Address at the opening of the G20 Anti-Corruption Roundtable

28 February 2014

Sydney, NSW

Acknowledgements

Thank you co-chairs. Before I begin, I would like to acknowledge the custodians of the land on which we meet.

Introduction

I am delighted to give the opening address to the G20 Anti-Corruption Roundtable, hosted by the Australian Government and G20 Anti-Corruption Working Group.

Today, officials of the G20 governments are joined by representatives of academia, business and non-government organisations.

This is a distinguished group that can offer diverse and informed perspectives on current and emerging corruption risks and address the task of tackling corruption.

In Australia’s G20 Presidential year, my Government places great value in working with experts from different fields to ensure that we can collectively benefit from your knowledge and expertise in addressing this serious and costly problem.

Writing in 1779, Thomas Jefferson said, “Experience has shown that even under the best forms [of government] those entrusted with power have, in time, and by slow operations, perverted it into tyranny”.

The insight, captured by Jefferson's observation, is that even the best of political systems, no matter how well‑designed, can degenerate into the worst, by slow degrees, depending upon the integrity with which they are governed.

'Government' and 'governance' are different concepts: when we speak of 'government' we have primarily in mind the institutions which constitute the state; the mechanisms by which its affairs are conducted.

When we speak of 'governance', we speak of the way in which those institutions operate – the principles, values and standards which we expect of the state's ministers, judges and officials.

Without good governance, the best government, as Jefferson saw, is no guarantee against the deterioration of the state. And of all the threats to good governance, there is none more insidious - and potentially ruinous - than corruption.

Therefore we as leaders, have a high obligation to guard against corruption and so prevent Jefferson's nightmare of the descent into tyranny.

G20 priorities for 2014

The Anti-Corruption Working Group was established in 2010 by leaders in Seoul in recognition of the importance of combatting corruption to achieving broader G20 goals of growth and global financial integrity.

Four years on, this important initiative by leaders remains more pressing than ever. Despite promising signs of global economic recovery, the agenda still has a long way to go.

Promoting growth and creating jobs are the top priorities of Australia’s Presidency of the G20 in 2014.

To deliver these objectives, we will be focusing on two main themes:

  • Promoting strong economic growth and employment outcomes by empowering the private sector; and
  • Making the global economy more resilient to future shocks.

Central to our approach will be the development of country specific growth strategies: setting out practical actions to encourage trade, strengthen investment in infrastructure and make it easier to do business.

When we consider initiatives to boost employment, trade, infrastructure and investment, continuing our effort to combat corruption is of critical importance.

Corruption is, and remains, one of the greatest barriers to global growth.

Global Financial Integrity estimates that in 2011 alone (the most recent year for which the figures have been prepared), the developing world lost USD946billion in illicit outflows, including the proceeds of crime, corruption and tax evasion.

The World Bank has estimated that the cost of bribery worldwide is USD 1trillion annually. That is, by comparison a figure equal to approximately two-thirds of Australia’s GDP.

And, on the World Bank’s 2012 figures, is greater than the GDP of all but the 15 largest economies in the world. Or, to put the point differently, the annual cost of corruption is greater than that of the GDP of any of the 180 or so non-G 20 economies, and in fact greater than the GDP of some of the smaller G20 economies.

Analysis by the OECD has highlighted that corruption is a significant deterrent to foreign investment, which leads in turn to a loss of innovation and all the missed opportunities that that entails.

Corruption results in the diversion of funds from growth producing projects like infrastructure and other essential services.

It is also a major barrier to international trade as businesses lack confidence in the security of their investments and struggle to operate on a level playing field.

Combating corruption is for all those reasons a critical issue for all governments, and is something that calls for constant vigilance. In his 1994 book on the Federal Reserve System, The Creature from Jekyll Island, American scholar G. Edward Griffin wrote,
“To oppose corruption in government is the highest obligation of patriotism.”

It is a wise observation, which reminds us why corruption must be exposed wherever it is found.

Corruption is not just a threat to public institutions or private companies. It affects the industrial system as well.

In Australia we have recently seen serious allegations of widespread corruption within our trade unions, representing a threat to honest businesses and important projects.

In order to ensure those allegations are effectively investigated and that no stone is left unturned, the Prime Minister, the Minister for Employment and I recently announced the creation of a Royal Commission into trade union governance and corruption.

It is important to note that, in the industrial arena, corruption requires two or more parties, not just one, which is why the powers of the Royal Commission will be wide enough to extend to all industry participants, not just the trade unions.

Establishment of the Royal Commission is a significant decision, and demonstrates our Government’s commitment to stamp out corruption in all its forms and wherever it arises.

Within your current mandate, there are three specific issues that I would suggest warrant particular attention: judicial integrity, foreign bribery and the transparency of legal structures.

Judicial integrity

The 2013-14Action Plan requires G20 countries to ‘consider how to promote and protect the crucial role of the independence of the judiciary in combating corruption’.

An effective, independent and impartial judiciary is an essential part of any modern system of governance.

Public confidence in the administration of justice should be axiomatic but can never be taken for granted.

In addition to being a key element of an effective governance framework, an independent and high calibre judiciary is a key precondition for economic growth. The public and business need to see the rule of law is being upheld and administered impartially. I understand that yesterday, my friend, the distinguished Australian judge John Byrne, addressed you on this topic.

Foreign bribery

The bribery of foreign officials is another issue that is part of this Group’s mandate. This an area where despite good progress, much work remains to be done.

Among its many detrimental effects, foreign bribery skews competition, inhibits business growth and ultimately shrinks the global market for domestic exports and investment.

The nature of this problem is such that we must act collectively, and this is precisely where this Group can lead by example.

Transparency of legal structures

Finally, the transparency of legal arrangements and entities is something that resonates across the G20.

We continue to see legal structures being misused to avoid paying taxes, evade sanctions and launder the proceeds of corruption.

A 2011 study by the Stolen Assets Recovery Initiative (a partnership between the World Bank Group and the United Nations Office on Drugs and Crime that supports international efforts to end safe havens for corrupt funds) showed that 150 of 213 serious corruption trials investigated worldwide involved the use of at least one corporate vehicle to hide information about the beneficial owners, and that the estimated proceeds of corruption sought to be concealed in these cases was USD 56.4 billion.

It is critical to G20 goals that we ensure the real owners of legal arrangements who are the beneficiaries of corrupt and criminal payments are easily identifiable.

I understand that the Group is actively pursuing this goal, and the Australian Government supports your work in this area.

Purpose of the Roundtable

Today is an opportunity to take stock of the Working Group’s achievements thus far, and to consider what can be meaningfully done to build on this work.

As the Working Group’s 2013-14 Action Plan draws to a close, the development of a new Action Plan which provides a clear vision of the Working Group’s priorities, activities and outcomes is an ambitious undertaking, and again provides an opportunity to show why the G20 is such an important institution that can effect real change.

I will emphasise that point. It is one of Australia’s principle objectives for its G20 Presidential year, that it be marked by real and measurable reform and not merely pieties and aspirational statements.

An important priority for the Group should be the effective implementation of existing commitments and I urge the Working Group to stay the course, and deliver on these commitments.

Conclusion

May I conclude by encouraging you to look beyond just establishing more restrictive laws – it was Tacitus, in the Annals of Imperial Rome, who said
“The More corrupt the state, the more numerous the laws”.

The appropriate legal framework is a necessary, but not a sufficient tool in protecting a state from corruption. What is most important of all - and this a point made by among others, Transparency International - is to foster, by legislation, by governance arrangements and by widely accepted ethical standards, both in public and private sectors, a culture in which corruption is understood to be the evil that it is; that it is swiftly identified, decisively extinguished and firmly punished.

I encourage the development of a post-2014 mandate which approaches the task in that spirit and sets out focused, action-oriented goals directed towards areas where the G20 can make a real difference.

In closing, let me thank you all for being in Sydney today, and I encourage you to wholeheartedly engage and take to the next stage the challenge of eliminating corruption around the world.

Ends