Remarks

Remarks by Ambassador Patricia A. Butenis at the Conference on Good Governance

Dhaka

June 25, 2006

Mr. Mahmudur Rahman, distinguished panelists and guests, ladies and gentlemen, Asalamu alaikum and good afternoon.  Welcome to our Conference on Good Governance.  Let me start by thanking the American Chamber of Commerce for their support and co-sponsorship of this important conference.  Thank you, Andrew for suggesting a yearly conference with the Embassy and providing your support.  Also, Gafur, thank you for your hard work and support in the planning process.  We are also grateful to all the speakers and panelists who have graciously agreed to participate in the three seminars during our two-day conference. 

In my short time here, I have already been impressed by the warmth and hospitality of Bangladeshis.  What has impressed me even more is the resilience and creativity of people who are not just surviving but thriving under difficult circumstances.  This highlights not just the challenges Bangladesh faces, but more importantly, the potential Bangladesh has to develop on the foundations of its resourceful human capacity.  Bangladesh’s private sector is dynamic and resilient.  While state owned enterprises continue to struggle under a near insurmountable burden of debt and losses, private enterprises – from the smallest micro-enterprise to the largest industry giants like Square Group or Beximco, are growing significantly – some reporting double digit growth. 

Foreign investors are also seeing significant growth in the market and are reporting positive returns in the midst of political uncertainty and turmoil.  While the economic outlook may seem rosy from one perspective, there are serious challenges to business that are hampering growth.  The single largest challenge to economic stability and growth is poor governance.  Much has been written about governance in the papers recently.  In the last month alone, there were more than a half dozen editorial pieces in the mainstream media from experts bemoaning the lack of adequate governance in Bangladesh.  Newspapers are full of stories of corruption and non-transparent institutions.  The public is becoming uneasy with the lack of progress in this area and is demanding better from their politicians and leaders. 

I don’t need to go into the details of how governance challenges are affecting the economy.  Experts tell us that more than two percent of GDP is lost to corruption and lapses in governance.  In addition to that, the reputation of Bangladesh both internally and globally suffers greatly.  Investment is going to all countries in the region  and Bangladesh has recently generated a lot of interest from international investors.  Governance failures prevent this interest from turning into significant investment in the near-term.  When we in the embassy talk about corruption and transparency, and we are told, “but Bangladesh’s economy is doing well”, our answer is “not as well as it could be doing and not as well as the people of Bangladesh deserve”

The broad concept of governance -- the act, process or the power of governing – applies to all aspects of a government’s relationship with the people.  Governance refers to the broad set of actions that a government undertakes to ensure that social, political, and economic mechanisms continue to function effectively.  Good governance, then, results from actions of a representative government that are transparent, predictable, efficient, and institutionally sound.  Establishing good governance in Bangladesh requires reforms of the state generally – and more specifically of the institutions, processes, and mechanisms of governance. 

The goal of this conference is to get to some concrete solutions to the economic governance problems in Bangladesh.  To attack the problem at its root we cannot just focus on government reforms.  Weakness in governance is most visibly highlighted by rampant corruption in government to business relations, but it does not end there.  To tackle corruption, we cannot just focus on the demand side of corrupt payments, we must also confront the supply side.  Government, private sector, and individuals are all culpable of corrupt business practices in Bangladesh.  To combat corruption, we must focus on all of these elements. 

In the public sector, existing institutions need to be strengthened with transparent implementation of laws and regulations. Already, I've seen the government change tender specifications and submission deadlines to assist a preferred bidder. New institutions need to be created to address gaps in oversight of governance.  Agencies like the Anti-Corruption Commission are a good start to creating oversight mechanisms.  But without the proper enforcement tools, transparent processes, and expertise in law-enforcement, such commissions or agencies will remain under-utilized and ill-equipped.  Another area that is easily noticeable is lack of oversight on government spending.  Ministries spend allocated funds as they see fit without adequate oversight over the types of spending and their results.  Any reporting done is often years, if not decades late.  An effective institution to oversee government spending that is adequately staffed and equipped to handle the large burden would go a long way towards curbing irresponsible government spending.

I am happy to note that some government institutions are taking steps to improve enforcement within their authority.   We will hear from government leaders that are implementing positive reforms and seeing great results.  Strengthening existing institutions is necessary to curb unethical business practices.  Many businesses use the judiciary to stall or delay enforcement measures from legitimate government authorities.  Take Customs for example.  We hear stories about businesses and private importers undervaluing imported products to avoid customs duties and then filing frivolous cases against NBR (National Board of Revenue) to stall payment when NBR challenges their valuation.  The courts or an administrative review panel must be empowered to deal swiftly and effectively with such challenges.  On the other hand, there are stories of Customs officials using improper valuation methods to demand bribes from importers.  Without a transparent and predictable system of customs procedures, such problems will persist with little recourse.  Moving towards automated processing and increased training for Customs officials will be critical to improving efficiency and transparency in customs procedures. 

Stronger, more predictable laws and regulations, backed by credible and timely enforcement are needed to make sure that the business community understands the parameters for operating in Bangladesh.  Clearly defined laws that are predictable in the short and medium term will help strengthen investor confidence in the business and regulatory climate in Bangladesh.  Seemingly arbitrary changes to regulatory procedures without adequate notice or public comment contribute to perceptions that the government is catering to vested interests willing to pay for protection.

The private sector needs to play a more active role in stemming the supply side of corruption.  I understand that most businesses look at corruption as a necessary evil.  Some have told us that they just account for it on their books – as much as 10% – as a cost of doing business.  It is up to leaders of large businesses, like many of you here, to set the example; to show that businesses can succeed in Bangladesh without resorting to or giving in to corruption.  In our two-day conference, we will have the chance to hear from some of the business leaders that are setting this example.

Another private sector initiative that is critical to governance is setting internal controls and auditing mechanisms for corporate governance.  Corporations need to set clear and enforceable policies against corrupt or unethical business practices.  You need to periodically train middle and senior managers on business ethics to ensure that corporate governance standards are institutionalized throughout your companies.  Businesses also need to demand that the managers they hire have a comprehensive business education with emphasis on ethics.  Bangladeshi business managers can not afford to be unaware of or uneducated about global ethical standards for doing business.

On the citizens’ group side – and by that I mean chambers, NGOs, media and educators – there is a lot that can be done.  Indeed, I believe you have the largest role to play in improving governance both in the public and private sector.  Chambers can be more active in generating consensus on ethical business practices for local businesses.  Large chambers should promulgate rules of conduct for their members and put pressure on the members to comply.  This would have a trickle down effect on smaller businesses through association. 

NGOs can be active in raising awareness among the general public of the direct costs to them from poor governance.  The average Bangladeshi understands that corruption at his or her level is hurting his or her wallet.  Coordinated efforts can be made to spread the message that corruption at every level is affecting the standard of living and development in Bangladesh.  I always see reports on how corruption is costing billions in Bangladesh.  Mass campaigns highlighting how this affects the average citizen could change public attitudes significantly and build support for positive change.

Bangladesh is fortunate to have a very active media.  The recent growth in the number of private electronic and print media outlets has increased not just the amount of information available but also its quality.  I encourage the media to take be more aggressive role in investigating and  exposing large scale and high profile corruption.  Naming and shaming has been a very effective tactic in the United States and elsewhere.  Even in developing countries, where corruption is accepted as the norm, this tactic has been effective in recent years.  In India, high profile cases uncovered and actively reported by the media have led to disgraceful dismissals of high level government officials and even criminal action against public figures.  The media has the ability to generate outrage among the public that can be channeled productively.  It is easy to see how powerful your role in society can be in transforming the culture of business and governance.

With this powerful role, even the media risks succumbing to corruption or undue influence.  Editors and reporters must be vigilant so that corrupt and unethical journalistic practices do not undermine the power of the media.  Media groups, just like corporations, need to set journalistic ethics standards and train their reporters adequately to ensure that they are not easily influenced by corruption. Bangladesh needs modern slander, libel and contempt laws to ensure accurate reporting without undue influence or intimidation.  Laws need to ensure that the media acts responsibly in investigations to avoid slandering business or political leaders without adequate information.  They also need to protect the media from law suits and injunctive actions from businesses and politicians who use the courts to muzzle the press.  Bangladeshi media has a good reputation that needs to be fiercely protected and improved upon through unbiased reporting.  Once you are perceived as unbiased, you have the ability to champion apolitical, social causes that can benefit the society at large.

Educators, just like the media, have big responsibilities in this area as well.  You can affect attitudes towards corruption at an early age.  Intermediate and secondary education can inform young minds about the failures of bad governance and how students can affect it in positive ways.  Education on critical issues like these can help empower a new generation of business leaders and public figures who will champion positive reforms. 

I have been surprised at the number of private universities that are cropping up all over Bangladesh.  This is a testament to the importance you place on education.  The largest growth area for education has been in business schools.  Students are flocking to them because they see the tremendous potential for business in Bangladesh in a global economy.  Business schools need to ensure that their students have a comprehensive business education that emphasizes business law and ethics.  MBA students need to be educated on global standards of ethics in order to be competitive in a global marketplace.  I propose a curriculum that includes at least one course on business ethics.  In addition to the personal and professional benefits this brings, this kind of education will go a long way to improving the business environment in Bangladesh.

Let me give you some very public examples from the United States on corruption and how they were handled.  We have recently seen a series of high profile corruption cases in the public and private sector in the U.S.  The good news in all that has happened is how we have dealt with them.  Cases like Enron, Martha Stewart, Worldcom, and Tyco have made international news.  Large business empires have fallen hard as a result of unethical practices.  Enron's CEO and CFO have been convicted and sentenced to life terms for their crimes.  Martha Stewart, possibly the most well-known female TV personality since Oprah, was convicted on insider trading charges and sent to prison.  These large corporate scandals provoked the government to pass new laws, like the Sarbanes-Oxley Act, to drastically change reporting and auditing requirements for corporations.  Proactive steps were taken to address these serious failures in corporate governance. 

The most interesting and shocking case this year was the bribery scandal associated with California Congressman Duke Cunningham.  Through informants, media investigations, and inside sources, the government uncovered a huge corruption ring connecting Congressman Cunningham to millions of dollars in bribes in exchange for public contracts.  Media played a critical role by investigating allegations initially and publicizing them immediately.  The whole investigation became public within days and was prominent in the mainstream media for several weeks.  The government took the case to the federal court.  Cunningham now faces serious charges of alleged bribery, fraud, tax evasion and general corruption in excess of 10 million dollars.  Due to the public attention to the allegations, he resigned from office well in advance of formal charges.  New elections were held in his constituency just two weeks ago to replace him. 

The lesson in this case is that once a case breaks open because of the media or a government investigation, there are strong enforcement mechanisms to handle it.  An independent and transparent judicial system is in place that has the ability to expeditiously bring people to justice regardless of their position in politics or business.  You may be interested to know that all the court documents in this case are available online through the court and are posted for public consumption on major media websites.  This sort of public flogging has a deterrent effect on others in such positions.  This case is a perfect example of how the government, private sector, and citizens – especially the media – can play a collaborative role in addressing cases of corruption. 

In our conversations with everyday business people, leaders in the field, and political economists, we have been amazed by the number of ideas that are generated independently.  I think the reason that these ideas don’t come to fruition is because like-minded reformers do not collaborate to press for change.  There are a lot of organizations – international and domestic, corporations, government agencies and others – that are all individually working on tackling corruption in a piece-meal fashion.  I would like to see a more comprehensive approach to addressing governance.  I suggest all stakeholders work together in a coordinated attack on this pervasive problem.  Lung cancer cannot be treated with just a lung specialist or a cancer specialist.  The tumors can only be identified and effectively removed without destroying the body when experts from all relevant fields come together and pitch in with their ideas and commit to do their part. 

I am not suggesting that more conferences are needed.  Conferences are only as effective as the outcome of the discussions.  Unless what is discussed is acted on, a conference has no value.  What I would like to see in my tenure here is a commitment from all of you – the leaders in your fields – to take on the challenge of improving governance and to do your parts to address it in a collaborative manner.  Corruption, as in all economic matters, has two parts: a demand side and a supply side.  The demand side can only be curbed through institutional reforms of the state, comprehensive regulatory reforms, strengthened enforcement and implementation mechanisms, and enhanced independence and transparency in the judiciary.  As private citizens affected by governance problems everyday, you can insist on changes from the government on the demand side, and implement measures to control the supply side.  A collaborative, comprehensive approach will have the desired effect on governance as long as every sector remains committed.  I am hopeful that the discussions in our seminars will serve as catalyst for such an approach.

My last words:  My personal goal is that when my posting here is over, when I talk to Washington and U.S. business and international and local NGOs what I don’t hear, as I do now, is how bad corruption is in Bangladesh, but rather, how much corruption is being reduced; that when I talk to Bangladeshi government officials, the political elite, and Bangladeshi Business Leaders, I don’t hear that corruption is worse elsewhere, or that that’s the way of life here, but rather, that, yes we understand how damaging corruption is to our economy, to our political system, to our international image, and most importantly, to our average citizens, to the people who are not here today, who don’t get invited to conferences.  That would truly be a joyful moment for me, if there is any way at all in which the U.S. Embassy can help in arriving at that moment, please tell us and we will act.

Thank you.

Note:  A Bangla translation of this article is also available from the American Center.  If you are interested in the translation, please call the American Center Press Section (Tel: 8837150-4, Fax: 9881677; e-mail: DhakaPA@state.gov; Website: dhaka.usembassy.gov