Transparency Times October 2020

From the Chair

Suzanne Snively

As all of the country has now moved into Alert Level 1, I’ve had the opportunity over the past month to travel, and to speak at two live events.

The planes to and from Auckland were nearly full when I travelled to meet with the FINANCIAL Integrity System Assessment (FISA) project team. That same week, audiences turned up for both a Transparency International New Zealand’s (TINZ) event in Wellington and the Kapiti/Horowhenua Business and Innovation Awards.

COVID-19 has created economic uncertainty. The June 2020 decline in economic activity of 12.2% was one of the biggest in our history.

The next ‘Alert’ is for the recovery of business and growth in jobs to replace the ones that have been lost. The potential to do this is enhanced in New Zealand because of the processes in place to prevent corruption and the international perception that New Zealand is a place of integrity.

Candidates speaking at the TINZ event on 6 October demonstrated this in their responses to questions about Business and Political Integrity from the COVID Crisis.

Business Can Move Forward

The Kapiti/Horowhenua Business and Innovation awards (hosted by electricity line company, Electra, held on 9 October) themed Business and Innovation During the Covid-19 Pandemic, exemplified the positive community outcomes achieved by doing business with integrity.

For this event, the decision was made to go ahead with an awards-application process fitting for COVID-19 conditions. The topics examined were based on earlier Baldridge factors about what makes a successful business. Applicants were prompted to tell stories to make their case.

It was a full house event filled with optimistic local businesses. Their stories reflected a strong degree of engagement to make things work for their communities during the COVID-19 lockdowns. The gains made from this have given them optimism for the future.

Using the current jargon, the applicants for the business awards pivoted successfully. They have been succeeding IN SPITE OF the COVID-19 pandemic.

Working from home, they zoomed and teamed together to test the viability of innovative ideas aimed first at just surviving and THEN proving their worth in building resilience and sustainability.

The Kapiti/Horowhenua Region has been fortunate. With more and more local people working from home instead of travelling into Wellington to work, the region’s retail economy has benefited. There has also been strong demand for housing there.

Positive Outcomes in Auckland

These positive economic outcomes are also happening in the suburbs of Auckland, where automobile and house sales are up overall and where essential services have benefited as people work from home rather than in the inner city.

Building the Economic Recovery

Through considered and deliberate steps, those businesses have tried things and identified ways in which they can contribute to building the economic recovery.

Based on their examples of innovation and sustainability, aligned with values of transparency and integrity, our economy can be driven into a positive upward spiral.

7 Key features of an integrity framework that prevent corruption

My From the Chair column in the September Transparency Times listed the 7 key practices for preventing corruption.

These practices provide the foundation for more resilient people, organisations and communities that generate the potential for better business recovery and economic outcomes.

7 Key outcomes of an integrity framework that support potential

When there are clear initiatives to implement and develop the 7 key features or an integrity framework, the foundations are laid. These support a structure and systems that generate a sustainable economy.

The 7 key outcomes from integrity frameworks are:

  1. Reputation and brand
  2. Market access
  3. Lower costs
  4. Customer loyalty
  5. Access to responsible investment
  6. Committed and loyal staff
  7. Higher productivity/ increased returns

The net effect of the above 7 outcomes of transparency and integrity is that everyone – people, families, communities, financial organisations, businesses, non-government organisations and sporting bodies, has the potential to invest to improve productivity and achieve more sustainable returns.

‘Tone from the top’ is working

Turning to the question of economic recovery, New Zealand’s tone from the top has attracted the world’s attention.

New Zealand’s reputation and brand are at an all time high. Its practices to contain the COVID-19 pandemic have actually worked using democratic processes. This is largely attributable to knowledge sharing among international public health experts.

Suzanne Snively, ONZM

Chair

Transparency International New Zealand Inc.

Candidates’ Panel: Business and political integrity during COVID-19 recovery

“To retain the country’s high ethical standing, our political leaders need to recognise the importance of integrity as a vital part of the post-pandemic recovery, and embrace their roles as ethical leaders.” So says Professor Karin Lasthuizen, Brian Picot Chair in Ethical Leadership, Wellington School of Business and Government.

On Tuesday 6 October approximately 200 people gathered at Rutherford House, Victoria University of Wellington to hear 2020 election candidates discuss business and political integrity.

Participants 

Master of ceremonies, Tamatha Paul (Wellington City Counsellor), facilitated the event. Five political parties were represented by Andrew Little (Labour), Fletcher Tabuteau (NZ First), David Patterson (National), Jessica Hammond (TOP) and James Shaw (Green). Each fielded questions from former broadcaster Ian Fraser, on the theme of the discussion.

A highlight of this event was Ian Fraser’s skillful questioning, which empowered considered and open reflection rather than soapbox posturing.

Viewpoints aired

All candidates agreed that extraordinary times require extraordinary effort to avoid corruption. There was general agreement that when policy and funding decisions are made at speed and under pressure, there is likely to be inefficient use of funding and unintended impacts.  James Shaw (Green) made a case for a post election regulatory review of decisions made during COVID-19.   The candidates also discussed the important role played by the Pandemic Response Select Committee, Chaired by the Leader of the Opposition, in maintaining public trust. 

Jessica Hammond (TOP) was keen to talk about infrastructure and public procurement.  She reflected on the politicisation of pre-1990s infrastructure spending, and how she was now seeing an erosion of the independent response on infrastructure spending. Hammond said that debt funding will inspire opportunism and for that reason we need to depoliticise infrastructure funding.  Shaw supported the concept of an infrastructure bank, set up at arms length from Ministers. 

Fletcher Tabuteau (NZ First) talked about the Provincial Growth Fund and said he had a high level of confidence in the neutrality of those funding decisions.  He said that at times politicians, wanting to move faster, were frustrated with this approach.

David Patterson (National) said that Kiwis tend to be a little naive around bribery and facilitation payments and there is more to do to raise the awareness of New Zealand businesses.

Andrew Little (Labour) indicated his support for a broader anti corruption role for the Serious Fraud Office.

All candidates talked about the importance of a healthy media sector to a liberal democracy.  They had varying positions on the level of state funding for public and even private media.

Concluding observations

TINZ Chair, Suzanne Snively, wrapped up the evening by observing that the strong message conveyed by all 5 candidates was that they are decent people who want to make our country a better place for its residents. “Given that the best antidote to corruption is integrity and, compared to what’s going on elsewhere in the world, this is something that is remarkable about New Zealand.  At the same time, taking deliberate steps to build the economic recovery on the values of transparency and integrity has the potential to move our economy more quickly into a positive spiral.”

This event, jointly hosted by Transparency International New Zealand and the Victoria University of Wellington Brian Picot Chair of Ethical Leadership, is part of our ongoing effort to ensure that political parties, candidates and our elected officials prioritise the need for transparency and corruption prevention. Access to an edited audio recording of the event will be provided here when made available soon.  

Newsroom’s Dileepa Fonseka was in attendance and published a recap: Funding in crisis mode: The Covid corruption risks.

Also, see our election advocacy section. TINZ posed seven questions to the ten political parties on the topics of pandemic recovery, political party funding, codes of ethics, whistleblower protection, and anti-corruption measures. The responses show that claims of taking corruption prevention seriously, are not supported with much knowledge or planned action.

Key questions put to all five candidates

  1. TINZ’s National Integrity System Assessment has found that the public sector became more focused on preventing corruption between 2013 and 2018 – what has been COVID-19’s impact on transparency and accountability  in areas such as whistle blowing, protective disclosure, procurement and conflicts of interest?

  2. While there are signs of improvement in public sector integrity, business integrity showed little if any signs of improvement in its complacency about conduct and culture between 2013 and 2018. Given the nature of the economic recovery required now that the COVID virus is contained, what can be done to ensure business integrity is strengthened?

  3. Already weakened by disrupted business models from social media diluting advertising revenue, the media was further disrupted by the COVID Crisis. Why is freedom of the press so important for transparency and accountability and what are your ideas about what needs to be done to strengthen the integrity systems underlying the media so it can be effective in preventing corruption?

  4. Three political parties had/have cases in front of the Serious Fraud Office related to what may be illegal political party donations. What form of political party funding will both prevent corruption as well as support the development of viable political parties with a role of creating qualified candidates for Parliament.

Opening statements—Business and political integrity during the recovery from the COVID crisis

Full Seminar: Business and political integrity during the recovery from the COVID crisis

Keep Thinking and Carry on – Online political campaigning in New Zealand

Blog Post by
Julie Haggie
Chief Executive Officer
Transparency International New Zealand

Think, ponder, evaluate, consider! New Zealand brains have had to run extra laps over the last while. 

COVID-19 has smothered our political thinking space ahead of the election. Collective tiredness has made it harder to focus on important issues such as online political advertising because of the urgent and intense demand on critical thinking across many spheres of work.

But our work must continue. Transparency International New Zealand (TINZ) is contributing a New Zealand centric report to a collaborative Transparency International (TI) project on online political advertising. This project also involves other chapters of TI, in Lithuania, UK, Kenya and the Czech Republic.

New Zealand’s profile

Online Political Campaigning in New Zealand is a result of thorough and insightful research by lead Joshua Ferrer. We are grateful for his time, skill and forbearance. We are also grateful to the team at TI for their encouragement.

It became clear during the development of this paper that digital political advertising is a new frontier. Election campaign regulations in New Zealand have recently changed to enable the growth of digital advertising. Transparency remains an area of risk concern.

It is a rapidly evolving environment. In the last national election (2017) 64 per cent of New Zealanders used the internet for information about the election. Almost 19 per cent of all reported party expenditures for that election were for digital campaigning. We can expect to see an increase this year.

New Zealand has to date allowed digital providers to largely self-regulate on transparency. Their response has been variable. Regulatory bodies have insufficient enforcement or investigative power, including around post-election expense returns. Parliamentary Service funding of online political advertisements is opaque. In addition, advertising threshold limits were not designed for an era of online campaigning, where a modest amount of money can buy a lot of reach.

Misinformation is also on the increase as we know from the number of complaints coming to the Advertising Standards Authority. This agency walks a difficult line between unnecessarily fettering free speech vital to democracy, and fighting against the promotion of untrue or misleading political advertisements. It is facing volume and resourcing pressure, which affects responsiveness.

Platforms such as Facebook or Google have also ramped up their efforts to shut down foreign adversaries, prevent social media hacks, and address astroturfing, or the spread of disinformation through robot accounts and paid participations. Real risks remain. 

Weak disclosure laws

Weak disclosure laws mean that third party promoters – individuals or groups not directly contesting an election but that spend money to influence its outcome – can: 

  • spend up to NZ$13,600 (US$8,980) without having to register with the Electoral Commission.
  • spend up to NZ$100,000 (US$66,000) without having to submit a post-election expense report.   
  • spend up to NZ$330,000 (US$217,800) for the election and NZ$330,000 (US$217,800) for each referendum, without disclosing funding sources.

Considering the wide reach of promoted Facebook and other social media advertisements from relatively small expenditures, there needs to be consideration of lowering these thresholds substantially, to reflect the new realities of online political advertising.

A lack of proactive enforcement powers means that the Electoral Commission is unable to monitor technology companies to ensure compliance with existing laws.  Without a regulatory framework outlawing foreign social media advertising in New Zealand elections, the country remains at the whim of social media giants to fight foreign influence campaigns.

The issues raised in this TINZ report on Online Political Campaigning in New Zealand, reflect the new ground being trod. We need measured consideration of new challenges to ensure voters are able to make choices without undue influence of money or misinformation.

Four recommendations

Based on the evidence provided by Ferrer, TINZ’s four recommendations to increase the level of transparency and accountability of online political campaigning in New Zealand are:

  • Searchable registers of digital political ad buys
  • Detailed reporting in campaign expense returns
  • Greater investigation and enforcement by the Electoral Commission
  • Assessing the role of the Advertising Standards Agency

We recommend that Parliament take the opportunity to not only maintain New Zealand’s status and reputation as a leader in political integrity, but to show other countries the way forward in dealing with a critical issue for protecting democracies and fighting political corruption.

Read our full Online Political Campaigning in New Zealand report here.

 

New Zealand is not doing enough to fight foreign bribery

Fewer of the world’s biggest exporting countries are actively investigating and punishing companies paying bribes abroad, according to a new report released by Transparency International. Exporting Corruption 2020: Assessing Enforcement of the OECD Anti-Bribery Convention finds that active international enforcement against foreign bribery is shockingly low.

Only four out of 47 countries, which make up 16.5 per cent of global exports, actively enforced legislation against foreign bribery, compared to seven countries and 27 per cent of global exports in 2018.

Exporting Corruption in New Zealand

The report labels New Zealand at “limited enforcement” and finds that New Zealand needs to do a better job of fighting foreign bribery.

“The threat of New Zealand being used for international corruption remains real”, says Professor John Hopkins, the lead New Zealand author, on behalf of TINZ. Hopkins adds “The combination of a reputation for probity coupled with limited enforcement capacity and legislative gaps (around beneficial ownership for example) is an extremely dangerous one. New Zealand risks being seen as a soft target for criminal entities wishing to legitimise their activities.”

Recommendations

Recommendations for New Zealand include:

  1. Improve availability of statistics and information on investigations, mutual legal assistance (MLA) requests and cases in relation to foreign bribery
  2. Develop central registers (new or existing) to ensure public accessibility of beneficial ownership information for all New Zealand companies and trusts
  3. Remove the “routine government action” (facilitation payment) exemption from Section 105C of the Crimes Act 1961
  4. Introduce clear and specific legislative protection for auditors (and others) who report suspicions of bribery to the relevant authorities
  5. Improve protection for whistleblowers by strengthening the provisions in the Protected Disclosures Act 2000, and other legislative amendments. An example of this is the extension under the Anti-Money Laundering and Countering Financing of Terrorism Act 2015, of auditor protection to include foreign bribery
  6. Introduce a positive requirement for commercial organisations to prevent foreign bribery by introduction of an offence of failure to prevent bribery (see The UK Bribery Act 2010, s7)
  7. Give greater priority and resources to the proactive investigation of foreign bribery to assess its extent in New Zealand
  8. Consider creating an independent anti-corruption agency, whose remit includes managing foreign bribery investigations
  9. Remove the requirement that the Attorney-General consent to foreign bribery prosecutions

“Foreign bribery is not an abstract phenomenon; it has huge consequences for both the payer and recipient. Money lost to foreign bribes creates significant economic repercussions, triggers unfair competitive advantages and results in fewer public services for the people who need them most. New Zealand needs to take action and demonstrate world leadership in the fight against corruption”, says Julie Haggie, CEO of Transparency International New Zealand.

Webinar

As we go to press on Thursday 15 October, Transparency International New Zealand, Transparency International Australia and the Transparency International secretariat will hold a webinar discussing foreign bribery and the Exporting Corruption Report.  To register visit the Exporting Corruption Down Under registration page.

View the full report Exporting Corruption 2020: Assessing Enforcement of the OECD Anti-Bribery Convention report on the Transparency International Website. 

Better rules: better outcomes

Tod Cooper
TINZ Director
Special interest areas include Procurement, Online Training and Whistleblowing

Tod Cooper
TINZ Director

Each year the New Zealand public sector spends around $42 billion on goods, services and works from third party suppliers, to build infrastructure and provide public services.

Never in New Zealand’s history has it been more important to channel government spending inwardly to ensure it is delivering sustainable outcomes for New Zealanders.

Revised expectations

The 4th edition of the Government Procurement Rules, which came into effect over a year ago (1 October 2019) for all public service departments and ‘state services 1 agencies’ (refer Rule 5), set out the Government’s expectations for how procurement will be leveraged to achieve sustainable outcomes.

While there were several good additions to these rules, one salient rule is Rule 16 ‘Broader outcomes’. 

The four broader outcomes are:

  1. Increasing New Zealand business access to government contract opportunities

    Agencies must consider how they can create opportunities for New Zealand businesses, including Māori, Pasifika, and regional businesses, as well as social enterprises.

  2. Construction skills and training

    Government must find ways to partner more effectively with the construction sector to grow the size and skills of New Zealand’s construction workforce.

  3. Improving conditions for New Zealand workers

    Improving conditions for workers in higher risk industries, including those that are susceptible to exploitation. Agencies must ensure suppliers and their sub-contractors comply with employment standards, and health and safety requirements. This outcome also ensures a more level playing field by providing a focus on ensuring those suppliers who meet their responsibilities cannot be undercut by those who use unsafe and unfair practices or exploitation. An initial focus is on cleaning services, security services, and forestry.

  4. Reducing emissions and waste

    Generating positive environmental outcomes through procuring low emissions and low waste goods, services and works.

Avoiding exploitation

While all these outcomes are important for New Zealand, improved conditions for New Zealand workers is a rule that is of specific interest to Transparency International New Zealand (TINZ). In our view, there needs to be more focus by agencies to ensure that in their quest for the ‘best bang for their buck’ they are not inadvertently driving exploitative and unsafe behaviours from industries.

Cleaning services, security services and forestry are all industries that have traditionally been subject to low wages and more vulnerable to poor labour practices. For these industries in particular, agencies will be required to:

  • ensure suppliers are meeting employment standards

  • require suppliers to undertake due diligence of any sub-contractors to ensure they too are meeting employment standards

  • monitor both suppliers and their domestic supply chain to make sure they continue to comply with employment standards for the duration of the contract.

Transparency is critical

Regardless of the outcome, transparency is critical. It will be important that agencies are capturing and reporting against these outcomes in a consistent and meaningful way, backed up by evidence. Equally important is that suppliers provide the necessary data to these agencies.

TINZ continues to promote ways to hold agencies to account for these outcomes and ensure:

  • the values of transparency and accountability are being met
  • that behaviours leading to workers exploitation and other corrupt behaviours are never associated with public spending.

Extending the Government procurement rules

Consultation: Extending the Government Procurement Rules to government entities in the New Zealand public sector

The Ministry of Business Innovation and Employment (MBIE) is undertaking a public consultation to understand the potential benefits, opportunities, and other impacts of extending the Government Procurement Rules to more government entities in the New Zealand public sector.

Transparency International New Zealand (TINZ) supports open transparency in all forms of government spending. The current Government Procurement Rules (4th Edition) spell out the behaviours and principles from which the public sector should operate.

World-leading but limited reach

TINZ considers these are largely world leading. The key challenge is to widen the reach of these Rules across government procurement. Currently they cover approx 135 government entities that make up the core public sector and state services. Their annual $42 billion of procurement spending is only a small portion of overall government procurement. 

As the illustration below shows, a significant portion of the New Zealand public and state sector are only ‘encouraged’ to apply the Rules. This includes 2,400 School Board of Trustees and 78 regional and territorial authorities (with annual collective spend of approximately ~$8 billion).

This limits the Government’s ability to influence procurement and implement system-wide improvements to procurement practices, to achieve greater public good from the spend. It also limits the accountability and transparency around the use of taxpayer money across all the New Zealand public sector.

On the flip side, extending these Rules could have the detrimental effect of limiting the ability for some of these government entities to operate independently of central government. In some instances, the Rules directly challenge current statutory obligations. They could provide an additional burden (and cost) around procurement capability, and the capacity to meet more comprehensive reporting obligations.

For further information we encourage you to review MBIE’s Discussion document: Extending the Government Procurement Rules to government entities in the New Zealand public sector.

Submissions due 23 November

While we encourage you to submit your feedback direct to MBIE, TINZ will also be providing feedback. For the latter, we welcome your thoughts on the potential benefits, opportunities, and other impacts of extending the Government Procurement Rules to government entities in the New Zealand public sector. This may help shape our response.

Note: Submissions close at 10am on Monday 23 November 2020.

TINZ and TI Secretariat provide much needed support to CLCT Integrity Fiji

Joseph Veramu

Executive Director

CLCT Integrity Fiji

“Anti-corruption advocacy in Fiji is urgently needed”, says Jofiliti Veikoso, the Board Chairperson of Civic Leaders for Clean Transactions Integrity Fiji (CLCT-IF). “We are deeply grateful for the continued support of both Transparency International New Zealand (TINZ) and Transparency International, in expediting our work during this challenging pandemic period.”

Fiji Independent Commission Against Corruption (FICAC) invited CLCT-IF in September to provide constructive inputs into their new 5-year Strategic Plan covering 2021-2025. A timely and generous grant from the New Zealand Ministry of Foreign Affairs and Trade (NZ MFAT) channelled through TINZ from July 2019 to March 2020, enabled CLCT Integrity Fiji to prepare all its Policies, Plans, Reports, Manuals and Tool Kits. This good governance process is a prerequisite to CLCT-IF’s application for accreditation as a TI Chapter in Fiji.

Transparency International has acquired the services of Tebutt Research, a highly regarded polling company, to undertake the Global Corruption Barometer (GCB) Survey in Fiji. CLCT-IF has made constructive inputs into the survey. The GCB will also be rolled out in other Pacific countries.

CLCT-IF received a grant of EUR 15.000 (NZ$ 26,600 approx.) for the August to December 2020 period from Transparency International secretariat under the TI IPP STRONGG PROGRAMME. The programme objective to “Actively partner with dynamic state and non-state agencies to increase our impact on Anti-Corruption Initiatives”, has led to an exciting partnership with the Department of Ethics and Governance of the Faculty of Humanities of the Fiji National University and the Fiji Independent Commission Against Corruption (FICAC). We have been asked to develop an anti-corruption massive open online course (MOOC). There has also been a request for our Youths For Integrity Initiative to be rolled out to the 500 trainee teachers at their Lautoka Campus.

On September 24, we had a Zoom meeting with TINZ CEO, Julie Haggie, and Mary Jane Kivalu, Project Manager of the TINZ project focussing on anti-corruption networking with South Pacific communities in New Zealand and beyond.

We recently published Procurement Processes in Fiji and Strategies for Curbing Corruption to the Integrity Fiji website.

With support from TINZ and Transparency International, CLCT Integrity Fiji has been able to continue and strengthen its networking and advocacy work in anti-corruption.

CLCT Integrity Fiji including Joseph Veramu, Exec Director, pictured with Mr Narendra Prasad, the Director of Finance, Prof. James Pounder, the Pro Vice Chancellor Teaching and Learning, Professor Unaisi Nabobo-Baba, the Dean of the Faculty of Humanities and Prof Nii-k Plange, the Head of the Interdisciplinary Climate Change Unit of the Fiji National University.

TINZ Submissions activity

Transparency International New Zealand (TINZ) continues to encourage our readers to exercise their democratic responsibilities by making submissions and responding to government consultation processes with their opinions on future direction-setting and legislation.

Recent TINZ submissions

 View earlier submissions prepared by TINZ, or search on the ‘Submissions’ category at the bottom of TINZ homepage www.transparency.org.nz

Submissions currently being sought

The following two centralised websites invite and facilitate public submissions on a variety of legislation, policies, levies, plans and projects currently being processed under, and beyond COVID-19 restrictions. They also provide updates about progress for recently closed submissions:

Unfortunately some government agencies still choose not to utilise the above websites, and instead advertise their public feedback invitations only within their own websites. 

The following invitations of potential relevance to TINZ, are currently open for public comment by their stated deadline. We encourage our readers to take the time to draft a submission, even if it is a short one. The submission process is an opportunity to exercise your democratic rights. 

 

Reserve Bank Act Review – Consultation phase 3

  • Deadline: extended to Friday 23 October
  • Submissions are invited by The Treasury 
  • This consultation is on the regulation of deposit takers and the introduction of a deposit insurance scheme to ensure that the framework within which the banking sector is regulated and supervised, enables the Reserve Bank to perform its role effectively

Extending the Government Procurement Rules to
government entities in the New Zealand public sector

  • Deadline: 10am, Monday 23 November 2020
  • Public consultation is invited by Ministry of Business, Innovation and Employment (MBIE), by participation in a survey and/or by email
  • This consultation seeks to understand the potential benefits, opportunities, and other impacts of extending the Government Procurement Rules to more government entities in the New Zealand public sector.  
  • Refer to related article Extending the Government procurement rules in the October 2020 edition of this newsletter. 

Protected Disclosures (Protection of Whistleblowers) Bill

Overseas Investment Amendment Bill (No 3)

  • Deadline: (extended – to be confirmed at later date)
  • Submissions are invited by The Finance and Expenditure Committee
  • The purpose of this bill is to ensure that risks posed by foreign investment can be managed effectively while better supporting productive overseas investment by reducing the regulatory burden of the screening process

TINZ Team

TINZ engages New Zealand and New Zealanders in a broad range of issues related to building stronger integrity systems to mitigate the impact of bribery and corruption. TINZ Directors, Members with Delegated Authority and staff provide subject matter expertise in the topic areas of interest.

TINZ Subject Matter Experts, current at the time of this newsletter publication, can be can be found at TINZ Team October 2020. To view by topic, visit the category page which lists TINZ topics and respective current subject matter experts.