by Ranjit Dev Raj

Bangkok, 19 Feb 2000 (IPS) -- Western countries and multilateral agencies that have been blaming the financial ills of developing economies on cronyism and corruption, saw fingers being pointed right back at them at the UNCTAD X conference here.

"Cronyism and corruption exist everywhere -- within and outside financial systems, and governments -- they pertain not only to the South and it would be too painful to discuss recent examples from the North," said Supachai Panitchpakdi, Thailand's deputy prime minister and conference president. At the start of the week-long conference that ends Feb 19, Malaysian Prime Minister Mahathir Mohamad said he was disappointed that "the international community cannot think of any other solution to the crisis in East Asia except call for improvements in transparency and governance." Mahathir regretted that although blame for recent market crises in the region was being laid on the lack of transparency and accountability, concrete measures were not being taken to address these issues such as direct regulation of hedge funds and "highly leveraged" institutions.

Sweden's minister for trade Leif Pagrotsky said that neither the United Nations Conference on Trade and Development, nor the World Trade Organisation (WTO) had come to grips with the problem of corruption and suggested a programme of regular analysis and exchange of relevant experiences among member states. "Corruption is not an issue of the developing world alone but has an international character, as the most sensational and publicised scandals have shown -- in the end it hurts everybody," he said.

By way of illustration, Pagrotsky referred to kickbacks in a billion-dollar deal under which Swedish Bofors guns were sold to India more than a decade ago, the reverberations of which are still being felt. "It is a problem for both India and Sweden," he said. "Corruption impedes activities in both public and private sectors, distorts trade and investment in all countries, be they rich or poor, industrialised, in transition or developing countries, while large groups of people are deprived of their rights to social and economic progress because of corruptive practices," he said.

In spite of what leaders like Mahathir and Pagrotsky said, calls for transparent functioning in developing countries continued to be heard at the conference, including from Michael Camdessus, managing director of the International Monetary Fund (IMF) who just left his post this week. Camdessus' selective advice on transparency drew sharp reactions from non-government organisations (NGOs) at the UNCTAD conference such as Transparency International and the Third World Network.

Said Stiaan de Merwe of Transparency International: "Good governance and anti-corruption drives should be directed not only at developing countries but to international bodies, transnational corporations (TNCs) and developed countries as well." Earlier in the conference, Third World Network director Martin Khor said it was a pity that Camdessus did not call for the " transparency and strict regulation of financial markets and big market players like hedge funds and investment banks that have manipulated currencies and stock markets and transferred billions of dollars from victimised countries."

Khor said if Camdessus was serious, he would have taken steps to "prevent the IMF from being made use of by financial institutions, the U.S. Treasury and other major developed countries and sought to change discredited structural adjustment policies and resolve the Third World debt problem." Camdessus disputed his remarks, saying that it the Fund had similar views with US Treasury Department, it was because they thought the same way and nothing else.

According to TWN's Khor, the worst kind of corruption and cronyism was that to be seen in the "nexus between Wall Street, U.S. Treasury and the IMF secretariat." "This international cronyism has put the interests of a few financial institutions and financiers ahead of the interest of economies and people of the world, in both North and South countries," he said.

Ann Pettifor, director of the U.K-based Jubilee 2000 Coalition, said poor country elites have often borrowed unwisely and diverted funds to western banks. They were responsible for the plight of several highly indebted poor countries (HIPC). In Nigeria, with foreign debt at $34 billion, a government commission found that at least 60 development projects, with over $5 billion in foreign loans, have either failed or never started. But the list of loans for bad, foolish or unwise projects around the world was endless and, according to Pettifor, often the result of "loan pushing" by private interests looking for lucrative contracts.

"Banks lend money to poor country governments and then literally sent men with suitcases to bring back dollars from the leaders of those countries," Pettifor said and cited a high-ranking IMF official who admitted the institution lent money and then accommodated the flight of capital. In Indonesia, whose foreign debt burden totals $120 billion, the 1999 Bank Bali case not only exposed corruption in World Bank projects but also exposed efforts by the Bank to conceal the fact that it knew about the corruption, she said.

In November, Citibank gave details of accounts frozen by Swiss courts for illegal payments. These included Raul Salinas, brother of former Mexican President ($100 million) and former Pakistan prime minister Benazir Bhutto ($40 million). Citibank's special "private banking division" caters purely to hot money diverted by developing country elites and is reported to handle 40,000 such accounts, several of them sizeable fortunes. (SUNS4611)