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“Poverty is like heat –
you can’t see it,
so to know poverty
you must go through it.”

These were the words of a poor man in Ghana, a man who had to “go through it” every day of his life.

In our part of the world, we don’t.

We know about the extreme poverty. We see the pictures, read the figures, sigh over the statistics. But we don’t really know how it feels, how it permeates every aspect of life, how it traps you - every day.

Extreme poverty means living on less than a dollar a day. That is the grim reality facing 1.2 billion people every day.

2.8 billion people have twice as much: two dollars a day. A little better - but not much. There is no safety net, no options for breaking the cycle, no hope for a better future.

What the man in Ghana and billions of others have to endure, violates fundamental rights. It violates human dignity. It is our duty as human beings to provide a way out of this hopelessness.

Five years ago, at the UN Millennium Summit, the world’s leaders came together to address extreme poverty, and to act. They agreed on the Millennium Development Goals, a massive international effort to eradicate poverty, guided by concrete indicators. A set of clear goals - to be reached by 2015.

The fight against poverty is about letting children grow and develop, about securing fundamental rights such as health, education and participation, about creating opportunities for every individual to live a decent life.

It is also about building institutions and systems that deliver, that provide basic services and rights for the citizens of poor countries.

And it is about fighting corruption. Because in the fight against poverty, corruption is one of our worst and most entrenched enemies.

“A cancerous tumour ... one of the main obstacles to sustainable and equitable development” - to quote World Bank President Jim Wolfensohn.

Corruption is stealing from the very poorest, from those who have least and whose voice is the last to be heard. Let me give you an outrageous example - unfortunately only one of many.

In the city of Bangalore in southern India, one out of two women who give birth in a public hospital says she has to bribe a doctor to attend to her during delivery. As many as 70 per cent say they have to pay to be allowed to see their own child, the size of the bribe depending on the sex of the child: 300 rupees for a boy and 200 rupees for a girl. Many parents are afraid the child will be swapped for another if they don’t pay up. ( Global Corruption Report 2003)

Although corruption exists everywhere, there is a correlation between the degree and nature of corruption and the extent of poverty in the country. Whichever countries we choose as partner countries, we will have to confront the corruption problem in our development co-operation. However, the ways in which corruption manifests itself, and its consequences for society and individual, vary a great deal from country to country.

A few examples closer to home:

In many European countries the public can access information about donations to political parties in order to ensure transparency in the relations between private sector and political parties. But in Austria, Belarus, Bulgaria, Finland, Spain and Turkey the level of public disclosure is low or “hidden”. Donations are reported, but figures are “lumped together” in such a way that it is impossible to figure out who gave what to whom, when, and for what purpose. In Albania and Croatia there is no public disclosure whatsoever. ( Global Corruption Report 2004 )

Even in Norway we are not immune to corruption. But the corruption here is not a matter of life and death, never a part of our everyday life like it is in poor countries. Corruption does not deprive us of the welfare services we are entitled to. It does not affect our rights to health care, security, education. It does not touch us at a personal level.

In many developing countries corruption afflicts people every day of their lives. The police and the judicial system turn away the poorest, and deny them services they are entitled to. The poor are denied access to basic services and to information about administrative decisions that concern them; in fact they are deprived of any chance to influence their own situation. They may even be denied clean water, health care and education.

Why? Because they can’t afford to bribe public officials.

Corruption undermines the institutions necessary for building a country and ensuring its development. The figures are horrifying. According to recent figures from the World Bank, a conservative estimate for bribery annually world wide is about 1 trillion US dollars. This estimate does not include embezzlement of public funds (from central and local budgets), or theft (or misuse) of public assets.

The numbers are shocking. The consequences are enormous.

One example: Bangladesh. In 1999 the country attracted only half the foreign investment it might otherwise have had - because corruption scared off investors. The result is capital drought, lack of private sector development and rising unemployment.

But the good news is that we, the international community, have acquired some important national and international tools for fighting this evil. The UN Convention against Corruption was adopted by the UN General Assembly last autumn. It has been signed by Norway and 116 other countries. This is the first time a convention has been targeted specifically against corruption. It contains a number of innovative provisions, including provisions for the recovery of assets acquired by means of corruption.

The convention also has provisions concerning prevention, such as requirements for rules on public procurement, recruitment and transparency in the public administration, and concerning the criminalisation of certain acts committed by public officials.

But the signing and ratification of the convention are only a start. Ensuring that the provisions of the convention are implemented is a major challenge for developing countries, because they lack the necessary institutions and expertise. We must therefore assist them in their efforts to build the necessary institutional framework and technical expertise.

The government wants Norway to play an active role in the international co-operation on fighting corruption and economic crime. The efforts to mobilise support for international instruments, and their effective follow-up, are particularly important. G-8 countries referred to this in a statement pointing to the significant institutional progress in the fight against corruption in Georgia, Nicaragua, Nigeria and Peru.

“Good governance” is a key concept in development policy, and one that has a broad scope of application. In the fight against poverty, good governance refers primarily to the authorities’ capability and willingness to pursue policies that benefit the people. This means keeping track of the money coming in and going out. It means listening to the desires and needs of the people, letting everybody participate in decisions. Good governance is all about democracy.

But good governance is much more than financial management. It is also about security – being sure that those in power don’t abuse it. This is a matter of human rights. Good governance implies the sound management and equitable distribution of common resources, and respect for liberty, human rights and the rule of law, including the promotion of diversity in the media and NGO sectors.

Poor governance and corruption are often two sides of the same coin. Corruption undermines the principles of the rule of law and the individual citizen’s rights and security. Public revenues and other resources that should benefit the community disappear into private pockets. The poor are hit the hardest, and they are the least able to change the situation.

The fight against poverty cannot be won unless we eradicate corruption. The international community has at long last realised that it is so - but there is a long way to go.

Norway is actively involved in the fight against corruption on three fronts:

• We participate actively in international norm-building
• We support our co-operation partners’ own efforts to combat corruption
• We support “watchdogs” in civil society and the media
• And we strive to ensure that Norwegian development assistance is used effectively and as intended.

Together with like-minded countries in the South and the North, Norway has been a force in pushing anti-corruption initiatives high on the agenda of development policy fora such as the UN, the OECD Development Assistance Committee and the World Bank, as well as in our bilateral co-operation with the authorities in our partner countries. Heads of state openly admit that corruption is widespread and deeply entrenched. And they are acknowledge that they must combat corruption if they are to stand a chance in the fight against poverty. A number of African presidents have signed an agreement on assisting each other’s efforts to improve governance through a peer review mechanism under the New Partnership for Africa’s Development. This would have been unthinkable only a few years ago.

The anti-corruption efforts have gone through different phases. Initially, the challenge was to get the problem out in the open, and get rid of the taboo. That has been done. Norway contributed to that. The next phase focused on the establishment of regulatory frameworks and new control mechanisms and institutions. We have contributed here, too. In almost all our partner countries - in Asia, Africa and Latin America. Good governance efforts now account for about 17 % of the aid budget (2003).

But now, I believe the time is ripe for the most important phase, serious and vigilant implementation:

• Action through concrete steps to clean up government, through law enforcement and top-down measures;
• Action through mobilizing people in fighting corruption, through bottom-up approaches;
• Action through new international instruments of the UN and the International Financial Institutions, such as the UN Convention Against Corruption and the extended mandates of the IFIs in the area of Anti Money Laundering, FATF (Financial Action Task Force) and others.

Some countries are already taking steps in this direction. Nicaragua and Zambia have launched extensive anti-corruption campaigns with support from Norway and others. This has led to the arrest and prosecution of two former presidents, among others. In Malawi, the new president has taken bold steps. The last finance minister and other high-level officials are under investigation for corruption. Madagascar also has high ambitions on the anti-corruption front, and we must make sure that the follow-up is at the same level. Here, we are supporting the establishment of an anti-corruption bureau with extensive powers.

We had similar hopes for Kenya. Norway is consequently only working in anti-corruption and reform of the justice sector in Kenya. The situation at present is, however, very questionable. It seems that we are getting new confirmations on the fact we all know – corruption always fights back.

Political support is essential in order to achieve results in combating corruption at country level. Nigeria has a reputation of being one of the most corrupt countries in the world. But thanks to genuine political backing and some extremely brave people, we are beginning to see some encouraging results.

Combating corruption requires a coherent approach. It needs action along all three areas that I mentioned. Here, donors have important roles to play. Donors can monitor the use of their own development assistance. But this alone will not solve the partner country’s corruption problem. Far from it. In our project support we have tracked our own money and focused on ensuring that Norwegian money stay in the right place. But we must not limit our concern to what happens to our own money. We need to be alert to what happens to all the other funds in the system.

If corruption is to be stamped out, we must think in terms of governance reform more broadly. We must focus on quality assurance of our partner countries’ financial management systems. We must look at institutional structures, sets of rules, expertise and capacity. It is relatively easy to see the results of a single project that benefits a few people. The real challenge is to achieve results at the national level. Results that can be documented. In other words, we must view the picture from a broader perspective.

We must make sure that the country has an official policy of delivery on pro-poor policies and anti-corruption. And we must make sure that these public policies are not just words, but deeds as well. That central institutions receive the funding, the capacity building and the room for manoeuvre they need. That key personnel are recruited on the basis of their qualifications, and not their family connections. That sound control mechanisms are in place to ensure that funds are used as intended.

Here, public sector reform is key. Improved financial management is one of the most important areas of donor assistance in most poor countries. Weak ministries of finance, with marginal oversight over the flow of funds, in and out or off budget, and public procurement offices with weak capacity and legislative authority, leads to increased corruption. We are – together with other donors – working to strengthen the capacity of in financial management and public procurement. This means that we are directly involved with the quality of financial management in recipient countries. It means that we are more involved in the country’s overall use of public funds and monitor it much more carefully.

In addition, support to public control bodies such as the auditor general, anti-corruption institutions and public political institutions is imperative. Capacity building, competence building and legislative independence of these institutions are important parts of our support.

Part of our job as donors must be to, through our aid policies, make it easier to strengthen financial management and control, not to make it more difficult.

A “donor circus”, where one country might have to administer and report on 10 000 projects annually, does not make it easier to fight corruption. The “donor circus” breeds corruption. Recent reforms in development cooperation – on harmonization, coordination, disciplined donorship –helps to fight corrupt practices.

It is the total picture that counts in poverty eradication, and this also applies to the overall use of public funds, which includes the use of development assistance. This means that donors must work jointly in co-operation with recipient countries on ensuring that government budgets are in line with poverty reduction strategies and are implemented in an accountable way. Does the government budget have a high enough poverty profile in relation to the government’s own goals for poverty reduction? Is the money being used in accordance with the budget? Bringing all aid on budget, not off budget, and aligning with budget procedures is key in the fight against corruption.

This brings me to the question of budget support. It has been said that budget support is throwing money down an infinitely long, corruption-infested drain. I disagree. In my view, budget support that is combined with reforms in governance and strong financial management procedures is better for the anti-corruption efforts than the “donor circus” we have seen in previous years.

We evaluate the quality of the country’s public financial management very carefully in co-operation with the International Monetary Fund, the World Bank and other donors when we consider allocating money through budget support. In addition, the activities of key institutions are monitored by means of joint comprehensive reviews several times a year. Most of these reviews reveal a need for improvement in one or more areas. Consequently the mechanisms for tracing the flow of funds through the national budgets have become much better than they were five years ago.

Donors and partner countries have also become better at documenting results at the national level over the last few years. But we still need to work harder in this area. Performance Assessment Frameworks are now being established in Tanzania and Mosambik. In this way, progress can be monitored in terms of results for people. The Publish as you Pay-principle is important in combination with the PAFs. Here, action from above is combined with action from below – with mobilizing people against corruption. I have seen this at close range. When the resource allocations are published, in regions, districts, divisions, and all the way to the village and school or health clinic, people will see whether they have got what they are entitled to. If not, they protest. This “grass roots” approach to fighting corruption is very effective. I have seen it. This is how budgetary support and basket funding should be provided.

But budget support is not appropriate for every country. It is therefore important that we adopt the same broad approach to other countries as to the budget support countries, even though in these cases the money is being allocated directly to projects and sector programmes.

We will continue to work on improving policies and administration and on strengthening civil society’s control functions and civil society actors such as political parties, the media, and non-government organisations. Whether they are part of a functioning public sector or of civil society, these bodies serve as watchdogs, and they all play an important role in the efforts to promote good governance in developing countries. There is often a great need for support in all these fields.

But we must recognise that in order to achieve results in our development co-operation, we must be willing to take calculated risks. We must be very conscious of what the risks are and do what we can to minimise them. Every new intervention must be based on a thorough risk analysis.

Predicting where, when and how corruption may occur, and how to deal with it, must be a part of this risk analysis. We can then implement measures to deal with the identified risk factors in such a way as to ensure that the objectives of the assistance are affected as little as possible. We need to be sure that the expected results on poverty reduction are proportional to the risks we take.

In the last few years, development assistance to countries in transition from war to peace, from emergency relief to long-term assistance, has been high on the agenda. This is known as transitional assistance. Assistance in post-conflict reconstruction is particularly vulnerable to corruption. Lack of co-ordination and of capacity on the part of the authorities is one reason. Increased tolerance of leakage because of enormous procurement needs and time pressure is another. Post-conflict assistance is also characterised by a large degree of construction activity. This activity is in itself especially liable to corrupt practices, and there is a greater risk of this happening in situations marked by instability and confusion.

It is therefore important that transitional assistance is also used to ensure a functioning public administration in post-conflict situations. Although we know that this form of assistance is particularly vulnerable, we will not and cannot be more tolerant to corruption here than elsewhere. Again, the challenge is to find the most effective mechanisms for preventing money from going astray, and prevent emerging cultures of corruption in the new, post-conflict states.

East Timor is a good example. So far, corruption has been a relatively minor problem in the world’s newest state. But it would be naïve to imagine that an economy built on petroleum resources cannot easily fall prey to corruption. In such situations we must take precautions and support the establishment of a sound framework of prevention.

This brings me to another issue – the special challenges posed by the extractive industries, particularly in the petroleum sector. Norway is a strong force in the efforts to promote transparency in the extractive industries. The aim of the Extractive Industries Transparency Initiative (EITI) is to promote greater transparency in the cash flows between companies in the extractive industries and their host countries. This was originally a British G-8 initiative, supported by us from the outset.

The transparency provided by agreed reporting guidelines will help prevent corruption and promote equitable distribution of revenues. With regard to EITI, the Norwegian authorities are aligned with the Norwegian oil companies. We also acknowledge that we have a special responsibility for anti-corruption measures in our efforts to assist countries like East Timor, Nigeria and Angola in their development of institutions to manage oil and gas resources.

Ensuring that there is correspondence between petroleum revenues and actual production is an important step in reducing the risk of leakages. Thus the Norwegian Petroleum Directorate’s co-operation with the authorities in countries like Angola and East Timor includes training in technical control of the calculation of the volume and value of the oil and gas being produced as well as transfers of other anti-corruption expertise. In East Timor these efforts are supplemented by Norway’s co-operation with UNDP on strengthening the justice sector, and we are in the process of joining a programme co-ordinated by the UN for strengthening the parliament of East Timor. An important goal is to strengthen the parliament’s control function.

In 2002 the Norwegian Ministry of Justice launched an anti-corruption project headed by Special Adviser Eva Joly. She is internationally renowned for her role in investigating the ELF scandal in France, and has unique experience in this field. One of the tasks of the project has been to assist in the development of the government’s action plan to combat economic crime. The plan takes account of the challenges posed by the fact that economic crime is becoming more and more international. We are extremely pleased that Ms Joly has agreed to assist the Norwegian authorities in the field of development policy throughout 2005.

The white paper on development policy was recently debated in Parliament. The white paper devotes a lot of attention to the international fight against corruption. It proposes a number of measures in support of these efforts, including active follow-up of the UN Convention against Corruption in international fora, and the development of a robust follow-up mechanism. We must investigate ways in which Norway can provide its partner countries, at the bilateral and multilateral levels, with technical assistance and competence building so that they are able to implement the provisions of the convention. We must make use of policy dialogues with the authorities, financial support and co-operation with other actors to ensure that the appropriate anti-corruption measures are put in place in our partner countries.

Today’s topic posed a difficult question at the outset. Is Norway a spearhead in the fight against corruption? Spearhead might be too strong a word, considering the size of the problem and our limited means. But Norway has been an important contributor in the efforts to bring corruption out into the open and onto the development agenda. This might be our most important contribution: to ensure that this problem continues to receive the attention it deserves internationally - to be a voice for the millions whose life is plagued by corruption, who are not heard - the millions whose chance to beat poverty depends on our ability to eradicate the cancer of corruption.

And to take action!

Thank you for your attention.