THE FORUM’S EIGHT PRINCIPLES OF ACCOUNTABILITY;  PROGRESS TO DATE

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PACIFIC ISLANDS FORUM SECRETARIAT

Suva, Fiji Islands

PRESS STATEMENT February 27, 2001

TRANSPARENCY INTERNATIONAL REGIONAL MEETING Tanoa International Hotel Nadi, Fiji Islands

July 25 – 27, 2001

Statement by Mr. W Noel Levi, CBE Secretary General Pacific Islands Forum Secretariat

"THE FORUM’S EIGHT PRINCIPLES OF ACCOUNTABILITY; PROGRESS TO DATE"

Distinguished Delegates, Ladies and Gentlemen, let me begin by thanking the organisers of this meeting for the invitation and in particular for giving me the opportunity to address this august gathering of representatives of the regional chapters of Transparency International. As you are all aware, the Leaders of the Pacific Islands Forum have given priority and emphasis to the debate on the issues relating to transparency and accountability for the past few years. This morning I want to share with you the Secretariat’s perception of the issue, a summary of what has been done to date, and an outline of what we want to do in the immediate future.

INTRODUCTION

Much has happened at the global scene over the past decade, and similarly, much has also happened in our region. Globalisation, changes and adjustments in the international trading system, the impact of the Asian financial crisis, the impact of climate change on the environment and the shift in geopolitical alliances since the end of the cold war have influenced the way we live and do things in our region. These external influences when added to our common features of small size, geographic isolation from the major global markets and our capacity constraints to deal with new emerging issues have, not made life easy for the Forum Island Countries.

One cannot talk about economic issues without talking about good governance, a topic which has become a regular item on the agenda of the international organisations in their dealings with member states. Promoting good governance in all its aspects, including ensuring the rule of law, improving efficiency and accountability of the public sector, tackling corruption, and commitment to social equity, is an essential element of the framework within which economies can prosper.

Government attitudes and policies towards good governance and accountability are also a critical pre-condition to attracting foreign direct investment and to generating sustainable economic growth. This is because investors have to weigh all risk factors into the cost of investment. For instance, uncertainty arising from discretionary decision making, or weak judicial systems, is a real cost to legitimate investors and "raises the hurdle" that they have to clear before committing to investment.

It also raises the ongoing rate of return targets, which ties up investment funds that would otherwise be available for in-country spending on labour and other services.

Lack of good governance and transparency encourages corruption in all societies, regardless of their stage of development, developed or developing. Very often corruption leads to gross misuse of power and resources which usually results in significant losses, to both the economy and to civil liberties, and consequently, to the public at large in terms of the provision of goods and services. This at the end of the day, very often leads to the loss of legitimacy, support from the population, challenges to governments and consequently, civil unrest. Some of these are evident in the challenge last year to the legitimacy of the democratically elected governments of the Solomon Islands and Fiji and similar situations are simmering in other member countries of the Forum which have the potential to erupt unless appropriate corrective measures are taken now.

Corruption in terms of bribery, nepotism and perversion of due process are each manifestations of weak governance and remain widespread in the Pacific. Their insidious effects also hamper economic growth and must be of major concern to governments, citizens and non-governmental organisations in developing and industrial countries alike. Most importantly, however, these sorts of corruption are entirely within our control. Even if we cannot control global economic forces, typhoons or malaria we can make our political systems transparent, accountable and fair - we can have good governance - and we can all enjoy the benefits.

Good governance helps to ensure that political, social, and economic priorities are based on a broad consensus in society and that the voices of the poorest and most vulnerable are heard in decision making. It is the foundation on which a nation’s aspirations and that of its people and livelihoods are built.

BACKGROUND

The negative effects of poor governance were a major concern at the 1996 Forum Economic Ministers Meeting which led to the adoption by the Pacific Islands Forum Leaders in 1997 of the Eight Principles of Accountability. These principles in general call for the promotion of openness with government information and, more significantly, the need for public scrutiny of the performance of governments and public officials. I have attached to copies of my statement for information and ease of reference the Forum’s Eight Principles of Accountability.

Since the adoption of the Eight Principles of Accountability, most Pacific Island Countries have undergone substantive public sector reform and private sector development strategies and programmes designed to generate economic growth and to improve standards of living. These adjustment programmes are still on-going and results to date have been rather mixed. Difficult decisions have to be made during this adjustment period, and not without some costs for some member states and their leaders.

EIGHT PRINCIPLES OF ACCOUNTABILITY

I would now like to briefly discuss the key points of the Eight Principles of Accountability. The first and third principles focus on transparency as the key in the fiscal management of the economy. They suggest that budgets be presented over a multi year framework in order that the implications of current and new fiscal policies can be well understood. A key element is the need to provide Parliament or Congress with all the information used to compile the budget in order that the economic effects can be better understood and debated. To enforce the need for and to ensure transparency and accountability, it is important that all national issues must be discussed in the setting of Parliament or Congress.

The second, fourth, fifth, sixth and seventh principles generally deal with accountability of government for its financial resources and the way in which these have been used. These are about the processes of reporting expenditure, the use of capital assets, the sanctions on those misusing these assets and resources and the powers of the relevant authorities to investigate these matters. This in turn is linked to efficient fiscal management by government. The importance of this aspect cannot be over emphasised. Fiscal management is important because of the impact it has on broad macroeconomic variables, such as the level of aggregate demand, national saving and investment, and the growth in monetary aggregates, not forgetting of course, its impact on the macroeconomic efficiency of resource allocation.

The eighth principle is basically meant for those countries with their own currencies as well as Central Banks. It reinforces the tradition of independent central banking system which provide an independent commentary on economic developments and the impact of fiscal policy on the economy.

In the 1997 Forum Communiqué, Forum Leaders amongst other things agreed to strong commitment by all members to create an enabling policy environment to encourage private sector development and enhance the competitiveness of their economies. They also acknowledged the importance of public accountability to economic development and agreed to implement legislation, supported by administrative measures to counteract undesirable financial activities in the region, noting that such activities undermined development. The Forum Secretariat was directed to accord high priority to facilitating the implementation of the outcomes of the Economic Ministers meeting and to report the progress of implementation to the 1998 Forum.

PROGRESS TO DATE

Progress reports on the implementation of the FEMM Plan of Action, including the Eight Principles of Accountability, have been provided to the Forum Leaders at their annual meetings since 1997. This year the Forum Economic Ministers agreed at their recent meeting in Rarotonga, Cook Islands, to submit to the Leaders a Draft Consolidated Forum Economic Action Plan, comprising the Consolidated Plan from 2000 with completed actions deleted and new principles and actions for 2001 added.

There have been considerable follow up actions in other areas as well, including a Forum Secretariat, UNDP, Pacific Financial Technical Centre and ESCAP Vanuatu office joint stock take exercise carried out in early 1998. Through a form of questionnaire, this exercise revealed a wide divergence among Forum member countries in so far as compliance and enforcement of the eight principles were concerned, in particular the distinction between intention to implement and the actual implementation process through the enactment of the appropriate form of legislation.

A further review was undertaken during a joint Secretariat/UNDP regional workshop in Nadi in April 1998, in which issues relating to progress was discussed and a programme of in-country and regional workshop was developed. An outcome of this Programme was the workshop conducted in Nadi last year, for Members of Parliament and Speakers. A similar workshop/seminar was again held in Nuku'alofa early this year.

The Forum Economic Ministers at their meeting a couple of months ago in the Cook Islands, considered progress in implementing the Eight Principles and highlighted the importance of continued monitoring, identification of impediments and sharing of experiences in this process.

The Ministers:

(a) welcomed the progress towards implementation of the Eight principles and recommit to implementing these in their own nations recognising assistance in doing so is available from the UNDP or could be sought from bilateral donors.

(b) requested the Secretariat to undertake a stock take and report to FEMM 2002 on Progress made with the implementation of the Forum’s Accountability Principles and the FEMM Action Plan.

(c) welcome the development of the Guiding Principles of Best Practices for FIC Legislatures and the commitment by the Pacific Islands Speakers Forum to review annually progress in legislative development in FICs against these best Practices.

(d) commended for adoption by the Pacific Islands Forum the Guiding Principles of Best Practices for FIC Legislatures.

CONCLUSION

Let me re-state again that governance and accountability are the core of the Forum Economic Ministers Action Plan. The implementation of the Eight Principles of Accountability is therefore essential and important in the regional promotion of these objectives. The efforts of the Forum cannot benefit the majority of the people of the region unless there is genuine goodwill and commitment from the public sector, the private sector and civil society. I believe organisations such as yours can do a lot more, by advocacy and by exerting pressure on governments in the region, a little more actively than what has been done to date. An important theme running through all of the Eight Principles of Accountability is the absolute need to discuss all issues of national importance in a Parliamentary setting as the only sure way to ensure and enforce transparency and accountability.

Over the past year, a number of the governments in the region, some by choice and others by force, had had no Parliamentary sitting but at the same time had been able to make binding decisions on sensitive national issues outside the scrutiny of parliamentary debate. The result as we have seen is more burden to the taxpayers, not to mention more hardship for the poor and disadvantaged sector of the community and the unnecessary loss of lives, as has happened in my own country Papua New Guinea, here in Fiji and also in the Solomon Islands.

Finally, I hope my elaboration and explanation of the Forum’s Eight Principles of Accountability has cleared up some grey areas in your understanding of what these principles are about, and more importantly the rationale for their development. I urge your organisation, NGO groups and civil society in the region to fully embrace these principles and promote the implementation of the objectives for which they were designed. Thank you for your attention.

ANNEX 1 FORUM EIGHT PRINCIPLES OF ACCOUNTABILITY

Principle 1: Budget processes, including multi-year frameworks, to ensure Parliament/Congress is sufficiently informed to understand the longer-term implications of appropriation decisions.

To be fully understandable, the budget needs to present all the details of budget performance including the results of audits and other evaluations, and the assessed impact including on the key objectives previously specified for major programs (showing estimates where final figures are not available).

The budget presentation papers also need to include forecasts of the key budget figures for the next two years together with the details of the assumptions on which they are based and the policy objectives they are meant to serve.

Existing commitments should be distinguished from new policies.

Budget data, including revenue, grant and expenditure data should be presented in a way that follows international practice and allows international comparisons.

Budgetary processes, including the full involvement of ministers, need to be directed specifically at the generation of good estimates, which are properly aligned with policy and program output intentions.

In keeping the management of budget implementation under review during the course of the year, the government should give the legislature and the public timely reports as the year proceeds, as well as at year’s end, which contain all of the details of actual budget performance which are needed for a full understanding of any impacts of deviations from the original budget policy intentions and estimates (using revised estimates where actual figures and results cannot be obtained).

Government operations should be subject to audit reports.

Principle 2: The accounts of governments, state-owned enterprises and statutory corporations to be promptly and fully audited, and the audit reports published where they can be read by the general public.

State-owned enterprises should be subject to the full force of the accounting, reporting, disclosure, and other relevant requirements of a modern regulatory framework for corporate governance adjusted to the circumstances of small island countries as appropriate.

Principle 3: Loan agreements or guarantees entered into by governments to be presented to Parliament/Congress, with sufficient information to enable Parliament/Congress to understand the longer-term implications.

The principle should be enshrined in the law.

Presentations to the Parliament/ Congress should be timely.

Principle 4: All government and public sector contracts to be openly advertised, competitively awarded, administered and publicly reported.

The award of contracts should be reported publicly and immediately. The principle should be enshrined in the law.

Principle 5: Contravention of financial regulations to be promptly disciplined.

The principal and subordinate laws and instructions governing fiscal and financial management should be comprehensive, up-to-date and workable.

Administration of the legal framework governing fiscal and financial management should be active and vigorous.

Ethical standards of behaviour for public servants should be clear and well publicised.

There should be ready public access to the administrative laws governing access to government benefits, the application of taxes, duties, and charges, etc., which should be as specific as possible and which should limit the exercise of discretion by public servants and other holders of public office to the minimum compatible with good administration.

The exercise of discretion in public administration should be guided by clear, published criteria.

Principle 6: Public Accounts/Expenditure Committees of Parliament/Congress to be empowered to require disclosure.

Principle 7: Auditor General and Ombudsman to be provided with adequate fiscal resources and independent reporting rights to Parliament/Congress.

The principle of statutory independence should be applied to the public auditor and the ombudsman.

The law which provides for the appointment and tenure of the public auditor, and the ombudsman, and which deals with their functions, operations and resourcing, should accord with international best practice in specifying the independent functions they are to perform and fully protecting their performance from being compromised.

The law should specify the right of the two office holders to unimpeded access to the Parliament/Congress where the office holder has grounds for believing that independence might be coming under threat.

Principle 8: Central bank with statutory responsibility for non-partisan monitoring and advice, and regular and independent publication of informative reports.

For additional information, contact: Ulafala Aiavao at UlafalaA@forumsec.org.fj 

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