PACIFIC BASIN ECONOMIC COUNCIL
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Additional Info: Policy Statements Speeches Photos Speakers & Noted Participants Featured Biographies Registration Media Information Conference Statement Regional Vitality in the 21st Century April 6-10, 2001 — Tokyo, Japan Mr. Tunku Abdul Aziz President Transparency International (Malaysian Chapter) We meet today in a region of the world that has seen in a dramatic way what unaccountable and irresponsible business behaviour could do even to the supposedly unassailable dragon and tiger economies of unhappy memory. If we are to profit from the lessons of the devastation that wiped many of our countries off the global economic radar screen, we must take on board the fact that the unbridled excesses of Japan Incorporated, Korea Incorporated and Malaysia Incorporated, for example, are really no substitute for international standards of business conduct; standards that are firmly grounded in transparency, accountability and integrity. The corporate world, like the world itself, is undergoing rapid change, the sort of change that forces top managers to play a vital and crucial role at the very centre, more often than not, of totally unfamiliar situations. Not a particularly happy position to be in, but then this is what top managers earning top money are paid to do. One of the most pressing contemporary issues facing management is business ethics, or, not to put too fine a point on it, corruption in national life. It is a subject that is receiving a great deal of international attention because of heightened public awareness that bad governance, whether in the private or public sector, contributes directly to corruption. Surely, the corrosively damaging effects of corruption are not in dispute. Anyone telling you that corruption has no victim is more than likely to be a politician doing what he or she does best, - lying through his or her teeth. .All of us should be concerned about its impact on humanitarian, ethical and utilitarian values. What can we in the private sector do to confront corruption? We can begin, of course, by closing windows of opportunity for unethical, corrupt behaviour. This can best be done by examining and reviewing the existing legal framework, operating systems, procedures and practices to make them more effective and transparent and, consequently, less susceptible to abuse. In a difficult economic climate such as Asia is now experiencing, it is particularly important to do this in order to improve investor confidence, so critical for sustainable growth. The private sector, often portrayed as a helpless victim of corruption, must develop a viable business climate which makes it possible to do business without bribery by adopting voluntary codes of conduct. Better still, it should develop and adopt a national code of business ethics specifically promoting ethical public behaviour and prohibiting bribery and corruption in business transactions. In this connection, it should look seriously at Transparency International's "Integrity Pact" which simply means that all parties bidding for contracts sign an undertaking not to pay bribes. Any breach of this pledge will render an offending party ineligible for participation in any future bids. Unfortunately, it is an idea from which many businessmen shy way, arguing, not unreasonably on the face of it, that such an arrangement, without the force of law, would be difficult to sustain. A commitment to an integrity pact as part of a national code of business ethics offers great benefits, as the cost of doing business without corruption is much less than it would otherwise be. Another important initiative which is beginning to make an impact on the conduct of international business is the OECD Convention. Although many countries in this region are non-OECD members, the private sector can take the fight against corruption a stage further by either urging their governments to adopt the OECD Convention which criminalises the bribery of foreign public officials or, even better, submit to parliament a private member's bill proposing legislation against both foreign and domestic bribery. What this will do is to send a clear signal to business partners everywhere that corruption, in any shape or form, will attract both severe legal and moral sanctions. Business codes should go beyond the mere mechanical regulation of corporate dealings or transactions if they are to serve their primary purpose of helping companies to embrace "best practice" which in turn is intended to promote a sound, and corruption free, business culture. Once in place, a code is like a national constitution; its integrity must never be trifled with. This is because it is the foundation of your corporate existence, and marks your organisation out as being committed to high ethical business standards. A typical "best practice" code gives due recognition to the place of transparency and accountability in any business equation. It sets out clearly a company's policies which are basically aimed at its own protection, and that of its directors, employees and stakeholders from unethical or corrupt business practices. Directors and employees who have dealings with customers, suppliers and others must act in the sole interests, and to the sole advantage, of the company, to the exclusion of any consideration of personal advantage. They must bear in mind always the absolute importance of complying with the laws of the country. Needless to say, other equally important ingredients that can help reinforce and strengthen both personal as well as corporate integrity are trusteeship and stewardship without which all values break down, to the detriment of social justice and equity. The private sector, in spite of itself, can make a useful contribution to the general good. Peter Eigen, Chairman of Transparency International, speaking at the 8th International Anti-Corruption Conference in Lima in 1997 argued that while it is governments that have a formal responsibility to reform national and international integrity systems, "the private sector has a unique input to make. It is the dominant engine of change, and an effective anti-corruption campaign can hardly be sustained against the opposition of the corporate community." Let no one, therefore, underestimate the power for good the private sector can generate and harness. Much is expected of the private sector. It has a heavy responsibility to bear because of its special position in society. The private sector in much of our economically troubled region is seriously concerned about the colossal damage done to their business reputation and prestige by corruption, defined by Transparency International as the "abuse of entrusted power for private profit." The very survival of many private sector companies in our region now depends on how serious they are about reforming the financial, banking and other business systems, rules and procedures. Public confidence is a fragile commodity, and don't we know that! Its restoration requires strong political commitment. The private sector must accept some of the responsibility for the current state of affairs. In many countries, it played a major role in perpetrating and perpetuating some of the worst excesses bordering on the criminal ­ in legal, economic and ethical terms. This PBEC International General Meeting here in Tokyo today underscores, in a spectacularly unambiguous manner, the global concerns not only about corruption, but also the declining standards of public behaviour in general, the sort of behaviour that affects our attitude to political, economic, social and environmental issues, with all the implications for mankind. These concerns have taken a life of their own, and will, whether we are comfortable with them or not, elbow their way into the continuing debates on business responsibility for sound management of the ecology and the environment in which we operate. This is a responsibility that has to be taken seriously because time is not on our side. Even as I pontificate on the issue, many of our scarce and non-renewable resources are being criminally and wantonly depleted. Whatever our views may be, many will agree that globalisation offers some hope of success in curbing corruption because of its demands for much greater transparency and accountability in the management of our resources, including the environment. Globalisation demands stricter compliance with "best practices." It also demands: Fuller disclosures by banking and other business institutions of all relevant information so that the public can make informed judgements on those matters that affect them personally; a better appreciation and understanding on the part of national authorities and corporate organisations of what international institutional, as well as domestic, investors, expect and want from the companies in which they invest; a well-regulated capital market which brooks no "insider trading" and other forms of manipulation, particularly in relation to the position and the protection of minority shareholders. A watchdog that bites, rather than one that merely barks, and often up the wrong tree, will be good for investor confidence; a well-managed banking system underpinned by the highest principles of prudence, diligence, stewardship, and trusteeship; political stability as a means of ensuring that the playing field will always be level and that the goal posts will not be shifted while the game is in progress. Nothing worse for encouraging a stampede of capital. And, last, but not least, a sound legal framework that will guarantee equity and justice, including a transparent system of trade arbitration. This means an independent judiciary and legal service. The terms and conditions I have outlined represent minimum prerequisites, and companies in our region should seriously ponder the possible consequences of their not playing by the new global corporate rules. The new regime is here to stay, and it simply cannot be wished away. A heavy price to pay, some may claim, but the long term benefits of globalisation or the New Economy, in my view, far outweigh any little spot of bother. If nothing else is achieved, at least we will see a return of investor confidence and interest in the future of the Asia Pacific Basin countries as the business destinations of choice, a sentiment sadly lacking in the current economic climate in our region. You will, I hope, forgive me for being ungracious to you, generous hosts that you are, by telling you that the sector you represent is unfortunately perceived to be part of the problem of corruption. You should, therefore, make a conscious and determined effort to become part of the solution. Your success or failure as businessmen, and women is going to be judged not solely by the confounded "bottom line", the thinking manager's constant nightmare. The ultimate measure is going to be the demonstrable depth and breadth of your understanding of, and how you respond, to the needs and aspirations of your fellow beings with whom you should work as coalition partners in order to create a truly sustainable living and working environment for all. We are not promoting good governance for its own sake. Protecting the environment is about protecting people against themselves so that mankind as a whole will continue to have a future on this earth. In conclusion let me just say this. At the end of the day, business is not just about making deals, making a profit, making clever marketing or investment decisions, and coping with economic imponderables. Of course profits are important. Profits make it possible for us to fulfil our social obligations to society. Having cut my own teeth all those years ago on the returns on funds employed, and all the other equally tiresome business disciplines, I am all for companies making lots of money. No harm in that at all. But I believe we have a higher duty to perform, and that is to establish what we can do as a group to bring about the sort of change that will make a difference in social, economic and ethical terms to society. How we confront corruption will decide whether the coming decades will herald the Age of Accountability. We are duty-bound, because of our special and privileged position as a community, to promote integrity not, I might add, as the luxury of the virtuous, but as a business necessity.