12 March 1999

TRANSCRIPT: WORLDNET DIALOGUE ON FIGHTING ECONOMIC CORRUPTION

(U.S. officials talk with Hong Kong, Beijing, Jakarta)  (9700)

Washington -- Honesty really is the best policy, according to two U.S.
officials who fight corruption.

Deputy Assistant Secretary of State for International Narcotics and
Law Enforcement Jonathan Winer and State's Deputy Inspector General
John Payne spoke on corruption with participants in Hong Kong, Beijing
and Jakarta during a March 11 USIA Worldnet interactive video program.

The bad news on the anti-corruption front, according to Winer and
Payne, is that globalization may have opened up new avenues for
corruption. The good news, they assert, is that countries are now
working together to curtail that corruption.

More and more, nations are finding that they have a common interest in
weeding out corruption, they said.

"If we expect to have a world where free markets, democracies, rule of
law and stability all flourish," Winer told audiences in the three
Asian cities, "you've got to have systems in place to protect people
against corruption, because corruption threatens all of those things."

A simple idea for fighting corruption, yet a basic one, according to
Winer, is to pay government workers. "What we do first," he explained,
"is we pay our civil service."

If governments do not pay their workers adequately, he warned, "it's
very, very difficult to have government that works and government that
works for the people."

"People are going to earn a living that's sufficient to support their
family, one way or another. If the government won't pay them, they'll
take it from other people," Winer observed.

Internal controls and transparency are the other critical factors,
Winer said.

"Underpaying employees or paying people less than a wage that is
adequate to live on and to feed their families on is virtually an
invitation" to corruption, Payne said.

The State Department's Inspector General's office works on three
levels to prevent corruption, Payne explained.

"At the highest level," Payne said, "we act to educate and advocate
ethical behavior, high ethical conduct." Next, he said, the Inspector
General's office works to create an environment that does not offer
any opportunity for corruption. Finally, he said, the office acts
against those individuals who have committed corrupt acts.

Corruption at higher levels, where government officials and businesses
collude to fix contracts, is also going out of favor, the two
officials said.

The Organization for Economic Cooperation and Development (OECD),
Winer noted, passed a convention against bribing foreign governments
that went into force last month.

"A whole lot of (countries) have signed on to it already," Winer said,
"more are coming fast -- those days of bribery are over. It's
counterproductive. It doesn't work," he added.

"(Bribery) corrupts the giver as well as the receiver," Winer
stressed. "And ultimately it's not a good business practice because
you don't get the best goods. You don't get the best services. You
don't get things cheapest. It leaves resentments all the way around."

U.S. economic strength stems in part from the fact that U.S. companies
have had to win contracts on their merits, not because of corrupt
payments, he said. "If you've got a corrupt payment, you wind up in a
very, very bad deal," Winer said.

The global economy is a driving force behind efforts to clean up
corruption, Winer advised, "because corrupt countries fall behind
economically. And so many people see this that they insist on higher,
better standards, more efficient rules, more fairness, more justice,
because they can't afford the alternative."

Following is a transcript of the program:

(begin transcript)

WORLDNET
UNITED STATES INFORMATION AGENCY
Television and Film Service
Washington, D.C.

GUESTS:

Jonathan Winer, Deputy Assistant Secretary of State for
  International Narcotics & Law Enforcement

John Payne, Deputy Inspector General, Department of State

TOPIC:   Fighting Economic Corruption

HOST:    Judlyne Lilly

INTERACTIVE POSTS:  Hong Kong, Beijing, Jakarta

DATE:  Thursday, March 11, 1999

TIME:  8:00 p.m. - 9:00 p.m.


MS. LILLY: Hello, and welcome to Worldnet's Dialogue. I'm Judlyne
Lilly. Economic corruption is perhaps one of the most devastating
forms of corruption nations face today. It continues to devastate
economies and cripple financial markets. While it's not possible to
eliminate it completely, it can be deterred and significantly reduced.

On the heels of U.S. Vice President Al Gore's anti-corruption
conference in February, yet another major effort to fight corruption
is gearing up. On March 22nd through the 24th, Hong Kong's Commission
Against Corruption will sponsor the silver jubilee conference. Part of
this conference will be dedicated to eliminating the opportunities for
corruption in business.

Today, for our international audiences in Hong Kong, in Beijing and
Jakarta, in support of these international efforts, we present a
program on fighting economic corruption. Joining us is Jonathan Winer,
deputy assistant secretary of State for law enforcement and crime in
the Bureau of International Narcotics & Law Enforcement, and Mr. John
Payne, deputy inspector general, U.S. Department of State.

Gentlemen, welcome to Worldnet's Dialogue.

MR. WINER:  It's a pleasure to be here.

MS. LILLY: Secretary Winer, I understand you have a few opening
remarks.

MR. WINER: Well, sure. I think it's interesting that you're having
this show on corruption precisely right now, because we're seeing a
lot of events come together right now dealing with this issue. First
of all, just two weeks ago, in addition to Vice President Gore having
his conference on corruption, in which some 90 countries wound up
participating -- a really remarkable number of countries -- we have
had the Organization for Economic Cooperation & Development based in
Paris finally pass an international convention prohibiting illicit
payments. A lot of countries have signed on to that.

The 40 countries of the Council of Europe have also come up with an
anti-corruption convention which focuses on criminalizing acceptance
of bribes and commitments to combat corruption for all the Council of
Europe members. And we have the silver jubilee for the Hong Kong
Independent Anti-Corruption Commission, which is itself really quite a
remarkable institution and has started to spawn imitators literally
all over the world.

So what we've seen is that in response to globalization -- to the dark
side, as it were, of globalization -- countries coming together to
start to share their ideas on how to combat corruption. And there
seems to be a lot of work to go around.

MS. LILLY: Thank you, sir. Mr. Payne, your office has been working
with Hong Kong and China on anti-corruption issues. And I understand
you will be attending the upcoming silver jubilee conference in Hong
Kong.

MR. PAYNE:  That's right.

MS. LILLY: What role will the State Department play in this important
event?

MR. PAYNE: Thank you, Judlyne. We will, in fact, be going to Hong Kong
later this month. My boss, the inspector general, Jacqueline Williams
Bridgers, will be chairing one of the two workshops at the jubilee
conference. We're very much looking forward to working with
Commissioner Yam (sp) and the other staff of the ICAC. The last formal
meeting with them was in August of 1997, when we had a series of
meetings to exchange ideas and share information. We also have a
continuing relationship with the staff of the ICAC on a number of
cases that we're currently working with; currently working with the
ICAC on a case involving our consulate in Hong Kong.

I should also say that after the silver jubilee conference, we will
also be going back to Beijing for a continuation of a series of
exchanges that we have had with the ministry of supervision over about
the last year and a half. In August of 1997, the ministry of
supervision extended an invitation to the office of the inspector
general at the Department of State to engage in a discussion -- again,
a sharing of ideas and techniques and methodologies for promoting
ethical conduct and combating corruption. And the inspector general
led a delegation to Beijing and to Guangzhou and several other
locations, and we had what we considered to be an extremely productive
exchange of ideas and information.

Following that visit, we extended an invitation to the ministry of
supervision for a return visit to Washington DC, which occurred last
summer. And we continued the discussion with meetings with a number of
other law enforcement and office of government ethics offices in
Washington. We also made arrangements for the ministry of supervision
officials to visit the state of Kentucky and look at activities on a
state level.

We are, after the silver jubilee conference, going back to Beijing to
continue the discussion and the dialogue with ministry of supervision
officials.

MS. LILLY: Thank you, sir. Now we move to our panelists in East Asia
standing by. We go to Hong Kong for one question.

Q Hi. My name is Thomas Chen (sp) and I'm working for the Independent
Commission Against Corruption in Hong Kong. In fact, thank you very
much for the speaker's kind remarks about our organization.

I would just like to start making a point. In Hong Kong, we have been
operating for about 25 years now. And our strategy has always been a
three-pronged approach to fighting corruption through effective
enforcement of the law, public education about the evils of
corruption, and then finally introducing good systems and procedures,
good governance, into both the public and private sectors.

I wonder what is America's, the United States strategy in this area.
In particular, do you have any program to help businesses in this
fight against corruption? Thank you.

MS. LILLY:  Mr. Secretary.

MR. WINER: Sure. I'd like to start first with, again, saying how
wonderful we think the Hong Kong anti-corruption independent
organization has been, the commission. When we were planning the vice
president's conference in February, I brought together all the
different components of the United States government and said, "Who do
you want to have from other countries to talk about systems that
work?" And every agency said, "Well, we want to have Lily Yam (sp) of
the Hong Kong commission come speak." And I said, "But somebody else
wants Lily Yam." "Yeah, but we want her, too."

And it was really quite amazing, the number of different parts of our
government which had worked with the Commission Against Corruption. So
it has had not only an impact, I think, within Hong Kong in setting
impact globally already, and it has been a very important example for
us.

Now, back home, what we do first is we pay our civil service. If you
don't pay civil service, it's very, very difficult to have government
that works and government that works for the people. People are going
to earn a living that's sufficient to support their family, one way or
another. If the government won't pay them, they'll take it from other
people. So that's the first component.

One hundred years ago, we had a lot of corruption in our country,
tremendous corruption around the turn of the century. The people who
wanted to preserve the old boss system, the local graft, from
political leaders holding onto power through giving people jobs and
contracts, said that the system would be destroyed by civil service
reform. They were right. Civil service reform had a huge impact in
protecting the United States against corruption.

The second thing is internal controls, auditing mechanisms, accounting
mechanisms, oversight mechanisms of the kind Mr. Payne does with the
Department of State through inspector generals, that kind of a
function.

Third, transparency. An active press and an active public saying, "We
won't tolerate corruption. If you're corrupt, you're going to go to
jail. If you're corrupt, you're going to get thrown out of office.
There's no place for you in our country, no place for you in our
public life."

I think those are really critical elements. My kids, who are 10 years
old, eight years old, they know what corruption is. They know what the
rules are. They know that you get punished for lying or cheating or
stealing. And so that kind of civic education component is, I think,
very important. And for me, those are really the most important
elements.

Mr. Payne, if you want to add something.

MR. PAYNE: Yeah, if I could just add to that. Our organization, the
office of inspector general, is in many ways similar to ICAC. We are
an internal oversight organization. And our approach to promoting
ethical behavior and combating corruption is also a three-pronged
approach.

At the highest level, we act to educate and advocate ethical behavior,
high ethical conduct. And we issue a brochure on standards of conduct
for Department of State employees, which takes the overall government
standards of conduct and recasts those in terms of the environment or
the types of situations that an employee who works in the Department
of State might be faced with. We also speak at seminars, training
programs, orientation sessions and so forth, and try to inform
individuals about the wisdom of practicing high standards of ethical
conduct.

At the second level, which is where probably the bulk of our effort is
devoted, is to removing opportunities and temptations for corruption
or problematic behavior to occur. We try to make it more difficult for
individuals to practice corruption and make it more likely that if
they do, their behavior will be detected. And this is, as Jonathan
mentioned, through the development of internal controls, through
advocating separation of duties, a number of these types of
activities.

At the third level, which is basically enforcement, this is the option
that we resort to when numbers one and two aren't successful; in other
words, if we aren't successful in convincing people that they should
act in an ethical manner, if we haven't taken adequate steps to remove
opportunities and temptation and a problem occurs, then we deal with
it through a relatively standard law enforcement approach.

We have criminal investigators who develop a comprehensive statement
of facts as to what actually occurred. We present the case to the
Department of Justice for criminal or civil prosecution. Or if we
don't choose one of those mechanisms, then we have an administrative
remedy that's a possibility for disciplinary action or other action
within our department. So our approach, I would say, is very similar
to the three-pronged approach that the ICAC uses.

MS. LILLY: Thank you, gentlemen. Now we go to Beijing for one
question. Beijing, your first panelist, please.

Q Okay, thank you. My name is Wan Lee Pei (ph) from the international
department of (CPC?) central committee. Fighting corruption is a big
concern in the world, and people are thinking -- have been thinking of
ways and means to stop this problem. And one of the solutions people
think, that the higher salary may bring a clean government. Would you
comment on this? Thank you.

MR. WINER: Well, from my perspective, anyway, it's one of the most
important aspects of clean government, if you pay people a good salary
and you give them a career and you give them a pension upon
retirement, so that they know that if they do do this all the way to
the end, they're going to be taken care of when they're old. And if
you couple that with good internal controls and a strong public
involvement with government, transparency in government turns out to
be important, too.

If you put that all together, it creates real incentives to do the
right thing and real disincentives to do the wrong thing, because
then, if you get caught, you go to jail. You've lost that salary.
You've lost that income. You've lost that retirement. You've lost your
place in society as well. Your reputation is lost; everything. So the
combination of the incentive to do right and the disincentive to do
wrong is, I think, very important. It has a big impact.

It also winds up producing a lot of money for the government. That's
the funny thing about it. If you pay people more, you save a lot more
money in government contracts going for less money and producing more
goods and services, in customs revenues collected, in government
working, in attracting foreign investment, making everything more
efficient, building public trust. You save so much money and generate
so much money by that that the high salaries turn out not to be so
expensive after all. So to me, it's one of the very fundamental
choices a government can and should make.

Mr. Payne.

MR. PAYNE: I'll just add briefly, I agree with what Jonathan said. I
think that paying high salaries or paying adequate salaries certainly
is no guarantee that you will eliminate the possibility that some
behavior will take place that you don't want to occur. But underpaying
employees or paying people less than a wage that is adequate to live
on and to feed their families on is virtually an invitation that
something is going to occur that you would not really be in favor of.

MR. WINER: I actually know of an experiment that was done in a Central
European country recently in which the country basically said, "We're
going to fire immediately, a month from now, one third of our customs
officials. And we're going to fire the ones who are generating the
least revenue for their location and leave the rest of them. We're
going to increase the salaries of the remaining two-thirds of the
people by the amount of money we save by firing the one-third." And
they did that, and they found they generated a huge amount of
additional money. Goods moved more quickly. They had fewer complaints.
The customers were happy. Everybody was happy except the people who
had been fired.

Corruption was substantially reduced. Then they did it again by
another third. They found that that remaining one-third could still do
the job. They were now being paid three times as much. They didn't
want to lose those jobs. They weren't getting any reports of
corruption anymore because there was a tremendous incentive at that
point, if somebody was dirty, to report on them. And the whole thing
worked tremendously well.

Now, you still have to have internal controls. You still have to have
enforcement, because there are always people who are going to take
advantage. But it can make a tremendous difference.

MS. LILLY: Thank you. And thank you, Beijing. Now we go to Hong Kong
for a series of questions. Hong Kong, your first panelist, please.

Q Well, thank you. I'm Eden Wun (ph), director of the Hong Kong
chamber of commerce. I guess I would like to add a short comment on
what has gone before. I would hope that government servants would also
serve because of a sense of public service and not just for a high
salary, even though I certainly agree that a reasonable salary is a
deterrent for engaging in this type of activity.

But the question I really want to ask is to focus on global trade. And
I would like to ask the gentlemen in Washington to say a little bit
about the Foreign Corrupt Practices Act. And how does the U.S.
business community take that? Is there unanimous support for this? And
why are some countries, some other countries, notably in Europe, do
not adopt this? So could you comment a little bit on this and why you
obviously think that this is something that is good for American
business around the world?

MR. WINER: Sure. Twenty-five years ago, we had huge scandals in the
United States over corrupt payments involving Asia, as it happened,
and involving an American company, Lockheed, and South Korea, I
believe, is what really pushed it over the edge. And we passed the
Foreign Corrupt Practices Act, making it a criminal offense for any
American individual or firm to offer or pay a bribe. We had a bunch of
prosecutions under that.

The Europeans said, "Oh, great. Now we can continue our bribing, and
we'll win contracts away from American firms." And the fact is, we
lost billions of dollars in contracts as a result. But something else
also happened. Our companies could not compete on the basis of
offering bribes. They had to compete on the basis of offering better
technology, better deals, better services, better products.

The Europeans started having real problems with their public saying,
"We don't like our officials being involved in the bribe-paying
business." We had officials in countries that were receiving the
bribes saying, "We don't want our officials to be offered the bribes."
We had the public saying, "We don't want our officials being offered
the bribes."

And so a counter-drive came to develop in public opinion, in the
Americas first and then in Central Europe, Western Europe, also in
Africa and Asia, against those corrupt payments. Now, the OECD
convention that just came into force last month says to all OECD
members who sign on to it -- and a whole lot of them have signed on to
it already, and more are coming fast -- those days of bribery are
over. It's counterproductive. It doesn't work. It corrupts the giver
as well as the receiver. And ultimately it's not a good business
practice because you don't get the best goods. You don't get the best
services. You don't get things cheapest. It leaves resentments all the
way around.

And I think that the strength of the United States economy in part --
I don't want to overstate it, but in part is because we've had to win
contracts on the merits, not because of corrupt payments. If you've
got a corrupt payment, you wind up in a very, very bad deal.

And I know a situation in Russia that just came to my attention a
couple of hours ago in which there was a contract given in connection
-- a very big government contract. There were two bids. All of the
other bids were disqualified. One of the two bids belonged to a
company that was owned by an alcoholic with a ruble to his name. It
was totally phony. And the second bid was essentially an insider deal.

Well, when that all became public, it produced a huge public reaction
of disgust, distrust of the process. And part of the result of that
kind of a problem is that Russia is not attracting the foreign
investment it wants, because too many people have perceived that the
system isn't clean, that it's rigged, that you can't win on the
merits.

So clean countries wind up getting stronger economies. They wind up
getting more investments. And that includes countries that are making
the bribes as well as countries receiving the bribes. So I think in
this case, ultimately, virtue is its own reward. And it produces
monetary and financial rewards as well.

Mr. Payne.

MR. PAYNE: I'd just like to add one anecdote to that. I'm sure that
there are those who -- there are some who would not be in favor of the
Foreign Corrupt Practices Act. But one of the recurring comments that
we have heard from individuals who are subject to the act is that they
find some comfort in having the act, so that they can use it as sort
of a shield against actually giving bribes in those instances where
bribes may be aggressively sought of them.

They can say things like, "Well, you know, I really would like to give
this bribe to you, but actually I have legislation that can get me in
a whole lot of trouble. So I really can't do that." So it's kind of
ironic that I think, over the years, as Jonathan said, the attitude
toward the act has changed considerably. And I think it's now embraced
at virtually all levels.

MR. WINER: Yeah. With international oil prices down, I know that a
number of Middle Eastern countries where bribery was formerly very
common have said, "We've got to tighten our belts." And I know of one
Middle Eastern country where officials have said, "Look, no more
demanding bribes. No more bribes in contracts. We can't afford it
anymore. It's hurting our government. It's hurting our system. It's
hurting our people."

And I've seen some information recently suggesting that a prince of
this particular country is complaining that he can't make a good
living anymore because his bribery has dried up. His government won't
let him take it anymore and the countries and companies that used to
offer him money aren't offering him the money.

This really surprised me, because what this said to me is it's not
just talk, people like me and John and you talking about this, but
there's real changes in behavior starting on the ground. And I think
that the Asia-Pacific financial crisis is another very important
element in which people are saying, "Hey, we can't afford that kind of
stuff anymore. We need to have things cleaned up. We need to have
things less expensive."

Q My name is Neil Frasier (sp). I'm a journalist with the South China
Morning Post newspaper in Hong Kong. I'd like to stick with the
Foreign Corrupt Practices Act, if I can, and the issue of enforcement.
Figures show -- non-governmental figures show that between 1994 and
1996, only 11 cases have been investigated by the Justice Department
in the United States under the Foreign Corrupt Practices Act. And out
of that 11, no one has been prosecuted. Do you think the Foreign
Corrupt Practices Act is effective in stamping out corruption by U.S.
companies abroad? Or do these figures hide something else? Thanks.

MR. WINER: I think that American companies can't get away with paying
bribes, and they don't do it anymore. Let me tell you, if you get any
information of an American person or company paying a bribe, bring it
to the American embassy. Bring it to the American press. You'll see a
prosecution.

Q This is Howard Sang (sp) from Hong Kong Economic Journal. I've got a
few questions about the money laundering problems currently. There has
long been problem historically, especially if it's involved in
offshore banking, in which confidentiality is very important. And the
offshore banking is -- (inaudible) -- jurisdiction. Will you comment
on the international cooperation in this area? And how is the reaction
of the offshore banking community?

MR. WINER: That's a great question. That's one of those things I care
about most. Right now, offshore is still a giant black hole in the
global financial system. It's a huge problem for every country,
because the stuff that goes offshore can't be seen by anybody. The G-7
countries are talking about this problem right now. The 26 member
states of the Financial Action Task Force based on Paris are talking
about it right now. The U.N. in Vienna is talking about it right now.

We have got to get transparency to the offshore areas as fast as
possible. What that means is when there's a case involving financial
crime, there has to be rapid exchange of information for law
enforcement purposes that is not protected by bank secrecy. That's
absolutely imperative to combat corruption.

Mr. Payne.

MR. PAYNE:  (I'll pass?).

MS. LILLY: Well, thank you, Hong Kong. Now we go to Beijing for a
series of questions. Beijing, your first panelist, please.

Q My name is Jong Lee Jin (ph). I come from China Institute of
International Studies, and I have a question. I think the reform
countries, such as Russia and China, cite the same problems. So in
Russia, in the radical reforms such as it has, most of them involve
the corruption. And in China, in the coastal areas such as Guangzhou
province, a lot of officials in charge of the economic strategy are
involved in corruption.

So my question is, if there is corruption and -- (inaudible)? Thank
you.

MR. WINER: I think that this corrupt problem in countries that are in
transition, economies that are changing, is particularly difficult to
deal with. I know that in China right now, there's a huge
anti-corruption and anti-smuggling campaign. For our part, the United
States is very interested in working with government officials of
China on strengthening internal controls, building more transparency
into the system, finding ways to prevent corruption through various
kinds of transparency mechanisms and control mechanisms.

It is a very important fight for countries undergoing major economic
change. There's almost nothing more fundamental for protecting and
strengthening government than combating corruption in these areas.

Mr. Payne.

MR. PAYNE:  (Off mike.)

Q I am -- (inaudible) -- from the Institute of Political Science,
Chinese Academy of Social Sciences. I have a very simple and a general
question. What are the most effective measures in preventing
corruption in a non-democratic country? Thank you.

MR. WINER: I think that measures to fight against corruption are the
same in every kind of system, to a considerable extent. There are
differences in terms of culture, but there are also some things that
are the same.

The first is, in every kind of country, government has to be, at some
level, accountable to the people. And government servants have to be
accountable to the people -- government servants. Who do they serve?
They serve the people. And I think that's true in practically every
country in the world. They're serving the people. That means they're
not serving special interests. They're serving the general interests.

How do you go about promoting this? You break up power. You have power
going in more than one location, so that nobody's in a position to
say, "I run everything." Everybody has got somebody over them,
exercising oversight.

John and I are friends. We know one another. His job is to exercise
oversight over my function, the U.S. Department of State. If somebody
calls him to complain against me, because he knows me, he can't
investigate me. He would have to find somebody outside to take a look
at that complaint, to follow it up properly and to refer to somebody
else who didn't know me to investigate me, to prosecute me and to
throw me in jail if I have done something wrong.

That kind of an independent mechanism, like the independent commission
in Hong Kong, seems to me to work in any kind of society, as long as
there's independence and accountability and integrity.

MR. PAYNE: Even in a non-democratic environment, there are certain
practices and certain activities that can be undertaken that will make
it more difficult or more risky to engage in corrupt activity; as
Jonathan said, having a separation of duties, having a situation where
no one person is in control of an entire transaction from start to
finish, making it more likely that if a corrupt behavior occurs, it
will take at least the participation or the knowledge of two or more
individuals. Having some sort of reporting systems and oversight
mechanisms can be used to reduce the temptation or to remove the
opportunities for an individual to engage in this kind of conduct.

MS. LILLY: Thank you, Beijing. Now we'll take one question from Hong
Kong.

Q Thomas Chen (sp) from the Hong Kong IG again. In Hong Kong, we
think, to prevent corruption in the business sector, it is most
important that we involve the businesses in this battle, entering into
a formal partnership with them. So in Hong Kong, we have set up what
we call an ethics development center to actively encourage major
companies, corporations, to draw up codes of conduct. And we also
provide assistance in training programs for their staff, as well as
assisting them to reinforce their control procedures. I wonder if the
American government also has these sort of programs to help business
in this battle against corruption.

MR. WINER: Well, actually, there is a huge amount of back-and-forth
between the private sector and the public sector in the United States
in combating corruption. Reporting corrupt practices in the United
States is pretty easy, because anybody who makes such a report to the
Department of Justice or some other component is going to find the
government is very receptive to hearing it, because it is intolerable
for us culturally to protect corruption. It's just considered to be
wrong, as well as a career-killer. You can't do it. You can't get away
with it.

And so the cultural element that you talk about is, I think,
tremendously important in both the private sector and for government
officials and for the general public as well. I would emphasize the
notion that everybody has a civil responsibility both to insist on
clean government, and if they see something that's not clean, to make
it a public matter. And that cultural intolerance of corruption
becomes a very important element, I think, of protecting against it.

MS. LILLY:  Mr. Payne.

MR. PAYNE: I have visited your center, and it's one of the most
impressive and innovative activities that I think I have seen. I don't
think we have anything as aggressive or as active in the United States
as the program that you have for engaging with the private sector.

But we do have government-sponsored or government-supported or
government-encouraged activities that can take place through NGO-type
activities, such as the American Bar Association, the Association of
Accountants, other organizations that are very active in developing
ethical rules and standards of conduct and policing their own
membership. And the government is an active supporter of those kinds
of efforts. That's the closest thing I can think of that compares with
your activities there.

MR. WINER: John, your comments remind me of one other idea or one
other thought, which is, the United States being the kind of society
it is, everybody sues everybody all the time. A lot of people have
heard that about the United States. Well, this has a big impact
against corruption, because if somebody protects a corrupt activity or
if an accounting that does audits doesn't discover a corrupt activity,
they can get sued.

When I was in private practice as a lawyer, I used to tell my clients,
"Do the best compliance job you can. Have the most aggressive internal
controls you can, because if you don't, somebody's going to say you
were negligent." So that negligence thing, backed up by civil
lawsuits, turns out to have a huge impact on our constantly
strengthening the internal controls in our society.

Q Yes, this is Eden Wun from the Hong Kong chamber of commerce again.
I just want to second what Mr. Chen said earlier, that the business
community here in Hong Kong works very closely with ICAC. And, in
fact, ICAC has several advisory committees that have notable
businessmen on it. So this is an excellent community relations effort.

The question I have is that if you go around the world and ask people
what they feel are corrupt practices and what they feel are practices
beyond reproach, I believe that probably what you would get is, on
both sides of the spectrum, the answer will be fairly unanimous.

My question is, do you think there are gray areas in between, because
of cultural differences? Or do you think there is an absolute
international standard that actually, you know, points things to one
way or the other?

MR. WINER:  Mr. Payne, why don't you go for that?

MR. PAYNE: One of the most interesting discussions that I heard at the
vice president's conference was a discussion about countries that had
evolved from a period of colonization or countries that had separated
from, like the former Soviet Union. And it was an attitude of the
people toward the government and an attitude that the government did
not represent the people, and so that trying to take advantage of the
government or act in a corrupt way or to cheat the government was in
the interest of the people, because the government was not a
legitimate government and it had imposed its rule on the people over
their objection.

So I think cultural differences are extremely important in the giving
of gifts, the giving of bribes. I mean, there are places where this is
an expected practice, not something that you would treat as a corrupt
practice.

MR. WINER: Though ultimately, it does have an economic impact, however
it's characterized, whatever is accepted. And I think that at some
levels, as you say, it's really clear everything. I mean, what just
happened at the International Olympic Committee involving officials
all over the world, and most particularly in the United States with
the host, Salt Lake City, that was corruption. Everybody knows it's
corruption. It's a huge international scandal. And now it gets cleaned
up.

Now, at Vice President Gore's conference, probably for me the most
interesting moment was when one of these delegates from Africa said,
"Well, there are some very fundamental cultural differences. Women
tend to be much less corrupt than men." (Laughs.)

Q Hi. It's Neil Frasier from the South China Morning Post again. If I
can move to Central Europe, and Estonia in particular. Estonia,
because of its location, I believe, was (drawing?) concern that it
could be a transshipment point for organized crime. And what Estonia
did was to drop their tariffs on trade very significantly, thus making
it very, very non-profitable to smuggle. How important do you think
macroeconomic policies are, such as these, in combating corruption, as
well as the micro issues that can be dealt with by enforcement
agencies and so forth?

MR. WINER: I think that macroeconomic choices, in terms of reducing
licensing and transactional costs, can make a big difference in
combating corruption if they're accompanied by respect for what
government has to do. If you wind up with just eliminating government
right and left in order to reduce the cost of government and free up
private enterprise, you wind up with no enforcement mechanisms, no
law, no justice, no anything, and it doesn't work.

So you have to have very aggressive deregulation, on the one hand, and
continued regulations and protections, particularly in the financial
services area, on the other. And some of the countries in transition
did only one and didn't do the other, and they got themselves into
trouble.

MR. PAYNE: Yeah, I would agree with Jonathan. There are certain types
of activities that deregulation or eliminating the opportunities for
that type of corrupt practice to occur; the Estonia situation that you
mentioned is probably a good example. But the approach to dealing with
corruption is not to make everything legal or to remove any
opportunities where there's no ability to commit a corrupt practice.
So you have to have, at the same time, some sort of a program to build
respect for the law, because sooner or later there has to be some law
or regulation or some process that has to be respected and dealt with.

MR. WINER: I think, John, good record-keeping in every case is really
a good public good. The more you have records of any kind of
transaction and transparency so you can reconstruct what happened, the
better protected everybody is.

Q This is Howard Sang from Hong Kong Economic Journal. Another
question about offshore banking. (Inaudible) -- how much they can
actually identify and -- (inaudible) -- company? Will you comment on
that?

MR. WINER: "Know your customer" is a tremendously protective device.
If you know your customer, you're much less at risk if your customer
turns out to be doing something bad. From my perspective, if banks and
other financial services firms know their customers and report
suspicious transactions, they're going to be able to protect
themselves.

Now, when Barron's Bank went down, Singapore's whole financial
reputation was at risk. When the -- (inaudible) -- cases happened a
couple of years ago, it hurt Japan. When we had our own problems with
offshore hedge fund investments, it wound up disrupting our entire
stock market in the United States last fall; in fact, the global stock
market.

The offshore havens still are sufficiently secret that they disrupt
true understanding of what's going on in their transactions, making it
very hard for people, when they're dealing with these offshore havens
in the South Pacific, in the Caribbean, in the Mediterranean and
elsewhere, to really know what's going on.

That's why the G-7 countries are right now talking about that problem,
why the Financial Action Task Force is talking about that problem, why
the U.N. is talking about that problem, because until we make sure
that the offshore havens are transparent, that you can penetrate and
know who the beneficial owners of every firm are, you're going to have
these black holes, these financial safe havens. And that turns out to
be dangerous for the entire system.

MS. LILLY:  Thank you -- oh, Mr. Payne.

MR. PAYNE: I was just going to say that I have nothing at all to add
to anything Jonathan says about offshore banking or money laundering.
(Laughter.)

MS. LILLY: All right. Well, now we go to Jakarta and (SCTV?) for a
series of questions. We're going to be joined by Brigita Fracilla (sp)
for the Newswatch program. Jakarta, thank you for your first panelist,
please.

Q Good morning from Jakarta. I'm Brigita Fracilla from SCTV, an
Indonesian television station. Yesterday I had the opportunity at
looking at Indonesia's corruption perception index chart, which lists
Indonesia as the 80th most highly corrupt country out of 85 countries.
Do you have any suggestions to improve Indonesia's position?

MR. WINER: It's a matter of perception. That's a matter of perception.
I can't say that any particular country is or isn't corrupt. But if
it's perceived that way, obviously there's a problem. The first thing
I would say is, on public contracts, make sure people feel that any
time the government is issuing contracts, all the bidders have an
equal chance, that there's no cronyism, that there's no inside deal
for anybody, that the lowest bidder of the best products gets the
contracts and that the contracts have performed well; if it isn't
performed on time and at cost, that there's some accountability. And
that's what I would start with.

I would then go on to making rules very, very clear as to what the
ethical rules were and making sure they got enforced. I used to tell
my clients, when I was a lawyer, that the best possible thing for the
government to do in any area was to do a few quick prosecutions. And
if you were the unlucky target of a prosecution, your job was to then
do the best possible job to make sure everybody else in the industry
that you were in met your standards. So you have to put maximum amount
of controls in place, then get everybody else to adopt it at risk that
they then get prosecuted.

So I'd start out with clear rules, clear contracting, some public
prosecutions, a lot of public attention. Then you'll see reputations
change reasonably fast.

MR. PAYNE: I would say that dealing with corruption is a very
complicated approach and requires a comprehensive approach with
top-to-bottom engagement. But I would say that I believe that at the
outset it requires a serious commitment from the highest levels of
government to deal with the corrupt situation, and then the engagement
and the involvement of the institutions of government in all branches,
and all the way down to the individual citizens. There's no easy
solution and no magic bullet. It's a comprehensive approach that
requires a lot of work at a lot of different levels.

Q Touching on the subject of good governance, how would you apply it
to a nation in transition like Indonesia?

MR. WINER: I would apply it first by having a tremendous amount of
public engagement and press engagement on the issues that matter. When
you see something that offends your moral sensibility, you publicize
it. You talk about it. You discuss rules and approaches that can
respond to it.

Now, if the public won't tolerate a corrupt official, that official is
gone. He can't function, because ultimately it's the tolerance of the
public that keeps anybody in a position. Publics want better
governments. Businesses want better government, because that's more
efficient. They can make more money that way. Citizens want to lead
better lives, more secure lives, fairer lives. It's the common
instinct for justice.

So at some level, it's up to every society to demand better
government. And there are a lot of approaches around and pretty well
codified at this point, available. The U.N.'s got 40 or 50 different
techniques that you can use with various manuals. The Council of
Europe in Europe has got a whole lot of things you can do. The
Organization of American States has got an entire list of actions you
can take.

At Vice President Gore's conference, we issued a lengthy booklet of
effective practices that we took from work being done all over the
world by different governments. So what you do is available. I mean,
it's out there. It's a question of will to implement it.

Now, at Vice President Gore's conference, there was an Indonesian
religious leader who came to the conference and spoke about it. And he
said, from his perspective, Indonesia demonstrated the fact that it
was not enough to have faith and to believe and to be religious and do
all the religious things right. You had to act on the implications of
your faith, too. That was what he said. And he said that some of
Indonesia's issues with corruption were because too many people felt
faith and experienced faith but didn't act on it and make that action
part of their lives and part of their demands on the government. I
thought that was a very interesting perspective.

MR. PAYNE: As a practical matter, in a transition state, you might try
to identify those components of the government that are at the leading
edge of the transition and try to maximize the benefit you gain from
those activities; if it's the press, if it's the legislature or the
parliament, if it's the courts or whatever. Whichever component seems
to be progressing or developing at the fastest rate would be an ideal
point of focus to try to maximize the progress that you can make in
that area.

MR. WINER: In Italy, the real assault on corruption took place when a
couple of judges said, "Enough. We're going to fight it. We're not
going to be frightened by the Mafia." They wound up both being
murdered by the Mafia. But then the public and the press said, "Enough
is enough." We had courageous judges. In Western Europe generally, the
press has played a critical role. In some other countries -- Hong Kong
is a very good example -- independent commissions have played the
critical fulcrum role.

As John has suggested, in different societies, different institutions
are going to take that lead at first. But I can't emphasize enough
public engagement, because it seems to me that is one absolutely
essential ingredient.

Q Mr. Payne, you mentioned about political will. How would you
reinforce this on Indonesia's leaders?

MR. PAYNE: I would say probably the best way would be to engage some
sort of public level of support or engage a group of individuals to
impress their will or to make their will known on the government
leaders. That's probably the best way, in my opinion, because the
leaders usually will pay attention or will act in response to the will
of the masses. And so I would think possibly organizing some sort of
grassroots movements to advocate this type of behavior would be a
potentially effective mechanism.

MR. WINER: I mean, we in the United States from time to time have had
people out in our streets complaining about our government. When the
people go out and complain, the government ultimately has to change.
Now, in Indonesia, Mr. Suharto is no longer president because the
Indonesian people said they needed change and they wanted change. That
wasn't done by anybody outside of Indonesia. That was a decision that
Indonesia made for itself.

In every country, there are similar public institutions. There's
religious institutions, judicial institutions, legislative
institutions, the business institutions, the business community and
economic interests, the various other kinds of civic institutions,
students. All of these different elements -- the press -- can play a
role in insisting on standards.

In Belgium recently, the whole Belgian government went into crisis
over a series of corruption issues which literally transformed that
country. And nobody in the government was looking for it, but that's
where the public was. So public engagement ultimately drives
government.

I'm in government today because 25 years ago I saw things in my
government that just really made me mad. And I said, "That doesn't
represent the values I was taught and grew up with. We can do better."
And that began my work, which has now gone 25 years, to fight
financial crime, to promote transparency, to promote government that
meets the values that my parents taught me when I was growing up. I
think almost every human being has these values innately in their
heart and wants to see a government that reflects those values.

Q It's interesting that in Indonesia, a lot of organizations are
actively involved in countering corruption. But despite international
pressure, there is still a lot of tendency towards corruptive
practices.

MR. WINER: Well, corruption is also a universal component of the human
character. And Rome wasn't built in a day. And one of my favorite
expressions is that politics is a battle that you fight every day.
None of these things are over quickly. If you've got lots of aspects
of Indonesian society engaged in this struggle, that's already very
powerful and very significant, and you'll see change.

When I look at my work, I say, "Okay, what's changed this week? What's
changed this month? What's changed this year?" And I feel despair.
Then I then look and say, "What's changed over the last five years?
What's changed over the last 10 years? What's changed over the last 20
years?" And I say, "My Lord, look at the changes." And I feel a sense
of awe. So I think we have to have horizons that are appropriate. That
doesn't mean we reduce the pressure, but it does mean to recognize
that these things take sometimes five and 10 years to play themselves
out.

Global economics are driving cleaning up corruption, because corrupt
countries fall behind economically. And so many people see this that
they insist on higher, better standards, more efficient rules, more
fairness, more justice, because they can't afford the alternative.

MR. PAYNE: I think it is a long-term project, as Jonathan said. One of
the things that I'm encouraged by is just the amount of focus and the
attention that is being paid to fighting corruption in the last few
years. My office has had discussions over the last couple of years
probably with representatives of 16 or 18 foreign countries. This is
an area culminating with the vice president's conference and with the
ICAC conference coming up this week.

I think it speaks wonders to just the worldwide, the global momentum
that is growing with respect to dealing with corruption. And this
attitude, this groundswell, if you will, has to spill over. And I
think even if Jakarta is not at the leading edge or Indonesia is not
at the leading edge right now, the global environment is such that
there can be a fine benefit from that as well.

MR. WINER: A lot of European countries were very happily bribing
people decade after decade. And then in the last two or three years,
their publics said, "No more. It's over." As I've seen, it is over.
They're signing on to these conventions saying, "No more bribes."
They're living by it. They're criminalizing it. They're prosecuting
those cases when people pay the bribes. It is a sea change. Now,
that's in Western Europe. It takes time. You never would have thought,
five years ago, they would have eliminated the right to bribe to get
commercial contracts, but they have.

Q With regard to the OECD convention, how will the steps or the
mechanism be applied to Indonesia?

MR. WINER: The OECD convention is very interesting in terms of its
mechanism. First, any country can sign on to it. You don't have to
even be an OECD member to sign on to it. It's open for signature to
the entire world. Second, it's got a self-assessment and a mutual
assessment provision. Any country that wants to can say, "Okay, we'll
throw out the questionnaire to determine to what extent we think we're
living up to the OECD standards. And then we'll invite experts in from
other OECD countries and have them assess us, tell us how they think
we're doing, where we might be able to do better."

What's going to happen as a result of that is a lot of mutual
education, a lot of improvement in mechanisms for any governments that
want to participate. Governments that go through it are going to wind
up not rating very high on the -- (inaudible) -- because people are
going to say, "They're taking steps to combat corruption." That's, in
turn, going to give them economic advantage. So the combination of
doing right by doing good and doing good by doing right is, I think,
going to drive this transformation still further as a result of the
OECD's mechanism.

Q What are the steps in applying the mechanism here in Indonesia, the
starting point?

MR. WINER: The starting point would be Indonesia saying, "We want to
be part of the OECD convention. We want to sign on to it. We want to
self-assess and we want to be mutually assessed." That's how it would
start. It would be very new, because the convention is only a month
old. And if Indonesia said that now, it would be as early as almost
any country in the world.

Q Will foreign companies have the chance -- will foreign grants be
somehow tied to the OECD convention?

MR. WINER: That's a really interesting question. At Vice President
Gore's conference here in the United States 10 days ago, the World
Bank, the head of the World Bank, Paul Wolfensohn, came to the
conference and he talked about this issue of how the World Bank was
becoming much more interested in thinking about how to make
anti-corruption and promoting integrity at the core of its various
kinds of lending programs.

And the United States is (going to be far enough?) with the World
Bank, the International Monetary Fund, other multilateral
organizations and multinational lending organizations, financial
organizations, to try and figure out what would be fair and proper
rules. It would be wrong to say to a country that -- (inaudible) --
and is going to use that money wisely to develop institutions to say
you have to fit any particular rules. But it's right to say, "If we
don't have enough mechanisms in place to ensure this money isn't
abused, we're not going to lend it."

Tolerating corruption as part of the lending process is
counterproductive. And I think the World Bank is saying that pretty
clearly. In fact, Mr. Wolfensohn said that he's prosecuting some of
his own people at the Bank for past corrupt practices, because the
Bank has to set an example now that this stuff is intolerable and that
combating corruption matters.

Q     Thank you, Mr. Winer and Mr. Payne.

MR. WINER:  You're welcome.

MS. LILLY: Well, gentlemen, it's a week before this big conference in
Hong Kong. Do you have anything you'd like to tell us now, before you
go?

MR. WINER:  John?

MR. PAYNE: Again, I would just like to repeat the sort of impression I
have of how the interest and the attitude toward dealing with the
problem of corruption is growing at an exponential rate. And I think
the ICAC conference and the vice president's conference are sort of a
culmination. It's a growth industry, as far as I'm concerned.

There is more -- I've been in this business for about 32 years, and
there's nothing like the focus on dealing with corruption and
promoting ethical behavior and ethical conduct in government and in
the private sector that I have seen during that period of time to
compare with what's happened in just the last few years. And I find
this extremely encouraging, and I think that it will benefit those
countries and those locations that are at the forefront and those that
are sort of in the wings. But I think it's a very positive sign and
something that I think is going to be of benefit worldwide.

MR. WINER: What I would say is that if we expect to have a world where
free markets, democracies, rule of law and stability all flourish --
and globalization is driving the whole world towards those kinds of
results, which are basically good for people -- you've got to have
systems in place to protect people against corruption, because
corruption threatens all of those things.

So there's tremendous energy behind the move against it. And every
generation has something that it's not tolerant of. Every person has
something that they say, "I just can't stand that." And right now, it
looks to me that the thing the people are saying we're going to be
intolerant of is corruption. And that's not just a bad thing.

MS. LILLY: Well, we have run out of time. And we would like to thank
all the panelists in Hong Kong, Beijing and Jakarta and SCTV for their
thought-provoking questions. And, of course, we extend our special
thanks to our guests, Deputy Assistant Secretary Jonathan Winer and
Mr. John Payne, for taking the time to join us and for sharing your
expertise with us.

For Worldnet's Dialogue, I'm Judlyne Lilly.

(end transcript)

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