Confederation of International Contractors’ Associations

Transparency of Procurement and the Battle Against Corruption

Eng. Livio Amato

Past President of CICA Past President of FIIC

8TH International Conference Leading The Future in Construction

Cairo – Egypt 14 – 15 October 2003

FIIC

Transparency of Procurement and the Battle Against Corruption

INDEX

1. INTRODUCTIÓN 3

2. ADVANCEMENTS IN LATIN AMERICA 5

3. INTERNATIONAL OVERVIEW 8

4. WORLD STATISTICS 8

5. CONCLUSIONS 9

6. PROPOSALS 9

7. ANNEX I GRAPHICS AND STATISTICS 11

ANNEX II METHODOLOGY 23

ANNEX III SOME OF THE MOST SPECIFIC

PROBLEM COMMON TO THE BIDDERS IN

LATIN AMERICA 24

8. REFERENCES 25

9. INTERESTING WEBSITIES 25

SPECIAL GRATEFULNESS 26

2 de 26

TRANSPARENCY OF PROCUREMENT and the Battle Against Corruption

1. INTRODUCTION

1.1. The main objective of this work is to offer a global vision on bid transparency, supported by the improvements in Latin America and at an international level, through some relevant cases of what has been done in favor of bid transparency and against corruption; some conclusions and concrete proposals to improve bid transparency in our sector, including quoted references, relevant websites, graphics, statistics, methodologies proposed by governmental and non-governmental organization and, finally, some of the most specific problems shared by bidders in Latin America. 1.2 . “Knowledge will always govern over ignorance”

James Madison (August 4th, 1822)

Madison’s observation is as valid nowadays as it was 200 years ago. Access to information is still a mined field throughout the world. Knowledge is power and those who detain it have the power to govern.

This concept is problematic enough in many industrialized countries, but is it specially provocative in those countries in which colonial style government systems were implemented, marked by the concern of keeping as a secret even the most trivial information, and where accountability was not for its own people but for the remote metropolitan capital cities. Therefore, it is fair to say that trust was non-existent.1

The struggle for the right to information is, from beginning to end, a struggle for accountability. At the World Summit on Sustainable Development in Johannesburg, where we participated, this fight was related to the communities throughout the developing world that should have the right to access information, which will enable them to be accountable for their acts if and when they pollute the environment and affect the health of their peoples.2 1.3. Corruption and lack of transparency of procurement, among other consequences, distorts prices and market conditions, reduces confidence in authorities, affects national and corporate sustainable economic development, hinders investment, increases uncertainty in commercial transactions, and increases the operating costs of companies. 1RE: World Summit on Sustainable Development in Johannesburg, South Africa, August 26-30th, 2002.

3 de 26

There is no doubt that globalization is a good source of opportunities, as well as challenges. With the increase of economic activities through the borders, the negative side effects related to corruption and criminal practices in the international political scenario have increased as well due, in many cases, to a lack of transparency in the bidding processes and in the game rules. For those entrepreneurs who have global activities it is essential to count on a work frame that is fair, predictable and transparent. Throughout the world an increasingly large number of companies and governments recognize that corruption and lack of transparency raise the costs and increase all kinds of risks in transactions. Bankruptcy of important transnational companies, millionaire fines and the latest corporate crisis facing the markets have made it necessary for both sectors to work in coordination to improve transparency in global economies, strengthen the policies and practices of the corporative government and reinforce the game rules. 1.4. For a long time, the problem of corruption was considered as a national phenomenon. Multilateral efforts for fighting corruption and improving transparency started a long time later. Globalization caused that many of these problems that had been considered local, were turned into problems with global solutions.3 Thus, The United Nations Organization (UN), the Organization of American States (OAS), the Organization for Economic Cooperation and Development (OECD), the European Council (COE), the World Bank (WB) and other Non-Governmental Organizations (NGOs) such as The Committee of Organizations of the Treadway Commission, (COSO) Transparency International (TI) and its 90 national chapters throughout the world, focused their efforts on the war against corruption and on improving transparency. 1.5. As a result of the technology that makes it easier to exchange precise and updated information, the media and the society are increasingly demanding accountability from the public and private sectors. Under this scrutiny from these and other civil organizations, governments are now implementing the necessary measures to encourage the cause of transparency. From Chile and Brazil to South Korea and India, the propagation of e-government (electronic government) involves a wide spread use of the Internet for spreading the information that belongs to the public realm and to open to society the offering process in public bids.4

4 de 26

2. ADVANCEMENTS IN LATIN AMERICA 2.1. Almost all over Latin America, the scope of public bids has been, traditionally, a focus of corrupted practices, influence traffic, wrongful management of privileged information, preferential treatment, etc.. Despite various legal reforms that have been implemented in several countries, regardless of the introduction of new technologies such as the Internet, despite an increased vigilance by the civil society, the scope of public bids is still being perceived as highly problematic. In this context, a first regional project on this issue is being developed, headed by Transparency International Latin America and the Caribbean (TILAC)5 . As a first case, it is making a regional risk map of the potential vulnerabilities along the bidding processes. In the process of organizing this risk map, a structured electronic moderated discussion on this issue is being organized. Parallel to this, national workshops will be held in order to obtain the largest and most varied participation. These are the objectives and results obtained to this date: “Outlines of the Regional Prioritized Project” PROJECT OBJECTIVES:

1. To impel, from the civil society, more transparency in public contracts in Latin America.

2. To reduce corruption as much as possible in public contracts in Latin America.

3. To create the conditions for civil control over public contract processes in Latin America.

RESULTS:

1. There is a common legal guideline for legislative reformations in each country.

2. Acquisition regulations have been negotiated with the multilateral agencies in accordance to the legal guideline, and that are common to the region.

3. Civil actions for corruption control have been encouraged in public contracts.

4. Corruption levels in public contracts are being monitored, based on indicators5.

RE: TILAC of Transparency International groups 14 Latin American countries

5 de 26

2.2. In the case of negotiations of the Free Trade Area of the Americas (FTAA), formed by 29 countries, the intention is to establish some basic principles that are being promoted at a bi-lateral level and at a national level with the same strength, in order to ensure transparency, public information and civil participation in the whole area of public bidding (services or goods). During the VI Commercial Forum of the Americas in Buenos Aires, Argentina (April, 2001), the private sector gave a priority character to transparency in the negotiating processes of the FTAA6.. In addition, those members who participate in the workshops on acquisition, investments and services, also summoned for laws, regulations and more transparent processes in the bids.

2.3. In the last twelve months, the International Financial Institutions (IFIs), as well as the World Bank (WB) and the Inter American Development Bank (IADB), have increased even more their scope of attention to issues related to corruption7. For the donors, it is a more common concern, that financing for development is being granted to corrupted governments, so now they are conditioning the issuing of loans to the implementation of safety measures against corruption. The IADB offered loans to support anti-corruption and transparency initiatives to several countries in South America during 2001-2002, including Chile, Bolivia, Argentina, Brazil, Ecuador, Peru, Uruguay and Venezuela8.

In January 2002, the Organization of American States (OAS) decided to follow the implementation of the Inter American Convention against corruption. Even though no judicial formal sanctions will be taken against the countries that have not reached the full implementation of the Convention, the reports that must be delivered on the evaluation made will be useful for demanding that the governments change or improve the issues that the Expert Committee, formed by government technicians from the member States, consider as being unaccomplished9. Up to now, the three non-member countries that have adhered to the Anti-Bribery Convention of the Organization for Economic Cooperation and Development (OECD) are South American: Argentina, Brazil and Chile. Argentina and Brazil have ratified the convention that adopts common regulations to sanction the companies and persons involved in bribery transactions, and that penalizes bribery payments to foreign countries10. RE: FTAA countries: Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Estados Unidos, Grenada, Guatemala, Haití, Honduras, Jamaica, Mexico, Nicaragua, Paraguay, Peru, Dominican Republic, San Kitts and Nevis, St. Vincent and Granadinas, Surinam, Trinidad and Tobago, Uruguay y Venezuela. Inter American Convention Against Corruption (AEO) March 2000 Anti-Bribery Convention, of the OECD November 2l- 23, 1997

6 de 26

The United States Agency for International Development (USAID), concentrated its anti-bribery programs at a more local level in Colombia, Ecuador, Paraguay and Peru.11

In Panama, the Transparency Law in Public Administration was approved on December 200. It grants civilians free access to the information on governmental activities. In Mexico, the Commission for Transparency and War Against Corruption of the Federal Public Administration has been created as an Inter-Secretarial Commission with permanent character12,,

together with the National Program of War Against Corruption and Transparency and Administrative Development Encouraging 2001-200613, as well as the new Federal Law on access to Public Realm Information, and the introduction of the e-government systems, www.tramitanet.gob.mx and www.declaranet.gob.mx The World Bank establishes that corruption takes around 9% of Mexico’s Gross Domestic Product, amount that is higher than the total expense in education in that country. In the case of Colombia, the cost of corruption is approximately 2,600 million a year, equivalent to the 60% of the country’s debt. Chile received a better mark than many countries in Eastern Europe in the Corruption Perception Index 2002, issued by Transparency International (TI)14. During the last year, new e-government initiatives (electronic government initiatives) have been issued in the region in order to provide online information on institutional procedures, programs, accounts, expenses and services of the governmental dependencies. The government of Argentina, for example, launched “active control” www.controlactivo.com.ar a web site that seeks to increase the degree of civil participation and to monitor the biddings and contracts within the public sector15. The Internet has turned to be a very useful tool to reduce corruption in public biddings, in publishing the bids, making a follow-up of all the public buys and publishing online the results of those bids. Brazil and Chile, by establishing www.comprasnet.gov.br and www.compraschile.cl became pioneers of their region regarding this issue. The Colombian government site www.gobiernoenlinea.gob.co and the one in Mexico www.compranet.gob.mx are already working, and Peru is about to install a similar electronic model.

7 de 26

3. INTERNATIONAL OVERVIEW

3.1. The World Bank has mentioned that, in Palestine, corruption is the second biggest limitation for growth, after political instability and uncertainty. In Morocco, the entrepreneurs that were consulted by Transparency Moroc, which is a member of TI, expressed that corruption is the second most important challenge after high taxes. Corruption costs Rumania thousands of millions of dollars a year, according to a report by the accountant and audit world company PriceWaterHouse Coopers (www.pwc.com). They state that the direct foreign investment of 1,300 million in 2001 was one third of what could be attracted to the country. An inquiry made by Social Weather Stations at the end of 2001 revealed that entrepreneurs in the Philippines were willing to invest 2% of their corporative net income to financing programs against corruption. They have estimated that preventing corruption would result in an increase of 5% in their net income and that they would save 10% in the contracts, at the same time that the government would be saving 15%-20%. We can state that the lack of bid transparency is a huge limitation to growth. Since the Law for Diffusion of Information was promulgated in Japan in April 2001, citizens are guaranteed the right to access information.16.

4. WORLD STATISTICS (Refer to annex I ) References17 and 18

Oceania 9.1 North America 6.8 Europe 5.6 Asia 4.2 Latin America & Caribbean 3.4 Africa 3.3 Note: Excepting Chile, the Latin America figure would go down to 3.2 (the lowest)

9.1

6.8

5.6

4.23.4 3.3

0

1

2

3

4

5

6

7

8

9

10

Oceania NorthAmerica

Europe Asia LatinAmerica &Caribbean

Africa

Corruption Perception by World Region (TI)

8 de 26

Finally, a quote for reflection: “We believe that the function of a modern non-governmental organization is to participate in the search for solutions and not just to agree on identifying problems and demanding a change”.

Dr. Peter Eigen President of Directory

Transparency International Annual Statement 2001

5. CONCLUSIONS 5.1A change is needed in the culture between what is public and what is private, through the creation of ethical codes that increase confidence within the communities to whom they belong and which they serve.

5.2. There is no doubt that in a context of total openness towards globalization, adopting the standards proposed by the different international organisms contributes to strengthen the world’s governability and to establish defined and clear rules for economic international transactions. 5.3. The private sector has its own needs with regard to accessing complete and reliable public information, specially the one related to public bid regulations and procedures that some countries have started to make known through the Internet. 5.4. The register management systems must guarantee the transparency of the bid through the information that the contractors have the right to receive, and this information must be exact, complete and easily accessed. 5.5. The lack of bid transparency will keep on growing if the different parties avoid exerting their functions. “Transparency has come to replace trust”. 6. PROPOSALS 6.1. To search for, analyze and divulge the methodologies, control mechanisms, follow-ups and developments in the bid processes that have been proposed or recommended by international organisms (governmental and non-governmental) such as the IFIs, UN, OECD, OAE and TI. The latter proposes new figures such as integrity pacts, social witnesses and unilateral integrity declarations, among others, to evaluate bid transparency and to prevent any kind of irregularity, illegality or dishonesty during the contract adjudication process (Refer to Annex II)

9 de 26

6.2. To stimulate information access in order to generate bid transparency, (and this may be the most powerful weapon in the war against corruption). 6.3. To support institutional efforts as well as the efforts of the international organisms such as WB, IDB, UN, OAE, OECD and TI, among others, to move forward in the task of achieving transparency and in fighting against corruption along the work bidding processes. 6.4. To stimulate a culture of transparency in our sector considering that this phenomenon causes serious moral and political complications, wears out the economic development and distorts competitive international conditions. 6.5. That the companies belonging to the member Federations consider, within their policies and procedures, those elements that could be used against corruption and lack of transparency during the bidding negotiations. 6.6. To stimulate conduct codes and compliance mechanisms in the company policies between our members, in order to direct them towards a new culture of transparency. 6.7. To promote international events that encourage bid transparency and war against corruption. 6.8. To establish among the Confederation, the Federations, the Chambers and the affiliates, a commitment for transparency and war against corruption, looking forward to strengthen ethical behaviors and values in order to achieve credibility and confidence, both internal and external, within the member organizations, through a joint declaration. Elements that could be included in the Declaration: Ø To support “decisively” those construction companies that feel they

are being affected by corruption practices. Ø To preserve free concurrence and fair competence in international

bids. Ø To stimulate among our members a thorough training regarding bid

transparency and war against corruption.

10 de 26

7. ANNEX I GRAPHICS AND STATISTICS17 Y 18

Country Score Chile (17)* 7.5Uruguay (32) 5.1Trinidad and Tobago (33) 4.9Costa Rica (40) 4.5Brazil (45) 4.0Jamaica (45) 4.0Peru ((45) 4.0Colombia (57) 3.6Mexico (57) 3.6Dominican Republic (59) 3.5El Salvador (62) 3.4Panama (70) 3.0Argentina (70) 2.8Honduras (71) 2.7Guatemala (81) 2.5Nicaragua (81) 2.5Venezuela (81) 2.5Bolivia (89) 2.2Ecuador (89) 2.2Paraguay (98) 1.7

Perception Corruption by countries in Latin America, according (TI)

1.72.22.22.52.52.52.72.83.03.43.5

3.63.64.04.04.04.9

5.1

7.5

4.5

0123456789

10

Chi

le (1

7)*

Uru

guay

(32)

Trin

idad

y T

obag

o (3

3)

Cos

ta R

ica

(40)

Bra

sil (

45)

Jam

aica

(45)

Per

ú ((4

5)

Col

ombi

a (5

7)

Méx

ico

(57)

Rep

. Dom

inic

ana

(59)

El S

alva

dor (

62)

Pan

amá

(70)

Arg

entin

a (7

0)

Hon

dura

s (7

1)

Gua

tem

ala

(81)

Nic

arag

ua (8

1)

Ven

ezue

la (8

1)

Bol

ivia

(89)

Ecu

ador

(89)

Par

agua

y (9

8)Low corruption

This index of corruption perception (ICP), is recognized all over the world, and were determined by Transparency International. It belongs to the 2002 edition. It reflects the corruption levels in the public sector, as perceived by entrepreneurs, analysts and civil citizens. It keeps showing alarming corruption levels in most of the countries, which include many of the poorest in the world.

- In this first graphic 20 countries were classified from Latin America and the Caribbean.

* Note: Excepting Chile, the Latin America figure would go down to 3.2 (the lowest).

* The figure in parenthesis is the Global Rankings

11 de 26

Index of Corruption Perception (ICP), according (TI) the table 102 countries are classified, 10= highly clean, 0= highly corrupt

Rank Country Score Rank Country Score 1 Finland 9.7 52 Czech Republic 3.7 2 Denmark 9.5 Latvia 3.7 New Zealand 9.5 Morocco 3.7 4 Iceland 9.4 Slovak Republic 3.7 5 Singapor 9.3 Sri Lanka 3.7 Sweden 9.3 57 Colombia 3.6 7 Canada 9.0 México 3.6 Luxembourg 9.0 59 China 3.5 Netherlands 9.0 Dominican Republic 3.5

10 United Kingdom 8.7 Etiopía 3.5 11 Australia 8.6 62 Egypt 3.4 12 Norway 8.5 El Salvador 3.4 Switzerland 8.5 64 Thailand 3.2

14 Hong Kong 8.2 Turkey 3.2 15 Austria 7.8 66 Senegal 3.1 16 USA 7.7 67 Panama 3.0 17 Chile 7.5 68 Malawi 2.9 18 Germany 7.3 Uzbekistán 2.9 Israel 7.3 70 Argentina 2.8

20 Belgium 7.1 71 Ivory Coast 2.7 Japan 7.1 Honduras 2.7 Spain 7.1 India 2.7

23 Ireland 6.9 Russia 2.7 24 Botswana 6.4 Tanzania 2.7 25 France 6.3 Zimbabwe 2.7 Portugal 6.3 77 Pakistan 2.6

27 Slovania 6.0 Philippines 2.6 28 Namibia 5.7 Roumania 2.6 29 Estonia 5.6 Zambia 2.6 Taiwan 5.6 81 Albania 2.5

31 Italy 5.2 Guatemala 2.5 32 Uruguay 5.1 Nicaragua 2.5 33 Hungary 4.9 Venezuela 2.5 Malasia 4.9 85 Georgia 2.4 Trinidad and Tobago 4.9 Ukraine 2.4

36 Belarus 4.8 Vietnam 2.4 Lithuania 4.8 88 Kazakhstan 2.3 Africa 4.8 89 Bolivia 2.2 Tunisia 4.8 Cameroun 2.2

40 Costa Rica 4.5 Ecuador 2.2 Jordan 4.5 Haití 2.2 Mauritius 4.5 93 Moldovia 2.1 South Korea 4.5 Uganda 2.1

44 Greece 4.2 95 Azerbaijan 2.0 45 Brazil 4.0 96 Indonesia 1.9 Bulgaria 4.0 Kenya 1.9 Jamaica 4.0 98 Angola 1.7 Peru 4.0 Madagascar 1.7 Poland 4.0 Paraguay 1.7

50 Ghana 3.9 101 Nigeria 1.6 51 Croacia 3.8 102 Bangladesh 1.2

12 de 26

The Graphic shows the Corruption score by World Regions

Oceanie 9.1 North America 6.8 Europe 5.6 Asia 4.2 Latin American and Caribean 3.4 África 3.3

9.1

6.8

5.6

4.23.4 3.3

0

1

2

3

4

5

6

7

8

9

10

Oceania NorthAmerica

Europe Asia LatinAmerica &Caribbean

Africa

Corruption Perception by world Region According (TI)

13 de 26

The Index of Bribery Sources (IBS) 2002, that complements the ICP, reflects the tendency of companies in the main exporting countries in the world to pay bribes in the export markets. Several of the main bribery payers have signed the Anti-Bribery Convention of the OECD. The IBS also includes a classification of the different sectors of the economy according to the corruption level that is perceived in each one of them. More than 800 business experts from 15 countries with emergent markets answered the following questions:

Index of Bribery Sources (IBS), according (TI)

Classification for Countries Classification for Sector of the Economy

Rank Country Score Sector Score 1 Australia 8.5 Public Works / construction 1.3 2 Sweden 8.4 Armament and defense 1.9 Switzerland 8.4 Petroleum and gas 2.7 4 Austria 8.2 Real estate 3.5 5 Canada 8.1 Telecomunications 3.7 6 Netherlands 7.8 Generation / transmition energy 3.7 Belgium 7.8 Mining Industry 4.0 8 United Kingdom 6.9 Transport / storage 4.3 9 Singapoure 6.3 Pharmaceutic Products /medical care 4.3 Germany 6.3 Heavy Industry 4.5

11 Espain 5.8 Bank and Finances 4.7 12 France 5.5 Civil airspace 4.9 13 USA 5.3 Sylviculture 5.1 Japan 5.3 Information Services 5.1

15 Malaya 43 Fishery 5.9 Hong Kong 4.3 Light Industry 5.9

17 Italy 4.1 Agriculture 5.9 18 South Korea 3.9 19 Taiwán 3.8 20 Popular Republic of China 3.5 21 Russia 3.2 22 National Companies 1.9

What is the probability that high ranking public servers in this country (the interviewed person’s country) will demand or accept bribes in, for example, public bidding processes, regulations or license granting, in the following economic sectors:

A perfect mark, indicating that no tendency to pay bribes has been perceived is 10. The classification list starts with the countries that have been perceived as having a low tendency to pay bribes abroad.

With regard to the sectors of the economy to which you are most familiarized, please indicate what is the probability of companies from the following countries will pay or offer bribes in order to get or to keep business in this country.

The marks are an average of all the answers in a scale from 0 to 10, where 0 represents the perception of very high corruption levels, and 10 represents the perception of extremely low corruption levels. The highest marks are in the public works and construction sectors.

14 de 26

Anexo I Gráficos Estadísticos

6.08-I15 de 26

Rank Country Score 1 7

1 Singapore 5.92 Finland 5.53 Iceland 5.34 Israel 5.35 United Kingdom 5.26 United States 5.27 Tunisia 5.28 Hong Kong SAR 5.19 Austria 4.910 Canada 4.911 Netherlands 4.912 Denmark 4.813 New Zealand 4.814 Australia 4.815 Switzerlan 4.816 Taiwan 4.817 Sri Lanka 4.718 Bptswama 4.719 Germany 4.720 Malaysia 4.621 Chile 4.522 Ireland 4.523 Namibia 4.524 Sweden 4.425 South Africa 4.426 Morocco 4.227 Slovenia 4.228 Norway 4.229 Thailand 4.130 Korea 4.131 China 4.132 Estonia 4.133 Hungary 4.034 Vietnam 3.935 Spain 3.936 Trinidad and Tobago 3.837 France 3.838 Portugal 3.839 Mauritius 3.840 Czech Republic 3.741 El Salvador 3.742 Jamaica 3.743 Belgium 3.744 Lithuania 3.645 Japan 3.646 India 3.547 Nigeria 3.548 Colombia 3.549 Latvia 3.550 Italy 3.551 Costa Rica 3.552 Indonesia 3.453 Brazil 3.454 Uruguay 3.455 Jordan 3.356 Philippines 3.357 Dominican Republic 3.358 Greece 3.359 Croatia 3.160 Turkey 3.161 Panama 3.162 Mexico 3.163 Slovak Republic 3.064 Bolivia 3.065 Peru 3.066 Honduras 2.967 Bangladesh 2.968 Poland 2.869 Ecuador 2.670 Russian Federation 2.671 Haiti 2.572 Zimbabwe 2.473 Paraguay 2.474 Ukraine 2.475 Bulgaria 2.476 Nicaragua 2.377 Guatemala 2.178 Romania 2.179 Argentina 2.180 Venezuela 2.0

Transparency of government policymakingAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

MEAN: 3.8

Firms in your country are usually informed clearly and transparently by the government on changes in policies and regulations affecting your industry (1= never informed, 7= always fully and clearly informed)

Public Institutions Contracts and Law

Anexo I Gráficos Estadísticos

6.09-2 **16 de 26

Rank Country Score 1 7

1 Denmark 5.62 Finland 5.53 Singapore 5.24 Australia 5.15 Iceland 4.96 New Zealand 4.87 Tunisia 4.88 United Kngdom 4.79 Switzerland 4.410 Sri Lanka 4.511 Austria 4.512 Netherlands 4.413 Belgium 4.414 United States 4.315 Hong Kong SAR 4.316 Norway 4.317 Canda 4.218 Chile 4.219 Germany 4.120 Taiwan 4.121 Sweden 4.122 France 4.023 Israel 4.024 Morocco 4.025 Botswana 3.826 Portugal 3.827 Japan 3.728 Ireland 3.729 China 3.730 Korea 3.731 Uruguay 3.632 Slovenia 3.633 Brazil 3.634 Estonia 3.635 Lithuania 3.536 Spain 3.437 Mnamibia 3.438 Malaysia 3.339 South Africa 3.340 Jordan 3.341 Maurituis 3.342 Italy 3.243 Hungary 3.144 Mexico 3.145 El Salvador 3.146 Thailand 3.147 Inida 3.148 Latvia 3.149 Vietnam 3.150 Greece 3.051 Costa Rica 3.052 Turkey 2.953 Ukraine 2.954 Jamaica 2.855 Trinidad and Tobago 2.856 Czech Reublic 2.857 Croatia 2.858 Bulgaria 2.759 Peru 2.760 Poland 2.661 Colombia 2.662 Russian Federation 2.663 Slovak Republic 2.564 Dominican Republic 2.565 Indonesia 2.466 Bangladesh 2.367 Nigeria 2.268 Venezuela 2.269 Panama 2.270 Philippines 2.171 Romania 2.172 Argentina 1.973 Honduras 1.974 Bolivia 1.975 Zimbabwe 1.976 Nicaragua 1.877 Haiti 1.778 Ecuador 1.779 Paraguay 1.680 Guatemala 1.6

Favoritism in decisions of government officialsAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

MEAN: 3.3

When deciding upon policies and contracts, government officials (1= ussually favor well - connected firms and individuals, 7= are neutral among firms and individuals)

Public Institutions Contracts and Law

Anexo I Gráficos Estadísticos

7.03 - 317 de 26

Rank Country Score 1 7

1 Denmark 6.82 Finland 6.83 Iceland 6.84 New Zealand 6.85 Australia 6.66 Sweden 6.67 Singapore 6.68 Canada 6.59 United Kingdom 6.510 Norway 6.511 Lithuania 6.312 Netherlands 6.313 Hong Kong SAR 6.314 Switzerland 6.215 Chile 6.216 Ireland 6.217 Japan 6.118 Germany 6.119 Slovenia 6.020 Austria 6.021 Bulgaria 6.022 United States 6.023 Uruguay 5.924 Taiwan 5.925 Estonia 5.926 Spain 5.827 Israel 5.828 Malaysia 5.729 France 5.730 South Africa 5.631 Mauritius 5.632 Hungary 5.533 Botswana 5.334 Belgium 5.335 Peru 5.336 China 5.237 Portugal 5.138 El Salvador 5.039 Trinidad and Tobago 5.040 Italy 4.941 Colombia 4.942 Tunisia 4.943 Jamaica 4.944 Mexico 4.945 Croatia 4.846 Thailand 4.847 Slovak Republic 4.848 Namibia 4.849 Costa Rica 4.850 Korea 4.751 Brazil 4.752 Panama 4.653 Russian Federation 4.654 Latvia 4.555 Zimbabwe 4.456 Sri Lanka 4.457 Jordan 4.458 Czech Republic 4.259 Romania 4.260 Nicaragua 4.161 Dominican Republic 4.162 Poland 4.163 Turkey 4.164 Argentina 3.965 Morocco 3.866 Ecuador 3.767 Vietnam 3.768 Honduras 3.769 Venezuela 3.770 Greece 3.671 Guatemala 3.672 Ukraine 3.573 India 3.474 Bolivia 3.475 Paraguay 3.276 Indonesia 2.977 Philippines 2.678 Nigeria 2.579 Haiti 2.3

MEAN: 5.0

Irregular payments in tax collectionAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

In your industry, how commonly would you estimate that firms make undocumented extra payments or bribes connected with annual tax payments?(1= common, 7= never occurs)

Public Institutions Corruption

Anexo I Gráficos Estadísticos

7.04 - 4 **18 de 26

Rank Country Score 1 7

1 Finland 6.62 Denmark 6.43 Sweden 6.44 Iceland 6.35 New Zealand 6.36 Singapore 6.27 Australia 6.18 United Kingdom 6.09 Hong Kong SAR 5.910 Norway 5.811 United States 5.612 Canada 5.613 Switzerland 5.514 Lithuania 5.415 Taiwan 5.416 Israel 5.317 Netherlands 5.318 Chile 5.319 Bulgaria 5.220 Ireland 5.121 Austria 5.122 Germany 5.023 Belgium 5.024 Tunisia 4.925 Uruguay 4.926 Spain 4.927 China 4.828 Botswana 4.729 France 4.630 Slovenia 4.631 Japan 4.632 Estonia 4.633 Italy 4.634 Portugal 4.535 Korea 4.336 South Africa 4.237 Sri Lanka 4.238 Dominican Republic 4.239 Brazil 4.240 Colombia 4.141 Malaysia 4.142 Jordan 4.143 Mexico 4.044 Costa Rica 3.945 Croatia 3.846 Thailand 3.847 Nicaragua 3.848 Russian Federation 3.849 El Salvador 3.850 Greece 3.851 Hungary 3.752 Ukraine 3.753 Venezuela 3.754 Panama 3.755 Latvia 3.656 Mauritius 3.657 Trinidad and Tobago 3.658 Namibia 3.559 Vietnam 3.560 Peru 3.561 Jamaica 3.562 Morocco 3.363 Honduras 3.364 Poland 3.265 Czech Republic 3.166 Ecuador 2.967 India 2.968 Argentina 2.969 Slovak Republic 2.870 Romania 2.871 Indonesia 2.672 Turkey 2.673 Bolivia 2.674 Guatemala 2.675 Paraguay 2.676 Zimababwe 2.577 Haiti 2.378 Bangladesh 2.279 Philippines 2.180 Nigeria 2.0

Irregular payments in public contractsAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

MEAN: 4.2

In your industry, how commonly would you estimate that firms make undocumented extra payments or bribes connected with public contracts (investment projects)?(1= common, 7= never occurs)

Public Institutions Corruption

Anexo I Gráficos Estadísticos

7.07- 519 de 26

Rank Country Score ´ 1 7

1 Finland 6.92 Denmark 6.83 New Zealand 6.84 Australia 6.75 Iceland 6.76 United Kingdom 6.77 Sweden 6.68 Germany 6.59 Singapore 6.510 Switzerland 6.411 Netherlands 6.412 Hong Kong SAR 6.413 Austria 6.414 Ireland 6.315 Canada 6.316 Norway 6.317 Israel 6.118 Portugal 6.119 United States 6.120 Japan 5.921 Belgium 5.922 Uruguay 5.923 Slovenia 5.724 south Africa 5.725 Spain 5.626 France 5.627 Botswana 5.528 Jamaica 5.429 Mauritius 5.330 Trinidad and Tobago 5.331 Taiwan 5.332 Namibia 5.333 Estonia 5.334 Lithuania 5.335 Chile 5.236 Tunisia 5.237 Jordan 5.138 Hungary 5.139 Malaysia 5.140 Bulgaria 5.041 Italy 5.042 China 4.943 Korea 4.844 Costa Rica 4.845 Sri Lanka 4.746 Tahailand 4.747 Brazil 4.748 Greece 4.749 Vietnam 4.550 Colombia 4.451 India 4.452 Czech Republic 4.253 Croatia 4.254 Zimbabwe 4.155 Dominican Republic 4.156 Nicaragua 4.057 Poland 3.958 Latvia 3.959 Mexico 3.860 Panama 3.761 El Salvador 3.662 Russian Federation 3.663 Bangladesh 3.464 Ukraine 3.465 Turkey 3.466 Morocco 3.467 Slovak Republic 3.368 Nigeria 3.269 Argentina 3.170 Guatemala 3.171 Honduras 3.072 Romania 2.973 Venezuela 2.974 Ecuador 2.775 Peru 2.776 Paraguay 2.677 Bolivia 2.578 Philippines 2.579 Haiti 2.580 Indonesia 2.0

Irregular payments in judicial decisionsAccording to The Global Competitiveness Report World Economic Forum 2002 - 2003

MEAN: 4.8

In your industry, how commonly would you estimate that firms make undocumented extra payments or bribes connected with getting favorable judicial decisions?(1= common, 7= never occurs)

Public Institutions Corruption

Anexo I Gráficos Estadísticos

7.11 - 6 *20 de 26

Rank Country Score 1 7

1 Finland 6.92 Iceland 6.83 Denmark 6.84 Australia 6.75 Aunited Kingdom 6.76 Norway 6.67 New Zealand 6.48 Singapore 6.39 Hong Kong SAR 6.310 Ireland 6.211 Switzerland 6.212 Sweden 6.113 Canada 6.014 Austria 6.015 Israel 6.016 Netherlands 6.017 United States 5.918 Germany 5.719 Portugal 5.720 Belgium 5.521 Spain 5.522 Estonia 5.423 Japan 5.324 Hungary 5.325 South Africa 5.326 Slovenia 5.127 Chile 5.128 Italy 5.029 France 5.030 Taiwan 4.931 Greece 4.832 Uruguay 4.833 Namibia 4.834 Korea 4.835 Botswana 4.836 Mauritius 4.837 Tunisia 4.738 Lithuania 4.739 Malaysia 4.740 Latvia 4.741 Slovak Republic 4.642 Trinidad and Tobago 4.643 Jamaica 4.644 Turkey 4.645 Jordan 4.646 Thailand 4.547 Costa Rica 4.448 Croatia 4.449 Brazil 4.450 China 4.451 India 4.452 Russian Federation 4.353 Panama 4.254 Romania 4.255 Peru 4.256 Poland 4.257 Meico 4.058 Bulgaria 3.959 Bolivia 3.960 Sri Lanka 3.961 Czech Republic 3.962 Argentina 3.863 Nicaragua 3.764 Honduras 3.765 Haiti 3.766 Vietnam 3.767 Dominican Republic 3.768 Morocco 3.669 Colombia 3.670 Ukraine 3.571 Zimbabwe 3.572 El Salvador 3.573 Philippines 3.574 Ecuador 3.575 Paraguay 3.476 Nigeria 3.477 Indonesia 2.978 Venezuela 2.979 Bangladesh 2.8

Business costs of corruptionAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

MEAN: 4.8

Do other firms' ilegal payments to influence government policies, laws, or regulations impose costs or otherwise negatively affect your firm?(1= impose large costs, 7= impose no costs/not relevant)

Public Institutions Corruption

Anexo I Gráficos Estadísticos

7.12 - 7 *21 de 26

Rank Country Score 1 7

1 Singapore 6.42 Denmark 6.03 Finland 5.84 Switzerland 5.45 Hong Kong SAR 5.26 Netherlands 5.17 Iceland 5.08 Norway 4.79 Austria 4.710 New Zealand 4.611 Canada 4.512 China 4.413 Tunisia 4.414 Botswana 4.315 United States 4.316 Chile 4.117 Sweden 4.118 Australia 4.019 Israel 3.920 United Kingdom 3.921 Vietnam 3.822 Uruguay 3.723 Belgium 3.724 Malaysia 3.625 Portugal 3.626 Germany 3.627 Spain 3.428 Namibia 3.329 Slovenia 3.230 Taiwan 3.231 South Africa 2.932 Estonia 2.833 Jordan 2.834 Italy 2.735 Greece 2.636 Thailand 2.637 Morocco 2.638 Hungary 2.439 Korea 2.340 France 2.341 Mexico 2.342 Latvia 2.243 Poland 2.244 Mauritius 2.245 Czech Republic 2.246 Sri Lanka 2.147 Ireland 2.148 Croatia 2.149 Costa Rica 2.050 Japan 2.051 Brazil 2.052 El Salvador 2.053 Lithuania 2.054 Bulgaria 2.055 Trinidad and Tobago 1.956 Russian Federation 1.957 India 1.958 Dominican Republic 1.859 Jamaica 1.760 Slovak Republic 1.761 Indonesia 1.762 Honduras 1.763 Romania 1.664 Turkey 1.665 Peru 1.666 Ukraine 1.667 Colombia 1.668 Bangladesh 1.669 Philippines 1.570 Nicaragua 1.471 Venezuela 1.472 Panama 1.373 Zimbabwe 1.374 Nigeria 1.375 Ecuador 1.276 Guatemala 1.277 Bolivia 1.278 Paraguay 1.279 Haiti 1.1

MEAN: 2.8

Public trust of politiciansAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

Public trust in the financial honesty of politicians is(1= very low, 7= very high)

Public Institutions Corruption

Anexo I Gráficos Estadísticos

7.08 - 8 ***22 de 26

Rank Country Score 1 7

1 Israel 6.32 Taiwan 5.73 Spain 5.64 Belgium 5.35 singapore 5.36 China 5.27 Estonia 5.28 France 5.19 Croatia 5.110 Ireland 5.111 Korea 5.112 Australia 5.013 Finland 4.914 Canada 4.815 Mexico 4.816 Slovenia 4.817 Brazil 4.818 Italy 4.819 Lithuania 4.820 El Salvador 4.821 Japan 4.722 Hong Kong SAR 4.723 Portugal 4.624 Botswana 4.625 United States 4.626 Latvia 4.627 Malaysia 4.628 Austria 4.529 United Kingdom 4.530 Norway 4.431 Tahailand 4.432 India 4.433 New Zealand 4.434 Turkey 4.435 Czech Republic 4.336 Uruguay 4.337 slovak Republic 4.338 Tunisia 4.339 Mauritius 4.340 Switzerland 4.341 Vietnam 4.342 Greece 4.243 Sri Lanka 4.244 Denmark 4.245 Jordan 4.146 Namibia 4.047 Colombia 4.048 Iceland 4.049 Sweden 4.050 Bulgaria 4.051 Dominican Republic 4.052 Hungary 4.053 south Africa 4.054 Morocco 3.955 Costa Rica 3.956 Poland 3.857 Russian Federation 3.858 Germany 3.859 Netherlands 3.860 Peru 3.761 Chile 3.662 Nigeria 3.563 Honduras 3.564 Philippines 3.565 Ukraine 3.466 Indonesia 3.467 Ecuador 3.368 Argentina 3.369 Jamaica 3.370 Trinidad and Tobago 3.171 Nicaragua 3.072 Paraguay 3.073 Romania 2.974 Haiti 2.875 Panama 2.676 Bangladesh 2.577 Bolivia 2.478 Zimbabwe 2.479 Venezuela 2.180 Guatemala 2.0

Frecuency of payments or bribesAccording toThe Global Competitiveness Report World Economic Forum 2002-2003

MEAN: 4.1

In the past three years, the frequency and extent of additional payments or bribessuch as those listed in questions 7.01-7.07 (1= has increased significantly, 7= has decreased significantly

Public Institutions Corruption

ANNEX II METHODOLOGY PROPOSED

BY TRANSPARENCY INTERNATIONAL (TI) Ø “Integrity Pacts” (IP) They guarantee a broad participation and fair

competence in equal conditions promoting transparency, openness and trust virtuous circles in public biddings. The IP are formal agreements between the governments or their dependencies and the participants in a bidding process, that are established in order to prevent irregular or corrupted practices from distorting the competitiveness and affecting the rationality of an administrative decision. The IP are signed in the presence of Social Witnesses, which are members of the civil society, during a bidding process of a good or service that has been offered to the government or its dependencies.

Ø “Social Witness” (SW) This is a new figure that will have full access to the

linked information and documentation through the whole bidding process, and it may constitute an extraordinary and healthy precedent in favor of legality and transparency, being a witness in compliance with norms and regulations. The social witness enhances the access to public information by means of bulletins and information given to the media. The SW must be a recognized and trusted public figure and must have specific capacity and general recognition regarding the issue he will witness. As a sine qua non condition, he must be absolutely independent from all the parties involved in the process, in order to avoid conflicts of interest. A conflict of interest is basically an ethical issue. It belongs to the conscience, and a person of principles knows perfectly well in which cases he must excuse himself from participating in an issue subject to his consideration, deciding not to be involved. In the IP, the SW, supported by the work team he designates, participates, among others, in: checking the basis of the bid and the bidding notice; he/she is present in all the sessions that are held with possible bidders to clarify any doubts they may have; he receives the unilateral integrity declarations from the parties and he witnesses the delivery of technical and economical proposals, as well as being present at the session where the awarding will be announced.

Ø “Unilateral Declarations of Integrity” this instrument contemplates the

commitment (individual) of ethics and morals in the bidding process as the essence of the IP and it is formed by the individual and the unilateral declarations of integrity from both parties: the public officers and the general directors of the bidding companies. The level of those who sign these declarations of transparency and integrity establishes the degree of commitment that is being assumed by the parties and will model the behavior of those who are participating. It makes transparency immanent.

23 de 26

ANNEX III SOME OF THE MOST SPECIFIC PROBLEMS COMMON TO THE BIDDERS IN LATIN AMERICA

Ø Lowest solvent proposal

The procurement of public work at the lowest price means the acceptance, by the entrepreneurs, to execute the projects with prices that are not remunerative This results in:

• Descapitalization of the construction companies; • Abandonment of the works; • Low quality of the works; • Omitting employers’ fiscal obligations

Ø Bid calls and bidding bases:

• An excess of documentation when registering in a bid for public work that can

be used for disqualifying the bidders due to the discretional criteria of the public officers.

• It is a general practice to summon a bid without having the finished projects

and the work engineering, thus generating variations in volume and additional concepts that were not considered in the original project, all of which lessens the original budget of the companies, that will have to establish additional agreements.

• The executing times of the works are not set according to the magnitude and

complexity of the works.

• The requirements and documents requested are not always compliant with the complexity and magnitude of the works.

Ø Clarification meetings:

• It is common that during these clarification meetings, the answers given to the

entrepreneurs’ doubts are not totally clear, which causes different interpretations among the bidders.

Ø Presentation and proposal opening (technical and economical):

• Disqualification for reasons that deal with the way of presenting the

documentation (order of the documents, color of the tabs, the lack of a signature in the documents).

• The lack of an adequate review of the technical and economical proposals that can effectively determine which proposals are solvent and reliable, instead of just considering the costs.

Ø Decision on the bid:

§ Lack of a detailed analysis of the proposals and of the foundations of the

bidding criteria. § Adjudication to the lowest proposal and not to the lowest and most reliable,

because public officers fear appeals from the companies. § Presentation of the companies’ appeals as a result of the bidding, which will

cause delays and overpricing in the works.

24 de 26

8. REFERENCES 1 Informe global de corrupción 2003 Pág. 8 2. Lori Udall “El Banco Mundial y la Rendición Pública de Cuentas: ¿Algo ha cambiado?”, eds., Jonathan A. Fox y L.D. Brown, la lucha por la rendición de cuentas: El Banco Mundial, las ONG y los movimientos comunitarios (Cambridge, Ma: The MIT Press, 1998). 3 Reglas claras negocios transparentes, SECODAM – México 2002 4 and 14. Informe Global la Corrupción 2003, Transparencia Internacional 5 www.tilac.org/licitaciones.htm

6 www.ftaa-alca.org 7 “ Esfuerzos antisoborno que producen beneficios en todo el mundo”, Kiplinger Business Forecasts, 28 de junio de 2001, www.kiplingerforecsts.com 8 BID Boletín de prensa, 26 de junio 2002, www.iadb.org/exr/PRENSA/2002/cp14202e.htm 9 Los documentos del Comité de Expertos se pueden ver en: www.respondanet.com/english/index.htm 10. www.ocde.org 11 www.ard-decentralization.com/Colombia.htm 12 Diario Oficial de México – 4 diciembre 2000 1ª. Sección 13 Diario Oficial de México – 22 de abril 2002 15 Clarín (Argentina), 19 de septiembre de 2001 16 Transparency International – Comunicado de prensa Informe Global de la Corrupción 2003, Novedades regionales, enero 22, 2003. 17 Índices de Percepción de la Corrupción (TI) 2002 18 The Global Competitiveness Report World Economic Forum (WEF) 2002–03 9. INTERESTING WEBSITES

World Bank www.worldbank.org/publicsector/anticorrupt/ International Chamber of Commerce (ICC) www.iccwbo.org E-government Mexico www.compranet.gob.mx Ethics Resource Center www.ethics.org Council of Europe (COE) www.coe.fr Committee of Sponsoring Organizations of the Treadway Comisión (COSO) www.coso.org Financial Action Task Force on Money Laundering (FATF) www.oecd.org/fatf Organization of American States (OAS) www.oas.org

25 de 26

International Criminal Police Organization (INTERPOL) www.interpol.int/Public/Corruption/IGEC/Default.asp Organization for Economic Co-operation and Development (OECD) www.oecd.org/daf/nocorruption United Nations (UN) www.uncjin.org Anti – Corruption Project and Accountability of the Americas www.respondanet.com Transparency International (TI) www.transparency.org Transparencia Mexicana (TM) www.transparenciamexicana.org.mx SPECIAL GRATEFULNESS: Ø International Transparency (IT)

Dr. Peter Eigen President of Directory Ø Transparencia Mexicana (TM)

Lic. Bernardo Sepúlveda Member of the Governing Council

Lic. Federico Reyes Heroles President

C.P. Humberto Murrieta Executive President Ø Secretariat of the Public Function (SFP) (Mexico)

Mtra. Josefa Casas Assistant General Director International Relations

Lic. Rodrigo Arrangóiz Assistant Director International Relations

26 de 26