Staff Survey Sector Follow Up

1
Our Challenging Climb on Anticorruption World
Bank experience - Implications for OECD-DAC
Presented to OECD-DAC Development Partnership
Forum Improving Donor Effectiveness in
Combating Corruption December 9-10, 2004
Presented by Sanjay Pradhan Director Public
Sector Governance The World Bank
2
The initial ascent getting to base camp
State in a Changing World (97)
O.P. Mainstreaming AC in CAS (99)
Governance Strategy (00)
Governance Pillar - CDF (98)
Strategic Compact (97)

• Public Expenditure, Financial Mgt. Procurement
  Reforms
• Diagnostic/Data/ Monitoring Tools
• Administrative Civil Service Reform
• Civil Society Voice, Accountability, Media
  Transparency Mechanisms
• State Capture/Corporate Governance
• Legal/Judicial Reform

JDW Cancer of Corruption Speech (10/96)
WDR on Institutions 1982
Gov/A-C Diagnostics start (98)
Anti-corruption Strategy (97)
TI CPI (5/95)
Broadening Mainstreaming
The Prohibition Era
Internal AC unit created in WB (98)
1st set of firms Debarred from WB (99)
Formalization of INT (01)
1970
1980
1990
1995
1996
1997
1998
1999
2000
2001
2002
2003
3
World Bank Assistance to Client Countries

• Diagnostics
• Multi-pronged Assistance Strategy to Client
  Countries
• Lessons Learnt
• The Possible Way Forward

4
The Bribe Fee List Unofficial Payments by
Firms in Ukraine
Enterprises Type of License/Service/Favor
Average fee required admitting need to pay
(1996) unofficially
Enterprise registration 176 66 Each visit by
fire/health inspector 42 81 Tax inspector (each
regular visit) 87 51 Telephone line
installation 894 78 Lease in state space
(square ft. per month) 7 66 Export
license/registration 123 61 Import
license/registration 278 71 Border crossing
(lump sum) 211 100 Border crossing (percent of
value) 3 57 Domestic currency loan from bank
on 4 81 preferential terms (percent of
value) Hard currency loan on preferential 4 85
terms (percent of value)
5
Client Survey Report Card of Government
Services in Latvia
Post Office
State Educational Institutions
Office of Social Benefits
Polyclinic/Health Services
Agency of Immigration Citizenship
Prosecutor
Customs Service
Courts
Local Housing Authority
Police
0
10
20
30
40
Percent giving favorable rating
6
Public Officials Surveys Purchasing Public
Positions
60
Customs inspectors
48
41
52
Tax inspectors
41
25
43
Natural resource licensers
33
27
39
Judges
32
16
Albania
25
Ordinary police
40
Georgia
23
Latvia
32
Investigators/ prosecutors
33
14
24
Local officials
21
18
Based on 1998 World Bank surveys of public
officials in these countries 218 public
officials in Latvia (with Latvia Facts) 350
public officials in Georgia (with GORBI) and 97
public officials in Albania (with ACER).
5
Ministers
10
19
0
20
40
60
80
Percent of public officials believed to have
purchased their positions
7
The Challenge of State Capture
Proportion of firms affected by capture of
30
Parliamentary Votes
25
Presidential Admin. Decrees
Civil Court Decrees
20
15
10
5
Hungary
Estonia
Russia
Ukraine
8
Addressing Capture Economic Reform and
Political/Civil Liberties Matter
0.4
0.3
State Capture Index
0.2
Slow
Partial
0.1
Pace of Econ Reform
Advanced
0
Partial Civil Libs
High Civil Libs
Political/Civil Liberties Reforms
9
Good governance has Many Dimensions and Entry
Points

• Institutional Checks Balances
• Independent, effective judiciary
• Legislative oversight
• Decentralization with accountability
• Global initiatives OECD Convention, anti-money
  laundering, WCO

• Political Accountability
• Political competition, credible political parties
• Transparency in party financing
• Disclosure of parliamentary votes
• Asset declaration, conflict-of-interest rules

• Civil Society Voice Participation
• Freedom of information
• Public hearings on draft laws
• Media/NGOs
• Community empowerment
• Report cards, client surveys

GOOD GOVERNANCE

• Competitive Private Sector
• Economic policies
• Restructuring of monopolies
• Effective, streamlined regulation
• Robust financial systems
• Corporate governance
• Collective business associations

• Public Sector Management
• Meritocratic civil service with adequate pay
• Public expenditure, financial management,
  procurement
• Tax and customs
• Frontline service delivery (health, education,
  infrastructure)

10
Expansion of Governance and Anticorruption
Components in Bank Operations Number of
IBRD/IDA Operations with Explicit Anti-Corruption
Components, 1997-2003
200
40
186
31
172
28
155
Number of Projects
150
20
14
14
12
0
100
1997-98
1999-00
2001
2002
2003
2002-03
1997
1998-2001
World Bank projects with Anti-Corruption
components (Annual Averages)
World Bank projects with Governance Components
(Annual Averages)
Source World Bank Business Warehouse, 2004
11
Examples of major programs launched across
countries
Latvia (anticorruption)
Russia (customs/treasury)
Ukraine (tax admin)
Albania (public admin.)
Kyrgyz Republic (governance reform)
Jordan (civil society)
Cambodia (PE forestry)
Ghana (PE accountability)
Philippines (procurement)
Guatemala (diagnostic to action program)
Indonesia (local governance)
Gabon (water/electricity)
Bangladesh (civil society)
Colombia (diagnostics civil society)
Uganda (PRSC education)
Pakistan (devolution)
India Andra Pradesh (power e-gov) Karnataka
(right to info)
Bolivia (public admin.)
Tanzania (PSR)
Ethiopia (decentralization)
12
High Risk Country Indonesia
The Strategy Local Empowerment Governance
Background

• The Suharto Regime Stationary Bandits
• The Transition Roving Bandits perception of
  increased corruption
• Lack of serious Government commitment to AC
• High fiduciary risk for the Bank

An Entry Point
From local empowerment to local governance
13
High Risk Country Indonesia
The Programs
Looking Ahead The New CAS
Post Suharto

• Kecamatan Development Project (3rd Phase,
  covers more than ½ of country)
• Information community empowerment
• Some local officials jailed a first
• 2 provinces suspended until corrupt official
  fired money returned
• Costs reduced by more than 20 in procurement of
  infrastructure
• Communities demanding rights to information
• Corruption still prevalent formal system still
  not responsive to victories under KDP

• Governance based CAS focused on strengthening
  reformist LGUs
• Encouraging participation link AC reforms
  closely to service delivery reward good
  governance
• Challenge Choosing winners carefully
  evaluate/manage risk convince CSOs to join effort

Approach
Results
Challenges
14
Public Financial ManagementA Performance
Measurement Framework

• A common set of high level PFM indicators to
  assess performance against six critical PFM
  objectives
• Narrative report on how the PFM system compares
  against given performance benchmarks
• Based on observable, empirical evidence to the
  extent possible
• Improves focus on capacity building in core PFM
  areas
• Wide donor agreement around a single instrument
  in order to reduce information demands on
  government
• Bank and Fund jointly managed 27 assessments in
  2004

Source Based on the Preliminary Results of the
2004 Joint IMF-World Bank HIPC Re-assessments.
15
The PFM Performance Report A Review of Key
Aspects of the PFM System
Budget Realism Is the budget realistic is it
implemented as intended in a predictable manner?
Accountability and Transparency Are
arrangements for external transparency and
external scrutiny operating effectively?
Six critical objectives of PFM system
Comprehensive, Policy-based, budget Does the
budget capture all relevant fiscal transactions,
and is the process giving regard to government
policy?
Control Are arrangements in place for the
exercise of control and stewardship in the use of
public funds?
Fiscal Management Are the aggregate fiscal
position and risk monitored and managed?
Information Is adequate fiscal, revenue and
expenditure information produced and disseminated
to meet decision-making and management purposes?
16
The Power of Transparency and Monitoring
Primary Education in Uganda
US per
Student
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1990
1991
1993
1994
1995
1999
Intended Grant Amount
Received by School (mean)
17
Public Procurement Increasing Transparency and
Competition

• Using ICT Chile

Engaging CSOs Philippines

• All supplier companies register, indicating areas
  of business (e.g., IT, construction, furniture)
• Public agencies submit tenders through internet
• Automatic e-mail to all companies in selected
  area
• Online information on name, position of official
  in-charge
• Online information on results who participated,
  proposals made, scores received, who won bid,
  historical record of agencys purchases and
  contracts

• Legal foundation a mess with over 100 laws and
  regulations
• New omnibus law needed for clarity and
  predictability in the process
• New law in 2003 with determined efforts of reform
  minded public officials allied with strong and
  unified advocacy efforts of CSOs to offset
  entrenched vested interests
• For credible enforcement requirement that all
  bids and awards committees must have at least one
  observer from a certified CSO
• Extensive training of CSOs now under way

18
The Chad Cameroon Pipeline
4.3bn total cost of Pipeline and fields
19
The Scale of Chads Revenue Flows
The Chad Cameroon Pipeline
Revenue Management Agreement

• Long life project to 2030
• Net revenues average about 60m pa in base case
• higher (100m pa) in first half of project
• Net income will depend on oil prices (much higher
  at 30bbl), and, ultimate level of oil
  recoverable
• Expected revenues to increase to about 50 of
  government current revenues in base case
• But note
• About 3 of annual GDP
• 60m pa about equal to current Chad aid flows
• 10-15 per capita per year at base case levels
• Note quality differentials important for low
  quality Chad oil.

• Agreement on use of revenues
• 10 royalties and dividends saved for future
  generations in external savings funds
• 80-95 royalties 85-100 dividends for
  priority sectors for poverty reduction agreed
  with Bank and approved by Parliament
• 5 royalties to Doba region
• Balance to government operating costs
• The pace of spending to be set by reference to
  capacity and other processes (MTEF, PRSP) agreed
  between Bank, IMF and Government
• Audited offshore escrow accounts
• Public Independent Oversight by committee made
  up of government, civil society, judiciary,
  parliament authorize and verify disbursement.
  Reports quarterly

20
Lessons learnt, broader implications a long way
to go

• Enhance demand pressures for reform
• Overcome vested interests against reform
• Reverse the culture of corruption in the public
  sector
• Tackle political drivers of corruption (e.g.,
  party financing)
• Within WB, mainstream across sectors and countries

But, struggling to address deeper underlying
issues
21
The way forward a long journey
22
The way forward shortening the journey
23
The way forward shortening the journey
24
The way forward shortening the journey
World Bank

• Lending
• AAA

Strengthening the demand for reform
Partnerships
Improving the supply of reform
Partners (e.g. OECD-DAC, TI)

25?
Years
25
The Way Forward Strengthening the Demand for
Reform
CORRUPTION
26
The Way Forward Enhancing the Supply of Reform
27
QA