Perspectives 2019 2020 Public Sector

Citi Perspectives 5 New Transparency Principles for Infrastructure Joaquin Jugo Jorge Ordonez An innovative industry-wide approach is essential to effectively address corruption in infrastructure projects and ensure project continuity. Corruption in the infrastructure and construction sectors, relating to both the award and execution of contracts, is a serious challenge for governments around the world. The problem occurs for countries at all levels of economic development and at national and sub-national levels. Recent Latin American corruption scandals uncovered the lack of adequate anti- corruption controls and poor enforceability of existing legislation. They also revealed that governments, sponsors, banks and other relevant parties are unprepared to respond to major corruption events, putting project continuity at risk and, in some cases, leading to the delay or cancellation of critical projects. Latin American countries responded in different ways to the corruption events in the region. Some countries implemented solutions to address and remedy the specific event; others put in place more comprehensive legislative changes to reduce corruption in the future. In Colombia, the government issued Law 1882 in January 2018, which builds on (and modifies) previous laws with the objective of strengthening the public contracting process for infrastructure projects. It also clarifies rules governing public private partnership (PPP) contracts, including the definition of a compensation formula and penalties in case of anticipated termination of PPP contracts by judicial or administrative order following a corruption event. 1 In Peru, the government issued the Emergency Decree 003 in 2017, later replaced by Law 30737 in 2018, to guarantee the continuity of projects, safeguard the payment chain and make reparations to the government on the occurrence of a corruption event. 2 The government of Panama took administrative steps towards remediating corruption issues. These include a ban on a firm from bidding on future projects until all reparatory fines are paid to the government (and unless they cooperate effectively with ongoing investigations), the cancellation of a hydroelectric project without cost to the government, and the timely completion of projects under execution. 3 The Need for a Wider Framework to Tackle Corruption The measures described above were much needed to quickly mitigate the impact of material corruption events. However, it is necessary to take a wider infrastructure ecosystem approach that creates industry standards to ensure integrity throughout the project lifecycle and that reduces ambiguity about how to properly respond to future integrity events. Ideally, participating parties in the infrastructure sector should convene to discuss and agree on a set of New Transparency Principles for Infrastructure (NTPI) that can be applied across countries, situations and throughout the award and execution of contracts. These would serve a similar role to the Equator Principles or the Extractive Industries Transparency Initiative and provide a high level framework to respond to material post-integrity events to guarantee project continuity. 1 Ley 1882 del 15 de Enero de 2018; http://es.presidencia.gov.co/normativa/normativa/LEY%201882%20DEL%2015%20DE%20ENERO%20 DE%202018.pdf 2 https://www.mef.gob.pe/es/por-instrumento/decreto-de-urgencia/15510-decreto-de-urgencia-n-003-2017/file http://www.leyes.congreso.gob.pe/Documentos/2016_2021/ADLP/Normas_Legales/30737-LEY.pdf 3 https://mire.gob.pa/index.php/en/noticias-por-meses/10764-comunicado-oficial-del-gobierno-de-la-republica-de-panama