PUBLIC PROCUREMENT represents on average 15% to 20% of GDP in developing countries, making it among the most corruption-prone sectors. In Thailand the presence of irregularities in public procurement is high and actually has deteriorated over time according to a 2010 survey, with major recent scandals in big infrastructure projects.
In July 2014 the Office of the Public Sector Development Commission (OPDC) requested UNDP to undertake a risk assessment to mitigate risks in the procurement system. The project is the result of the cooperation with several organizations: the Office of Public Procurement Management Department (PPO) of Comptroller General’s Department (CGD), the Ministry of Finance, the private-sector-led Anti-Corruption Organisation of Thailand, the State Enterprise Policy Office, and other key stakeholders.
Conducted through desk reviews, interviews and surveys with the actors involved by missions of international advisors, the assessment focused on the four main pillars of the public procurement system:
i) Legal and Regulatory Framework
ii) Institutional Framework and Capacity
iii) Operational Capacity and Market Functionality, and
iv) Control Structure and Integrity Mechanisms.
The results of the assessment were presented on 7 January 2015 in Bangkok and discussed by a panel of experts including the main stakeholders involved in the project: representatives from the Government (Comptroller General, National Anti-Corruption Commission), the private business sector (Thai Institute of Directors), the non-profit sector (Thailand Development Research Institute) and UNDP. Around 200 participants attended the presentation of the findings, from public agencies, private companies, CSOs and media.
As a result of the assessment UNDP recommended a 20-point action plan to strengthen integrity in public procurement as well as the development of integrity red flags and risk mitigation measures in procurement. UNDP also supported the government in developing guidelines for mitigating risks to integrity in procurement.
The project has gained a lot of political momentum, with the Prime Minister, General Prayuth Chan-Ocha, announcing the partnership with UNDP in a televised speech on 3 October2014. The Thai government has now taken the initiative of drafting a procurement law and setting up a sub-Committee on procurement as part of its National Reform Council. Besides the successful involvement of all major stakeholders from government and the private sector in the project, another condition for the success has been to ground the analysis on evidence-based data through surveys. This pilot provides the basis for developing a methodology that could be used at the global level, as previously done by UNDP in the areas of water, health and education.
Preventing illicit financial flows for financing development in Asia-Pacific
Illicit financial flows are drawing enormous resources out of countries: Most aid-dependent countries struggle to finance their population’s basic needs (schools, hospitals, infrastructure, and the like), even though they could access larger development budgets more easily by preventing financial resources from illicitly flowing out of their borders. These outflows are not only budget losses but also total losses in terms of the legitimate economy since they reduce investments and future growth.
Illicit flows are cross-border flows of money illegally earned, transferred (through trade misinvoicing, among other means), or utilized. This definition includes the transfer of the proceeds of crime, corruption, money laundering, and tax evasion. If the capital breaks laws, regulations, or global standards anywhere along the path of the international transaction, then it is classified as an illicit financial flow.
Asia-Pacific accounts for nearly 40% of total illicit outflows from developing countries, according to Global Financial Integrity, a non-profit based in Washington DC. This percentage is the largest share among regions in terms of volume. And yet, the topic so far has gained little attention in the region.
“Coming to Grips with Illicit Financial Flows in Asia-Pacific – Illicit financial flows as a result of trade misinvoicing, 2002-2011” is a ground-breaking study prepared by Global Financial Integrity, in cooperation with the United Nations Development Programme, and the United Nations Office on Drugs and Crime. This study provides a new perspective, as it analyses the phenomenon not only in the least developed countries (Bangladesh and Nepal), but also in the middle-income countries, which are the major drivers of illicit financial flows in the region, with case studies of Indonesia and Malaysia. In these countries financing for development is not an issue, but the activities fuelling illicit flows (corruption, organised crime, drug smuggling, etc.) undermine governance, rule of law, and security.
The challenge with illicit financial flows lies in the development of integrated solutions to this multi-faceted problem. Illicit financial flows are fuelled by various sources and although there have been several regional and international efforts to curb these issues, they have been scattered, focusing often on one side of the problem – for example on tax loss from capital flight (e.g., UN Tax Committee, Tax Justice Network) or money laundering (e.g., FATF Asia-Pacific Working Committee on Anti-Money Laundering).
It is important to work for improving interagency cooperation, enhancing transparency in financial transactions, improving data collection, enabling and building capacities of FIUs, conduct further in-country consultations to analyse the problems and its possible solutions.
The study was presented for the first time on 5 September 2014, during a Workshop on Preventing Illicit Financial Flows hosted by the Anti-corruption Unit of the Government of Cambodia with support from UNDP, UNODC, at the sides of the 8th regional Conference of the ADB/OECD Anti-Corruption Initiative for Asia and the Pacific. This was followed by an e-consultation to gather comments from workshop participants and other experts. The comments received were utilized to edit, expand and revise the paper before its finalization. The final study can be accessed here.
By Liviana Zorzi, Event Coordinator on Transparency, Accountability and Anti-corruption (UNV), UNDP Bangkok Regional Hub