Strip. In April 2004the ministry was finally able to enforce

the payment of salaries to the security andpolice services through the banking system,which significantly reduces opportunitiesfor the misappropriation of public funds

when payments are made in cash.Acknowledging the significant steps

towards reform that have been taken inrespect of the PAs finances, the World Bankannounced its intention of establishing afund to support the PAs budget, which hasaccumulated a deficit of US $650 millionfor the year 2004. On the negative side, alaw regulating the salaries, promotion andpensions of civil servants has not beenimplemented (ostensibly because of the PAsdifficult financial situation), permitting thecontinued abuse of public office in respect toappointments in terms of public perceptionone of the most common forms of low-levelcorruption in the PA.3 The chairman of thePLCs budget and financial affairs committeeannouncedthat he expected the amendedlaw to be implemented in July 2004, affectingthose employed in the civil administrationfrom that date, and those employed in thepolice and security services by the end ofthe year. Regretfully, this legislation would

still fall short of being applicable to all thoseemployed by the PA.

Elections as mechanisms tocombat corruption

A key reform to increase accountability andenhance the fight against corruption wouldbe the immediate organisation of elections be they internal political party, legislative,presidential or local. The suspension of nearly

all electoral activity within the PalestinianAuthority has strengthened the power ofindividuals whose interests are well served bythe stasis caused by the political and militarydeadlock between the PA and Israel.

Elections are widely seen as a mechanismfor the renewal of the PA, and for thecreation of a new dynamic in the Palestinianpolitical system through encouraging theparticipation of opposition political parties

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Jamil Hilal (TI Palestine)

Further reading

Aman The Coalition for Accountability and Integrity,Apparatuses for Overseeing, and Systemsof Accountability in the Palestinian Public Sector(Ramallah: Miftah publications, 2003) (inArabic)

Civic Forum Institute and Friedrich Naumann Foundation,Reform: A Palestinian Perspective Between Reality and Aspirations (Ramallah, 2003)

Jamil Hilal et al., The Criminal Justice System in Palestine (Beirzeit: Institute of Law, 2003)

Palestine Economic Policy Research Institute (MAS), Social Monitor, issue No. 6, (Ramallah,2004)

TI Palestine: www.aman-palestine.org

Notes

1. The Quartet of Middle East mediators comprises the European Union, the Russian Federation,the United Nations and the United States; four other bodies involved in negotiations are Japan,Norway, the World Bank and the IMF.

in the process of legislation (through thePLC) and policy-making (through partici-pation in government). General electionscould provide Palestinians with a chance

to elect representatives who are more able,have more integrity, and are more ready tofight corruption.

General elections have been due sinceMay 1999, but the political and militaryconflict with Israel, particularly sinceSeptember 2000, created objective obstaclesto the holding of such elections, such asan extensive system of road blocks andcheckpoints and sections of the separationwall that intrude into PA territory. The PAleadership (that is, the Fateh leadership) has

been unwilling to call for elections evenwithin their own party. Municipal electionshave been due since 1997. Although thefrequent incursions in the Gaza Strip andWest Bank and the armed confrontationshave made any serious progress towardspresidential and legislative electionsunrealistic, the holding of local elections iswidely seen as both plausible and crucialfor fighting corruption and reducing theinefficiency of centrally appointed municipaland village councils.

Calls by political and civil society groupsfor local elections have been insistent andregular. Nearly two-thirds (64 per cent) ofPalestinian adults surveyed in March 2004

said there is discrimination in the provisionof services by local government councils,and 70 per cent said that family and kinshipconnections play a part in appointmentsin local government. Some 69 per cent ofthe public believe corruption exists in localgovernment councils.4

The holding of general and local electionsis an essential part of the reform agenda,and a certain degree of change may now beinevitable. The prime minister announced

that the council of ministers had decidedin a joint meeting with the NationalSecurity Council under the chairmanshipof President Arafat (held in May 2004) tostart holding local elections in August 2004,after making the necessary amendments tolocal government election law. The meetingalso decided to ask the PLC to approve ageneral election law, and to ask the QuartetCommittee to work with the PA to createsuitable conditions to hold general elections,and to set a date for them.

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2. The committee is composed of representatives of various civil society bodies, including Aman The Coalition for Accountability and Integrity (TI Palestine), private sector companies,Palestinian professional associations and the General Union of Palestinian Women.

3. A majority of Palestinians in the West Bank and Gaza Strip believe that corruption exists in thePA, and 77 per cent believe that jobs in the PA are, to a large extent, obtainable through informalconnections (Palestinian Centre for Policy and Survey Research, Ramallah, poll number 11,1417 March 2004).

4. Poll No. 3 (2527 March 2004) conducted by PANORAMA (Palestinian Center for theDissemination of Democracy and Community Development, Ramallah, 2004).

Corruption Perceptions Index 2004 score: 3.7 (62nd out of 146 countries)

Conventions:OAS Inter-American Convention against Corruption (ratified July 1998)UN Convention against Corruption (signed December 2003; not yet ratified)UN Convention against Transnational Organized Crime (ratified August 2004)


A draft code of parliamentary ethics and honourwas submitted to the legislativeassembly in September 2003, setting out the behaviour expected of parliamentarians andtheir substitutes when faced with a conflict of interest situation, nepotism, attemptedbribery and the abuse of office for personal gain.1 Several allegations of corruptioninvolving legislators emerged in the period under review, but the bill had not been

passed at the time of writing. A draft law to reform the 1998 regulations governing the legislative assembly was

submitted in September 2003. The bill aimed to improve the legislatures public imageat a time when the credibility of its members had been damaged by media reports abouthigh levels of absenteeism and allegations that parliamentarians were abusing a right toimport cars for personal use by selling them on to third parties. The proposed reformsinclude the introduction of salary cuts for failure to attend plenary and commissionsessions, and the reduction of the right to import cars from three to one car per legislator,and two to one car per substitute. At this writing the bill had not been passed.

A draft law modifying secondary legislation that enforces a constitutional provisionagainst administrative corruption was also introduced in September 2003. If passed, the

law will compel high-ranking officials to declare the value of their assets before taking upoffice and upon leaving it. The reform would give the auditor general powers to ensure thata full asset declaration is made. It would also lower the burden of proof for complainantsto file allegations of illegal enrichment; circumstantial evidence would be sufficient toconvict, rather than summary evidence as at present. Civil society organisations are callingfor asset declarations to be made public, for an annual audit of them to be kept by theauditor general, and for public notaries to facilitate investigations in case of a complaint.At this writing the bill had not been passed.

A draft law was submitted in September 2003 to modify a 2002 law on transparencyin public administration. The reform would eliminate the requirement that anybody

Panama

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requesting information must first prove that he or she has a direct link to the informationrequested. The condition was added to the original law by executive decree in May 2002and is considered the main obstacle to implementation of the transparency law. Afterthe May 2004 elections the supreme court ruled that the section of the decree relating

to access to public information was illegal. At this writing the reform of the law had notbeen passed.

A draft law submitted in December 2003 aims to expand a law on the transparency ofpublic procurement processes by disclosing the owners or shareholders of companiesthat do business with the state. Under the bill shareholders of companies that win statecontracts would have to certify ownership of their shares and pass this information tothe public prosecutors office or to the auditor general. At this writing the reform of thelaw had not been passed.

Corruption takes centre stage in the

third general electionsMartn Torrijos was elected president in May2004 on a platform of zero tolerance forcorruption, in an election that was widelypraised for its transparency and fairness.As in the elections in 1994 and 1999,voter turnout was high at 77 per cent andboth Panamanians and the internationalcommunity generally regarded them ashonest. This was in sharp contrast to the1989 elections, which were annulled

because of electoral fraud. The winningcandidate was announced four hours aftervoting centres closed and his three rivalsacknowledged defeat a few moments later.

President Torrijos ran for Patria Nueva,a coalition of the Partido RevolucionarioDemocrtico and the Partido Popular. Hiselection platform featured 16 anti-corruptionpromises, including pledges to create aNational Council of Transparency and theFight against Corruption; to implement aprofessional civil service career structure;

and to submit a salary bill to the legislativeassembly. The pledges read well in principle,but the experience of his predecessor in office,Mireya Moscoso, contains a cautionary tale.Her plan of action also included measuresto fight corruption and the fact that theywere never carried to fruition generateddisappointment among the public.

All four candidates in the 2004 presidentialelection placed corruption high on their

agendas. In December 2003, TI Panamasent them a minimum agenda to fightcorruption and each responded by adoptingaround half of the 13 proposed actions.President Torrijos now has a majority inthe legislative assembly and therefore littleexcuse not to push through the legislativechanges called for under his anti-corruptionagenda.

Other actions may require more thanpolitical will, however. Anti-corruptioninstitutions need to be strengthenedand consideration should be given to

the creation of a body charged with theprevention of corruption, such as a publicethics office, an anti-corruption office or aprosecutor general specialised in corruption.Whistleblower protection also needs to beintroduced at present the Panama CanalAuthority is the only public institutionin Panama that provides full protectionfor whistleblowers, making investigationseasier to carry out. Another challenge is tostrengthen the widely discredited supremecourt and attorney generals office. In order

to do so, a proper career structure needsto be created, with nominations basedon merit so that judges do not act in theinterests of the government that selectedthem.

A deep reform of electoral law is alsorequired. The electoral court is expected toset up a commission in 2005 to evaluatechanges to the electoral code. One proposalis to call for a second round of voting if the

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leading candidate fails to win 50 per cent ofthe vote. President Torrijos only obtained47.3 per cent; Moscoso won in 1999 with44.8 per cent; and Ernesto Prez Balladares

won in 1994 with 33 per cent. Another setof proposals, already being discussed in thelegislature as part of a constitutional reformpackage, is to limit the campaign period andreduce the period of transition from fourto two months. A third issue, and one thathas received a lot of public attention, isestablishing ceilings on campaign donationsand requiring disclosure of campaignfunding sources. A previous electoral reformcommission discussed the issue, but onlyone party supported a proposal to requireparties to disclose the size and sources ofdonations. The text that the legislatureeventually approved only requires partiesto present accounts to the electoral courtin a confidential manner.

The number of electoral irregularitiesdenounced to the prosecutor responsibleunderscored the need for reform. There arecurrently 1,186 cases under investigationand, while the majority are related to voterfraud (chiefly, falsely registered addresses),

a number are related to campaign finance.Several legislators have been accused ofmisusing public or private funds in theirre-election bids, for instance by handingout scholarships, supermarket vouchers andcheques in exchange for votes. One of thebiggest scandals involved legislator HaydeMilans in the province of Darin who wasfound guilty of channelling US $370,000of government funds through 28 bankaccounts into her re-election campaign.The case was widely publicised and Milans

eventually went on hunger strike in protestat the accusations.

Monitoring the Inter-AmericanConvention against Corruption

Within the framework of the monitoringmechanism provided by the Organizationof American States (OAS) to oversee the

implementation of the Inter-AmericanConvention against Corruption (IACAC),civil society organisations identifiedshortcomings in Panamas compliance with

the provisions of the convention. Thesefailings were echoed by the OAS committeeof experts.

In February 2004 civil society organisationspresented an alternative report to thegovernment on the state of compliance withthe convention at a hearing with the OASpanel of experts. Civil society organisationsacknowledged the advances made by thecurrent government, spoke of difficultiesin implementing the IACAC and issuedrecommendations. Among the positivedevelopments mentioned was the adoptionin July 2001 of reforms to the penal andjudicial code and new norms to preventcorruption.

There was also agreement between civilsociety and the experts about obstacles tofighting corruption. First, in terms of accessto information, the committee of expertsstrongly recommended that Panama reviseand modify the decree regulating the lawon transparency (see above). Second,

there are problems with the national anti-corruption directorate, which was created byexecutive decree in 1999 but has never beenregulated through secondary legislation.The directorate is coordinated by an interimdirector and does not have national reach.Third, concerns were expressed about theregulations for financial disclosure by publicofficials, since there is little evidence thatthey are being implemented efficiently.

Both civil society organisations and the

panel of experts agreed in recommending anumber of actions, including: strengtheningthe implementation of laws and enforcementsystems with regards to conflicts of interestin order to underpin a practical andeffective system of public ethics; creatingand establishing mechanisms for publicisingasset declarations (of income, debt andassets); and carrying out a full evaluationof the powers currently in the hands of the

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Anglica Maytn Justiniani (TI Panama)

Further reading

Marianela Armijo, Investigacin diagnstica de la administracin pblica panamea ylineamientos de accin (Diagnostic investigation of Panamas public administration andlines of action) (Procuradura de la administracin del Ministerio Pblico de Panam,

2004), www.procuraduria-admon.gob.pa/Linette Landau, Revisin de legislacin anticorrupcin, Panam (Review of Panamas

anti-corruption legislation) www.respondanet.com/spanish/anti_corrupcion/legislacion/revision_legislacion_el_panama.pdf

Rafael Prez Jaramillo,ndice de impunidad(Impunity Index) (Panama: Editorial LibertadCiudadana, 2003)

La Prensa (Panama),Las caras de la corrupcin (The faces of corruption) special reports 14,2004, www.prensa.com/especial/2004/corrupcion/corrupcion.htm

TI Panama: www.libertadciudadana.org

Note

1. Each legislator has two substitutes.


Conventions:

OAS Inter-American Convention against Corruption (ratified June 1997)UN Convention against Corruption (signed December 2003; not yet ratified)UN Convention against Transnational Organized Crime (ratified January 2002)


A framework law for a participatory budget, adopted in August 2003, is aimed atincreasing transparency and citizens participation in budgetary decision-makingin the municipalities and the newly created regions. Civil society groups had pushedfor the law which, while a positive step, is stated in very general terms and lacks clarityabout how civil society organisations are to be identified and encouraged to participate.

national anti-corruption directorate, witha view to creating a new national office ofgovernmental ethics.

The OAS experience of civil society

inclusion in anti-corruption workhighlights the importance of listening tonon-governmental voices that are able topenetrate official rhetoric in assessing the

state of corruption. The UNDP has also

taken some steps in engaging civil society

organisations in the effort to promote public

integrity and transparency, though its Foro

Panama 2020, a forum for the government,

political parties and civil society to debate

public policies until 2020.

Peru

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Secondary legislation adopted by the finance and economy ministry in November 2003failed to clarify these points (see below).

Perus first ever law regulating political parties was adopted in November 2003. One of theaims was to improve the transparency ofpolitical party financing, which had previously

been poorly regulated. The new law bans funding from certain clearly stated sources;sets a ceiling on private donations; establishes auditing procedures; regulates campaignadvertising; and establishes some sanctions. There are still flaws in the legislation, however:it does not call for disclosure of sources of financing and does not establish sanctions forall infractions.

A law adopted in October 2003 created the Special Commission for the Integrated Reformof the Justice Administration (CERIAJUS), as called for by a wider commission forrestructuring the judicial system. Reform proposals under consideration include publicethics training for judges, steps to make it easier for people to file complaints, and theintroduction of asset-declaration mechanisms for judges. The civil society recommendationthat external controls on the judicial system be introduced was not adopted, however.1

A series of scandals involving serving government officials prompted the cabinet chiefin February 2004 to announce new anti-corruption measures, though these were notwidely discussed and have not been fully implemented. They included the re-launchof the National Anti-Corruption Commission (CNA) with new functions and a newpresident (the first president stepped down in February 2003 to take up a diplomaticpost). Four months after the announcement, the justice minister designated a group madeup almost entirely of civil society representatives to review and revive the wide-ranginganti-corruption proposals made by the National Anti-Corruption Initiative (INA), theworking group set up by the transition government that recommended the creation ofa robust and independent CNA.

Lack of political will to root outcorruption

The transition to democracy in Peru hada strong anti-corruption element fromthe outset, but its focus was always on thepast. Specialised anti-corruption courts,prosecutors and police divisions were setup to investigate and prosecute the grandcorruption that took place during the regimeof former president Alberto Fujimori. There

were important successes: the main headsof Fujimoris corruption racket have beencharged and many have been convicted.But fewer successes can be claimed againstcorruption that unfolded under thetransitional administration or under thenew democratically elected government.

There is a clear need for a national anti-corruption strategy to tackle not just pastcorruption cases, but current and future

cases. This involves looking at preventionas well as enforcement and requires an anti-corruption policy that is interdepartmentaland has short-term, as well as long-term,objectives.

This does not mean that such a blueprintfor change does not exist the INA workinggroup set up under the transitionalgovernment drew up a comprehensive setof recommendations which the governmenthas so far failed to implement. Nor does it

mean that there are no departmental orinstitutional initiatives to fight corruptionin Peru. The clearest example is the projectto restructure the judiciary, as outlinedabove. Other important areas of reform arethe police and armed forces, previously thepillars of Fujimoris corrupt network, and thedevelopment of online procurement systems.But these efforts have not been sufficientto curb corruption, as demonstrated by the

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number of scandals exposed by the press inrecent years.2

President Alejandro Toledo selected a newcabinet in February 2004 and the cabinet

chief took responsibility for drawing up anexit strategy for overcoming the politicalcrisis amid plummeting approval ratings.The cabinet chiefs proposals included aseries of disparate anti-corruption measuresthat are individually positive (for example,actions against contraband, new extraditionmechanisms and a commitment to formulatea coherent anti-corruption plan), but onceagain fail to add up to a strategy that goesto the structural roots of corruption.

President Toledo has always spoken of his

will to fight corruption, but he has failedto translate this into effective initiatives,arguably because of the restraining factorof allegations of corruption against peopleand interest groups who are close to him.Media sources have reported a number ofcorruption allegations involving familymembers, legislators affiliated to thepresidents party, close friends, ministers,ex-ministers and the first lady.3 The fact thatthere are legislators aligned with the rulingparty who were closely tied to the Fujimoriregime adds to suspicions that the presidentlacks the necessary distance from groups orindividuals who might be compromised byan effective fight against corruption.4

The chances of a national anti-corruptionpolicy being drawn up are inevitably linkedto the evolution of the political crisis, whichat present threatens to fell the president andproduce an early election. The creation ofa working group to revive proposals madeby the aforementioned INA is positive, but

comes at a difficult time. If the elections arebrought forward and the new governmentalso lacks the political will to address theroots of corruption, the recommendationscould once again be shelved.

Decentralising corruption

Various sectors of Peruvian society, especiallythe poorest and most marginalised, have long

been calling for the devolution of power tothe regions. In the second half of the 1980sthe Aprista government initiated a processof decentralisation that was dismantled

by Fujimori after 1992. During the 2001election campaign after Fujimoris escapeto Japan, the question of decentralisationwas again raised as an election promise.When Alejandro Toledo won, expectationswere high that he would fulfil his campaignpledge.

Public demands for an immediate startto the process of decentralisation led to anannouncement in 2002 that elections wouldbe held for presidents of regions that had yetto be fully constituted. The organic law onregional governments was not promulgateduntil November 2002, four days after theelections took place.

The speed with which the operationwas implemented meant there was notime to put in place the necessary controlmechanisms to supervise the new localgovernment institutions, let alone work outa timetable for when programmes would betransferred. The only control mechanisms inplace were those that already existed, namely

the auditing bodies created under Fujimori,ostensibly to oversee the Transitory RegionalAdministration Councils but in practice toensure that social programmes were allocatedalong political lines to benefit the formerpresidents election campaign in 2000. Thefact that the same mechanisms had failedto prevent Fujimori from spinning a webof corruption begged the question whetherthey would exercise real control over thenew regional governments.

The question was answered in 2003

and the first half of 2004: corruption wasdecentralised along with political andadministrative powers, as a number of expertshad predicted. By the time of writing, eightof the 25 regional presidents had alreadybeen subjected to investigation on suspicionof corruption, and one had been deposed forbribery and embezzlement.

The decentralisation of corruptionmay be explained by the limited access to

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Samuel Rotta Castilla (Protica, Peru)

Further reading

Apoyo Opinin y Mercado, Protica,II encuesta nacional sobre corrupcin(Second nationalsurvey on corruption) (Lima: Protica, 2004), www.proetica.org.pe

Ciudadanos al Da, Transparencia en las municipalidades: El caso de las licencias de funcionamiento(Transparency in municipalities: the case of operating licences)(Lima: CAD, 2004), www.ciudadanosaldia.org

Lorena Alczar, Jos Lpez-Calix and Eric Wachtenheim,Las prdidas en el camino. Fugasen el gasto pblico: Transferencias municipales, vaso de leche y educacin (Losses on the way.Public spending links: municipal transfers, state milk programme and education) (Lima:Instituto Apoyo, 2003)

information and civil society monitoringin Peru.

Access to public information wasenshrined in law in August 2002, but many

institutions seem not to understand thecontents of the law or lack the resourcesnecessary to implement it.5 Implementationis also hindered by attitudes of mistrust andreticence to provide information when it isrequested attitudes [that] were associatedin many cases with the disinformation ofpublic officials with regard to norms andprocedures, the civil society monitoringnetwork Vigila Per found.6

According to Vigila Pers survey of12 regional governments, the barriers to

accessing information related to the budgethave lessened since 2003. The same is truefor political and normative informationproduced by the Regional Council, thehighest regional government body, andthe Council for Regional Coordination.Transparency of information about purchasesand acquisitions has also improved. Whilethese improvements are important, it isequally important to note that regionalgovernments are moving towards minimalcompliance with the law, and not beyond.

At the level of municipal government theproblems are much worse: they are notoriousfor disorganised information systems andfor having difficulty locating relevantdocuments, particularly from the past.

The lack of civil society participationis also critical. In almost all sub-national

arenas there is a political component thatstrains relations between the governmentand civil society, as the political oppositioncan abuse monitoring functions by using

audits as a weapon against the authorities.Hence officials tend to reject attempts bycivil society to monitor government, evenwhen they are provided for in legislation. Bylaw, the Council for Regional Coordinationmust include provincial mayors andrepresentatives of civil society elected bymember organisations, but in practice,according to ongoing research by TIs chapterin Peru, Protica, sub-national governmentshave found ways to keep institutions thatdo not support them out of the council. In

addition, two public hearings must be heldeach year to monitor the budget. In pasthearings, however, only those institutionsthat support the administration were invited,or invitations were poorly distributed. Inother cases, public hearings were not carriedout at all.

This situation provides the backdrop tothe high level of corruption in decentralisedadministrative bodies in Peru, whereauthorities have very low approval ratingsamong the population.7 As a result, the

process of decentralisation has been calledinto question. A tragic indictment of thisstate of affairs occurred in April 2004 whenpart of the population in Ilave, Puno,outraged by allegations of corruptionmade by the political opposition, lynchedtheir mayor.

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Vigila Per, Reportes nacionales 1, 2 y 3 (National reports 1, 2 and 3) (Lima: Grupo PropuestaCiudadana, 2003), www.participaperu.org.pe

Protica (TI Peru): www.proetica.org.pe

Notes

1. CERIAJUS supported the proposal, but the commission for restructuring the judicial system which looks at all aspects of judicial reform, not just judicial administration argued infavour of the existing system of self-regulation.

2. Some of the most notorious cases involve the national intelligence council (which is currentlybeing reorganised), and political interference in the media and the judiciary.

3. For the most part these allegations have not been confirmed by official investigations, withthe exception of the case of Csar Almeyda, a friend of the presidents and former chief of thenational intelligence council who has been in prison since February 2004 for business dealingswith the Fujimori corruption racket.

4. Global Corruption Report 2004.

5. See, for example, a study by Protica on the health and education departments of theLambayeque regional government, Csar Guzmn Valle, Diagnstico de la organizacin de ladocumentacin en el gobierno regional de Lambayeque, available at www.proetica.org.pe

6. Vigila Per, Reportes nacionales (National reports) (Lima: Grupo Propuesta Ciudadana, 2003),www.participaperu.org.pe

7. II encuesta nacional sobre corrupcin (Second national corruption survey) (Lima: Apoyo Opininy Mercado, 2004).


Conventions:Council of Europe Civil Law Convention on Corruption (ratified September 2002)Council of Europe Criminal Law Convention on Corruption (ratified December 2002)OECD Anti-Bribery Convention (ratified September 2000)UN Convention against Corruption (signed December 2003; not yet ratified)UN Convention against Transnational Organized Crime (ratified November 2001)


In September 2003 a law creating Voivodship tax administrative bodies and amendingother laws entered into force. The law on tax control was amended by specifying groups ofpersons obliged to submit annual property and income declarations. The specified groupsinclude tax inspectors, employees of tax offices and customs officials. Monitoring is theresponsibility of an office within the finance ministry. By increasing the transparency ofthe personal finances of administrative officers, the law should reduce the incentive fortax and customs officers to abuse their position by demanding bribes.

Also in September 2003 the lower house of parliament adopted legislation on militaryservice (which entered into force in July 2004), which prohibits professional soldiers fromholding positions in companies or foundations, and from earning money for advisory

Poland

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roles. The law requires military commanders, deputy commanders and chief accountantsto submit

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