Presented by: The Public Sector Group The World Bank

1. Our Difficult Climb: Initial Progress and the Ascent Ahead Transparency International—World Bank Combating Corruption Workshop Washington, DC March 21, 2003 Presented by: The Public Sector Group The World Bank

2. A promising start … Tremendous increase in awareness Explosion of activity, cutting-edge diagnostics Major programs launched, with some early successes … but we are also facing formidable challenges To have major impact, need to tackle deeper issues Possible Paths … Overview

3. The initial ascent … getting to base camp … O.P. Mainstreaming AC in CAS (99) Governance Strategy (00) State in a Changing World (97) Strategic Compact (97) Governance Pillar - CDF (98) • 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 Anti-corruption Strategy (97) Gov/A-C Diagnostics start (98) TI CPI (5/95) Broadening & Mainstreaming The ‘Prohibition’ Era 1st set of firms Debarred from WB (99) Internal AC unit created in WB (98) Formalization of INT (01) 1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

4. GOOD GOVERNANCE Good governance has many dimensions & “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 • 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)

5. Explosion of activities: 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 (transport) 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)

6. Some approaches that appear to be working … Latvia (Anticorruption) Ghana (Public Expenditure Accountability) Indonesia (Community Empowerment) Gabon (Water/Electricity) Uganda (Education, Capacity Building-Action Learning/Core AC Course) India – Andhra Pradesh (Power; E-governance)

7. But on average, no evidence of significant improvement on control of corruption … Source: ICRG, 1994-2002. Subject to margins of error, as it is based on only one source. Good Poor

8. … though variations across different dimensions … How significant are these obstacles to your business? High 1999 2002 Low 0 Frequency of active Perceived Impact of Bribe frequency State Capture capture by firms Some signs of initial progress in some regions… Business Environment & Enterprise Survey (BEEPS) in ECA

9. Some programs that have stalled – and why… • The challenge of politics: • No political ‘buy-in’ – despite plethora of diagnostics and pressure from civil society: Bangladesh • Difficulties in sustainability when there is no political traction: Georgia judiciary • The need to anticipate political obstacles: Action Oriented Learning Program in AFR – Malawi vs. Uganda • Opposition from powerful vested interests in Cabinet & bureaucracy: India, Karnataka – right to information

10. These appear to be working when the underlying environment is conducive: • Committed leadership • Coalition for reform • Capacity Excellent at diagnostics 0 Good at addressing the ‘surface’ manifestations Good at technical solutions and design 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

11. Shrinking the time horizon • New New approaches CORRUPTION CORRUPTION CORRUPTION • New New approaches 10? 7. The way forward … shortening the journey World Bank • Lending • AAA Strengthening the “demand” for reform Partnerships Improving the “supply” of reform Partners (e.g. TI, bilaterals) ¥ 25? Years

12. Enhance domestic pressures for reform Strengthen international pressure for reform • Assist civil society in monitoring governance reforms: Slovakia, TI • Support CSOs & FBOs that mobilize citizens in favor of government performance: PAC, Bangalore; Action Learning Programs, LAC • Help SMEs to organize & mobilize MNCs against capture by large vested interests: ECA • Strategically support responsible media on anticorruption: Philippines Center for Investigative Journalism • Use international bully pulpit to re-energize the agenda: JDW • Say “no” when warranted: Indonesia? Kenya? • Use the international platform to highlight good and bad governance countries: TI, CPIA, KKZ, BEEPS indicators • Strengthen global anticorruption initiatives: OECD Convention, Anti-Money Laundering The Way Forward: Strengthening the “demand” for reform CORRUPTION

13. Reverse the“culture” of corruptionafflicting the public & private sectors Help reformist governments overcome obstacles Help tackle political drivers of corruption • Understand the norms permeating public-private corruption networks & how to combat them: Peru • Support CSOs/FBOs working towards a transformation of values/ethics in the public sector: AP, India • Support enforceable conflict of interest rules: Latvia • Promote better corporate governance & codes of conduct: TI business principles for countering bribery • Strengthen capacity building & institutional reform efforts: More robust lending & AAA • Strengthen evaluation for ‘scaling up’: DEC, OED, WBI; partners • Emphasize change mgt & design programs to defuse opposition: Education reform, LAC • Support AC efforts that improve service delivery that citizens can observe: Jordan • Address issue of party finance disclosure & regulation: UK DFID, TI? • Work with media & Parliaments on political corruption: WBI, others • Develop better tools to understand state capture, market for influence & networks DEC, WBI, others • Work with future leaders: WBI Youth Program The way forward: Enhancing the “supply” of reform

14. Internal incentives The way forward … World Bank Deepen and enhance leadership and ownership of anticorruption agenda across sectors – beyond PREM/ WBI/ OPCS/ LEG Strengthen staff fortitude and incentives to say “no” when warranted

15. Q&A and Discussion