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Diplomacy in Action

Combating Corruption and Bribery in APEC: Promoting Open Governance and Transparency Vital to Regional Economic Growth and Foreign Direct Investment

David M. Luna
Director for Anticrime Programs, Bureau of International Narcotics and Law Enforcement Affairs
ABAC-ACT Public-Private Partnership and Dialogue: Anti-Corruption and Illicit Trade
Kazan, Russia
May 28, 2012


Good morning.

As a co-chair of this Dialogue, I would like to thank ACT Chair Timur Eyvazov and the APEC Business Advisory Council (ABAC) for their leadership in APEC 2012 and our continued dialogue on combating corruption and illicit trade across the Asia Pacific region. Working together via effective public-private partnerships, we can help meet the governance and security challenges that threaten the prosperity of our economies, and the health and safety of our people.

The strong partnership between ABAC and the Anti-Corruption and Transparency (ACT) Experts’ Working Group promises to ensure progress against corruption and foreign bribery in 2012. We also applaud the Russian Federation for organizing the APEC-OECD workshop on combating bribery, held yesterday in Kazan. With the commitment of our APEC leaders, we have made transparency and anti-corruption efforts a cornerstone of the overall APEC agenda and a linchpin for improving societies and expanding markets across our economies. We also take note of the commitment by President Vladimir Putin during his inaugural address earlier this month to make anti-corruption a top priority in Russia, recognizing its role in attracting foreign direct investment (FDI) and promoting economic growth.

We can appreciate why business leaders have made fighting corruption and bribery a priority in their investment portfolios overseas. The impact of corruption on GDP growth and FDI in both advanced and developing economies is well-documented. Corruption stifles entrepreneurship and international investment as businesses are less inclined to invest in markets where corruption is rampant and kleptocrats abuse their positions for self-enrichment. Capital and FDI are timid, and savvy investors flee business climates where the playing field is uneven and the rule of law is unreliable.

As the ACT-ABAC illicit trade dialogue has established in recent years, corruption also opens the floodgates for cross-border illicit trade flows, which raise the costs of doing business and divert legitimate revenues into the coffers of transnational illicit networks. According to a 2011 World Economic Forum Report on Global Risks, “illicit trade is estimated to represent between 7 and 10 percent of the global economy – in some countries, illicit trade is the major source of income.”

The criminal entrepreneurs and illicit networks that smuggle tens of billions of dollars of illegal goods across borders each year – drugs, arms, humans, natural resources and endangered wildlife, counterfeit medicines, and pirated software, as well as embezzled public funds – not only sow insecurity and instability across the APEC region, but also cost APEC economies jobs and vital tax revenue, endangering the welfare and safety of our families and communities.

A supply chain is only as strong as its weakest link, and the proliferation of corrupt actors and criminal entrepreneurs forges new points of entry for all sorts of illicit trade, corroding the integrity of legitimate supply chains and harming the economic interests of our businesses and markets. The proliferation of counterfeit goods, for example, tarnishes brand reputations and reduces returns on innovation and investment.

Illicit trade creates unfair, unregulated competition for legitimate businesses across APEC economies. We must continue to dismantle illicit trade networks at every opportunity and prosecute criminal entrepreneurs and their facilitators who arbitrage weak and corrupt law enforcement systems and exploit internal border controls for illicit gain.

The ACT 5-year medium-term plan also rightly places a priority on promoting green and sustainable growth and encourages the ACT to work across APEC subfora to work through the governance challenges associated with protecting our environment and natural resources.

Environmental crimes such as the illegal timber trade and wildlife trafficking impose significant negative externalities on local ecosystems; distort markets; reduce revenues from eco-tourism and taxes; destroy the livelihoods of communities that rely on our precious biodiversity; and discourage companies from paying for licenses and making other responsible investments that promote transparency and accountability. A recent World Bank study found that illegal logging in areas such as those found in Southeast Asia reaps profits of USD 10-15 billion annually, while the probability that illegal loggers will be punished is less than 0.08 percent.

Beyond the threat posed to economic development, the illicit profits generated by “marriages of convenience” among different criminal actors and networks engaged in every type of illicit activity—from drug trafficking to counterfeit production to illegal logging and associated trade—could finance criminal and terror campaigns that endanger not only our markets but our collective security.

APEC, in concert and cooperation with other partners, is taking these threats seriously and is committed to combating corruption and dismantling crime-terror pipelines across the Asia Pacific region, especially where illicit activities and risks within the illegal economy threaten to harm licit commerce.

We cannot realize these objectives without the active and continued engagement of the private sector at every link in the global supply chain. Again, we welcome the opportunity that this ABAC-ACT dialogue provides to bring together senior government and business leaders to tackle corruption and illicit trade.

Collective action—on the part of governments, the private sector, and civil society—is essential to secure greater accountability, competitiveness, and supply chain integrity. As reflected in our ACT work plan, we must employ the full range of tools in our toolbox—ranging from tools to prevent corruption and enhance market integrity to tools to more effectively investigate and prosecute corruption and combat money laundering and illicit trade.

In closing, we must capitalize on our momentum here this week and in the coming months, including at the July 10-11 Phuket APEC Workshop on Combating Corruption and Illicit Trade: Tracking Cross-Border Financial Flows, International Asset Recovery, and Anti-Money Laundering Efforts. Other efforts in Chile, China, Malaysia, Peru and the Philippines will also strengthen our APEC regional efforts. We hope that our ABAC-ACT anticorruption and illicit trade dialogue here this week in Kazan is also recognized by leaders in both public and private sectors at the 2012 APEC Summit in Vladivostok this September.

We also hope that APEC, ACT, and ABAC can work with other partners such as the OECD and World Economic Forum (WEF) in advancing a global dialogue to combat corruption and illicit trade.

Russia’s active leadership in APEC and its participation in the OECD Working Group on Bribery will ensure that combating corruption, foreign bribery, and illicit trade will remain at the top of the list of priorities for APEC economies in 2012 and beyond. We also appreciate Indonesia’s active leadership and applaud their efforts to build on the ACT’s work in 2013.

The United States looks forward to further advancing APEC’s leadership in the coming years to work with other international partners to combat illicit trade; attack the financial underpinnings of transnational criminal organizations; strip criminal entrepreneurs and corrupt officials of their illicit wealth; and sever their access to the global financial system.

Finally, we also hope that the ACT continues to advance the work of last year's APEC High-Level Policy Dialogue on Open Governance and Economic Growth on ways that economies can work to enhance public trust by combating corruption and by committing to transparent, fair, and accountable governance, especially in a manner that empowers communities to monitor and voice their perspectives on government policies and the use of resources.

Through collective action, we will succeed in exposing criminal activities hidden behind legitimate fronts; protecting the integrity of our markets and financial system; promoting open governance that nurtures economic growth; and safeguarding the security of our citizens.

Thank you.

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