Tag Archives: African Development Bank

Incorporating Anticorruption Measures in the African Continental Free Trade Agreement (AfCFTA)

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On April 2, 2019, The Gambia became the 22nd country to ratify the African Continental Free Trade Agreement (AfCFTA), which was the minimum threshold to approve the deal among the 55-member states of the African Union (AU). The AfCFTA aims to provide a single continental market for goods and services, as well as a customs union with free movement of capital and business travelers. Although the agreement will enter into force one week from tomorrow (on May 30, 2019), the negotiations for the Protocols and other important matters such as tariff schedules, rules of origin, and sector commitments are still being negotiated. However, once the treaty is fully in force, it is expected to cover a market of 1.2 billion people and combined gross domestic product of $2.5 trillion, which would make it the world’s largest free trade area since the creation of the World Trade Organization. This could be a game-changer for Africa. Indeed, the U.N. Economic Commission on Africa predicts that the AfCFTA could increase intra-African trade by as much as 52.3%, and that this percentage will double when tariff barriers are eliminated. The AfCFTA promises to provide substantial opportunities for industrialization, diversification, and high-skilled employment. And the AU’s larger goal is to utilize the AfCFTA to create a single common African market.

Yet there are a number of challenges that could thwart the effectiveness of this new treaty in promoting free trade and economic development. Corruption is one of those challenges. International indexes indicate that Sub-Saharan Africa is perceived as the most corrupt region in the world, with North Africa not much better. The current version of the treaty, however, does not address corruption directly. It should. Continue reading →

Beneficial Ownership Disclosure by Multilateral Development Banks

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Joseph Kraus at The ONE Campaign recently summarized for GAB readers  measures governments are taking to require companies registered in their territory to reveal the natural person or persons who own and control them, their beneficial owners.  A parallel effort has begun to persuade the international development banks – the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the European Bank for Reconstruction and Development – to reveal the beneficial owners of the companies “their monies” (read taxpayer monies) fund.  In May 2017, the U.S. Congress ordered the Secretary of the U.S. Treasury to see that each bank: –

“collects, verifies, and publishes, to the maximum extent practicable, beneficial ownership information … for any corporation or limited liability company, other than a publicly listed company, that receives funds from [it].”  Division J, section 2079(f) of the  Consolidated Appropriations Act, 2017.

As the U.S. is a significant funder of each bank, an American serves on the board of each.  In the 2017 law, Congress directed the Treasury Secretary, to whom the American board members answer, “to instruct” each to urge its bank to comply with Congress’ wish on beneficial ownership.  It also required the Secretary to report on how the successful the American board member had been in persuading the other board members and the management of their bank to gather and reveal beneficial ownership information.

The Secretary’s report contains several surprises on which banks took the U.S. effort on beneficial ownership seriously and which ones blew it off.  With the banks that ignored the U.S. effort, it leaves unanswered an interesting question: What if anything did board members representing other countries committed to the disclosure of beneficial ownership do to push the issue?

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Sanctions Systems of Multilateral Banks: Overview and Responses

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Although prosecutions under transnational anti-bribery laws like the US Foreign Corrupt Practices Act may get more attention, the major multilateral development banks (MDBs) have adopted administrative sanctions systems that significantly contribute to the strengthening of integrity structures in the countries in which they operate. Indeed, the seven large MDBs share an anticorruption strategy that includes harmonized definitions of fraudulent, corrupt and other prohibited practices. The strategy also incorporates shared principles for conducting integrity due diligence in private sector transactions, and a framework for sharing information to address integrity concerns. These sanctioning systems help to deter and prevent corruption in funded projects, thereby helping to ensure that MDBs achieve their development mandates and fulfill their fiduciary duty to guarantee that their loans are used “only for the purposes for which the loan was granted”. In some cases, as in the World Bank’s Macmillan Publishers and SNC-Lavalin debarments, MDB sanctions have preceded criminal charges by national authorities. In this post, I will provide a brief overview of these systems. Continue reading →