Director, International Defence Programme Transparency International

1. INTERNATIONAL EFFORTS FOR INTEGRITY AND EFFECTIVE MANAGEMENT OF DEFENCE Presentation to the Euro Atlantic Initiative Closing Conference on TransparencyMay 14, 2009 Director, International Defence Programme Transparency International Mark Pyman

2. “We reiterate our commitments to the ideals that inspire the work of Transparency International and express our full confidence and willingness to work together to combat corruption in Mexico and throughout the world” Vincente Fox, President of Mexico 1993, by ex World Bank staff Independent, Not for Profit In 100 countries Addresses corruption through constructive measures Secretariat in Berlin Funded by charities, gov’ts, individuals and companies Transparency International International Defence Programme Since Jan 2004 Joint military + civilian team International scope Implementing and leveraging new approaches Build integrity + reduce corruption In Defence Ministries, Armed Forces, national security. Funding: DFID, NATO Swedish MFA

3. Why care?What Defence people tell us Defence • Waste of scarce resources • It impacts operational effectiveness • It reduces public trust in the armed forces • Defence corruption can be very easy; and a target for politicians, re-election funds and reward for favours • International companies shun corrupt economies National security • Corruption can completely invalidate security strategies • Major corruption issues in Peace support, counter-insurgency, counter-narcotics, border security, state building • Nexus of military and exploitable assets in country • Little or no doctrine, policy on how to approach the issue Corruption in defence and security is a strategic issue

4. 1. With global defence industry and export governments - Tackle supply side issues - Engaged Lord Robertson, ex NATO Chief - Aim: a single global defence a-c code - Europe has developed and signed up to a new defence anti-bribery standard. Covers all countries, all defence companies. - Next step is to sign up the US. - Engage with Russia - Engage other major exporters, TI Defence Programme 2. With Defence Ministries Developing constructive measures to build integrity and reduce defence corruption in real situations in nations; Poland, Ukraine, Colombia and others. Capability building workshops • 3. With NATO • 50 Countries supporting this defence a-c initiative • 5 day training module - 3 international courses, 20 nations: One national: Kabul • Integrity self assessment process for nations: Ukraine, Bosnia, Norway in 2008 • Also in NATO Programme: Compendium of good practices (DCAF leading) • 4. With conflict countries • Afghanistan, Colombia, Balkans • Lessons learned by forces in theatre • Doctrine needed on interventions • Integrity, a-c training for MOD/Army/Police • Approach to corruption as strategic issue • 5. Development and research • World Bank, United Nations Peacekeeping • African Development Bank, African Union • Tunis workshops July 09 - 12 African nations • Conduct standards for defence officials • Opinion surveys, eg Trust in the military • Procurement integrity research

5. Governments: Practical reform areas • Transparency of defence policy and defence budget • Making a sound diagnosis of the key corruption and integrity issues • Developing a defence integrity and corruption risk action plan • Leadership days: Making the subject discussable and actionable • Engaging civil society • Engaging the defence contractors • Setting clear standards of business conduct for officials and officers • Using surveys and metrics to monitor performance • Establishing dedicated integrity training modules • Using independent monitors on public procurements • Raising the transparency of offsets • Reform of the defence procurement organisation • Developing doctrine for military in interventions

6. POLITICAL PROCUREMENT Defence Corruption risks - diagnostic OTHER PROCESSES DEFENCE POLICY not approved or published SALARY CHAIN WRONG PRODUCT PROPERTY SALES INCORRECTLY Specified or Evaluated DEFENCE BUDGETS not transparent or debated SECRET BUDGETS SINGLE SOURCE LEADERSHIP Appointments, Accountability OTHER INCOME SOURCES COLLUSIVE BIDDERS PRIVATE BUSINESSES ORGANISED CRIME AGENTS/ BROKERS PROMOTION, TRANSFERS CONTROL OF INTELLIGENCE SMALL BRIBES FINANCING PACKAGE SUBCONTRACTORS CONSCRIPTION REGIONAL POLICY SELLER INFLUENCE ROADBLOCKS NEXUS OF DEFENCE AND ASSETS eg Oil OFFSETS ETC

7. Diagnostic: Integrity Self Assessmentaimed at national Defence and Security Ministries • With NATO, Poland • Questionnaire of 50 broad questions • Reviewed by group of 5-10 nations • Expert team follow-up • Pilots • Bosnia July 08 • Ukraine Oct 08 • Norway Nov 08 • Review Nov 08, finalised Feb 09 • 2009: Reviews in Afghanistan, Croatia, Montenegro, Latvia, Macedonia Topics Democratic control and engagement Anti-Corruption policy in defence and security Personnel – behaviour, policy, leadership, training, discipline Planning and budgeting Procurement Operations Other financial processes Engagement with defence companies

8. Defence Action Plan Polish Ministry of Defence - start point - 2005 + Awareness of corruption and schemes within the MoD and military Many organisations involved in anticorruption activity: Control Department (MoD) Military Police Audit Bureau (MoD) Military Prosecutors Office Military Counterintelligence Supreme Chamber of Control − No coordination (in the MoD) No external cooperation Lack of a prevention bureau Very few system changes Lack of an anticorruption policy = Report on corruption – prepared, but no feedback occurred

9. Anticorruption Reforms in the Polish Ministry of Defence Code of Conduct Existing regulations: Code of Conduct for Professional Soldiers Both too general (no details, no examples) for practical enforcement Code of Conduct for Civil Servants Act on lobbying in law making process Does not cover industry lobbying Code of conduct for mil. & civil. per. in relationship with defence industry: General common sense principles Detailed regulations: Everyone pays own bills No gifts Contact with arms producers: directly or at arms fairs. No agents Common PR events: only linked with contract signing or implementation No cooperation or participation in events sponsored by industry

10. II. Anticorruption Reforms in the Polish Ministry of Defence Reforms in the procurement system Stronger regulation on conflict of interests More electronic auctions More information on the internet More tests; ordered by buyer, not by seller Supervision of key points by the anticorruption bureau: Operational requirements Do they enable fair competition? Technical requirements Are they accurate and objective? Single source proc. or tender Is the single source proc. justified? Evaluation criteria Are they accurate and objective? Quality assurance, testing Are the proper tests expected? The contract Is it accurate and assure MoD rights?

11. Leadership daysMaking the subject discussable • The TI Defence Programme has been pioneering high level discussions at Ministerial level on addressing defence integrity and corruption risk • Attendance: 15 to 30, typically senior forces officers and leadership of the MOD. Duration: One day • Typical agenda: • Understanding the problem • Diagnosing the issues for that country • Developing ways to address the problem • Engaging with staff and forces personnel • Outlining a plan High level facilitated discussion can transform the readiness of leaders to engage

12. Working with Defence Contractors International collaboration - TI facilitation • Initiated by TI in 2005. Chair is Lord Robertson, former Secretary General of NATO. US and European companies US: AIA, Lockheed Martin, Raytheon, Northrop Grumman, Boeing, Rockwell Collins, and others EU: ASD, EADS, Thales, BAES, Finmeccanica, Dassault, Saab, Ruag, Thyssen, Rolls Royce, MBDA, Kongsberg, Agusta Westland, VT, SBAC • Led to a pan-European initiative, now public • Now moving to training/education of second level defence companies National Ministry collaboration with defence contractors • New approach, High scope for benefits • Defence Ministries can lead; can use top tier companies to assist • More scope: Defence Integrity Pacts • More scope: Insist on company anti-corruption compliance Programmes

13. The ‘Common Industry Standard’ No-corruption commitment Active compliance Programme ‘Tone at the top’ Compliance with laws and regulations Extent of application - through to subsidiaries and affiliates Prohibition of corrupt practices Gifts and Hospitality Political Donations and Contributions Agents, consultants and intermediaries Integrity Programmes Sanctions Five pages, detailed text on agents (due diligence, agreements, etc)

14. Raising Business Conduct Standards inDefence Ministries and Armed Forces TI research: Purpose – to develop best practice for governments and armed forces in standards/rules for good ethical conduct Background: Numerous queries from media; apparent lack of clear guidelines in nations Scope: 60 country MODs contacted; 32 detailed responses • Europe: Albania, Bulgaria, Croatia, Denmark, Finland, Georgia, Germany, Ireland, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Russia, Serbia, Spain, Sweden, the Ukraine, UK • Africa: Kenya, Nigeria, South Africa, Tanzania, Uganda • Americas: Canada, Colombia, USA • Asia/Pacific: Australia, New Zealand, Pakistan

15. Research Conclusions Best Performers: UK, Australia, Chile, USA, Canada, Germany, Norway, Romania Structure: most countries relied on compliance-based regimes; better performing countries had ethics-based regimes backed up by hard rules Bribery: universally noted as outlawed, but most regulations were poorly developed Gifts and Hospitality: widely addressed; low reliance on quantitative regulations Conflicts of Interest: mostly poorly developed Post-Separation Employment: mostly not addressed Training: Mostly poor or very poor

16. NATO Training module - Five-day course Building integrity and anti-corruption Target: Military, civilians in the security sector at OF5 level Objectives: Strengthen integrity and reduce corruption Concept of transparency and good governance How to integrate integrity and corruption How to engage better with the public and civil society 2008: UK Defence Academy July 2008 NATO School Oberammergau, September 2008 Sarajevo Peace Support School, Bosnia, Dec 2008 Participants from 12-15 nations at each one 2009: Kabul Feb 2009, Kabul Oct 2009 Ukraine May 2009, Bosnia Dec 2009 Led by the UK Defence Academy with Transparency International

17. Course elements Workshop A NATO View Corruption inmy country Govt and Civil Society What is Corruption? Exercise Lecture/discussion Operations Iraq/Afghanistan - Organised crime - Media Personal conduct Legal enforcement Integrity & AC tools Mil corruption vulnerabilities Asset/eqpt disposal Exercise ‘Defence Procurement’ Conduct with industry Reform – The Bulgarian view Integrity Building - Change Management Processes Georgia MOD/NGO experience States in Transition Workshop Syndicate Presentations Integrity Building - How will I tackle it? Education as an Integrity Tool

18. Independent civil society oversightof major procurements • A good way of raising visibility • Respected people as monitors • Can be TI, or others • Used heavily in several countries • Intensive version - apply to major procurements only: Mexico, India • Light version - apply to all procurements eg India defence • Best practice: Mexico. Gov’t decides top 10 national procurements to be covered by Integrity Pacts • Example: Colombia:Procurement of 22 drug interdiction airframes • TI invited to monitor • ‘Defence Integrity Pact’ signed • Corruption risk review of • technical requirements • tender and contract documentation • evaluation criteria • Meetings with senior Military, Government officials, Independent Monitor and TI Colombia • Public reports

19. Colombia Defence Integrity Pact - Major Observations • Core Purpose and Capability - unclear • Future Capability - not considered • Simulation - not considered • Operational Evaluation - inadequate • Prototype Inclusion - unwise • Tender Evaluation Matrix - too operationally weighted • Pre and Post Contract Award - insufficient controls • Offset Programme - no transparency

20. Remedial measures • Offset contract to have same attention as main contract • Require tender prices with and without offsets • Set up dedicated team to deal with offsets • Insist on clear pre-award commitments • Stronger due diligence required on offset brokers and on companies receiving offset money • Set formal offset evaluation criteria • Publish the evaluation criteria and the result • Separate offset obligation from main evaluation • Require independent monitoring and evaluation • Require a public progress report each year • Require a post implementation audit of the offset outcome and who benefited • The issues • Can divert attention • Get less attention than main contract • Have unclear status in the evaluation • Multiple opportunities for individual reward • Poorly controlled • Happen later than contract award OffsetsNo transparency - theyare a significant corruption area

21. Concluding remarks + Countries actively engaging; Big companies engaged + NATO is a positive force for change + New measures work, are welcomed + Defence Ministries can lead their government in addressing corruption - and some are • Leaderships need confidence • Expert capability needs building • Many large exporting nations are complacent • Offsets are a scandalous dark area Key for success: Top level commitment + Civil society/ expert support

22. Thank you Mark Pyman Defence team contact: anne-christine.wegener@transparency.org.uk www.transparency.org www.transparency.org.uk www.defenceagainstcorruption.org