Former U.S. Ambassador Heather M. Hodges Speeches

The Millennium Challenge Threshold Program: A Tool for Fighting Corruption

Ambassador Heather M. Hodges Moldova State University Law Department

Rector Rusnac, Dean Avornic, professors and students, ladies and gentlemen: it is a pleasure to be with you here today. I always love meeting with students - and I always feel at home here at Moldova State University.

Last month, Moldova was invited to submit a proposal for a Millennium Challenge Account Threshold Program. Today I'd like to talk a little about the Millennium Challenge Account -- MCA as it is called -- and what we hope Moldova will be able to accomplish through a Threshold Program.

What is the Millennium Challenge Account?
The MCA was created in 2004 in response to President Bush's call to link greater assistance from developed nations to greater responsibility from developing nations. We want to give more assistance to developing countries, but we want to make sure that our assistance is effective. The MCA draws on the lessons we have learned about development over the past 50 years, including the fact that assistance is most effective when it reinforces the sound political, economic and social policies that are key to encouraging the inflows of private capital and increased trade -- the real engines of economic growth.

The assistance countries can get through the MCA is substantial. The five MCA assistance compacts signed so far total $900 million. That is an average of $180 million for each country receiving assistance through the MCA. Let me give you a few examples of the kinds of assistance we are giving through the MCA. In Cape Verde, where a lack of transportation infrastructure hinders the development of a common national market, increases the costs of production, and impedes the movement of people and goods, MCA funding is helping to build roads and small bridges. In Georgia, MCA assistance is funding physical infrastructure for water supply, sanitation, irrigation, municipal gasification, roads, and solid waste management in regions outside of the capital. And in Nicaragua, MCA assistance is supporting activities to improve water supplies for irrigation, thereby facilitating higher-value, sustainable agriculture.

So, if assistance through the MCA can do such wonderful things, why have only five countries completed compacts so far? This is because we only provide assistance through the MCA to low-income countries that are, in President Bush's words, "ruling justly, investing in their people, and encouraging economic freedom."

The U.S. government corporation that administers the MCA uses sixteen indicators to determine if a country is eligible for MCA assistance. A country must score above the median on at least half of the indicators in each of the three criteria areas I just mentioned -- ruling justly, investing in their people, and encouraging economic freedom. And it must also score above the median on one specific measure -- fighting corruption. Moldova performs well on almost every indicator, but has consistently fallen short on its demonstrated commitment to fight corruption, as measured by the World Bank.

Why does Corruption Matter so Much?
Why does corruption matter so much? The World Bank has put it simply: corruption is the "single greatest obstacle to economic and social development."

According to experts, including the World Bank and Transparency International, corruption in Moldova -- and the perception of corruption, which is equally damaging -- is extensive and impacts all levels of society. I am not here to talk about specific cases, but I am sure you have all heard of someone who paid to get a good grade on an exam, to get a scholarship -- or even just to get into a university. An acquaintance of mine who is studying part time was recently told she could skip a class entirely but still receive a passing grade if she gave the professor a little money. I have heard of people who are forced to offer bribes at hospitals or doctors offices in order to be treated; of bribes demanded by police officers; of businessmen paying fiscal authorities to ignore their accounting discrepancies -- or just not to audit them at all; of customs officials and border guards who are paid to turn the other way so that certain trucks can pass uninspected; or parties in a legal case who pay a judge to have the case decided in their favor.

How does corruption affect you? Corruption in education -- whether you are personally involved or not -- cheapens the degree you will receive at the end of your studies. People tell me that when they go to a clinic they prefer to be seen by an older doctor, since they can be more confident that an older doctor actually sat through medical school rather than just paying for his or her degree. In business, corruption distorts fair competition and makes goods more expensive -- again, it doesn't matter if you personally pay a bribe or not, it affects the choices you have and the prices you pay.

When governments are corrupt, it has a direct effect on the citizens. Leaders who are supposed to make important decisions based on the public good are instead basing their decisions on private gain. This results in policies and projects that impoverish rather than enrich the village, local and central governments, or the nation as a whole. The public good suffers through low quality work, waste of funds, and failure to deliver the health, educational, and other services to which people are entitled. And because the corrupt seek to protect themselves and their cronies from discovery, they may try to subvert the electoral process, intimidate and manipulate the press, and undermine the system of justice.

Again, let me emphasize, I am not singling out Moldova. These are the realities and consequences of corruption in every country. But let me ask a question: How many of you have ever been asked for a bribe?

If I asked the same question to a group of American law students, I would be surprised if even one hand was raised.

I am not saying that America has all the answers. We have corrupt officials and corrupt businesspeople in the United States. During the nineteenth and early twentieth centuries, corruption was almost pandemic in American public institutions. But we have been fighting back. We have worked to develop a culture that does not tolerate corruption. Some people are corrupt, but they are usually caught and brought to account. For example, in the past ten years, over 10,000 people have been convicted in the United States on federal corruption charges. You may have heard of some of the higher-profile cases such as Enron. And even the highest reaches of government are not immune. Just last month a Member of Congress pleaded guilty to accepting bribes to influence legislation. So my point is not that there is no corruption in America. But the reason corruption is less of a problem in my country is because the general public won't tolerate it. An American police officer who harasses motorists, an American doctor who asks for extra payments from patients, or an American congressman who sells his vote for money, sooner or later is likely to be caught. And when he or she is caught, the penalty is severe: months or years in prison, serious fines, and intense public shame.

Why is this important? Why is corruption the one area in which every country must score well in order to qualify for MCA assistance? Because unchecked, corruption is a plague that cripples a society. Because corruption undermines the transparency and trust in public institutions essential to a stable, functioning democracy. And because American taxpayers will not tolerate their money being sent abroad to governments that steal from their own people. We want our assistance to help those in need, not enrich those in power.

Moldova's Progress in Fighting Corruption
Moldova has made some progress in fighting corruption. I have been particularly pleased to track the implementation of the so-called "Guillotine Law." Through this law more than 100 unnecessary and obsolete business regulations have been eliminated. And as the number of stamps and signatures required to operate a business in Moldova is reduced, so too are the opportunities for corrupt officials to solicit a bribe. We are looking forward to the next step in this process, under which the National Working Group on Regulatory Reform will review existing organic laws that affect the business environment, and a Regulatory Impact Analysis Commission will be created to monitor the costs and benefits of proposed new legislation.

The Customs Service is another good example. It has done some very simple, yet innovative things to combat corruption, such as transferring Customs officers around the country, breaking up the little cliques. When you're in an office sitting next to someone you don't know very well, you're going to be more hesitant to ask for a bribe since you can't be sure if your new colleague will turn you in. They've also centralized the money collection at border crossing points so that you don't have to pay various officials individually; this has made bribery more difficult. The results are apparent: a 70% increase in Customs revenues over the past three years.

The recent changes in the police system -- removing police officers from the entry points into cities and towns, and changing the law so that police can only stop a car if there is an apparent violation -- are also positive steps that reduce opportunities for corruption and start to show citizens that they do not have to put up with "business as usual" any longer.

And Moldova has made a major step in addressing the problems of corruption in passing a coherent, attainable Anti-Corruption Strategy and Plan. Progress in implementing the goals of this Plan has been made in the past year, in part with assistance from the Council of Europe. The tangled jurisdiction of agencies handling criminal cases of corruption was examined and will be sorted out, an assessment of the risk of corruptibility of the Center for Combating Economic Crime and Corruption was performed and will be repeated at other relevant agencies, and a law was drafted on financing of political parties and electoral campaigns. These are important projects.

These efforts are starting to bear fruit, as reflected in Transparency International's Corruption Perceptions Index. Moldova's score jumped from 2.3 to 2.9, just below Romania's 3.0 and, along with Armenia, the highest among the twelve CIS countries. And Moldova's score on the MCA corruption indicator inched up slightly. I applaud the work of the government and civil society in fighting corruption. But more must be done.

It is important to note that Moldova does not need to reinvent the wheel when it comes to fighting corruption. This is an issue that is being talked about throughout the world and there are many organizations with good ideas. For example, the Council of Europe has two conventions against corruption, and Moldova ratified both in 2003. One year ago the United Nations adopted the UN Convention against Corruption. I understand that the Ministry of Foreign Affairs is preparing to present it for ratification by the Parliament. The 30th country ratified this UN convention earlier this fall, and today the UN Convention against Corruption enters into force. There are many tools and ideas in both the UN and the Council of Europe conventions that Moldova can use in the fight against corruption. The Moldova-EU Action Plan also contains important anti-corruption elements.

Ideas for Moldova's Millennium Threshold Program
As I mentioned previously, Moldova has been invited to submit a proposal for a Millennium Challenge Account Threshold Program. The MCA Threshold Program is designed to assist countries that are committed to undertaking the reforms necessary to improve policy performance and, thereby, qualify for a full MCA assistance program.

In Moldova, the area that most needs work is corruption, so this should be the focus of the Threshold Program. I would like to suggest a few areas that Moldova might want to consider when putting together its proposal. But let me add that these things should not be done just for the sake of the MCA program. These steps make sense because they are vital to good governance and to a successful, prosperous society.

The first is in setting standards for ethical behavior. Leaders of government, parliament, major companies, and NGOs need to publicly commit themselves to ethical behavior. They need to make it clear to their subordinates that corruption will not be tolerated. Moldova already has some policies designed to combat corruption -- such as the financial disclosure requirement for public officials and their families. But it is not enough to have these laws on the books; they must be enforced. In government and the private sector, policies need to be created and training conducted to ensure that people understand the rules -- and then they need to be held accountable for their actions.

The second aspect is access to information. Moldova has a very good access to information law on the books, but more needs to be done to implement it. In addition, Moldova should consider whether there are sufficient "sunshine laws" in place. Sunshine laws require openness in government decision-making, allowing the people to see what is being done in their name. It's amazing what happens when decision-making is brought into the light of day. In Latin America they say that "sunlight is the best disinfectant."

A free and independent media is also a powerful tool in combating corruption. I have spoken numerous times on the problems of the Moldovan media, and I won't go into detail today. But in order to fight effectively against corruption the media need to be free from government influence. They also need to be commercially sustainable. We all know that there are strings attached when someone offers money. When media organizations are dependent upon sponsorship of certain companies or organizations, they will not be able to actively pursue stories that might make their sponsors look bad by publicizing corrupt or unethical behavior.

And people need to be aware of their rights. This is a huge undertaking, but until people know what to do when they are asked for a bribe -- who they can go to for protection and to hold the person asking for the bribe accountable -- anti-corruption efforts will be incomplete. As awareness among the general public is heightened, there will be a critical mass of people who will stand up and say "no!" As Robert Jackson, one of our most illustrious Supreme Court Justices, said, "it is not the function of our Government to keep the citizen from falling into error; it is the function of the citizen to keep the Government from falling into error."

The last aspect I would like to discuss today is an independent judiciary. This is essential to a free society. Many countries have a huge number of anti-corruption laws on the books, but they also have judges appointed and beholden to politicians who are selective about the enforcement of these laws. Laws do not do any good when crooked politicians and businesspeople know that they will not be enforced. The key to success in fighting corruption is application of the rule of law without fear or favor.

One of the most common things I hear in Moldova is that the judicial system here is simply not dealing adequately with the problem. Prosecutors and the courts are not forcing public officials to pay for violating the public trust. There are very few prosecutions, and even fewer convictions, of corrupt officials.

Now some may argue for a complete overhaul of the judicial system in order to combat corruption. I am not a legal expert, so I am not going to get into that debate. But it would seem to me that there are some rather basic steps that could be taken to improve the integrity of the Moldovan judicial system. For example, random assignment of cases would make it harder for someone to ensure that their case is heard by a certain judge who is sympathetic or can be bought. An electronic case tracking system would ensure that clerks cannot be bribed to "lose" a file. Another idea would be sentencing guidelines. This would make it more difficult for a judge to be bribed into a minimal sentence -- and easier to detect if that did happen. It is also important to link training of judges to their appointments and career progress. And finally, access to the justice system by parties and impartial observers will ensure that judicial abuses and errors are brought to light.

Yes, Moldova is making progress in the fight against corruption. With the Millennium Challenge Account Threshold Program Moldova has the opportunity to intensify that fight. I hope that the Government and people of Moldova will seize this opportunity to create a political culture and social climate that does not abide corruption.

I would like to leave you with a challenge. As future lawyers and judges, you will be on the front lines in the fight against corruption. It will be up to you and your colleagues to ensure that the rule of law is applied without fear or favor. It will be up to you to turn down the bribe offered by a defendant to rule in his or her favor -- and it will be up to you to make sure the attempt is reported and the person held accountable. Your job will be difficult, perhaps even dangerous. But accepting that risk, and doing your job honestly and honorably to the best of your ability, will be the surest sign of your patriotism. Your generation has the opportunity to end the tolerance of corruption and confirm Moldova's future as a free, democratic and prosperous European nation. The United States will do what it can to help you. But the fight -- and the future -- are yours.

Thank you.