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Governance Global Practice
Middle East & North Africa
Issue 7
October 2016

www.cvmena.org

CV MENA
In-a-Nutshell
Connecting Voices (CV) Middle East and North Africa (MENA) is a
regional initiative and partnership that promotes governance and
improved financial management practices in the public and private
sectors. The ultimate aim is to support the demands of citizens
throughout the Arab World for jobs, better governance, a voice in
public affairs, and social and economic inclusion as reflected in the
World Bank’s MENA Regional strategy. CV MENA plans to seize on the
windows of opportunity available in the region. It will support capacity
building in the area of governance, facilitate the development of a
professional community, as well as the sharing and transfer of
knowledge both within countries and within the region as a whole. CV
MENA will help foster greater transparency and accountability, thereby
engendering enhanced public trust. In addition, building public and
private sector governance and financial management capacity will also
help attract and provide comfort to much-needed foreign direct
investment in the region.

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CVMENA won the World Bank’s 2013 MENA
Vice President Team Award

The Exchange is a major annual forum that provides a channel for dialogue,
enabling countries to share experiences and promote societal-governmental
consensus building. It fosters intra-regional cooperation and stimulates
interest in improving public sctor governance, public financial management,
and corporate governance and financial reporting in MENA. The Exchange
facilitates knowledge-sharing from transitional democracies and showcases
successful experiences from fragile and conflict states. The Exchange starts
where public sector and public financial management diagnostics leave off,
that is, in supporting the creation of an enabling environment for reforms to
move from concept to reality. It helps catalyze innovative activities to develop
regional public goods and enables the World Bank to fulfill its mission as a
“Solutions Bank.”

A Boot Camp is a practical and innovative concept. It involves gathering a
group of decision-makers and experts to address a particular issue through
focused and intensive discussion that takes into account both technical and
non-technical factors. After thoroughly examining the issue, the group
develops possible solutions and a work program to help implement them. The
experience is documented in a Solutions Paper—a brief note describing how
a specific challenge or problem is addressed in a collaborative and pragmatic
fashion. The Boot Camps, together with the Solutions Lab and discussions in
Maarefah (“knowledge” in Arabic), feed into the design of the Exchange and
CV MENA’s workprogram.

In partnership with the Wold Bank’s Global Development and Learning
Network (GDLN), CV MENA connects participants across the MENA region
(once each quarter) in finding solutions on topics related to public sector,
financial management, and corporate governqance and financial reporting.
The Solutions Lab realizes that an answer is not necessarily the solution: a
time-tested “best practice” may not be optimal in a particular situation
because it may not be politically or socially feasible at the time. The Labs help
our clients fashion an attainable solution—an alternative answer to the
problem—by bringing in other perspectives and different, yet relevant,
experiences from other countries. The Labs also feed into the design of The
Exchange.

Maarefah responds to the need to implement, sustain, and build on the
results of The Exchange, as well as to extend these benefits to those unable to
personally attend Boot Camps and Solutions Labs. Maarefah (“knowledge” in
Arabic) is a Community of Practice (CoP) that serves as a forum for ongoing
dialogue and continuous peer-to-peer and expert knowledge exchange. The
CoP—established by the Financial Management Unit of the World Bank’s
Middle East and North Africa Region in 2011 as a response to popular demand
for change, accountability, transparency, and inclusiveness—is designed to
serve as a robust base for extending the dialogue and refocusing it on the
needs of CV MENA.

www.cvmena.org
cvmena@worldbank.org

Publisher: Governance Global Practcie, MENA, The World Bank
Managing Editor: Hisham Waly
Art Director: Denis Largeron
Contributing Photographers: Denis Largeron
Images: World Bank Images, Shutterstock, Cartoon Stock (cover)

Note: The posts in the Connecting Voices magazine should not be reported as representing the views of The World Bank.
The views expressed are those of the authors and do not necessarily represent those of the The World Bank or its policy.

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Editor’s Note

Hisham WALY
Practice Manager
Governance Global Practice / MENA, World Bank
The Allegory of Good and Bad Government is a series of three fresco
panels painted in the Sala Dei Nove (Salon of Nine or Council Room)
in Siena, Italy by Ambrogio Lorenzetti around 1338. The series consists
of six different scenes: the Allegory of Good Government; the Allegory
of Bad Government; the Effects of Bad Government in the City; the
Effects of Bad Government in the Country; the Effects of Good
Government in the City; and the Effects of Good Government in the
Country. The fresco panels depict the effects of good versus bad
governance in a society as we are introduced to how life would look
like under good governance (with peaceful and thriving cities and
countryside) and the opposite under bad governance (with tyranny,
disorder and degeneration). This has inspired the cover story of this
issue of Connecting Voices (see drawing on page 62), where we
examine the impact of corruption on development.
There is increasing evidence that the costs of corruption are
enormous whether at the economic, social, environmental or political
level. We have seen many examples of corrupt politicians who use
their power to divert scarce public resources to unnecessary
purchases, projects and initiatives to benefit themselves and their
cronies instead of their constituencies. We have also seen
government officials deliberately not enforce environmental
regulations to enable a few to exploit rare, sometimes nonrenewable, natural resources and destroy the environment. Whether
it is petty, grand or political corruption, the media and watchdogs in
many developing countries share examples of it on a daily basis. They
wonder why strategies to address the root causes of corruption are
not successful in terms of design, implementation, monitoring and
impact.
In the Middle East and North Africa (MENA) region of the World Bank,
for many years we recognized that corruption is a symptom of a
deeper governance problem. Thus, we designed and implemented
reforms to promote governance and institutional reforms. Some of
these reforms focused mostly on the state, resulting in a top-down
approach generally aimed at formal institutions. However, based on
experience and research, we realized that in order to help build and

maintain effective, responsive, accountable, resilient and peaceful
states, a foundation of a strong state-society relationship (or social
contract) that is based on trust is crucial.
The key question becomes what are the factors associated with
building trust? A background paper for the 2007 Organization for
Economic Co-operation and Development (OECD) “Global Forum on
Reinventing Government” states that trust in government requires
“rule of law, an independent judiciary, free, fair and regular elections,
legitimate parliamentary processes, a healthy civil society, fighting
corruption and appearances of corruption, local governance and
decentralization, and finally, e-governance”.
In this context, building trust is a complex endeavor. For instance, a
report titled “Interventions to Increase Levels of Trust in Society”
(Carter, 2013) notes that building trust between citizens and the state
is both a major challenge and an important potential benefit of
reforms aimed at shaping the social contract (McNeil, Mary and
Carmen Malena. 2010). States that promote transparency and
accountability but fail to respond adequately to citizen demands can
intensify grievances, thereby compounding fragility. Thus, some quick
results are needed to restore confidence in low-trust contexts (WDR,
2010).
In the cover story of this issue of Connecting Voices magazine, we
interview a number of anti-corruption experts in the World Bank and
beyond to reflect on many of these factors and answer a number of
questions relating to the relevance of anticorruption efforts for
sustained development and building resilient institutions. We look at
what have we learned about corruption and anti-corruption in the
past 20 years, including the role of transparency and accountability;
and the importance of taking a broader approach to anti-corruption,
including strengthening institutions and building capacity among
citizens and policy makers alike. In addition, we examine the
importance of different stakeholders in the fight against corruption.
On a personal note, this will be my last Editor’s Note as I will be leaving
the World Bank’s MENA region to the Africa Region on October 1,
2016 as Governance Practice Manager (we interview the new MENA
Governance Practice Manager, Renaud Seligmann, on page 129.) It is
a bittersweet feeling to leave MENA as I will miss its people and the
amazing governance team, but I am also quite excited about moving
to the Africa region for a new set of opportunities.

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Content
Public Financial
Management (PFM)
08 Interview
Dr. Abed Kharabsheh,
President of the Jordan Audit Bureau

11 Extractive Industries in Egypt
Governance and the New Law

13 Methodologie PEFA
La conduite d’une évaluation de la
gestion des finances locales

Public Financial
Management (PFM)

Corporate Governance
& Financial Reporting (CGFR)

19 Decentralization
Decentralization and Service Delivery in Iraq

27 Interview
H.E. Dr. Talal Tawfiq Abu-Ghazaleh

20 Interview
Mr Alaa Marzougui, Fondateur de
l’Observatoire Tunisien de l’Eau &
chef du projet Watchwater

29 Interview
Samia Msadek, Director Governance
Global Practice, World Bank

23 Humanitarian Engineering
Innovative Approaches and
Partnerships in Crisis Response

31 Integrated Reporting
Counting What Counts

16 Taxation
All’s fair in love and (the global tax) wars?

32 MENA SMPs
MENA Region Results from
the IFAC Global SMP Survey
24 Procurement
Public Procurement Reform and
Modernization in MENA:
A Peer-Learning Experience
17 Refugees
Aid to Refugees and the Internally
Displaced: Who is watching?

26 The G20 Needs to Pay Attention
Seven Lessons from a Sculptor in Pakistan

34 Interview
Rajeev Swami, Lead Financial
Management Specialist, World Bank
36 Innovations in Ethics Education
IAESB Collaboration to
Support Worldwide Change

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Content
Corporate Governance
& Financial Reporting (CGFR)

Public Sector
(PS)

37 Insurance Accounting
Enhancements to Insurance
Accounting Under IFRS

44 Regulatory Reform
KRG-IRAQ: Guide to Legislative Drafting

Events
122 ECA Conference
Quality Financial Reporting,
A Catalyst for Growth

38 The Resilience of Accountancy
Professions in Fragile States
The Case of Yemen

46 Lagging Regions in MENA
The Governance Perspective
49 Lagging Regions in MENA
Intervening through a special Lens
40 Education
10 Steps to Finding a Career
Development Mentor

52 From Secrecy to Openness
The Government of Tunisia Heeds
Citizen Calls for Transparency

124 LAC Conference
Accountants in Latin America Discuss
Best Practices and Challenges
in the Modernization of
Public Sector Accounting

Cross-Cutting
126 Syrians
Will Forcibly Displaced Syrians
get their Land Back?

41 MSME Audits
Enhancing the Quality of MSME Audits:
Increase Access to SMP Audit Software
42 Interview
Mme Halima Bahar, Minister
des Finance Tunisien

54 Reforms
The Political Economy of Reforms

127 Syrians
International Community Endorses New
Initiative to Support Refugees, Host
Communities, and Recovery and
Reconstruction in MENA
128 Information
What Uber Drivers Can Teach Us
About Learning And Rationality

56 Citizen Engagement
Public Service Delivery in the Context of
Fragility: West Bank & Gaza

129 Interview
Renaud Seligmann, New Governance
Practice Manager for the MENA Region

43 Islamic Finance
Accounting and Auditing Reform

58 Citizen Engagement
Rebuilding Trust between Citizens and
Government: Morocco

131 Books Review
135 Comic Relief

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Cover Story

Corruption & Development
BIG PICTURE

THEMES

VIEWS FROM THE FIELD

62 Iconography
A World With and
Without Corruption

76 PFM
The Impact of Corruption
on Public Fionance

89 Interview
Asad Alam, World Bank Country
Director for Egypt, Djibouti and
Yemen

78 Tax Administration
Designing an Anti-Corruption
Strategy for Tax Administration

91 Interview
Jesko Hentschel,
World Bank Country Director,
Argentina, Paraguay and Uruguay

64 Overview
Corruption: Yesterday, Today, and
Tomorrow
66 Speech
Jim Yong Kim,
President, World Bank
67 Interview
Debbie Wetzel, Senior Director
GGP, World Bank

80

Uncertainty as a Factor in
Investment Decisions
The Case of the Russian
Federation’s Regions

INSTITUTIONS
94

A Multifaceted Approach
to Anti-Corruption

82 Wasta
A Key Challenge for Iraq’s
Civil Service

95 SAIs
Strengthening the Role of SAIs in the
Fight against Fraud and Corruption

PARTICIPATION
71

From Village Demi-Gods
to Paper Toilets

Why Citizen Feedback is Key to
Combatting Corruption

Parliament and Corruption

85 David and Goliath
Corruption in State-Owned
Enterprises

97 Ombudsman
Corruption and the Role of
Ombudsman
98

Anti-Corruption Agencies
An Effective Tool to
Curb Corruption?

73 Open Government
Transparency and Open
Government for Accountability

86 Global Issues
Illicit Financial Flows

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Cover Story

Corruption & Development
SECTORS

OPERATIONS

101 Service Delivery
Lessons from the MENA Region

111 Integrity
The Role of the World Bank’s Integrity
Unit in Addressing Corruption in Bank
Projects

IN THEIR OWN WORDS
James Wolfenson

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112 LAC
Entry Points in the Fight Against
Fraud and Corruption

103 Construction
The Construction Sector
Transparency
Initiative (CoST)

VIEWS FROM THE OUTSIDE

75

Ban-Ki Moon

115 Interview
Susan Rose Ackerman,

104 Justice
Corruption and the Justice Sector:
The Role of an “Independent”
Judiciary

117 Interview
Alina Mungiu-Pippidi

119

106 Policy Capture
Privilege-Resistant Economic
Policy-Making
108 Tax Evasion
Evidence from Tunisia

EVENTS
120 Events
Anti-Corruption Conferences
121 Meetings
Anti-Corruption Meetings

Christine Lagarde

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Public Financial
Management
Interview
Dr. Abed Kharabsheh,
President of the Jordan Audit Bureau
Interview conducted by Jad Mazahreh,
World Bank, Senior Financial Management
Specialist

What were the main stages in the evolution
of the Audit Bureau in the Hashemite
Kingdom of Jordan?
Jordan’s Audit Bureau has undergone three
stages, linked closely to the political,
economic, and legislative developments in
the country. The first stage occurred in 1928
when an audit branch called the "Accounts
Review Department" was established in the
Emirate of Trans-Jordan in order to review
the financial accounts.
The second stage dates back to 1931 when
the “Law of Audit and Verification of
Accounts” was enacted. As a result, the
Department of Audit and Verification of
Accounts in the Emirate of Trans-Jordan was
established. It was mandated with examining
government accounts related to revenues,
expenditures, deposits, and advances of the
State.
The third stage began with the passage of
Article 119 of the 1952 Jordanian
Constitution that stipulates: “An Audit Office
shall be set up by law for controlling the
State’s revenues, its expenses and the

manner of expenditure …” By virtue of this
Article, the Audit Bureau Law No. 28 of 1952
was then promulgated. Five amendments to
this Law were subsequently enacted with a
view to keeping abreast of the expansion in
the government’s political, economic, and
social activities, as well as the subsequent
evolution in the types, methods, and
objectives of auditing.
What are the main objectives of the Audit
Bureau?
The main objectives of the Audit Bureau
include fighting all forms of financial and
administrative corruption. The Audit Bureau
also contributes to reforming the State’s
public financial management systems. It

assists in enhancing the legitimacy,
transparency and equality principles upon
which administrative decisions should be
based. In addition, it plays a role in assisting
with the effective and efficient utilization of
the State’s available resources.
Importantly, it helps the Executive branch of
government in reformulating legislation and
laws. Finally, it assists the Parliament in
ensuring the legitimacy of the public sector’s
work through its audit reports, which expose
excesses and contraventions. Moreover, it
highlights any legislative, organizational and
institutional weaknesses and proposes
recommendations for ameliorating them.

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What is the legal, legislative and
institutional framework under which the
Jordan Audit Bureau operates?

Working along the lines of similar audit
organizations, the Audit Bureau has been
keeping pace with regional and international
developments in the area of auditing.
Between 2002 and 2007, the Audit Bureau
Law was amended five times. Amendments
were primarily aimed at: enhancing the
Audit Bureau’s financial and administrative
independence; conducting environmental
audits; and auditing the accounts of public
corporations whose capital is 50 percent or
more government-owned.
The Audit Bureau’s main tasks, jurisdiction
and scope of work cover a wide variety of
areas. For example, the Bureau submits an
annual report for each fiscal year, including
the Bureau’s opinion and remarks to the
Parliament at the beginning of the
Parliament’s ordinary session, or at any time
the House of Representatives requests such
a report. It audits the State’s revenues and
expenses, expenditure methods, deposits,
advances,
loans,
settlements,
and
warehouse accounts.

the entities subject to Bureau auditing;
and

full
financial
independence.

Subjecting the Bureau to the sole
control of the National Assembly in
order to ensure that the Bureau
implements its law in a neutral,
professional and objective manner.

What is the Bureau’s role in Arab and
regional organizations?

On the occasion of your appointment as
President of the Audit Bureau, what are
your main priorities? What are the
challenges that you will be facing?
Our priorities include the adoption of the
draft amendment to the Audit Bureau Law.
We also seek to raise the efficiency of Bureau
cadres and support the Bureau with qualified
personnel. We aim to improve the quality of
the annual report to meet auditing standards
issued by the International Organization of
Supreme Audit Institutions (INTOSAI).

Extending the Bureau’s control to
include corporations in which the
Government owns 25 percent of
capital, as well as professional
associations and labor unions, political
parties and voluntary associations and
bodies;

Adding valid international auditing
standards as references for the
Bureau’s work;

Authorizing the Audit Bureau President
to publish the Annual Report in a
suitable manner

Identifying the legal liability resulting
from non-cooperation on the part of

administrative

In view of its distinguished status and good
reputation at the local, Arab/regional and
international levels, the Bureau has been
elected for the third time to membership in
the Audit Committee of the Asian
Organization of Supreme Audit Institutions
(ASOSAI). The Bureau also participates in the
various activities of the International
Organization of Supreme Audit Institutions
(INTOSAI). In addition, the Bureau
participates in the various activities of the
Arab Organization of Supreme Audit
Institutions (ARABOSAI) through its
membership in most of the ARABOSAI
committees. Finally, the Bureau has been
accredited as an external auditor for several
donor agencies that provide loans to the
Jordanian Government, including the World
Bank, the Japan International Cooperation
Agency (JICA), and others.
What is the nature of the Bureau’s
relationship with other actors, for example,
the Parliament and the media?

So too, it provides auditing advice to all
entities subject to Bureau audits. In this
context, it ensures that the administrative
and procedural decisions adopted by the
public entities that are subject to Bureau
audits are carried out in accordance with
valid legislation. The Audit Bureau audits
public financial assets to ensure that
spending has been carried out in a sound,
legal, and effective manner. It also
coordinates with the relevant authorities to
ensure the soundness of implementing
environmental legislation.
In 2014, the Bureau developed a draft
amendment to its Law 18/2007. The draft
amendment, already deliberated by the
Legislation and Opinion Bureau, is still in its
final Constitutional stages. Specifically, it
stipulates the following:

and

With regard to guides, we will be updating
and issuing relevant auditing guides,
including performance auditing and
environmental auditing guides. We will also
be adopting the forensic auditing and
integrity auditing guides, and include
support for training.
We also face many challenges, including, for
example, the commitment of the audited
ministries and governmental departments
and institutions to implement the audit
findings and recommendations. These
include the various inquiries and auditingrelated correspondence issued by the
Bureau for the purposes of rectifying
financial, administrative and legal violations.
In this context, we will also be introducing
Information Technology (IT) Auditing of
governmental departments and ministries,
and recruit staff toward this end.
We need to conduct discussions of the
reports by the House of Representatives on
a one-by-one basis. Finally, a key challenge
concerns the achievement of the Bureau’s

The Bureau is fully supported by both houses
of Parliament – the Senate and the House of
Representatives. This support is evidenced
by the submission of the Bureau’s Annual
Report on time, that is, at the beginning of
each National Assembly ordinary session, as
stipulated by the Constitution. Other
manifestations of this support include
preparations of various abstracts of the
report for discussion with the relevant
audited entities. The Bureau also
participates
effectively
in
meetings
convened by the Financial Committee in
order to question and adopt legal and
administrative measures against any audited
entity charged with violations. In this
respect, a number of cases have been
referred to the Judiciary or the AntiCorruption
Commissions
at
the
recommendation
of
the
Financial
Committee.
In order to achieve transparency in the
Bureau’s work, the Annual Report is posted
on the Bureau’s website, as well as on the
websites of the Prime Ministry and the
National Assembly.
How would you describe your relationship
with the audited entities?
The Bureau has been striving to develop its
auditing procedures and methodologies. As
such, it is focusing on developing and
enhancing its employees’ skills and
capacities.

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With respect to relations with audited
entities, the Bureau conducts financial and
accounting consultations with the audited
entities because it believes that all the
parties concerned are partners in the success
of the audited entities, in the sense that “we
are all partners and overseers”. The Bureau
also submits recommendations that would
contribute to the development of the
entities’ methodologies. It also organizes
periodic workshops on various auditing
issues in which specialized employees at the
audited entities participate.
What are the challenges that confront
auditing bodies in the regions?
The challenges that Jordan is currently
confronting include the prolonged economic
recession, the budget deficit, the internal
and external public debt, and the impact of
the region’s political instability resulting in
the influx of large numbers of Arab refugees
into Jordan. Combined, these factors have
placed increasing pressures on the country’s
natural, economic and financial resources,
resulting in the addition of new oversight
tasks, which hitherto have not been included
in the Bureau’s normal plans. This has in turn
prompted the Bureau to give utmost priority
to this issue because it implies spending
large amounts of money to confront these
circumstances.
What are the main objectives which the
Bureau seeks to achieve?
The Audit Bureau seeks to accomplish
several objectives.
For instance, it is

amending the Audit Bureau Law with the
view to meeting international auditing
standards and professional auditing best
practices. It is giving renewed focus to the
Bureau’s reports and auditing outputs.
Another goal involves supporting all
ministries and government departments in
strengthening their internal control units.
The Bureau will also be looking to
standardize numerous legislative acts
regarding the regulation of the activities of
independent public institutions. Finally, we
will be updating and improving performance
measurement criteria and indicators.
What are the Audit Bureau’s
partnership arrangements?

The areas of cooperation are broad and
numerous. There are several factors which,
in our opinion, have a direct impact on
consolidating the Bureau's relationship with
the World Bank — most notably the Bank’s
selection of the Audit Bureau to be an
external auditor for World Bank grants to a
number of government agencies. This
selection
demonstrates
the
Bank’s
appreciation of the Bureau’s high efficiency
and professionalism in the field of auditing.
In this context, it is important to keep in
mind that such grants were previously
audited
by
private-sector
auditing
companies.

main

The main partnership arrangements include
the following: (i) the first and second
Financial Reform Project, funded by the
United States Agency for International
Development (USAID); (ii) The first twinning
project with the British National Audit Office
and the German Federal Audit Bureau, and
the second twinning project with the Audit
Bureaus of Estonia, the Netherlands and
Spain; (iii) the Support for Improvement in
Governance and Management (SIGMA)
program supported by the Organisation for
Economic Co-operation and Development
(OECD) and the European Union; and (iv) the
World Bank-funded project for building the
Bureau’s capacities.
What is the nature of the cooperation
between the Audit Bureau and the World
Bank?

Furthermore, the World Bank is keen on
contributing to the development of the
Bureau’s work. The Bureau was awarded a
World Bank grant to study the Bureau’s legal
and regulatory frameworks to ensure that
they conform to international best practices.
The grant also provides support to drafting
the legal and regulatory framework of the
Arab Audit Institute of Jordan, an affiliate of
the Jordan Audit Bureau. In addition, the
grant supports the organizing of training of
trainers’ courses and the development of
training curricula in the area of auditing
government-owned companies and publicprivate sector partnership projects. The
World Bank also regularly invites Bureau
staff members to attend conferences,
courses and seminars organized by the Bank
both inside and outside Jordan.

Governance in Sectors
Extractive Industries in Egypt:
Governance and the New Law

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Mohamed Yehia
Senior Financial Management Specialist,
World Bank

Significant efforts have been made by the
Egyptian government to improve the legal
and regulatory framework surrounding
extractive industries. Indeed, they may offer
insight for peer countries tackling similar
challenges. In 2014, Egypt took the bold step
of reviewing and replacing its Law of Mineral
Resources, which dates back to 1956, with
more modern mineral resource legislation.
The new law, Law No. 198, was first passed
in 2014 by the President who was acting for
the legislature according to the Constitution
(in the absence of the Parliament). The law
was later ratified by the Parliament in 2016.
Parliamentary ratification was not a smooth
process. Initially, it was rejected. In
response, a second round of voting was
conducted in which the law was eventually
ratified. The main causes of this initial
rejection were the complaints and
objections voiced by quarry owners and
other stakeholders who had benefited from
the previous arrangements and who did not
want to disrupt the status quo. The executive
regulations were issued in June 2015 by
virtue of the Prime Minister’s decree.
Rationale
Among the main critiques to the
arrangements that existed under the old law
was the stagnant fees/rates for rents which
had not been increased since 1956, and the
resulting loss that this created for state
revenues. Although alternative revenue
collection arrangements were pursued —
including different licenses and permits,
charging tolls on vehicles transporting
extracted materials — the new law sought to
streamline the state revenues from the
extractive industry (EI) business. In addition,
it aimed to consolidate these revenues in a
better controlled and more transparent
manner.

Main Features
Revenues revision. Articles 10 and 11 of the
new law allowed bi-annual revisions of the
rental value and royalty fee by the Mineral
Resources Authority (MRA) in the case of
mines, and by the respective Governors in
the case of quarries. The executive

regulations clarified the governance process
to be followed in revisiting the rates and
prescribed the composition of an advisory
committee for this purpose. The executive
regulations have also specified the revenue
categories and thresholds as follows:

Rental value: Annual rent based on the
total area of the mine/quarry.
According to the executive regulations,
rental value can be revisited every four
years by the MRA’s board for mines (or
the Governor in case of quarries). This is
to be done after consulting with the
advisory committee, and is subject to a
prime ministerial approval of the
proposal presented by the minister in
charge.

Royalty Fee: a percentage of no less
than 5 percent of the value of the
extracted material (according to the
rates specified in the executive
regulations with respect to the type of
material).

Dues to governorates: One percent of
the extracted material value to be used
for local development by the
Governorate of jurisdiction (host
Governorate).

Exporting rules. The law has imposed certain
restrictions on exporting production
outputs. The executive regulations clarified
the procedures regulating the export of
certain extracted materials of strategic
importance. These are to be allowed only
after creating an added value or using such
materials in industrial projects prior to
exporting. The rationale for restricting the
exportation of raw materials without further
processing seems valid as adding value prior
to exporting increases the foreign currency
inflows to Egypt and improves the country’s
economic and trade position. Further
processing has the added benefit of creating
much-needed job opportunities for the
Egyptian people. However, it is important to
note that the potential excessive chain of
approvals and associated bureaucracy might
hamper streamlined exporting processes
and reduce the potential benefits which may
accrue to Egypt.

Critiques by Stakeholders
Some of the stakeholders in the field have
criticized the new law and its executive
regulations. Among the main critiques cited
by stakeholders are the following:

Maintaining a database. Article 6 of the
executive
regulations
required
the
authorizing/licensing entity to maintain
certified records of applications, licenses,
areas,
companies,
rents,
royalties,
quantities, and so on.

The conflict of interest arising from the
Mineral Resources Authority and the
Governorates acting in the capacity of
regulator granting licenses while, at the
same time, maintaining the right to
operate in the same business. The law
allows Governorates to directly manage

12
quarries. Article 11 in the executive
regulations entitles the Mineral
Resources Authority to establish its own
companies in the field of exploration
and production.

The high rental values and royalty fees
on the output value, but without
factoring in the cost of production that
varies from one material to another and
from one location to another.

The calculation formula of quantities of
output using measurements that ignore
residual and scrap materials, which are
unavoidable.

What’s Next?
Overall, the new law provides reasonable
clarity concerning the regulations and
requirements governing the different stages
of the business cycle from licensing to
exploration to operations and production.
Unless this is coupled with strict
enforcement of the rules in a fair and
transparent manner, the government may
be vulnerable to losing investor confidence
and undermining growth in the sector.
Revenue sharing
Dispute and controversy are likely to
continue regarding the pros and cons of the
consolidation of the state revenue versus the
previous arrangements for revenue
collection at the sub-national level that
involved significant flows into special funds.
Private investors will always seek to
maximize their returns and challenge the
taxes and fees imposed by the government
— citing the effect of increased
taxes
on
discouraging
investments and the negative
implications for the overall
sector. In the final analysis,
revenues of the extractive
industries
business
are
naturally split between the
central government, the subnational administration and
the business owners. Striking a
balance between the three
parties to optimize fair
revenue distribution through
an equitable scheme/model is
the ultimate objective if the
overall economy is to benefit.
In principle, revenues should
ideally be proportionately
shared among the different
levels
of
government
according to their assumed
responsibility of the underlying
assets. Under the Egyptian

Mineral Resources Law, host Governorates
are entitled to 1 percent of the value of the
extracted materials. These contribute to
local development expenditures. This is in
addition to the annual fiscal transfers from
the state budget to the Governorates’ local
development budgets.
In countries
following a more decentralized fiscal model,
host local government units impose
additional fees and charges, such as a real
property tax, contributions to the special
education fund, a business tax, an
occupation tax, and/or a capital gains tax.
Governance and competiveness
The timely and regular release of
comprehensive information about resource
revenues allows governments, legislatures,
and citizens to exercise oversight and
conduct an informed debate about the best
use of revenues. Receipts from all major
revenue sources should be separately
identified in the annual budget presentation
(IMF 2007). To promote governance and
competitiveness in the sector, further
transparency is deemed essential. According
to the World Bank 2015 annual review of
extractive industries, 48 countries have
adopted
the
“Extractive
Industries
Transparency Initiative – or EITI”. In the
MENA region, only two countries have
adopted the initiative and were deemed
compliant with EITI requirements. These are
Iraq and Yemen, although Yemen’s
“compliant” status was later suspended. By
pursuing a transparent approach in the
extractive
industries
fiscal
regime,
governments can provide more assurance to
private businesses to attract new
investments. Such an approach also helps
reduce barriers to entry, and meet the public

and the local communities’ demands for
information.
Non-discrimination
The non-discrimination approach in applying
the legal provisions and regulations across
investors is key to ensuring a level playing
field that encourages sector growth. The
requirement in the law to establish a
database for licenses, production, and the
like, represents an adequate tool in the
governance context. Strong oversight of
quantities, strengthened tax administration,
and credible management of royalty
collections are also key pillars of good
governance.
Verification
The government’s institutional capacity to
verify the output quantity, quality, cost and
selling price is critical. Verifying the quality
produced has a direct bearing on the sales
value and the assessed royalties accrued to
the government. Substantiating the actual
costs incurred is equally critical to assessing
the amount of taxes due. Verifying the
selling
prices
requires
government
employees to maintain special skills. It also
necessitates
the
development
and
maintenance of a market database by the
government.
Hence,
government
investment in the required assets and skills is
crucial to ensuring that these activities are
professionally discharged and that the
accrued revenues are properly assessed.
REFERENCES
International Monetary Fund. 2007. Guide on Resource
Revenue Transparency.
World Bank. 2015. Annual Report: Extractive Industries
Transparency Initiative – Multi-donor Trust Fund.

13

Tunisia
La conduite d’une évaluation de la gestion des finances locales
selon la méthodologie PEFA: avis de la structure sujet d’évaluation
(Cas de la commune de Sfax/Tunisie)
Guidara Ahmed
Directeur Financier de la Ville de Sfax

Introduction
Dans l’objectif de renforcer sa crédibilité en
matière de gestion financière et de
consacrer sa politique de transparence, la
municipalité de Sfax s’est engagée en 2015
dans une évaluation de la mesure de
performance de la gestion des finances
locales selon la méthodologie PEFA et ce par
le biais d’un financement conjoint de l’AFD
en partenariat avec PPIAF. Cette évaluation
permettra aussi à la commune d’avoir un
diagnostic de sa gestion financière pour
déceler les pistes qui enregistrent des
insuffisances par rapport aux bonnes
pratiques internationales. Le projet est le
fruit d’un partenariat fructueux entre la
commune et l’AFD et l’aboutissement d’un
processus de négociation entamé depuis
2013 suite à l’acceptation des bailleurs de
fond de la requête de financement faite par
la commune pour la réalisation de
l’évaluation. Le Cadre commun d’évaluation
PEFA (version 2011) comprend une série
d’indicateurs de haut niveau (31
indicateurs), qui permettent de mesurer et
de suivre l’évolution de la performance des
systèmes, des procédures et des institutions
de gestion des finances publiques. Ces
indicateurs se rapportent à toutes les
dimensions de la gestion des finances
publiques, à savoir :





crédibilité du budget.
Exhaustivité et transparence.
budgétisation fondée sur les politiques
nationales.
prévisibilité et contrôle de l’exécution
du budget.
comptabilité,
enregistrement
de
l’information et des rapports financiers.
surveillance et vérification externes.

Le caractère standard des indicateurs cidessus cités permet de les utiliser pour
l’évaluation aussi bien des structures
nationales
qu’infranationales.
Depuis
l’acceptation du financement de l’exercice
PEFA et avant de connaitre les résultats de
l’évaluation et les notes attribuées pour
chaque indicateur, la municipalité a
exprimé son engagement à publier le
rapport final à l’instar de plusieurs
collectivités locales dans le monde sur le site
du secrétariat PEFA.

LES DIFFERENTS ASPECTS DE
L’EVALUATION
L’évaluation a touché à tous les aspects
relatifs à la gestion financière de la commune
en dépenses et en recettes. Elle a concerné
les phases de préparation, d’exécution et de
suivi-évaluation des opérations comptables
et financières. La première dimension
d’indicateurs évalue la qualité des prévisions
et d’exécution des dépenses et des recettes
pour juger la sincérité des prévisions et le
respect des transferts et les capacités de
gestion en matière d’exécution. L’indicateur
relatif aux arriérés et faisant partie de cette
première dimension était le plus difficile à
évaluer et ce à cause du volume important
des documents y afférent et de la nécessité
d’utiliser l’outil informatique pour faire les
requêtes nécessaires (listes ventilées par
fournisseurs, par année…). La deuxième
catégorie concerne des indicateurs se
rapportant à la règlementation comptable
en vigueur, qui est en général une
prérogative de l’autorité centrale. Les
autorités locales se trouvent ainsi évaluées
sur la base d’indicateurs qui échappent à leur
pouvoir. Dans cette même catégorie, on
trouve un indicateur qui concerne l’accès du
public aux documents comptables comme
condition nécessaire de participation dans le
processus d’élaboration budgétaire. Le cadre
énumère les éléments d’informations
auxquels l’accès du public est essentiel. Il
faut indiquer qu’un ensemble d’indicateur
relevant de la budgétisation basée sur les
politiques publiques est mal noté dans la

commune à cause du manque de vision et de
stratégie sectorielle en Tunisie post
révolution. Le cadre prévoit aussi des
indicateurs qui concernent la prévisibilité et
le contrôle de l’exécution budgétaire à
travers un focus sur les dépenses salariales
étant donné leur poids dans le budget
communal ainsi que les dépenses exécutées
suivant les procédures de la commande
publique pour les dépenses non salariales.
D’autres indicateurs sont réservés à la
dimension comptabilité, enregistrement de
l’information et rapports financiers.
L’évaluation de ces indicateurs dépend du
degré d’organisation administrative de la
recette municipale en terme de tenue de
dossiers et des justificatifs y afférents et de
la clarté des procédures de travail internes.
Le cadre prévoit aussi des indicateurs qui
concernent les missions de vérification
externe faites par les différents organismes
de contrôle et d’audit. Un dernier lot
d’indicateurs concerne les pratiques des
bailleurs de fonds étrangers dans leurs
relation avec la commune. Outre les
différentes
parties
prenantes
administratives intervenant dans la gestion
des finances locales ( le comptable, le
contrôleur des dépenses publique, la tutelle
régionale, , la direction régionales de
développement,..) , les experts ont
rencontré les membres actifs de la société
civile dans la région. La société civile inclut
essentiellement les associations intéressées
par la gouvernance locale, la transparence
financière, la lutte contre la corruption et
tout autre thème ayant une relation avec le
travail communal. De même, les experts

14
peuvent rencontrer les syndicats patronaux
et les organisations professionnelles
intéressées par le travail communal.
Généralement, ces rencontres visent à
évaluer la participation et l’implication de la
société civile dans les processus de décision
communale dans le volet financement
essentiellement la préparation du budget et
aussi l’accès aux documents comptables.
RESTITUTION DES RESULTATS ET PLAN
D’ACTIONS
La mission du terrain a été clôturée par une
restitution de l’évaluation sous forme de
briefing
des
résultats
préliminaires
susceptibles
de
modification
ultérieurement. Après la fin de la mission sur
terrain, la relation entre la commune et les
experts a continué à distance à travers un
échange
d’informations
et
d’éclaircissements demandés souvent par
les équipes d’experts. Après l’envoi du
rapport préliminaire, la commune a
rapidement réagi au contenu du rapport et
fait les observations nécessaires surtout
celles qui concernent le narratif de
l’indicateur sujet de notation et ce dans le
cadre du comité de pilotage créé pour cela,
le narratif étant l’explication de la motivation
de la note attribuée.
Le comité de pilotage a demandé l’avis des
autres partenaires ainsi que celui des
autorités centrales. En concertation avec
l’AFD, la commune a organisé en septembre
2015 un atelier de restitution des résultats
de l’évaluation PEFA auquel toutes les
parties prenantes ont été invitées. Durant
cet atelier, les experts ont présenté les notes
finales attribuées aux différents indicateurs
et ont répondu aux multiples questions
évoquées par les présents. L’évaluation PEFA
a permis de détecter les secteurs
ainsi que les pistes qui méritent un
appui sous ses différentes formes
(formation,
informatisation,
réingeneering,..). L’utilité du
diagnostic selon la méthodologie
PEFA ne concerne pas seulement
la commune. En effet, plusieurs
indicateurs évaluent les pratiques
des autorités centrales, les
dispositions
du
cadre
réglementaire et juridique, les
pratiques des instances de
contrôle et d’audit externe et les
pratiques des bailleurs de fonds.
Ce diagnostic représente une
opportunité pour la commune et
les autorités centrales pour
entamer des chantiers de réforme
et de modernisation qui leurs
permettront de s’approcher des
bonnes pratiques internationales
en matière de gestion des finances
locales (projet de code des

collectivités locales en cours d’élaboration).
C’est dans ce cadre que la commune et ses
partenaires ont insisté que l’évaluation soit
accompagnée en même temps par un plan
d’actions découlant du diagnostic fait. Cette
exigence a d’ailleurs fait partie des
stipulations des termes de référence qui ont
servi au choix des experts. Le plan d’actions
a comporté des propositions de projets de
réforme et de modernisation classés suivant
les six dimensions des indicateurs de
l’évaluation pour mettre en relief le lien
entre la mesure proposée et l’insuffisance
détectée par le diagnostic. Ces actions ont
les mêmes références que les notes
octroyées aux différents indicateurs
d’évaluation qui sont celles des bonnes
pratiques
observées
à
l’échelle
internationale. Parmi les actions proposées,
on peut citer celles relatives à la conception
d’un plan de trésorerie, l’élaboration d’un
cadre de dépenses pluriannuel qui concerne
l’investissement et le fonctionnement,
l’informatisation du mécanisme de suivi des
arriérés, la mobilisation des ressources et le
renforcement des capacités de la commune
en matière d’audit interne. Durant l’atelier
de restitution des résultats finaux de
l’évaluation, le représentant de l’AFD a
exprimé son accord préalable pour le
financement des actions découlant du
diagnostic PEFA et de continuer son
partenariat avec la commune de Sfax
Certaines mesures entreprises par la
collectivité peuvent être mentionnées dans
le rapport même si elles échappent à la
période d’évaluation. Elles doivent être
motivées par la documentation nécessaire
fournie par les autorités locales. Par
exemple, la commune de Sfax a entamé
depuis le début de l’année 2015 une grande
expérience de budgétisation participative

(affectation d’une enveloppe budgétaire de
trois millions de dinars de la section
investissement pour la décision par les
citoyens) pour la préparation du budget de
2016. Les évaluateurs ont jugé utile de parler
de ce projet dans le rapport final dans une
rubrique
appelée
« perspectives
et
processus de réformes ».
Conclusion
En guise de conclusion, l’exercice PEFA a été
une expérience passionnante malgré le fait
qu’il a demandé un effort en termes de
temps et d’énergie soit dans la phase de
préparation ou lors de la mission sur terrain
voire même après l’édition des rapports. La
connaissance préable du point focal au sein
de la structure objet d’évaluation PEFA de la
méthodologie d’évaluation ainsi que de sa
démarche et logique
représente une
condition sinéquanone de bonne conduite
de la mission. Cette connaissance se traduit
souvent par un travail préparatif préalable
qui consiste surtout en la collecte de la
documentation requise pour l’évaluation,
une coordination efficace entre les différents
intervenants ainsi que la garantie d’une
sensibilisation interne à la structure chez
toutes les parties prenantes concernées par
l’évaluation de l’utilité d’un tel exercice et
par la suite à l’adhésion pour sa bonne
conduite chacun de son côté. En moyenne
une évaluation PEFA dure 4 ans et au-delà
une évaluation répétée ou une autoévaluation permet de mesurer les
avancements réalisés par la commune dans
les différentes dimensions de l’évaluation.
L’auto-évaluation est considérée comme la
méthode la plus pertinente pour juger la
performance des actions entreprises suite à
une première évaluation.

15
I-Préparation de la mission d’évaluation
Après la désignation du bureau d’étude chargé de l’élaboration de l’évaluation suite à un appel d’offre sur la base de termes de référence établis
à l’avance et dressant avec précision les tâches à effectuer par des experts ainsi que leurs qualifications et références en la matière, la commune
est informée des résultats de l’appel d’offre organisé pour le choix de l’équipe d’évaluation ainsi que leurs coordonnées. En échange de mails
avec les experts désignés pour l’évaluation, la commune a reçu une liste des documents nécessaires à l’évaluation. Ces documents sont
constitués généralement des différents documents comptables (budgets, comptes de gestions, comptes administratifs,), la législation régissant
le travail communal (finance locale, fiscalité locale, emprunts, investissement,…) qui sont nécessaires à l’évaluation des systèmes et des soussystèmes des finances locales. De même, les experts envoient une liste des personnes à rencontrer pour organiser une série de rendez-vous avec
eux durant la mission sur terrain. Du coté de la commune et, dans le but de bien préparer la mission, un comité de pilotage a été créé. Il est
constitué par les parties prenantes intervenant en matière de gestion des finances locales à savoir :

Le secrétaire général de la commune

Le directeur financier,

Le directeur des affaires administratives et des ressources humaines

Le contrôle régional des dépenses publiques chargé de faire le contrôle à priori des propositions d’engagement et qui relève de la présidence
du gouvernement.

Le comptable public relevant du ministère des finances,

Le président de la chambre régionale de la Cour des Comptes.

Pour faciliter la mission de l’équipe d’experts, la commune a désigné le directeur financier en tant que point focal pour la mission. Il sera
l’interoculaire des experts durant toute la mission. Le rôle du comité du pilotage est le suivi de la mission durant toutes ses phases. Il intervient
dans toutes les difficultés qui peuvent naitre. Des arrêtés municipaux ont été promulgués par le maire pour la constitution du comité de pilotage
et pour la désignation du directeur financier comme point focal. Ces différents arrêtés ont été communiqués aux différents départements et
services de la commune accompagnés pour une note circulaire relative à l’évaluation PEFA qui explique l’objectif de la mission avec une
description succincte de la méthodologie et une motivation aux différents chefs de services et départements pour faciliter la mission des experts
et fournir toute documentation demandées pour la bonne conduite de l’évaluation.
Avant le commencement de la mission du terrain, le point focal a fourni à l’équipe d’experts l’organigramme de la commune traduit en langue
du travail du rapport, car par exemple en Tunisie et depuis 1996, tous les documents utilisés dans l’administration tunisienne sont en langue
arabe tandis que le rapport est rédigé en langue française. De même, le point focal a préparé un recueil des différents textes régissant le
fonctionnement de la commune (les textes doivent être mises à jour par les différents amendements pour faciliter aux experts la compréhension
du contexte de la décentralisation). Les textes de loi doivent toucher à tous les volets de l’action communale à savoir, le fonctionnement de la
collectivité locale, la fiscalité locale, la finance et le budget local, les emprunts et le financement des investissements locaux. Concernant la
période d’évaluation il faut se concerter avec l’équipe d’experts sur la période de travail ; celle-ci doit être basée sur des exercices clôturés
suivant la réglementation en vigueur relatif au règlement du budget communal.
A Sfax, la période de travail choisie était 2011-2013 malgré le commencement de la mission en Avril 2015. L’année 2014 n’était pas prise car le
compte du règlement du budget relatif à cette année (appelé en Tunisie compte financier et synthétisant le compte administratif et le compte
de gestion) n’a pas encore été voté par le conseil communal (la loi organique des collectivités locales stipule que le conseil communal délibère
sur le compte financier relatif au règlement de l’exercice N durant la session ordinaire du mois de Mai N+1). La commune doit préparer à l’avance
une présentation des aspects démographiques, économiques et sociaux de la collectivité. Cette monographie servira aux experts afin de bien
comprendre le contexte de l’entité évaluée et ses perspectives de développement. La phase préparatoire est très lourde et demande un
investissement considérable que ce soit en termes de temps ou de ressources humaines nécessaires pour la préparation des données qui font
parfois défaut et méritent le cas échant un effort de production ou de retraitement.

II-La mission sur terrain
Le commencement de la mission du terrain s’est fait par un atelier de lancement de l’évaluation présidé par le maire. Toutes les parties prenantes
aussi bien internes qu’externes intervenant dans la gestion des finances locales y ont été invitées. Durant cette réunion, les experts ont exposé
la méthodologie PEFA en faisant la différence avec les autres types d’évaluation et en insistant que cet exercice n’est pas une inspection ou un
audit mais que c’est plutôt une évaluation des systèmes et des sous-systèmes. Durant la réunion, le maire a donné ses instructions aux différents
intervenants pour faciliter la mission des experts en fournissant toute la documentation nécessaire. La conduite de la mission d’évaluation a
nécessité aussi la mobilisation au moins de deux cadres de la direction financière pendant la période la mission. Leurs taches ont consisté
essentiellement à la collecte des informations qui concernent les transferts d’Etat sous les différentes formes (Dotations non conditionnées et
conditionnées, subventions ordinaires, subventions exceptionnelles, crédits transférés des budgets des ministères,…), des statistiques
concernant les rejets des propositions d’engagements, des statistiques sur les rejets de mandats, le nombre d’amendements et de modification
du budget, les montants des rappels de salaires et les délais de régularisation, les dates de réunions des bureaux et conseils municipaux, les
dates de transferts des projets de budgets…

Taxation
All’s Fair in Love and (the Global Tax) Wars?

16

Jim Brumby
Director, Governance Global Practice,
World Bank
The mishmash of overlapping and incoherent
national tax policies and systems, which
together comprise the global tax
architecture, used to be a niche topic
relegated to the fringes of global policy
debates and the domain of a small number of
technical experts. But the leak of the
“Panama Papers” in April thrust these issues
into the spotlight anew.
This added fuel to the fire that was started by
the 2012 Amazon and Google cases and
subsequent initial high-profile leaks that first
brought international tax policy under public
and legislative scrutiny. The technicalities of
issues such as transfer pricing, offshore
financial centers, aggressive tax planning and
tax minimization, and illicit financial flows
involving public officials have gained the
attention of the media and taxpayers around
the world.
It looks like we are entering the fray of
“global tax wars”. This pits the interests of
tax administrators against internationally
mobile taxpayers, of developing against
developed countries, of domestic against
multinational companies, of physical output
against intellectual value, and of the top one
percent of income earners against the other
99 percent.
Demands for greater transparency and
fairness have already led to some tangible
changes, like elimination of the “double
Irish” in 2014. Some countries, such as
Australia and the UK, have recently
unleashed
new
taxes
(known
euphemistically as Google taxes) designed
very specifically to address the problem of
getting taxes out of multinational companies
with large operations.
Satisfactory resolution of the “global tax
wars” could fundamentally reshape the
international tax system with major
consequences for multinational enterprises,
governments, wealthy individuals, and
politicians. The implications for developing
countries and average citizens are less
straightforward, and this is of concern.
Although there is no precise figure, as it
involves leakages which by definition are
hard to measure, global corporate income
tax revenue losses due to profit shifting and

other tax maneuvers are in the range of $100
to $240 billion each year. This means the
amount of money at stake is roughly on par
with--or larger than--the total annual volume
of development aid flows.
The concerns associated with the global tax
wars may have had less resonance in
developing countries, even though this is
where the largest consequences are, and
where countries often lack the policies and
procedures to be able to detect and
adjudicate misuse of the domestic tax
system. Taxes in developing countries
represent a smaller share of GDP (10-20% of
GDP vs. 30-40% in OECD countries), and tax
policy discussions have focused on
broadening and deepening the tax base in
general.
However, it may be that tax avoidance has a
disproportionately large impact on nonOECD countries given that corporate tax
generally represents a larger share of total
tax revenue than in wealthy countries.
When the interests of developing countries
(which are often primarily the recipients of
capital inflows) are at odds with those of the
countries where multinational countries are
based, the former are likely to be at a
disadvantage. Taking unilateral domestic
steps to curb tax avoidance can be effective
in protecting the corporate tax base, but may
have the unwanted effect of making a
country less attractive to foreign investment.
Of course, developing countries also lose
wealth and tax revenues when wealthy
nationals or political elites take advantage of

offshore tax havens or engage in tax evasion
and money laundering schemes.
The OECD has coordinated the primary
international response to the growing
concerns about the international tax system
through the Base Erosion and Profit Shifting
(BEPS) action plan, with the addition of a
recently announced “inclusive framework”
to make sure that BEPS issues are addressed
more widely than in OECD countries alone.
To strengthen the voice of developing
countries in the global debate on tax issues,
the World Bank Group/IMF Joint Initiative for
Strengthening Tax Systems in Developing
Countries was launched in 2015.
Through this initiative, the Bank and the IMF
are assembling a set of tools and guidance
aimed at addressing developing economy
needs, working to push the concerns of
developing countries to the fore, and
boosting regional cooperation as a
counteraction
to
destructive
tax
competition.
Last week, the Bank sponsored a conference
that brought together international experts,
academics, civil society and other tax
practitioners around the topic of the ‘global
tax wars’. Several opportunities for tax
cooperation were described as possible
alternatives to end these tax wars.
The loopholes and structures (including tax
incentives) that enable tax minimization,
even when legal, undermine the concept of
progressive taxation and ultimately
represent diminished public resources for
development. Much of this has happened

17
with the full knowledge and even complicity
of some national authorities, who have
bowed to or lobbied for the interests of
powerful stakeholders.
Within the current framework, there are
significant short-term gains to be made from
helping countries improve rulemaking and
enforcement. A challenge for many
developing countries that is bigger than
tweaking domestic rules and processes,

though, may be dealing with old and
outdated treaties that are either unhelpful or
cannot be implemented. Negotiating or
renegotiating tax treaties, especially with
OECD countries, can be a daunting prospect.
Now that tax issues are part of the
mainstream policy discussion, it is time to
work toward a new consensus of what
constitutes a fair and equitable international
tax system for the global 21st century

economy. This is a steep hill to climb - the
domestic politics blocking any meaningful tax
reform in the US alone seem nearly
insurmountable.
But we are looking for ways to balance the
pursuit of quick wins at the country level with
support for a coordinated global solution.
Next on the agenda is a major launch of the
OECD’s “inclusive framework” in Kyoto this
month—stay tuned.

Refugees
Aid to Refugees and the Internally Displaced:
Who is watching?
Mona El-Chami
Senior Financial Management Specialist,
World Bank
Refugees and the Internally Displaced How Many? From Where? To Where?
According to the United Nations (UN), as of
the end of 2015, a worldwide record of 65
million men, women and children were
forced from their homes by war or
persecution. This means that roughly one in
every 113 people around the world was
either
a refugee,
an internally
displaced person or an asylum seeker. The
latest
annual Global
Trends
Study
(http://www.unhcr.org/5748413a2d9 ) from
the UN refugee agency, the United Nations
High Commission on Refugees (UNHCR),
shows that the total number of forcibly
displaced people rose sharply last
year, increasing from 59.5 million in
December 2014 to 65.3 million in 2015.
More than half of the refugees under the
UNHCR mandate are from just three
countries: Syria (4.9 million), Afghanistan
(2.7 million), and Somalia (1.1 million). A
further 5.2 million Palestinian refugees are
registered with the United Nations Relief and
Works Agency (UNRWA) for Palestine
Refugees in the Near East. Conflicts in the
Middle East and North Africa remained the
single greatest cause of displacement last
year. Syria’s war left 4.9 million people living
as refugees, with a further 6.6 million
internally displaced. In Iraq, the conflict
displaced 4.4 million people internally, and
created more than a quarter of a million
refugees. Yemen’s civil war, which began in
March 2015, has internally displaced 2.5
million people, while violence in Libya has
forced nearly half a million people to flee
their homes. For the second consecutive
year, Turkey hosted the largest number of

refugees worldwide, with 2.5 million people
seeking safety within its borders. Lebanon
hosted the largest number of refugees in
relation to its national population — roughly
183 refugees for every 1,000 Lebanese
inhabitants.

outside of their aid budgets to cover refugee
costs.1 The European Commission gave more
than US $1.2 million or some 72 percent of
its annual humanitarian aid budget in the
financial year 2015 to projects helping
refugees and internally-displaced persons.2

How Much Do
Disasters Cost?

Humanitarian

Is Available Data Accurate, Comprehensive,
and Timely?

Development aid totaled US $131.6 billion in
2015, representing a rise of 6.9 percent
increase from 2014 in real terms, as aid spent
on refugees in host countries more than
doubled in real terms to US $12 billion. Funds
spent on hosting or processing refugees in
donor countries accounted for 9.1 percent of
Official Development Assistance (ODA) in
2015, up from 4.8 percent in 2014, when
refugee costs totaled US $6.6 billion. The rise
in refugee costs did not significantly detract
from development programs, with around
half of donor countries using money from

When examining funding and resources
beyond humanitarian assistance, the
availability and quality of data is a challenge.
There is no complete picture of what
countries are spending on hosting refugees
— or of donor responses to displacement
elsewhere.
The only international platform3 (run by the
Organisation for Economic Co-operation and
Development- OECD) for host countries to
report spending does not provide all of the
facts. It only shows what can be counted as
ODA. As such, reporting practices vary

These

18
dramatically. For example, the contributions
of many developing countries, such as
Lebanon and Pakistan that host large
numbers of refugees are not reflected. In
addition, there is a question of data
timeliness, as key figures are typically
published a year after ODA is spent. In the
absence of comparable and up-to-date data,
not only do myths creep into the rhetoric,
but it is also hard to identify and fill financing
gaps.
Who is Responsible for managing these
Funds? What are their findings?
Usually, the Supreme Audit Institution (SAI),
Auditor General or Court of Audit of each
donor country audits the way in which funds
are managed and spent. A recent audit
report by the European Court of Auditors
regarding the management and use of
refugee aid alerted that: “Budgets were not
detailed enough and there were no
assessments of whether proposed costs were
reasonable; there was a lack of documentary
evidence to determine geographical priorities
and assess project proposals; and that
reports from the commission’s field staff
were ‘not sufficiently comprehensive’”4.
Around half of the aid provided by the
European Union (EU) was spent through UN
agencies, with the remaining half spent
through independent contractors. Although
data from UN agencies is readily available,
there was a lack of data regarding the
amount spent through subcontractors about
the amount actually spent on beneficiaries.
What reporting did take place was noted to
be “frequently late”, which the European
Court of Auditors noted “limited their
usefulness”. (figure 1)
How is the World Bank Trying to Help SAIs
Audit the Budget and Aid Allocated to
Refugees and Internally-Displaced People?
As approximately 10 million refugees and
internally displaced people are hosted by just
four key countries — Iraq, Jordan, Lebanon,
and Turkey — the World Bank Global
Governance Practice teams in the Middle
East and North Africa (MENA) and Europe
and Central Asia (ECA) regions have been
working
together
to
support
SAI
development. On April 20, 2016,
representatives from these four host
country5 SAIs attended a roundtable
workshop entitled “Refugees and Internally
Displaced Audit and Accountability.” Leading
the International Organization of SAIs
(INTOSAI) Working Group on Accountability
for and the Audit of Disaster-Related Aid, the
Netherlands Court of Audit co-led the group
discussion. Each of the four countries’ SAIs

shared its experiences regarding the audit of
refugee and internally displaced aid,
including also the auditing of state budgets.
For example, the audit reports of the Iraq
Federal Board of Supreme Audit had
identified many findings that concluded
ineligible use of funds, such as uncompetitive
procurement of shelters, lost funds, unspent
funds, and so on (figure 2). This confirms that
the refugees and internally displaced are not
fully benefiting from the funds allocated for
their relief. Though each SAI had a different
approach to this matter, all SAIs have
explicitly voiced the critical need of
developing sound arrangements to ensure
that public funds, donors grants and in-kind
support are spent for the intended
purposes— and in an economic and efficient
manner.
Figure 1: European Court of Audit Report
2016

“I am concerned that the
European Commission
does not have the
figures it needs to check
whether the aid is being
delivered in the most
efficient and costeffective way,” explained
Karel Pinxten, the
European Court of
Auditors member
responsible for the
report.
Source: Public Finance International.

Figure 2: Audit Findings of Refugees and
Internally Displaced People

Using funds for different
purposes
Uncompetitive procurement
Lost funds
Weak internal controls
Multiple responsible uncoordinating agencies
Source: Iraq Federal Board of Supreme
Audit, 2015.

Donors and governments need to know if the
refugees and internally displaced people are
actually receiving the services promised by
donors. Challenges remain in determining
the total
amounts allocated
and
spent because of the existence of multiple
sources of funds, the many organizations
involved, and the nature of internal controls
utilized. The
Roundtable
Workshop
provided an opportunity to discuss risks and
mitigating measures, including relevant
internal
controls
by
participating
organizations, targeted audit procedures,
public
participation,
and
engaging
parliaments, among other topics. It was
agreed that a performance audit would
provide better information about the
effectiveness of countries` responses to
refugees and internally displaced people.
The results of such an audit would be very
valuable in assessing the impact of such
programs, as well as in understanding
whether the funds were used effectively.
Additionally,
performance
audit
recommendations
would
help
the
governments in reshaping their response
programs in a more effective way.
Knowledge-sharing among peer SAIs is also
needed. The Netherlands Court of Audit is
starting an audit related to the refugees
recently hosted by the Netherlands. Findings
and lessons learned from this audit will be
shared. Follow-on events are presently being
planned and will seek to draw participants
from policy-setting bodies, aid organizations,
disaster
response
authorities,
nongovernmental organizations (NGOs), as well
as SAI representatives. It is expected that the
World Bank will again seek to partner with
INTOSAI
in
providing
additional
opportunities for calibrating responses to
these growing humanitarian crises.

REFERENCES
“Development aid rises again in 2015, spending on
refugees doubles”, OECD
http://www.oecd.org/dac/development developmentaid-rises-again-in-2015-spending-on-refugeesdoubles.htm.
2 ECHO Factsheet – June 2016 – Refugees and IDPs.
3 Creditor Reporting System, OECD
https://stats.oecd.org/Index.aspx?DataSetCode=CRS1.
4 “EU aid spending not properly tracked, auditors warn,”
see:
http://www.publicfinanceinternational.org/news/2016/0
7/eu-aid-spending-not-properly-tracked-auditors-warn.
5 Including the Iraq Federal Board of Supreme Audit, the
Jordan Audit Bureau, the Lebanon Court of Accounts,
and the Turkey Court of Audit.

19

Decentralization
Decentralization and Service Delivery in Iraq:
An Evolving Process
Rama Krishnan
Venkateswaran
Lead Financial Management Specialist,
World Bank
Decentralization is a multi-dimensional
process that requires a common
understanding of the outcomes and
processes by the various stakeholders
involved. In Iraq, although the Constitution
and the legal framework contain the broad
layout of the decentralization reform
process, there is still a lack of clarity among
key stakeholders regarding their respective
roles. In a diverse socio-economic and
political country such as Iraq, it is important
for the Central Government to reach out to
the various constituents involved in the
decentralization process both within and
outside of the government. Likewise, it is
essential that the government communicate
effectively about the expected outcomes and
benefits of this decentralization process.
Since the new Constitution of Iraq (enacted
in 2005) provided for decentralizing powers
and functions for the Governorates, the
Government of Iraq has enacted several
legal, policy and institutional reform
initiatives, the intent of which is to shift
political and administrative powers and
responsibilities
from
the
Central
Government to the Governorates.
The first major step toward decentralization
under the Iraqi authority was the election of
the Governorate Councils (for all 18
Governorates) in January 2005. This first
major step toward political decentralization,
taken by Iraq even prior to the adoption of a
new Constitution, has stood the test of time.
Its statutory basis was adopted in 2008 and
successful, subsequent elections in 2009 and
2013. The new Constitution, adopted
overwhelmingly in a national referendum in
late 2005, affirmed a federal structure with
locally-elected councils that in turn select the
local executive authority — which would be
the Governor in the case of the
Governorates. However, the federal nature
of the structure refers only to regional
governorates. The authorities of regions
(only the Kurdistan Regional Government
[KRG] at present) are protected in the
Constitution. For those Governorates not in
a region, the Central Government has the
constitutional
authority
to
legislate
Governorate authority and sources of
revenue.

From 2005 through 2009, the elected
Governorate Councils took two significant
initiatives, including the successful drafting
and lobbying for passage of the Law on
Governorates not Incorporated into a Region
(Law 21, 2008), as well as the preparation of
strategic plans for the development of the
Governorates. Law 21 provides the statutory
basis
for
governorate
authority.
Amendments in 2010, 2013 and 2015
(pending) have clarified some governorate
authority, such as the legislative authority of
Governorate Councils. Governorates also
took the initiative to address demands from
citizens for basic service improvement. In
addition, the Amendments mandated the
devolution of key functions in eight federal
ministries.
In parallel, the Council of Ministers included
in the 2006 Budget an allocation (under the
Accelerated Regional Development Program,
the ARDP) of a proportion of the federal
investment budget to each Governorate for
their discretionary use. Governorates have
taken advantage of their strategic
investment planning programs and the
federal budget allocations to fund projects in
their investment plans. However, project
approval processes in the Ministry of
Planning and regulations in the Ministry of
Finance for access to funds have hampered
the timely access by Governorates to
allocations, and project execution has been
weak.
In 2010, there were a few short-lived
initiatives to further decentralization. These
were fueled by legislation to take a major
step toward assigning service delivery

responsibility and allocating funds to the
Governorates. The 2010 Laws 18 and 20,
respectively, devolved the Ministries of
Labor and Social Affairs and Municipalities
and Public Works to the Governorates. The
initial enthusiasm, however, was stifled
when
both
laws
were
declared
unconstitutional by the Supreme Court. After
the Supreme Court’s decision, the
Governorate Councils elected in 2009 turned
more inward and were less inclined to start
new initiatives at the national level.
In 2013, there was a reversal with the
introduction of the Second Amendment to
the Law on Governorates not Incorporated
into a Region (Law 19, 2013). The enactment
of Law 19 gave a much-needed impetus to
the decentralization initiative. The most
important article of Law 19 gradually
transfers
the
“sub-directorates,
departments,
tasks,
services
and
competencies of eight federal ministries.”1
The law creates a new High Commission for
Coordination among the Governorates to
manage this transfer. The High Commission
is chaired by the Prime Minister, with the
Minister for Governorate Affairs as the
Secretary.
The 2013 amendments provided broad
statements of policy, but few operational
details. The devolution provision left the
practical issues about the devolution aside,
including what functions, staff and budgets
would be devolved and, over what time
period, to the individual ministries.
Moreover, despite its support, the High
Commission is a small organization with
limited technical staff support and the

20
authority only to coordinate, but not require,
specific actions. As a result, very little
happened in 2013 and 2014.
In 2015, the new Prime Minister Haider AlAbadi gave a strong push to implement the
2013 devolution provision, making it a core
priority of the Government. As a result,
several of the Ministries coordinated by the
High Commission began negotiating to
identify the functions to be devolved, as well
as the mechanics of staff and budget
assignments. Despite this sense of urgency,
no agreements were reached by the deadline
of August 2015, which was then extended to
November 5, 2015.
A Third Amendment to the Law on
Governorates not Incorporated into a Region
has been approved by the High Commission
and the Council of Ministers. This
Amendment is meant to force rapid
devolution of some ministry functions, and
allow for a more gradual devolution of other
ministry functions. Substantial agreement
has been reached on the devolution of the
Ministry of Housing and Municipalities
(including the five directorates of
Municipalities, Water, Sewage, Urban
Planning, and Planning and Follow up). Other
ministries to be devolved, at least in part,
indicate that they have not started the
process. Moreover, there was no clear
indication as to when they would expect to
complete the process. Although significant
policy changes have been made in 2013 and
2015 to substantially move decentralization
forward, tangible progress on the ground can
occur only if key issues are addressed.

Despite the devolution provisions of Law 19,
the Governorates continue to face a variety
of constraints that impede their ability to
deliver services. The institutional structures
of the devolved ministries continue to
operate in the deconcentrated mode.
Furthermore, there are no clear plans for the
transfer of staff, no clear guidelines for the
reporting and accountability relationships of
devolved staff to the Governorates and
former parent Ministries, and no clarity in
the organization of the civil service under the
decentralized context.
Finally, decentralization policy does not
appear to be matched by appropriate fiscal
arrangements. The 2016 budget’s protection
of central ministry investment budgets by
slashing
allocations
to
governorate
investments undermines the belief by
governorate officials in the seriousness of
policy reforms. In addition, it engenders
heightened citizen dissatisfaction with public
service levels — dissatisfaction that is
directed at governorate officials more than
at central government officials.
In conclusion, the decentralization model in
Iraq is evolving. Considering the diversity of
the country, asymmetric solutions are likely
necessary at the Central and Governorate
levels to adapt to differing regional capacities
and social, cultural, economic and security
environments.
In all likelihood, the
necessary
structure
for
effective
decentralization in Iraq will not be
encompassed by a single decentralization
model, and will likely require the

development of separate sub-models which
provide for increased autonomy and
discretion in a manner consistent with
capacity.
Going beyond the current model of
decentralization that is focused at the
Governorate level, it may be useful to
consider the feasibility of devolving powers
and responsibilities to the district/municipal
level as this is the tier of the State closest to
the citizens. However, the weak institutional
structure at the district/municipal level and
the absence of a clear assignment of powers,
responsibilities and resources prevent them
from functioning effectively as the third tier
of the State.
Iraq could learn from the experience of
countries such as Indonesia. Such countries
strengthened their local governments
through a series of interconnected policy
measures, such as providing discretionary
financial resources to local governments
through formula-based fiscal transfers, and
strengthening local service delivery by clearly
defining
institutional
roles
and
responsibilities. Further studies and analysis
are required to explore the modalities of
devolving powers and functions to the
district/municipality level.
FOOTNOTES
1

These include the Ministries of Housing and
Reconstruction, Municipalities and Public Works, Health,
Education, Labor and Social Welfare, Sports and Youth,
and Agriculture. The wording of the Article seems to
suggest Finance also, but apparently it has meant only the
creation of Finance Directorates in the Governorates and
not a devolution of the Ministry of Finance authorities.

Interview
Mr Alaa Marzougui,
Fondateur de l’Observatoire Tunisien de
l’Eau & chef du projet Watchwater
L’amélioration des conditions de vie des
citoyens suppose l’accès aux services publics
de base tel que l’eau, l’électricité et
l’assainissement. Cependant les institutions
publiques ont parfois du mal à garantir ces
services pour une multitude de raisons ce qui
peut être l’origine d’un manque de confiance
des citoyens envers ces institutions. En
Tunisie, où certains problèmes d’eau ont été
suivis récemment de mouvements de
contestations, une association a créé une
plateforme
citoyenne
qui
s’appelle
Watchwater. Cette plateforme vise à
cartographier les problèmes d’accès à l’eau
potable sur la base des alertes des citoyens
et les porter à la connaissance des décideurs
publics pour les aider à les résoudre et ainsi
réconcilier le citoyen avec les institutions
concernées.

21
Pouvez-vous
brièvement
présenter
l’association Nomad08 Redeyef et les
circonstances de sa création ainsi que le
profil de vos membres ?
Je suis Alaa Marzougui membre fondateur
de l’association Nomad08 Redeyef et
chimiste de formation. Nomad08 Redeyef a
été fondée en 2012 en marge de la
préparation du forum mondial social de
2013. C’est une sorte de « coopérative » créé
à Redeyef (Gouvernorat de Gafsa) par huit
jeunes diplômés chômeurs de différentes
spécialités. Tout a commencé lors d’une
réunion de préparation du forum mondial
social 2013 à Monastir suite à la défaillance
d’un prestataire de service pour fournir du
matériel de traduction simultanée. En effet,
Mr Mohamed Jeribi (ingénieur et membre
fondateur de Nomad international) a de
fabriquer le matériel en question en faisant
appel à notre groupe! C’est ainsi que notre
groupe a relevé le défi de fabriquer le
matériel nécessaire pour la traduction
simultanée de l’évènement du lendemain
alors que la plupart d’entre nous n’aient pas
de formations et d’expériences préalables en
électronique.
Suite à cette réussite, le comité
d’organisation du forum mondial social a
confié à Nomad08 la mission d’assurer la
traduction simultanée lors du forum mondial
social à Tunis de 2013. Par la suite, nous
avons continué à fournir des services de
traduction simultanée de qualité à bas coûts
aux associations locales qui ne pouvaient pas
se permette de faire appel à des traducteurs
professionnels.
En 2015, le forum mondial social s’est tenu
encore une fois à Tunis et le comité
d’organisation a refait confiance à Nomad08.
C’est grâce à ces expériences que Nomad08
a été créé et a pu développer son réseau en
nouant de bonnes relations avec la société
civile tunisienne et internationale.
Au fil du temps, nous avons réussi à nous
diversifier en collaborant à d’autres
initiatives à l’instar de « Watch The Med »
(http://www.watchthemed.net/) qui est une
plateforme en ligne de geo-mapping qui
permet de suivre et d’alerter sur les noyades
et les violations des droits des migrants dans
la frontière maritime de l’Europe. C’est une
initiative soutenu par la fondation Rosa
Luxemburg,
le
réseau
d’association
Boats4People et reposant sur une solution
de téléphonie par satellite. Nomad08 a
contribué à cette initiative en mettant en
place l'outil technologique libre pour le
projet reflétant ainsi notre philosophie qui
met la technologie aux services des causes
comme celle de l’immigration dans ce cas
précis.
Au fil des expériences Nomad08 a pu
constituer un réseau solide de membres
bénévoles surtouts d’élèves ingénieurs et
d’ingénieurs qui continuent à aider Nomad08

même après avoir eu leurs diplômes et
commencer leurs carrières. C’est grâce à ce
réseau que des groupes de travail ont été
créés pour concevoir des solutions
technologiques aux services des causes
sociales, économiques ou écologiques.
Comment est
Watchwater.tn ?

née

la

plateforme

L’idée de Watch Water nous est venue suite
au constat du quotidien des habitants de
Redeyef et des autres villes du bassin minier
qui souffrent de problèmes récurrents de
coupures, d’interruptions et de fuites d’eaux.
Ces problèmes sont dus entre autres à une
surexploitation de l’eau, la rareté des
ressources en eaux dans le bassin minier, les
difficultés pour la Société Nationale
d'Exploitation et de Distribution des Eaux
(SONEDE) à étendre et maintenir son réseau
de distribution d’eau potable – et aussi le
manque de conscience du citoyen pour
alerter la SONEDE à temps en cas de
coupures ou de fuites d’eaux.
Chaque région a ses problèmes spécifiques
d’eau et la SONEDE a tenté d’identifier leurs
origines en mettant en place une application
mobile permettant aux citoyens de l’alerter
des fuites et des coupures d’eau.
Malheureusement l’application n’a pas eu
beaucoup de succès, jusqu’à présent, à cause
de sa méconnaissance par le grand public et
le manque de conscience des citoyens.
Notre approche était différente car dès le
début on a travaillé conjointement avec un
réseau de personnes engagées dans les
régions touchées en vue de faire face aux
problèmes de pénurie d’eau potable en
Tunisie, d’améliorer la gestion des
ressources en eau et la prise de conscience
du citoyen de son rôle dans la résolution de
ces problèmes. Notre plateforme repose sur

une combinaison de logiciels libres tels que
l’outil de cartographie « Openstreet Map »
avec d’autres systèmes de gestion de
contenu web. L’objectif de la plateforme va
au-delà des alertes de coupures ou fuites,
mais tend à identifier les causes de ses
problèmes et à terme essayer de leur trouver
des solutions.
En effet, grâce aux premiers rapports
mensuels générés par la plateforme, on a pu
révéler les causes à l’origine de certaines
coupures d’eau. Ces principales causes
incluent les problèmes fonciers à Moulares,
les constructions faites sur les grandes
conduites d’eau,
les problèmes de
maintenance et d’extension du réseau de
distribution et le manque de moyens qui a
été soulevé par plusieurs techniciens de
maintenance de la SONEDE.
Comment votre initiative a été perçue par
les citoyens, décideurs publics et les autres
parties prenantes ?
La plupart des alertes proviennent de la
région de Gafsa où la plateforme est très
connue car les activités de notre association
sont très suivies dans la région, même s’il y a
d’autres régions qui souffrent autant que
Gafsa mais ne connaissent pas encore
Watchwater. Néanmoins, les outils de
communication en ligne et les médias
sociaux nous ont aidés à nous faire connaître
au-delà de Gafsa.
Notre réseau a été développé à travers nos
partenariats avec certaines associations
nationales disposant de représentants
locaux et quelques journalistes, reporters
régionaux/locaux de radios, journaux et
autres médias nationaux. Ces journalistes

22
utilisent aussi les données de Watchwater
pour dénoncer les problèmes d’eau au
niveau régional et local. Ainsi Watchwater
est devenue non seulement un moyen de
dénonciation pour le citoyen mais aussi une
source d’informations pour les journalistes
et les médias en leur permettant de porter la
voix des citoyens démunies au plus haut
niveau.
Il faut dire que nous avons commencé il y a
seulement quelques mois et malgré cela
nous avons réussi à constituer un réseau de
représentants dans toutes les régions de la
Tunisie. Nous avons une grande ambition
pour développer ce réseau et nous aimerions
que cette plateforme devienne une source
incontournable d’informations et permette à
terme d’exercer une pression sur les
décideurs publics en vue d’un changement
positif. J’espère que d’ici un an on aura un
historique d’alertes qui permettra de révéler
davantage de dysfonctionnements et une
compréhension plus approfondie de l’origine
des problèmes de coupures et de fuites
d’eau.
La décentralisation est un apport
considérable de la nouvelle Constitution.
Comment vous percevez le rôle de la société
civile pour accompagner ce processus et
favoriser un accès aux services publics
équitable ?
Je prendrai l’exemple de l’accès à l’eau
potable que je connais le mieux. Je pense
qu’il faudrait faire un bon diagnostic et
définir les responsabilités afin d’identifier qui
sont les responsables que ce soit la SONEDE,
ses sous-traitants et parfois même les
citoyens. Il y a des fuites qui restent
longtemps sans solutions à cause de
problèmes entre la SONEDE et ses soustraitants ou bien avec les sociétés de travaux
publiques qui ont initialement installé la
partie du réseau concernée par la fuite. Il n’y
a pas de mécanisme de suivi et de contrôle
systématique des prestations des soustraitants.
La décentralisation pourrait aider à
améliorer la fourniture de services publics
dans les régions. A titre d’exemple à Redeyef,
on pourrait avoir l’appui de la Compagnie de
Phosphate de Gafsa (CPG) d’une façon
formelle car jusqu’à ce jour elle est en train
d’assurer
informellement
l’approvisionnement en eau potable de
Redeyef. Une fois la prise de décision sera
décentralisée au niveau local, l’accès et la
qualité des services publics s’amélioreront et
il y aura plus d’équilibre entre la côte et les
régions défavorisées.
Est-ce que vous pouvez nous donner un
aperçu sur les principales réalisations de
votre association et vos futures initiatives
citoyennes envisagées ?

Le maître mot c’est le changement à l’image
de l’expérience de création de Nomad8. Je
tiens à rappeler que les membres constituant
le
noyau
de
Nomad08
étaient
principalement des diplômés chômeurs
désespérés ! Grâce à Nomad08 leurs vies ont
fait 180 degrés. Nomad08 a pu impliquer
beaucoup de jeunes dans ses activités
surtout des élevés ingénieurs dont le nombre
a atteint 88.
Nomad08 a permis de démontrer que la
science, la technologie et le savoir-faire
peuvent être mis au service des causes
sociales, économiques et écologiques ce qui
a convaincu d’autres jeunes à s’impliquer au
sein de Nomad08 en vue de contribuer à un
changement positif du quotidien des
citoyens tunisiens surtout issues des régions
défavorisées. Nous croyons beaucoup à
l’idée que les technologies peuvent soutenir
les causes et nous sommes disposés à fournir
notre expertise à d’autres ONG qui veulent
développer des plateformes en ligne, des
applications mobiles ou des solutions
techniques pour servir d’autres causes.

Actuellement,
nous
disposons
d’un
laboratoire dans notre local à Redeyef ou
nous
développons
les
solutions
informatiques et des appareils électroniques
pour soutenir les causes. Récemment nous
avons commencé à travailler sur les
problématiques énergétiques et s’orienter
vers les énergies renouvelables. Nous avons
ainsi réussi à créer des onduleurs solaires de
qualité en mobilisant l’expertise nécessaire à
travers notre réseau et à de l’autoformation
en ligne.
Néanmoins nous avons encore besoin de
ressources financières, matérielles et
humaines qui pourraient nous aider à
développer nos activités, nous faire
connaître davantage et nous aider sur
d’autres causes. On dispose de peu de
moyens pour l’instant et la plupart de nos
ressources financières proviennent de la
location du matériel de traduction
instantanée. Outre ce don en nature nous
avons réussi à décrocher quelques petits
dons dont l’un nous a permis de mettre en
place Watchwater.

Humanitarian Engineering
Innovative Approaches and Partnerships
in Crisis Response

23

Yolanda Tayler
Practice Manager, Public Integrity and
Openness, Governance Global Practice,
World Bank

On May 9-13, 2016, key stakeholders across
the global development community,
including the International Federation of
Consulting Engineers (FIDIC), United
Nations (UN) agencies, the World Bank, and
international experts met in Cyprus, under
the sponsorship of the Government of
Switzerland at a workshop on Challenges in
Post-Conflict and Reconstruction.
The overall purpose of the workshop was to
identify how reconstruction of infrastructure
and provision of essential services could be
more effective, especially in countries such
as Lebanon and Jordan that are facing a
massive refugee crisis driven by the war in
Syria. The attention of the international
community is increasingly focused on
maximizing effectiveness in crisis response.
This is underscored in the communiqué of
the recent G7 summit in Japan, and in the
recent UN World Humanitarian Summit in
Istanbul, which highlighted the need for the
humanitarian
and
development
communities to collaborate in addressing
the special needs of growing numbers of
people facing long-term crisis conditions.
The Cyprus workshop was thus very timely,
especially in identifying priority steps to
optimize the critical role of procurement, on
which the effectiveness of the crisis response
ultimately depends.
The notion of “Humanitarian Engineering”
and the International Humanitarian
Engineering Partnership (HEP) were key
themes at the workshop. “Humanitarian
Engineering” has been defined in terms of
enhancing human and community welfare,
including in situations of chronic distress
involving large numbers of people (for
example, emergencies and refugee crises),
and encompassing research, design,
manufacturing, construction and service
delivery.
HEP engages key stakeholders in developing
innovative approaches and tools for a more
effective crisis response, in particular with
regard to the procurement dimension. HEP is
creating a supporting framework of standard
contract templates in cooperation with
FIDIC, as well as an online platform for

sharing the standard contracts and practical
information with the broader engineering
community and other stakeholders in
humanitarian-construction-related projects
— thereby improving effectiveness and
efficiency in overall delivery of crisisresponse projects. The World Bank has
joined the HEP core team in preparing those
resources.
The critical need for resources being
developed by HEP was highlighted by a May
2016 survey conducted across regions1. It
revealed that almost half of respondents did
not use contracts in construction projects,
and three-quarters of respondents wanted
online information and tools for effective
crisis response procurement. The HEP
platform will offer key information (for
example, a register of curriculum vitae [CVs]
across specialist areas, vendor data, UN
Long-Term
Agreements,
employment
rosters,
training
material,
cluster
information per country, design standards
and technology, emergency response
information, and hosting and management
by select partners connected to social
media). Those tools will be useful for
stakeholders working in Fragility, Conflict
and Violence (FCV) contexts, including
governments, donors, non-governmental
organizations (NGOs) and small and medium
enterprises (SMEs) involved in crisis
response.
The practical information about effective
crisis response procurement that HEP can
disseminate was illustrated at the workshop.

The World Bank Government Global Practice
(GGP) Manager for MENA, Yolanda Tayler,
gave a presentation on “Adaptive
Procurement Solutions in Emergency, PostConflict and Reconstruction Context,”
drawing on experience in the fragile context
of Iraq, Jordan and Lebanon. It introduced
innovative tools such as a Reconstruction
and Recovery Procurement Toolkit and
tailored procedures for fragility, conflict and
violent situations in the World Bank’s new
Procurement Framework.
Traditionally, development organizations
have operated outside the emergency
context. However, with the rise in longlasting crises, it is critical to coordinate with
local and regional stakeholders such as
NGOs, humanitarian agencies, and the
private sector, including SMEs. This need is
particularly felt in the water and sanitation
sectors where demand for services has risen
7 percent in Lebanon alone. Jordan too faces
critical water challenges, with water losses
totaling over 60 percent.
The World Bank’s participation in HEP builds
on its commitment to addressing the
regional crisis, including the MENA Financing
Initiative to support refugees and host
communities through recovery and
reconstruction. In partnership with FIDIC,
and harnessing its experience in crisis
response procurement, the Bank can make a
key, cost-effective contribution through
participation in the HEP core team.

24
Partnering with stakeholders such as FIDIC in
the HEP initiative provides a strategic
multiplier for the Bank’s efforts in crisis
response. FIDIC represents the consulting
engineering industry globally, including 1.5
million professionals in 60,000 consulting
firms across 100 countries. FIDIC contracts
will provide accountability, efficiency and
enhanced development outcomes in crisis
response, through balanced contractual
clauses, fair allocation of risk, and credibility
as an international standard with a 50-year
proven track record supported by the public
and private sectors. Furthermore, FIDIC
facilitates dispute resolution options and
provides for capacity-building.

effectiveness in implementation of
crisis response contracts, other tools
and support for international and local
stakeholders (for example, through
follow-up
dissemination
and
coordination activities building on the
Cyprus event).

FOOTNOTES
1

Respondents from Greece, Iraq, Italy, Jordan, Lebanon,
Nepal, South Sudan, Sweden, Switzerland, and the MENA
region.

The dialogue at the workshop suggests key
takeaways for the way forward. It points to
steps the Bank can take through HEP and
partnering with FIDIC and specialized UN
agencies to make the humanitarian
engineering concept a reality in countries in
the region and elsewhere afflicted by
fragility, conflict and violence. The
takeaways from the workshop include:

The Bank’s engagement with the HEP
core team will enable greater

Procurement
Public Procurement Reform and Modernization in
MENA: A Peer-Learning Experience
The MENA procurement team is fully
engaged in dialogue with governments in
the region on public procurement reform
and modernization—a key pathway to
achieve the twin pillars of reducing poverty
and ensuring shared prosperity through job
growth, enhanced service delivery, and
greater economic activity. The team had the
valuable opportunity to help disseminate
and share experiences in regional and
international procurement reform with 30
high-level government officials from 11
countries in the region. [Bahrain, Egypt, Iraq
(Federal and Kurdish Regional Governments,
Jordan, Kuwait, Lebanon, Morocco,
Palestine, Saudi Arabia, Syria, Tunisia]. That
peer-learning experience was provided in
the MENA procurement team’s inaugural
course on current trends in public
procurement reform, hosted by the IMFMiddle East Center for Economics and
Finance (CEF) in Kuwait this February. The
peer-learning based course builds on the
work of the Bank-supported MENA Regional
Network of Procurement Experts, which has
brought together representatives across the
region to constructively learn from each
other’s lessons and together initiate regional

reform programs, such as a regional
procurement e-portal, capacity building
strategy, and training program for SMEs to

enhance their participation
procurement markets.

in

public

25
Rather than a course on “how to do”
procurement, the course showcased “how
to improve” it through high level reforms to
upgrade system performance and achieve
broader national development objectives.
The course drew on the Bank’s extensive
experience in assisting MENA countries in
the reform of public procurement systems
and included case studies presented by
participants from their own country
experiences and from international
examples.

“We consider this course to be one of
the CEF’s core courses geared toward
ensuring good governance in Arab
countries, which is essential for
durable, inclusive economic
development”, said CEF Director
Oussama Kanaan. “The practical,
hands-on training delivered as part of
the course, which complemented the
discussions of a rigorous conceptual
framework on best practices in public
procurement policy, was especially well
received by participants.”
Participants examined trends, techniques,
obstacles, and enabling factors in the main
dimensions of contemporary procurement
reform in the MENA region and beyond and
received materials they could subsequently
use in designing and implementing

procurement reforms in their countries. For
each of the course topics—which included
modernization of legal and institutional
frameworks and procedures, sustainable
procurement policies, social accountability
and integrity measures, capacity-building
and professionalization (including guest
speakers on the Massive Online Open
Course, MOOC1 on public procurement,
Morocco’s public procurement reform
process, the Sustainable Public Procurement
Initiative, the MENA Regional Capacity
Building Strategy, among others) — various
participants reported and compared notes
on initiatives and progress achieved in their
respective systems.
That peer-learning
approach, along with the real-world casestudies (e.g., on various types of SME
procurement programs) analyzed in
breakout sessions and discussed in plenary,
contributed to a highly interactive and lively
learning experience.
Key takeaways from the course highlighted
by participants related to critical
procurement-reform
success
factors,
including:

The importance of a strategy and
action plan that also allows for
appropriate phasing for reforms.

Inclusion of all stakeholders in the
reform
process
(e.g.,
through

empowering civil society in monitoring
public procurement and reducing
abuses).

Mainstreaming
of
procurement
reforms with other reform initiatives
and building on positive elements of
existing systems in a country.

Learning from international and
regional standards, experiences, and
assistance—such as through the
Network—while avoiding application of
one-size-fits-all solutions that do not
adequately account for local conditions.

In view of the critical, cross-cutting roles of
public procurement systems in service
delivery, development, and governance, the
inaugural administration of this course for
senior officials on public procurement
reform can be considered a strategic
development initiative, one which may well
serve to catalyze further needed
procurement reform in the MENA region.
Nadir Mohamed, Country Director MNC05,
and Firas Raad, Country Manager, Kuwait
guided and supported this initiative
the MOOC course is open to participants
worldwide at no or low cost, and the
materials of which will be made available in
Arabic.

Seven Lessons from a Sculptor in Pakistan
Why the G20 Needs to Pay Attention
Paul Welton
Lead Financial Management Specialist
World Bank
As the task team leader (TTL) for the Second
Improvement to Financial Reporting and
Auditing Project in Pakistan (PIFRA), I am
sure that not many people would equate the
role of the sculptor with that of the TTL —
especially for a Public Financial Management
project!. Let me explain why the two roles
are closer than one might think. I will do this
by sharing seven key lessons I
have learned which make me
think that TTLs —even those
of us who are accountants —
can aspire to be the next
Michelangelo or Rodin!
Lesson 1. Ensure the desired
results are achieved: For a
sculptor, materials can be
costly, and once the first cut
has been made into a block of
marble, there is no going
back.
Planning
and
preparation are therefore
important, as the detailed
sketches of the great
sculptors show. Similarly, for
the TTL, planning is also key,
and outcomes need to be
clearly delineated during the earliest stages
of the project cycle. In the same way as the
sculptor needs to keep referring to his
sketches to ensure he is on track, the project
team needs to continuously monitor and
evaluate progress against the project`s
results framework. In the case of the PIFRA,
the inclusion of a Bank monitoring and
evaluation (M&E) specialist as a key member
of the team along with a continuous focus on
results, meant that we were always more
likely to create our own “David” — rather
than ending up with a loose pile of marble
chips.
Lesson 2. Restructuring is not a crime:
Perhaps the sculptor responsible for the
beautiful Venus de Milo originally intended
for his design to have arms, but restructured
his thoughts at mid-term review and still
came up with a beautiful masterpiece- but
one without arms. Not exactly the case. It did
have arms, but they were lost over time. See
https://en.wikipedia.org/wiki/Venus_de_Mi
lo. Lesson needs rethinking in the case of art.
In my case, I restructured the PIFRA project
to extend the closing date so that the
masterpiece could be properly finished.

Lesson 3. Encourage candidness: The
sculptor and the people around him/her
need to be candid about the art being
produced. If nobody speaks their mind, then
the sculptor may well end up with a series of
ugly Gargoyles rather than the beautiful
sculptures intended because no one had the
courage to tell the truth (in the words of Jack
Welch, American business executive, this is
“false kindness”). The same analogy could be
applied to projects. In the case of the PIFRA,
all task team members were encouraged to

be candid in meetings. Assessments and
decisions were arrived at through open team
discussions and collective leadership. In this
way, better decisions are made.
Lesson 4. Be creative: Brainstorming new
ideas should be as normal for the task team
as it is for the sculptor. In this context, using
the statue of Rodin`s “Thinker” as an image
of creativity in action is indeed hard to resist!
Last year, the task team completely
“rethought” the format of the Aide Memoire
to make it short, sharp and focused on those
actions necessary for successful achievement
of the Project Development Objective (PDO).
Frequent, collective brainstorming exercises
also led to quick and innovative solutions to
problems, as well as lots of ideas for business
development. This, in turn, augers very well
for the pipeline of future projects.
Lesson 5. Ensure sustainability: Now
perhaps the oldest sculpture in the world is
arguably the Sphinx which is located on the
Giza Plateau in Egypt and sculpted out of
sandstone. At 4500 years old, and built on
solid
foundations,
it
demonstrates
sustainability long after its sculptor has
passed away. The legacy of sustainability is

26

equally important for the TTL. That is why a
key focus of the project task team has been
to ensure that a transition plan was
developed by the Government to ensure the
sustainability of the project after its formal
closure.
Lesson 6. Utilize opportunities for cross
support: A collaboration between the
Renaissance sculptor/painter Michelangelo
and the renowned Pakistani artist Sadequain
— each with a different style, technique and
experience — would, no doubt, lead to an
even greater masterpiece
than either could produce on
his own. You may wish to
instead use an example of
schools of artists influencing
one another and comparing
ideas (e.g. Impressionists,
Expressionists, Surrealists,
etc.). This illustrates the
potential
impact
and
importance of cross support
and knowledge sharing. As
such, I invited a public
financial management (PFM)
expert who is involved with a
similar project in Bangladesh
to join the task team to
contribute to missions. The
cross- fertilization of ideas
and
experiences
that
materialized is immense. Lessons have been
learned by the client from the sharing of the
Bangladesh experience, and the task team
has greatly benefited from the Bangladeshi
experience. Most importantly, this initiative
delighted the client and has led to ideas for
further collaborative initiatives. One for the
Louvre maybe!
Lesson 7. “Every block of stone has a statue
inside and it is the task of the sculptor to
discover it” (this lesson/quote is
unashamedly stolen from Michelangelo!).
On inheriting the PIFRA project from another
TTL, I took the decision to staff the task team
with
experienced,
creative
and
knowledgeable local Bank staff, rather than
using external international consultants. The
outcomes?
A reduction in costs, a
consequent increase in the number of
planned missions during a crucial period for
the project, more continuity between
missions and, again, a delighted client. Each
team member has proven to be a work of art
in their own right and I am so proud of their
achievements.ter all, there is not so much of
a difference in the role of a sculptor and a TTL
as one might think!

27

Corporate Governance
& Financial Reporting

Interview
Exploring the Role and Impact of the International Arab Society of
Certified Accountants (IASCA) on the MENA Region
H.E. Dr. Talal Tawfiq
Abu-Ghazaleh
IASCA Chairman

Please tell us a bit about yourself, your
professional career, progression and the
founding of IASCA. How did IASCA come to
be? What are its objectives and goals?
I was born in Jaffa in Palestine in 1938 and I
received my Bachelor's Degree in Accounting
from the American University of Beirut. I
established
the
Talal
Abu-Ghazaleh
International Organization in 1972 to
become the pioneering global provider of
professional and educational services.
Today, it offers its services to clients through
its 85 offices located around the world. The
company provides services in all domains
including — but not limited to — education,
accounting, intellectual property, business
and
commerce,
information
and
communications technology, science and

law. I established the International Arab
Society of Certified Accountants (IASCA) as a
non-profit
professional
accounting
association in 1984 with a host of leaders
from the accounting profession throughout
the Arab world. The Society was founded
upon my belief in the significance of this
profession and its role in driving
development, as well as the need for
advancing accounting and auditing and other
related topics at the level of the Arab League
member states. In addition, the IASCA was
established to maintain the professional
independence of accountants to guarantee
their protection and apply professional
standards in supervising their work. In this
way, the IASCA serves as a mechanism for
improving the accounting and auditing
professions. Finally, IASCA also plays a role in
the
development,
facilitation,
and
dissemination of scientific and technical
information through its constant exchange
among accountants and auditors in the Arab
world and at global levels. It does this
through the convening of conferences,
meetings, seminars, training courses, and
scientific gatherings, as well as through the
support of professional and scientific
research.
What activities / certifications / programs
does IASCA offer? What differentiates your
products, services and efforts?

IASCA offers a host of professional services to
its members, accountants and university
students in the Arab world, primarily through
the translation from English to Arabic of the
professional publications issued by the
International Federation of Accountants
(IFAC), the International Accounting
Standard Board (IASB), and John Wiley &
Sons, Inc. Translation of these documents is
vitally important in facilitating the
understanding and application of the latest
developments in accounting and auditing by
Arab accountants. Furthermore, the Society
holds professional exams for the professional
certificates issued by the Society, such as the
International
Arab
Certified
Public
Accountant (IACPA), the International Arab
Certified Management Accountant (IACMA),
and the International Financial Reporting
Standards (IFRS) Expert. Moreover, the
Society organizes professional workshops,
conferences and seminars throughout the
Arab world. The Society also plays an
essential advisory role to the public and
private sectors in the application of
International Public Sector Accounting
Standards (IPSAS) and the International
Financial Reporting Standards (IFRS). What
really characterizes the services of the
Society is the provision of the option for
learning in the Arabic language at the highest
levels for Arab accountants. In addition, the
Society utilizes up-to-date international

28
accounting standards and the International
Accounting Education Standards (IESs) in
authoring the professional curricula issued
by IASCA. The Society’s services are also
accessible to all professionals in the Arab
world in cooperation with the Talal AbuGhazaleh Organization’s 85 offices around
the world.
What do you foresee in terms of the future
of IASCA and for the professional
associations of the MENA region? What do
you see as the key challenges and areas for
opportunity for the MENA accountancy
profession as a whole?
From our point of view, the profession in the
Arab world needs continuous development
to face current economic challenges and
succeed in the evolving global economy. We,
at the Society, constantly seek to develop the
profession and help the national professional
societies develop their member knowledge.
IASCA supports this through our close
relations with international professional
entities and its presence at international
conferences and events, including IFAC’s
Annual Meeting. In this way, we seek to
share international experience with the Arab
world. With regard to key challenges facing
the MENA region’s accountancy profession,
IASCA views the lack of unification of the
professional societies in the Arab world as
important. Additional efforts are needed to
engage and coordinate the diverse voices of
the Arab profession throughout the region in
order to support the development of modern
accounting and auditing legislation. More
effort is also needed to enhance accounting
education at the university level, as well as to
support the strengthening of educational
institutions. To overcome these challenges,
IASCA aims to establish an Arab Regional
Center which will support the adoption and
implementation
of
international
accountancy standards in the public and
private sectors. It would create a convening
space where all professions may cooperate
to advance the quality of accountancy
throughout the Arab world. Furthermore,
IASCA will continue to expand on its efforts
to work with governments and private
universities to develop and provide
educational solutions (in particular through
distance learning) that support the
dissemination of accountancy knowledge.
I know that IASCA has been a strong
supporter of the effort to encourage MENA
region governments to adopt IPSAS. Can
you tell us about this? What has been your
motivation? What do you see as the
challenges and success factors in moving
IPSAS forward?
IASCA has had a significant role in supporting
the Jordanian government’s decision to fully

adopt International Public Sector Accounting
Standards (IPSAS) through the provision of
awareness-raising campaigns and specialized
workshops. These were designed and
undertaken throughout the Kingdom and
helped to illustrate the importance of
adopting the IPSAS, as well as the positive
impact that these standards would have on
national income and the economy. In
reflecting on the challenges facing the MENA
region and IPSAS adoption, one of the main
issues concerns the lack of information and
awareness regarding their significance — as
well as the benefits that governments will
gain through adoption and implementation.
Policymakers are often dissuaded by fears
regarding the complexity of the standards,
costs associated with transitioning, and a
lack of understanding regarding the potential
benefits of standards adoption. IASCA’s

related to the fight against corruption in
coordination with the Talal Abu-Ghazaleh
Knowledge Forum. This Forum has also
recently hosted the launch of the “Nazaha”
Integrity project under my personal
patronage and in the presence of
representatives of public and private sectors,
non-profit organizations, and academic
institutions. This project, which focuses on
integrity, aims at promoting awareness in
civil society of its crucial role in the
reinforcement of concepts of integrity and
the right of public access to information. At
the regional level, I participated by serving on
the board of the Arab Anti-Corruption
Organization (AACO) which aims to
strengthen
transparency
and
good
governance. The focus of the AACO is on
hosting programs and issuing publications
which strive to fight corruption — and

establishment and development of the Arab
Regional Center will help with the adoption
of the International Public Sector Accounting
Standards (IPSAS) through the conferences
and workshops which the Society organizes.
In this context, it may handle the costs
associated with encouraging Arab countries
to adopt IPSAS by offering them training and
assistance to apply the standards.

increase awareness of its destructive impact
on the Arab economy and political stability.
My professional contributions and research
have focused on the financial corruption that
might reach auditing institutions and
accountants. This could have a grave effect
on the Arab and global economy due to the
auditors' lack of commitment to the principle
of independence as advocated by the
International Standards on Auditing. IASCA
believes that we need to achieve a full
partnership between the public and private
sectors in combating corruption through
joint efforts. In addition, professionals play
an essential role in strengthening the
concept of transparency and integrity
through their commitment to the
professional and ethical standards of
conduct, as well as in developing systems,
regulatory methods and policies, and
appropriate accounting principles in
conformity with international standards.

A key theme of this edition of CV MENA
magazine is anti-corruption. Can you speak
to the efforts IASCA may be taking to
support anti-corruption efforts in Jordan
and throughout MENA? In your professional
opinion, what role could the profession take
in doing more to support government and
private sector anti-corruption efforts?
The IASCA is continuously working to
promote awareness about the need to
combat corruption in order to boost national
economies. To this end, we hold workshops
and produce publications on various issues

Interview
Samia Msadek
Director Governance Global Practice, World Bank
that can provide solid, reliable financial
statements. For those businesses that
cannot meet this demand, the opportunities
to grow are more limited and/or costly. By
providing high quality services to businesses
and reliable reports to investors, the
accounting profession helps to foster trust in
the private sector, thereby stimulating
investment and growth.

CV MENA Magazine recently had a chance to
sit down with Samia Msadek, Director of the
Governance Global Practice at the World
Bank, following her presentation and
participation at the Ordre des Experts
Comptables de Tunisie (OECT) 32nd Annual
Congress on “Enterprise Performance in
Times of Crisis”.
CV MENA: This year's topic for the OECT
Annual Congress centered on supporting
enterprises as they seek to cope during
times of crisis. Drawing upon your global
experience in corporate governance and
financial reporting, what advice do you have
for the Middle East and North Africa
(MENA) region’s Professional Accountancy
Organizations (PAOs) as they seek to
support enterprise development in fragile
and complex environments?
My advice to PAOs is to help companies and
markets in fragile and complex environments
to: create trust; be resilient; seek
inclusiveness; demonstrate leadership; and
create space for innovation. The accounting
profession should act together with
businesses as partners and trusted advisors
to achieve performance, deliver on the
desired social contract, support the lagging
regions and the excluded, and help investors
take informed risks to grow their businesses
and develop their country.
Trust. Accounting and financial reporting is
not an end in and of itself, but rather a means
by which transparency and confidence in the
business environment may be built. At the
recent Ministerial Conference on corporate
financial reporting in Vienna, venture
capitalists and other long-term investors
noted that they will only invest in businesses

Resilience. Operating successfully in fragile
and complex environments requires
resilience. The accounting profession and its
provision of business advisory services may
help business entities in navigating turbulent
times by adapting to a changing environment
and diversifying as needed. Supporting
business diversification is crucial as a diverse
economy is better able to resist shocks and
deliver goods and services to citizens.
Inclusiveness. To effectively support
businesses, the accounting profession must
seek to include and unify all elements of the
profession — women, minorities, young
professionals, accounting technicians, and
auditors — with the common purpose of
supporting the public interest and
strengthening the business environment.
Each element of the profession plays an
integral role in the development, production
and assurance of financial information. Only
when all are supported by a strong
professional association may they most
effectively
contribute
to
national
development.
Leadership. During times of difficulty, strong
professional leadership is necessary to
ensure that the profession evolves and grows
to meet both current and future challenges
facing professionals and the business
environment. The profession should choose
leaders who are aware of the contextual
challenges and know how to adapt. Such
leaders should then collaborate with
stakeholders, listen to varying viewpoints
and perspectives, and look for solutions in
which all parties may ‘win’. Leaders should
seek to build momentum for change and
development rather than pushing it on the
profession. They should also be able to think
strategically and connect to the larger
purpose of supporting national financial and
economic development.
Innovation. Innovation touches every facet
of our lives—from transportation to

29

communication,
from
personnel
management to office automation. The
accounting profession is not exempt from
the need to innovate and remain relevant to
the needs of economy and country —
especially during times of change.
Technology has enabled much of the
innovation we see today, but innovation also
requires effective leaders to apply these
technologies and drive change. The old
saying goes, “If you do what you’ve always
done, you’ll get what you’ve always gotten.”
For a different outcome, change the
methods. The first step is for leaders of the
accountancy profession to explain the value
of adopting new methods and new tools, and
then to actively shepherd their application by
professionals.
Performance. The concept of performance
has evolved over the past decades. It was
previously defined largely by performance
information and annual performance
reports. However, today’s concept of
performance focuses on achieving a handful
of strategic goals through the effective use of
data to inform real-time decision-making.
The accounting profession has a strong role
to play in supporting business entities as they
seek to shift and enhance performance.
Social Contract. The ‘social contract’ is an
idea that dates back to the ancient Greeks,
and refers to the implicit agreement among
members of a society that defines their
relationship with each other and the state.
When the social contract is broken and an
imbalance exists between what citizens
provide to the government in the way of
financial and popular support and the
benefits and rights which the government
grants to them, development and growth
suffer and citizens may seek to establish a
new social order. For example, in MENA,
lagging private sector growth was related to
the autocratic nature of the regimes. In
particular, friends and families of autocrats
benefited through monopoly rents in
domestic industries, undermining export
competitiveness and employment creation.
These actions laid the foundation for the
Arab Spring. As MENA countries seek to
determine a new social contract and correct
existing imbalances, the accounting
profession may play a key role in supporting
the development of legal and regulatory
frameworks which encourage competition
and transparency in business, create systems

30
for redistributing wealth and providing vital
services, and streamline and increase the
efficiency of governments and state-owned
enterprises (SOEs).
Lagging Regions. Countries around the world
are challenged by regional inequalities in
providing opportunities and outcomes for
their citizens. Although some inequality
among regions is inevitable, when disparity
becomes extreme, it may negatively impact
national unity, economic development and
social harmony. As policy-makers seek to
measure disparity and design policies to
balance the opportunities and quality of life
in leading and lagging regions, the
accounting profession may play a strong role
in supporting government efforts to quantify
and measure differences between regions.
For instance, it can bolster the profession
and businesses in lagging regions and
contribute to national efforts to strengthen
lagging regions.
Risks. In order for businesses to be successful
during times of instability, they must be able
to determine risks in advance, and
communicate their potential impact. They
must also be resilient in their responses to
facilitate
more
positive
outcomes.
Supporting accountants in attaining sectoral
and industry specific knowledge and
improving communication and soft skills may
best enable them to work as a true partner
of the business community. As such, they can
help in managing risks and contributing to
economic growth and development.
CV MENA: The OECT Congress touched upon
another subject, namely efforts to combat
corruption in business and government.
Indeed, corruption presently challenges to
countries within MENA and around the
world. In your opinion, what role can the
accountancy profession play in helping to
contribute to strong governance within the
public and private sectors?
Financial accountability and reporting are at
the core of any system of governance. As
such, professional accountants play a central
role in building strong governance systems in
their countries.
Around the world, governments are seeking
to combat corruption through modernizing
accounting and reporting systems, adopting
and implementing International Public
Sector Accounting Standards (IPSAS), and
meeting the financial and non-financial
information needs of parliaments and civil
society. The overriding objective of these
efforts is to increase transparency and
accountability in the public sector, and to
reduce the opportunities and incentives for
corruption. As accountants and auditors
often hold the knowledge and ability to
support such reform efforts, involving the

profession may be integral to successful
achievement of the aforementioned goals.
Additionally, as PAOs often maintain systems
for educating and training personnel on
accountancy-related issues, engagement
with and utilization of PAO training and
educational systems may offer opportunities
for supporting the appropriate practical
application of new standards and systems.
In the private sector, more than ever,
investors and lenders expect credible and
reliable financial reporting. Without this
information, enterprises may experience
difficulties in accessing finance, growing and
developing businesses, and expanding
operations and employment. Also, as SOEs
start improving their reporting practices and
enhancing their accountability, tangible
benefits are created throughout the public
sector supply chain that can result in
stimulating better service delivery.
The profession can contribute to the
production of high-quality financial reporting
through the training and supervision of
professional accountants to maintain their
knowledge, skills, abilities, and ethical
grounding to practice in the market. Working
through its PAOs, the profession should seek
to create educational programs that embody
international standards and good practices.
In this regard, developing programs of audit
quality assurance to oversee the continuous
improvement of the audit profession is also
important. Systems of investigation and

discipline should be designed to eliminate
the negative elements of the profession.
They should also support the adoption and
implementation of international standards
and sound accounting policies at the national
level.
CV MENA: PAOs around the world are
working to support anti-corruption efforts
and their countries during times of
instability. In this regard, what role can
international organizations like the World
Bank play in supporting the accountancy
profession?
Corruption is clearly a major challenge to our
twin goals of ending extreme poverty and
boosting shared prosperity for the poorest
40 percent of developing countries. In
addition, reducing corruption stands at the
heart of the recently established Sustainable
Development Goals1 and achieving the
ambitious targets set for Financing for
Development2. As such, there is a strong role
for the World Bank and other international
organizations in supporting the accountancy
profession in reducing corruption and
supporting businesses in times of uncertainty
and instability.
The World Bank and other international
organizations have demonstrated their
commitment to this agenda by signing on to
the objectives set by the Anti-Corruption
Summit held in London earlier this year. The

31
Summit calls on all countries to regulate the
professional service sectors, including the
accounting sector, to be alert to sectors
emerging as vulnerable — sectors that could
be used for facilitating or laundering the
proceeds of corruption. In this regard, they
also committed to driving out professional
service providers, including accountants,
who facilitate or are complicit in corruption.
Closely linked to corruption is the issue of
illicit financial flows (IFFs) — which include
taxes owed, but not paid and/or embezzled.
Such IFFs are particularly detrimental to
developing
countries.
Professional
accountants, external auditors, and company
and forensic accountants who are bound by
high standards — including financial
reporting, auditing and assurance, ethical

and educational — can make an important
contribution in the fight against illicit
financial flows. I think that more can be done
to emphasize the importance of the codes of
ethics by which accountants must abide, as
well as the unique role the accountancy
profession can play in “keeping capitalism
honest”.
In this respect, our Reports on the
Observance of Standards and Codes (ROSC)
Accounting and Auditing Program has played
an important role by advocating for what I
would call the “professionalization of
accountants”. This means promoting the
adherence to international standards,
developing modern education and training

systems, and building strong professional
accountancy organizations.
Finally, the World Bank works directly with
the profession at a global level to enhance
the role of the accountancy profession. We
also work directly with national and regional
PAOs to provide support and technical
assistance on a variety of subjects related to
these issues. Our recent support to the 2016
OECT 32nd Congress is a good example of
such efforts.
REFERENCES
1
http://www.un.org/sustainabledevelopment/sustainable
-development-goals/
2 http://www.un.org/esa/ffd/

Integrated Reporting
Counting What Counts
Lydia Habhab
Public Sector Analyst, World Bank

Monika Kumar
Environmental Specialist, World Bank

Paramount to the concept of integrated
reporting is the notion of putting financial
and non-financial considerations on the
same plane when making decisions. This
more holistic view is relevant to assessing an
organization’s opportunities and risks
associated with its operating activities. In
addition to traditional financial reporting,
non-financial reporting includes valuation of
the
environmental
capital
(water,
biodiversity), social capital (common values,
reputation), human capital (people’s
competencies, experience), intellectual
capital
(patents,
software),
and
manufactured
capital
(buildings,
infrastructure).
Such a “systems view” is a governance tool
which
promotes
transparency,
accountability, and participation with regard
to how capital is used and how decisions are
made in the interests of sustainable
development and societal well-being in the
short, medium, and long term. On a macrolevel, the valuation of capital beyond the
financial measures provides information
useful in addressing global problems of
climate change, human rights violations,
poverty, and human development. With the
adoption of the Sustainable Development
Goals (SDGs), organizations are being
encouraged to reflect on steps to measure,
manage, and communicate their use of
resources such as energy, water, and labor

—and their impact on the ecosystem,
society, development, and economies.
While not yet in the mainstream, nonfinancial reporting has been practiced for
decades. Between 1999 and 2015, there
have been over 33,000 non-financial reports
published in over 9,000 organizations. This
includes 77 percent of the top 100
companies in North and South America, 74

percent in Europe; 79 percent in Asia; and 53
percent in the Middle East and North Africa
(MENA).1 There is much support for nonfinancial metrics, as evidenced by the calls to
action and directives for reporting. Brazil,
European Union member countries, India,
Singapore, and South Africa have issued
directives or legislation requiring stateowned enterprises or companies listed on

32
their stock exchanges to provide nonfinancial reports on a “comply or explain”2
basis. The Integrated Reporting <IR>
Community of Practice at the World Bank
has been working to bring non-financial
reporting on the same plane as traditional
financial reporting. This starts with raising
awareness and breaking down silos to
achieve improved governance of an entity’s
inputs, outputs, and sustainable outcomes
for the greater good. At the recent <IR>
Community of Practice event on NonFinancial Reporting in the Public Sector at the
Sub-National Level, experts reflected on
some of the cited barriers to entry and
incentives for embarking on non-financial
reporting for organizations in the private and
public sector alike. Despite noted challenges
in realizing standardized reporting guidelines
and having multiple reporting entities and
platforms, the overwhelming consensus
during the conference was that the journey
toward reaching the report is just as
important and worthwhile as the report
itself.
Internally, looking at the organization as a
whole can break down silos. An organization
that involves employees and is transparent

in decision making and demonstrates a
mission beyond the financial bottom line is
better placed in achieving higher morale and
a sense of ownership. Some entities have
chosen to invest in executing non-financial
reporting in order to improve their value
proposition. For example, a municipality can
show it is well-placed to manage risk and be
an attractive place for businesses if it can
show,
upfront,
an
evaluation
of
performance, such as its relationship with its
citizens, the natural environment, and
regulations
pertaining
to
green
infrastructure. Other drivers can be more
externally imposed, and equally effective.
For example, in order to stay competitive,
organizations may choose to include nonfinancial metrics in their reporting practices
to keep up with their peers. The counter
argument of not sharing such information
when the competition is being transparent is
that there may be something wrong or
something to hide. Additional incentives to
pursue financial and non-financial reporting
include the demand for more transparency
by citizens, civil society, and investors; stock
exchange regulations; and/or national
legislation.

Finally, a common barrier to entry is a
misconception about a lack of data
availability. The fact is, data are being
collected all the time. The real challenge can
be better stated as deciding which issues are
important, to whom, and how to synthesize
and express this in a concise and
understandable manner. This will probably
be a trial-and-error effort with the necessary
engagement of employees, citizens, and/or
investors. But as Albert Einstein said, “not
everything that can be counted counts, and
not everything that counts can be counted”.
To learn more or to join the conversation,
email CoPIR@worldbank.org.
REFERENCES
1 Global Reporting Initiative. Non-financial Reporting in
the Public Sector at the Sub-national Level Conference at
the World Bank. PowerPoint Presentation. June 2016.
More information available at:
https://www.globalreporting.org/information/policy/init
iatives-worldwide/Pages/default.aspx
2 ‘Comply or explain’ is a regulatory approach in the field
of corporate governance and financial supervision
introduced in the Cadbury Report of 1992. Government
regulators set out a code by which entities may either
comply with, or if they do not comply, explain publicly
why they do not.

MENA SMPs
MENA Region Results from the International Federation of
Accountants (IFAC) Global SMP Survey
Gabriella Kusz
Senior Financial Management Specialist,
World Bank

Insight into the Middle East and North
Africa (MENA) Region’s Small and Medium
Practices (SMP)

With Special thanks to the IFAC SMP
Committee for the Use of the MENA Region
Global SMP Survey Data

In a series of surveys conducted since 2011,
the International Federation of Accountants
(IFAC) Global Small- and Medium-sized
Practices (SMPs) Survey provides an
opportunity for SMPs around the world to
share their insights on key trends and
developments facing them and their small
business clients. The results are critical to
IFAC and donor organizations, such as the

World Bank, in gaining a deeper
understanding of the challenges and
opportunities facing this key sector.
The 2015 IFAC Global SMP Survey asked
practitioners operating in a number of
countries questions about the challenges
they face, the market factors most likely to

affect them in the future, the consulting
services
they
provide,
and
their
performance, both in 2015 and projected for
the year ahead. In addition, respondents
were asked about their small- and mediumsized entity (SME) clients, including
questions concerning the challenges they
face and the extent of their engagement in

33
international activities. The 2015 survey was
conducted in 22 languages — including
Arabic and French — from October–
November 2015. This year’s poll included
329 respondents from the Middle East and
North Africa (MENA)1 region. Select analysis
of MENA region responses was undertaken
by the World Bank and the results are
presented herewith.
Around the world, we are now seeing the
role of the ‘accountant’ undergo a significant
shift. Building on the role of auditor and tax
preparer,
today’s
accountants
are
increasingly called upon to act as ‘trusted
business advisors’ to provide support in
financial and succession planning, business
strategy and organizational growth and
development. Not surprisingly, in the MENA
region, survey results confirmed the
increasing role of accountants in the region’s

economy. For example, when asked “In
addition to traditional compliance services,
such as audit, accounting and tax, which of
the following business advisory and
consulting services has your practice
provided to clients in 2015?”, the top five
areas noted by MENA region respondents
included provision of corporate advisory
services (57 percent of respondents),
support to management accounting (51
percent of respondents), assistance in tax
planning (43 percent of respondents),
guidance in human resource policies and
procedures as well as employment
regulations (roughly 41 percent of
respondents) and aiding in business
development (40 percent of respondents).
For the World Bank and donor community,
understanding the expanding role that
accountants are playing in regional and
national economies is important to

supporting ongoing efforts to facilitate SME
access to finance, business development and
economic growth.
Operating in the MENA region entails a
number of challenges to SMP audit practices.
Supporting SMPs in facing current challenges
is key to supporting a diverse audit
profession and ensuring competition and
choice in the audit market, as well as the
availability of services for SME clients. In
response to questions regarding challenges
faced by MENA region SMP firms,
respondents noted that the following three
challenges represented high or very high
challenges to their businesses: attracting
new clients (61 percent), rising costs (50
percent), and differentiating from the
competition (49 percent).

MENA Region Responses to IFAC Global
SMP Survey
"In addition to traditional compliance services, such as audit, accounting and tax, which of
the following business advisory and consulting services has your practice provided to clients
in 2015?”
Aiding in Business Development
Guidance in Human Resources Policies and Procedures
Assistance in Tax Planning
Support to Management Accounting
Corporate Advisory Services
0

10

20

30

40

50

60

% of MENA Region Respondents

Source: IFAC data. Note: The figure represents the author’s depiction of the data.

MENA Region Responses to IFAC
Global SMP Survey
"What is the Extent to Which Specific Challenges Will Impact SMP Operation in the Next 5
Years"
Globalization
Perceived Trust and Credibility of the Profession
Technological Developments
38
40
42
44
% MENA Region Respondents Noting Spec ific Challenge as 'High or Very High'

Source: IFAC data. Note: The figure represents the author’s depiction of the data.

46

48

34
These results were comparable to the global
averages which also noted these challenges
as significant to their business operations.
Indeed, around the world, SMP firms appear
to be struggling with business development
and cost management. In the MENA region,
additional support to SMPs in this area may
aid in strengthening SMPs and supporting
firm growth.
The ability to anticipate challenges and
adjust accordingly to meet emerging issues is
critical to effective SMP operation and
management. Through the SMP Quick Poll
Survey, MENA region respondents were
asked to note the extent to which specific
challenges would impact SMP operations in
the next 5 years. The top three challenges
noted as either high or very high included:
technological developments (47 percent),
perceived trust and credibility of the
profession (43 percent) and globalization (41
percent).

The high percentage of responses associated
with trust and credibility of the profession
may in part be due to the significant number
of professional accountancy organizations in
the MENA region operating without a strong
system of audit quality assurance. Audit
quality assurance systems function to ensure
that audit services provided are reviewed for
quality. They reinforce the credibility of the
profession and its ability to provide value to
the market. Additional analysis of this finding
may be needed to explore the foundations of
the perceived emerging challenges in the
area of trust and credibility of the profession,
and to ensure that the profession continues
to deliver high quality support to SME clients.
In addition to posing questions regarding
SMP operations and experiences, the Global
SMP Survey also delves into the challenges
faced by the MENA region’s SME clients.
Among the top challenges noted by MENA
region SMP respondents facing their SME
clients were economic uncertainty (70
percent), rising costs (64 percent), and

difficulties accessing finance (61 percent).
With regard to the very last challenge, the
inability and difficulties faced by SMEs in the
MENA region with accessing finance are welldocumented. In fact, a recent World Bank
research publication entitled SMEs for Job
Creation in the Arab World noted that
although SMEs contribute significantly to
Gross Domestic Product (GDP) and to private
sector employment, they often lack access to
the type of investment and financial services
required for start-up, operations and growth.
Further understanding of the current role
and potential for MENA region SMPs to
facilitate and support their SME clients in
accessing finance effectively may aid in
overcoming this key challenge.

FOOTNOTE
For the purposes of this article the MENA region is defined
to include the countries of: Algeria, Bahrain, Djibouti,
Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco,
Oman, Qatar, Saudi Arabia, Tunisia, the United Arab
Emirates, the West Bank and Gaza and Yemen.

Interview
Rajeev Swami
Lead Financial Management Specialist, World Bank
Corporate Governance and Financial Reporting (CGFR)
in East Asia and the Pacific (EAP)
Please tell us about the Corporate
Governance and Financial Reporting (CGFR)
work program in the East Asia and Pacific
(EAP) region. How did it get started? What
have been your key objectives and goals
with regard to the program?
When I joined the EAP region about two and
a half years ago, the region’s Corporate
Governance and Financial Reporting
program was still in its infancy. There were
some programs to support Professional
Accounting Organizations (PAOs), and maybe
a small grant here or there, but no significant
or systematic approach to facilitating CGFR
development in the region. CGFR
development was largely done in a
piecemeal fashion with some of the latest
analytical work being undertaken in 20092010.
When I reflected on the region and
considered how I wanted to structure a CGFR
program to meet the region’s needs, I noted
that there was significant economic
firepower in the EAP region — in particular,
dynamism in the Association of Southeast
Asian Nations (ASEAN) economic block.
ASEAN is a regional organization which

promotes
both
intergovernmental
cooperation and economic integration
among its ten member states (including
Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore,
Thailand, and Vietnam). Among its principal
aims are accelerating economic growth, and
achieving social progress and socio-cultural

evolution. What many people do not realize
is that ASEAN is the second largest economic
block outside of the European Union. As
such, it faces similar challenges in facilitating
such elements as mutual recognition of
professional accountants, movement of
professionals, and consistency in standards
and professional practices. In addition, due

35
to its economic and financial largess, there is
significant demand for proper standards, as
well as trained and qualified professional
accountants and auditors.
To address these needs, our unit built a
program which addressed the challenges of
the EAP region not only at the country level,
but also at the regional level — taking into
consideration the challenges and needs
which ASEAN posed for CGFR reform and
development. We engaged not only with the
profession, but also with the ministries of
finance. Within the World Bank, we worked
across the Global Practices with our
colleagues in Finance and Markets (F&M) to
build
partnerships
which
could
comprehensively address the challenges
faced by our client countries. We also
recognized the importance of results —
although we undertook and continue to
undertake analytical work, we do this in a
much targeted manner. We try to calibrate
the specific analytical work (Report on the
Observance of. Standards and Codes - ROSC
Assessments, policy notes, and so on) with
the provision of technical assistance, which
builds upon the results of analytical work.
What have been some of the more notable
projects and activities that you have
undertaken which have helped to lay a solid
foundation for CGFR work in the EAP
region?
There are several projects that I believe
highlight the progress and development that
we have seen in CGFR in the EAP region. One
of the more interesting has been the work
we undertook in Papua New Guinea. A few
years back, we undertook an Accounting and
Auditing Report on the Standards and Codes
(AA ROSC) assessment, which was well
received by the World Bank Country office
and stakeholders. We used the delivery of
the AA ROSC to re-engage stakeholders on
the topics of CGFR and public financial
management. In addition to revitalizing the
country’s stakeholders on the subject, we
also built a strong partnership with the World
Bank private sector arm, the International
Finance Corporation (IFC), which shares our
passion for and interest in CGFR. Ultimately
our efforts resulted in the management of a
joint World Bank / IFC program for the
simplification of business reporting for small
and medium enterprises (SMEs) in the
country. In Vietnam, we have had similar
successes. We are in the process of
concluding our AA ROSC assessment for the
country, which has included a unique
addition — namely, the creation of a
roadmap for International Financial
Reporting Standards (IFRS) adoption and
implementation of the IFRS for the country’s
largest state-owned enterprise (SOE). This
IFRS Roadmap was presented to the Minister
of Finance, who was so pleased with this

work that he has issued a ministerial decree
for similar IFRS Roadmaps to be completed
for another 17-plus SOEs in Vietnam. Finally,
we have also been working to support
countries
such
as
Malaysia
with
Reimbursable Advisory Services (RAS)
programs. This work supports Malaysia in
bringing expertise, as well as assisting the
country in exporting its own expertise to
benefit the region as a whole.

What are some of the challenges you have
had in supporting CGFR activities — and in
promoting and engaging stakeholders to
engage with the CGFR theme?
One of the challenges we have had in the EAP
region has been that we maintain significant
country knowledge and contacts with CGFR
champions within the region. However, we
may be lacking in more nuanced or specific
areas of high-level expertise needed to
support a comprehensive CGFR agenda. To
supplement our capacity, we have looked to
the World Bank’s Centre for Financial
Reporting and Reform (CFRR) in Vienna to
provide any specialized knowledge and/or
expertise we may require to deliver high
quality results to our clients. Another
challenge for us has been in supporting
traditional CGFR work, such as the
development of Professional Accountancy
Organizations (PAOs) and the like. Challenges
also remain with regard to ensuring that we
take advantage of opportunities to engage in
more macro-level issues, such as access to
finance or regional integration. Finally, we
have been challenged with finding examples
of and creating models for CGFR reform and
development that are innovative and
modern, but that perhaps do not follow the
typical ‘Western’ style. Our region is unique
and the models for regulation and CGFR
development require similarly unique
thinking and consideration so that the
resulting structures and frameworks best suit
the needs of our clients.
What do you see as crucial to continuing
your region’s success in CGFR?
From our side, one of the most crucial pieces
missing in the effort to promote and support

CGFR development has been at the global
level. This includes linking proper
international accounting and auditing
standards with benefits at the firm level (for
example, access to finance, and reduced cost
of capital). There is much anecdotal evidence
regarding the benefits that such standards
may bring. In this regard, there has not been
a significant study on this issue which would
help to best clarify and demonstrate the
benefits of adhering to such standards for
client countries. This is something the
department is working on with the CFRR
Centre in Vienna, but it is still in progress.
Additionally, we see partnerships with other
World Bank units as critical to our continued
success. In particular, partnering with the
other Global Practices (for example, Finance
and Markets; Trade and Competitiveness
[T&C]) will be important to ensuring that all
aspects of CGFR are comprehensively
addressed and that all World Bank units
dealing with CGFR efforts work in a
coordinated and cooperative manner.
Finally, we see our Financial Reporting and
Economic Development (FRED) Conference
series as key to driving reforms in EAP. The
recent FRED II Conference looked at the role
of PAOs in supporting public financial
management reform. It brought together
Ministries of Finance, Supreme Audit
Institutions and others to collectively discuss
and address the issue. Having knowledge
exchange activities, such as FRED
conferences and peer-to-peer learning, is
essential for facilitating regional learning and
development.
What suggestions do you have for other
professionals, World Bank staff and/or
interested stakeholders eager to embark on
a program of CGFR development for their
region?
I believe that it is important for Bank staff to
be technically adept at CGFR— and not
pedantic or dogmatic about the policy advice
given. Staff need to have a solid
understanding of the region and country
prior to determination of the proper
approach for CGFR reform in a given
situation. Previous efforts have at times
sought to apply a one-size-fits-all approach
to CGFR reform, but without reflecting on the
dynamics of the region — including a
thorough
understanding
of
the
macroeconomic and financial issues
surrounding the CGFR environment. From
my perspective, having an open mind and
refraining from entering a development
situation with a preconceived set of ideas
about how a reform should take place is
important to ensuring that reforms will
indeed meet the needs of the client — and
will be successful and sustainable long after
project closure.

Innovations in Ethics Education

36

International Accounting Education Standards Board
(IAESB) Collaboration to Support Worldwide Change

“Professional accountants at all
levels of the profession need to be
able to identify and deal with
increasingly complex circumstances
that may give rise to ethical
dilemmas. Education is key to
making this happen.”


Chris Austin
IAESB Chair

Professional accountants need to comply
with the fundamental principles set out in
the International Ethics Standards Board for
Accountants’ (IESBA®) Code of Ethics for
Professional Accountants™ (the Code).
Awareness of, and practice in, resolving
potential ethical dilemmas can help
accountants make sound, ethical decisions.
As Mr. Austin notes: “Individuals start to
develop their ethical make-up before they
enter the accounting profession — this toolkit
helps to develop the skills of those aspiring to
join the profession with a particular emphasis
on professional values, ethics and attitudes.
Ultimately the toolkit can help us shape
future generations to be better able to
practice consistently high standards of
professional conduct— thereby serving the
public interest.”

In order to help drive innovation in ethics
education worldwide, the International
Accounting Education Standards Board™
(IAESB™) has developed an Ethics Education
Toolkit to help educate and train business
and professional people at all levels. The
IAESB establishes standards in the area of
professional accounting education that
prescribe technical competence and
professional skills, values, ethics, and
attitudes. The Toolkit consists of five videos
and accompanying study guides covering
hot-topic issues such as conflicts, selfinterest, and intimidation. It was developed
in collaboration with The Institute of
Chartered Accountants in Australia (ICAA),
Michael Schildberger’s Business Essentials
Pty Ltd, Price Waterhouse, CRA and the RMIT
University (Australia). The ICAA owns the
copyright of the program, and has given
consent for the International Federation of
Accountants (IFAC) to adapt it for use by IFAC
member bodies in applying International
Education Standard 4, Initial Professional
Development - Professional Values, Ethics,
and Attitudes.

promoting discussion of ethics-related
issues in a workplace context;
using real case history scenarios which
can cover a range of functions within
the profession; and
Demonstrating a variety of scenarios
that really challenge a professional
accountant’s
professional
ethics
thought-process.

The toolkit can be used as part of a tertiary
education course, as training support
material for professional accountancy
organizations, as a supplement to existing
training and development programs within
organizations, or as part of a broad
management ethics program. By developing
the skills to identify these dilemmas,
accountants will be better able to deal with
situations which can potentially jeopardize
their professional ethics. While some of the
videos can become quite dated relatively
quickly — the messages and issues still
resonate — and help accountants working
within the profession to avoid making ethical
errors.
Users can access the videos free of charge via
the IAESB Website and YouTube.
“Alongside the IAESB, users of these videos
share and recognize the value of these in
communicating
with
professional
accountants and educators — that’s why
these toolkit videos are some of the most
accessed materials produced by IFAC,” noted
Mr. Austin.
“We are keen to see greater use made of
webcasts and video to improve the access to
and impact of learning materials related to
the International Education Standard™
(IES™).”
For more information about the IAESB - including
completion of our five-year project aimed at enhancing
the clarity of our IES and inclusion of the concept of
identifying and assessing “learning outcomes” click here
(https://www.ifac.org/publications-resources/guidancesupport-implementation-learning-outcomes-approach).
Why not also take a look at our recently published
inventory
(https://www.ifac.org/supporting-iesadoption-and-implementation) of guidance materials to
support implementation of the revised IES?

The five scenarios depicted in the video
program support learning by:

illustrating a decision-making model
that assists in developing learners’
ethical judgments;

Do you have any suggestions about how the IAESB can
help support education across the world?
Want to find out more about the work of the IAESB?
Drop us a note - email at,
IAESBCommunications@iaesb.org.

Insurance Accounting

37

Enhancements to Insurance Accounting
Under International Financial Reporting Standards (IFRS)
and its Importance for the Middle East and North Africa

Gabriella Kusz
Senior Financial Management Specialist,
World Bank
The insurance market in the Middle East and
North Africa (MENA) region has been
characterized by slow growth and
development. World Bank reports note that
the slow development of MENA’s insurance
sector may be due to numerous factors,
including regulatory policies, market
structure, the impact of the lack of a broad
financial sector on the insurance market,
social and human development factors, as
well as cultural and religious factors1.
Although the region’s insurance penetration
levels remain relatively low, it should be
noted that recent research indicates that
insurance sector growth may actually be
improving. As noted by the Qatar Financial
Centre (QFC) MENA Insurance Barometer
2016 – An Annual Survey, in the five-year
period from 2009–2014, total non-life and
life insurance premium volumes in the region
expanded by almost 60 percent (or roughly
US$ 51 billion). This translates to a sector
growth of more than 2 times that of regional
gross domestic product (GDP) — and,
optimistically, this growth trend is expected
to continue through 20172. As MENA
insurance markets continue to develop and
increase their prominence within both the
national and regional spheres, strong
accounting and auditing will be crucial to
ensuring transparency, accountability and
sound investments.
Given the increasing prominence of the
insurance market in the MENA region, recent
efforts by the International Accounting
Standards Board (IASB) to strengthen and
improve accounting for insurance contracts
should be of significant interest. The IASB’s
Insurance Contracts Project has consisted of
two phases: Phase I which resulted in the
issuance of International Financing Reporting
Standards (IFRS) 4 (as an interim standard to
be applied for insurance accounting), and
Phase II, which is currently being undertaken
to address key challenges in insurance
accounting — and will result in the creation
of a new standard to replace IFRS 4.
Challenges such as the diversity in
accounting models applied to different types
of contracts, the reliance on estimates
determined at contract inception, and the
lack of discounting for non-life liabilities
presently contribute to the complexity and

difficulty associated with insurance contract
accounting3
Phase II of the Insurance Contracts Project
aimed to improve the comparability and
transparency around insurance contracts
accounting. Specifically, Phase II has sought
to: (i) create a coherent, principles-based
framework for all types of insurance
contracts; (ii) develop a single accounting
model for all insurance contracts; (iii)
increase information regarding the degree of
risk and uncertainty; (iv) highlight
information about what drives performance;
(v) better explain what an insurer expects to
pay to fulfill its insurance contracts; and (vi)
expose the hidden value of embedded
options and guarantees.4
Inclusivity
and
engagement
with
stakeholders has been a cornerstone of the
IASB project process. The IASB notes that
they have consulted stakeholders across all
major
geographic
regions
with
representatives of the insurance industry,
the investor community and others — such
as actuaries, auditors and insurance
supervisors. In addition, the IASB has held
educational sessions, and has communicated
project progress through webcasts and
podcasts, email alerts and investor
resources5. Presently, the IASB is in the
process of finalizing the new insurance
contracts standard and anticipates issuance
towards the end of 2016.
As the new standard emerges, Professional
Accountancy Organizations (PAOs) in the
MENA region may wish to support
appropriate adoption and implementation

through the development of training
materials which focus on the details of the
standard — and offer insights for members
and the business community regarding how
to apply the standard in practice.
Additionally, PAOs may wish to ensure that
the new standard is incorporated into the
program of initial education for accounting
certificate candidates, as well as into
Continuing Professional Development (CPD)
activities for current professionals. Finally,
the inclusion of informational articles
regarding the recent change, and the various
aspects of the new standard in national
accounting journals and magazines may also
help to raise awareness.
REFERENCES
1

Lester, Rodney. World Bank.” The Insurance Sector in
the Middle East and North Africa: Challenges and
Development Agenda.” 2010.
http://siteresources.worldbank.org/INTMNAREGTOPPOV
RED/Resources/MENAFlagshipInsurance12_20_10.pdf
2 Qatar Financial Centre. “MENA Insurance Barometer
2016: An Annual Market Survey.” 2016
http://www.qfc.qa/en/Documents/Research%20and%20
Insights/MENA-Insurance-Barometer-2016.pdf
3 IFRS Current Projects “Insurance Contracts.” 2016.
http://www.ifrs.org/Current-Projects/IASBProjects/InsuranceContracts/Documents/ProjectHistory_Insurancecontract
sMarch2012.pdf
4 IFRS Current Projects “Insurance Contracts.”2016.
http://www.ifrs.org/Current-Projects/IASBProjects/InsuranceContracts/Documents/ProjectHistory_Insurancecontract
sMarch2012.pdf
5 IFRS Current Projects “Insurance Contracts.” 2016.
http://www.ifrs.org/Current-Projects/IASBProjects/InsuranceContracts/Documents/ProjectHistory_Insurancecontract
sMarch2012.pdf

The Resilience of Accountancy
Professions in Fragile States

38

The Case of Yemen

Walid Al-Najar
Financial Management Specialist,
World Bank

Moad Alrubaidi
Senior Financial Management Specialist,
World Bank
Yemen is a fragile state that has recently
descended into a full-fledged conflict. The
conflict has caused a humanitarian crisis,
massive physical damage, and has
devastated the economy. In the midst of a
war, public accountants and accountancy
associations in Yemen have demonstrated
extraordinary resilience and a remarkable
passion for the future of the profession. This
unplanned suspension of normal life has
given practitioners a chance to reflect on
their career paths and visualize their
future. The practitioners found themselves
coming together to exchange concerns and
brainstorm about the way forward. Aware of
the emerging situation and needs of its
members, the two accountancy associations
in the country — the Yemeni Association for
Certified Public Accountants (YACPA) and the
Yemeni Association of Internal Auditors
(YAIA) —explored opportunities to support
the career and business development of its
members.
The Yemen Association for Certified Public
Accountants (YACPA)
With very limited resources, but enthusiastic
volunteers, the YACPA was able to gather its
active members and experienced financial
experts through a social media platform

enabling an instant exchange of ideas.
Discussions continue remotely with
members scattered both inside and outside
of the country. The YACPA management was
also brought in to keep them informed, and
to help them be responsive to the needs of
members. The platform currently includes
around 170 participants, who have
promoted a variety of initiatives to be
undertaken by the YACPA.
Facing a challenging environment. With the
threat of diminishing opportunities in the
country, public accountants realized the
need to look for opportunities outside. In
order to facilitate this, YACPA members
called for the YACPA to quickly resume its
development efforts — including obtaining
international
recognition
from
the
International Federation of Accountants
(IFAC) by fulfilling the long-awaited
requirements.
Another
aspect
for
consideration was the departure of foreign
practitioners who were forced to leave the
country during the war, thereby providing
YACPA members with an opportunity to fill
the gap. The YACPA joined the World Bank’s
regional Solutions Lab on International
Financial Reporting Standards for Small- and
Medium-Sized Enterprises (IFRS for SMEs).
This led to bilateral discussions and meetings
with the World Bank team. The YACPA has
continued its collaboration with the
International Financial Reporting Standards
(IFRS) Foundation and will be signing an
agreement for the supply of data to adopt
and publicize IFRS standards (including IFRS
standards for SMEs) in Yemen.

Momentum with World Bank Technical
Assistance. The World Bank maintained its
technical assistance to the YACPA, but its
financial support through the Institutional
Development Fund (IDF) Grant was subject
to the Bank’s suspension of its portfolio.
Nonetheless, the YACPA continued the
momentum and revived its strong network of
volunteers to work on several reform areas,
including the development of the YACPA’s
effectiveness, the roadmap to IFAC
membership, the adoption of IFRS, and other
areas. The group prepared a comprehensive
plan to be discussed with World Bank
specialists.
Quality assurance, ethics, and a code of
conduct. Another initiative worth noting is
the launch of an initiative called “I am a
Professional” that will require members to
abide by when providing professional
services to the public. Although the YACPA
had adopted the IFAC Ethics and Code of
Conduct some time before the war, it did not
have the chance to arrange for training
sessions for its members across the country.
Therefore, this initiative was taken up by
volunteer members in the form of a
comprehensive program that would ensure
practicing public accountants could maintain
the
minimum
required
level
of
professionalism in terms of quality of
performance, expertise, and ethical conduct.
In its early stage, the initiative can be
followed by practitioners on an elective
basis. It will be adopted by the YACPA once
it has proven to be effective.

39
IFRS for SMEs amidst the war?! For the first
time, the YACPA successfully organized a
training event on IFRS for SMEs for more
than 150 of its members. Training was
conducted at its own training center
premises. The YACPA planned for a total of
70 participants. However, due to very high
demand, more than 150 participants
registered and participated. Practitioners
were encouraged to continue seeking
professional development opportunities and
to update their practices. The intensive 3-day
training event was conducted by a qualified
local trainer that covered all of the
standards. This event was exceptional in
nature,
considering
the
security
circumstances
and
continuous
bombardment — which did not prevent
participants from physically attending
throughout all three days. Moreover, the
training gave the participants a spark of hope
for a better future.
The Yemen Association of Internal Auditors
(YAIA)
The newly established YAIA continued its
momentum to keep inspiring the
professional society in Yemen. Indeed, the
YAIA provides an example of hope for other
associations to consider moving forward
with their development — regardless of the
security circumstances. The YAIA leadership
adopts an inclusive approach which
encourages creativity, and welcomes

contributions from members in any
development aspect. The YAIA also takes
pride in the international recognition it
received in a short period of time following
its
formation,
including
especially
recognition from the Global Institute of
Internal Auditors (IIA).
The YAIA is becoming the IIA’s Chapter InFormation. Following a series of meetings
and
submission
of
membership
requirements, the IIA‘s Global Board of
Directors officially approved YAIA as its
international chapter in Yemen. YAIA was
granted the status of “Chapter In-Formation”
as a probationary stage toward achieving full,
active status. In this regard, YAIA is well
ahead of other associations in more stable
countries in the region in its pursuit of IIA
recognition.
Knowledge dissemination. In a developing
country such as Yemen, the concept of
internal auditing is still new and unknown.
This creates both a challenge and an
opportunity for YAIA to develop the
profession from scratch. In this regard,
launching a series of awareness campaigns is
a costly exercise. Working with very scarce
resources, the YAIA approached sponsors
and adopted other less expensive electronic
means to raise awareness about the
importance of internal auditing. YAIA
produced a second issue of its professional

magazine during the war. It was a combined
product of member contributions and
translations into Arabic of articles from
international internal audit leaders. It is the
second magazine dedicated to the internal
audit profession in the region after the
United Arab Emirates’ IIA magazine. The YAIA
launched its official website and official link
for the IIA Chapter in Yemen as one of the
important communication means with and
between internal audit professionals and
stakeholders.
Qualifying and training members. A top
priority for the Yemen Chapter is qualifying
and training its members. This is a very
challenging endeavor because YAIA is not
able to hire trainers given the country’s
conflict and local scarcity. YAIA also cannot
hire the handful of professionals inside the
country because they are occupied with
bigger tasks. Therefore, YAIA approached
free on-line providers — along with the
available IIA online training — to customize a
training plan for its members. The roll out of
this training program is in progress.
Finally, two key success factors should be
highlighted with regard to both professional
associations in Yemen, namely, their ability
to maintain a politically impartial spirit, and
the notable hard work of their dedicated
volunteers who are keen to contribute to the
development of Yemen.

40

Education
10 Steps to Finding a Career Development Mentor
By The American Institute of Certified
Public Accountants (AICPA)

What comes to mind when you hear the
word “mentor”? Did you envision a wellconnected senior leader who is older, wiser
and much more experienced than you are?
While it is true that most mentors once fit
that description, the current thinking
around mentors and mentorship has
expanded. Today, we recognize that age,
experience or a person’s profession does
not necessarily mean that they will be an
effective mentor. The main requirement is
that a mentor is someone you highly
respect, who can offer feedback, and is
interested in helping you develop both
professionally and holistically.
Professional development experts have
been reassessing other aspects of
mentorship as well, including the notion of
time. In the past, mentoring relationships
were often expected to happen over the
course of years, or even without any clear
end date. Today, however, professional
development experts advocate for
mentoring relationships that are for a
specific timeframe —ideally, 6-to-12
months.
Additionally, in previous years, mentoring
frequently occurred in planned “sessions”
that focused on specific topics. These days,
a less formal structure is often more
effective. Mentoring relationships may be
short- or long-term, and formal or informal.
The important thing is to identify the
mentor that best fits your personal and
professional development goals.
Here are 10 steps that will help you take
charge, find a mentor and develop your
career:
1. Identify your goals. What do you want
to achieve? Are you looking to advance
in your current career? Or are you
thinking about moving into a new area
or industry?

2.

3.

4.

5.

Decide how your mentor could help
you most. Here is a rule of thumb: if
you can find the information you need
in a book or online, you should not be
asking your mentor. Mentors are best
at assisting with things, such as helping
you gain new perspectives and offering
insights; directing you toward
resources that can be most helpful to
you; and helping you establish new
contacts.
Think of the people you admire most.
Who do you admire most for their
openness, honesty, character and
leadership, versus their job title?
These individuals are potential
mentors. Try to identify three
candidates in case your first choice is
unavailable.
Consider someone other than your
boss. Your roles are already clearly
defined, and your boss must be
focused on immediate business goals,
which makes it challenging to offer
recommendations on your personal
career development.
If you cannot find a mentor in the near
term, consider other resources.
Consider connecting with an executive
search firm, even if you are not looking
for a new position. Find out what they
look for in candidates, particularly with
respect to the roles to which you
aspire.

6.

Remember, the mentor also benefits.
Approach your potential mentor with
confidence. Most people want to help
and inspire others, and in mentoring
you, they are also leaving a legacy.
7. Approach it as fun! Decide for
yourself, and let your mentor know
that the goal is not to engage in heavy
or challenging conversations. Instead,
it is to enjoy the process while learning
new skills and gaining fresh insights.
8. Decide how often you would like to
meet and for how long. If
geographically possible, the first
meeting should be an in-person one.
After that, one-hour monthly phone
calls or Skype sessions can work well.
You may also want to see if your
mentor is open to brief phone calls or
emails from time to time in case you
have a specific question and do not
feel that it can wait until your next
session.
9. Own the mentoring process. Let your
mentor know you will be responsible
for scheduling the meetings and will
come prepared—such as writing down
specific questions in advance of a
mentoring session and creating an
agenda you send in advance.
10. Stay focused on career development.
Finally, be very clear that you are
looking for feedback and professional
insights that can help you develop in
your career.

MSME Audits

41

Enhancing the Quality of Micro, Small and Medium Enterprise (MSME) Audits:
Increase Access to Small and Medium-sized Accountancy Practice (SMP)
Audit Software
Gabriella Kusz
Senior Financial Management Specialist,
World Bank

The 2014 CV MENA Exchange Conference
was organized by the World Bank’s Middle
East and North Africa (MENA) Region,
Governance Global Practice, and took place
in Abu Dhabi, United Arab Emirates.
Significant discussions and interest centered
on the subject of the use of technology in the
audit profession. During the session on audit
quality, a conversation began between audit
professionals from the MENA region and
presenters from the Development and
International
Partnerships
Directorate
(DDPI) of the Conseil Supérieur de l’Ordre des
Experts-Comptables - Compagnie Nationale
des Commissaires aux Comptes (CSOECCNCC)

the
French
Professional
Accountancy Organizations (PAOs). It
concerned remarks by representatives of the
DDPI who noted that their organizations had
developed software specifically suited to the
needs of accountancy small and medium
practices (SMPs) for their micro, small and
medium enterprise (MSME) clients which
allows for high quality audits on this smaller
scale. MENA regional audit professionals
noted that they had been struggling with this
same challenge, specifically how to deliver
high quality audits for MSME clients when
the market does not provide for costeffective and accessible audit software for
SMP practitioners.

Through successive World Bank MSME Trust
Fund-financed activities (virtual conferences
and workshops) as well as active
engagement by representatives of the DDPI,
this conversation developed into an
organizational dialogue between the Arab

Federation of Accountants and Auditors
(AFAA) and the CSOEC-CNCC regarding the
possible use of the CSOEC-CNCC software.
The AFAA is the regional organization
representing 18 Professional Accountancy
Organizations (PAOs) throughout the
Maghreb, the Middle East and the Arabian
Peninsula.
It sponsors international
conferences on emerging subjects, supports
PAO development within the region, and
facilitates coordination and communication
among its members.
The result of these efforts was the signing of
a Memorandum of Understanding (MoU)
between the DDPI and the AFAA during the
AFAA 2016 Conference in Cairo, Egypt. It
provides for audit software in the French and
English languages to MENA regional
professional accountancy associations and
their members at no charge. Additionally,
this agreement seeks to engage AFAAmember PAOs in training and education on
the application of the software so as to
ensure quality provision of audit services for
the MSMEs in the region.
Activities are expected to commence in the
next few months, with 4 PAOs from Egypt,
Jordan, Lebanon, and the West Bank and
Gaza already expressing an interest in
undertaking training on the software
package. Future efforts may focus on the

translation of the SMP audit software into
the Arabic language. However, before
translation can take place, additional efforts
will be needed to agree on a common
glossary of terms in the Arabic language so as
to ensure that the translated software
package will be comprehensible in all MENA
regional countries.

These and other efforts to strengthen the
quality of services provided by SMPs can be
expected to support small and medium
enterprise (SME) development because
SMEs typically comprise the majority of SMP
clients. Improving the quality of SMP services
can result in improvements in the financial
services and inputs used by SMEs. With
improved quality of financial information,
SMEs will be better equipped to manage
operations, access finance, and achieve
growth.

42

Interview
La Reforme du Systeme Comptable Public Tunisien, une Realite
Mme. Halima Bahar
Chargée de mission auprès du cabinet du
Ministre de Finances et Directeur General à
la Direction Générale de la Comptabilité
Publique et du Recouvrement.

Intervieweuse: Mme. Shirley Foronda –
Spécialiste en Gestion Financière – GGODR Gouvernance

Comment qualifiez-vous l’avancement des
reformes a caractère comptable en
Tunisie ?
La réforme de la comptabilité tunisienne est
un souci de longue date déjà prévue depuis
la promulgation du code de la comptabilité
publique en 1973. Plusieurs tentatives ont eu
lieu mais malheureusement n’ont pas abouti
pour diverses considérations dont le manque
de volonté politique. La réforme engagée
actuellement, s’insère dans le cadre du
projet de la Gestion de Budget par Objectifs
(GBO) et donc les travaux sur l’instauration
d’un système comptable de l’état ont
commencé à partir de 2012 visant le
rapprochement le maximum des standards
internationaux et relevant le cadre
comptable à un niveau qui nous permet la
comparabilité, la visibilité et la transparence
des comptes publics. Bien que l’avancement
est bien réel, le chemin est encore long pour
arriver à l’objectif final.
Vous avez mentionné tout à l’heure des
progrès faits sur l’avancement de la réforme
comptable. Quels sont les grands chantiers
de la mise en œuvre de la réforme?
On a travaillé sur deux chantiers essentiels.
Le premier c’est la construction du socle
juridique de la comptabilité de l’état, à savoir
la prévision d’articles dans la prochaineLoi
Organique du Budget (LOB). C’est une

première parce qu’on a relevé le socle
juridique d’un niveau de loi à une Loi
Organique qui est un niveau supérieur. On a
également fait des modifications dans le
code de la Comptabilité Publique pour
annoncer qu’il y a une nouvelle comptabilité
en droits constates qui traduit les droits et
les obligations de l’Etat et qui est fondée sur
des normes comptables qui se rapprochent
des standards internationaux. Cette
modification a renvoyé à un décret fixant la
composition
et
les
modalités
de
fonctionnement du Conseil National de
Normes des Comptes Publics chargé de
préparer les normes comptables. Ce chantier
a été bien préparé et on est à l’étape de
concrétisation. En parallèle on a travaillé sur
un autre chantier, l’expérimentation de la
comptabilité en partie double base caisse.
On a déjà commencé dans quelques postes
comptables dont notamment la paierie
générale de Tunisie qui est un poste
comptable assignataire de presque 80% des
dépenses publiques de l’état et qui a aboutit
à la mise en place réelle de la partie double,
éditant des journaux des opérations selon la
nouvelle nomenclature et les nouvelles
règles comptables.
Quels sont les défis auxquels fait face la
reforme comptable en Tunisie ?
Le projet de la reforme de la comptabilité de
l’état est un projet très grand qui implique
énormément d’acteurs et qui demande des
prérequis et mesures d'accompagnement
pour sa réussite. Le premier défi c’est la
préparation et la mise en place d’une
nomenclature budgétaro – comptable qui
garantit l’articulation complète entre la
comptabilité budgétaire et la compatibilité
générale prévues dans le nouveau système
comptable; le deuxième défi c’est
l’informatique, car sans base informatique et
sans systèmes d’information financière et
comptable qui portent aussi bien sur le volet
budgétaire ainsi que sur le côté comptable ça
sera un peu difficile de réussir une réforme
d’une telle envergure. Le troisième défi c’est
la sensibilisation et la formation de tous les
acteurs, parce que dans cette comptabilité
reformée le rôle des comptables publics, des
ordonnateurs, des contrôleurs financiers et
même de la cour de comptes va également
être modifié. Enfin, le chevauchement et la
complémentarité entre les différentes
composantes du projet GBO, dont la reforme
comptable fait partie, reste aussi un défi
majeur

Quels sont les changements introduits par
la Loi Organique du Budget (LOB) en
matière comptable ?
Plusieurs nouveautés ont été introduites
dans le projet de la nouvelle LOB. Il y a des
articles qui parlent pour la première fois des
types de comptabilité et sa leur
complémentarité (budgétaire, général et
comptabilité de coûts). Il y a aussi des articles
sur le règlement du budget où l’on a
introduit des états financiers nouveaux qui
accompagneront le projet de règlement de
budget d'une part, et de certification de
comptes d'autre part. La nouvelle LOB
prévoit également des nouveaux (et réduits)
délais quant à la production et soumission au
parlement du projet de loi de règlement de
façon à ce que le rôle du parlement le suivi
et le contrôle de l’exécutif soit fait dans des
bonnes conditions. En parallèle, on a
commencé par les travaux de réflexion pour
la refonte du code de la comptabilité
publique, c’est tout à fait normal parce que
la LOB a beaucoup aménage les règles
budgétaires et le code de la comptabilité
publique ce n’est qu’un texte d’application
de la LOB. Des adaptations pour être en
harmonie avec la nouvelle LOB et pour
traiter certaines questions nouvelles sont
désormais nécessaires.
Selon vous de quoi un système comptable
efficace en Tunisie serait fait ?
Un système comptable bien fait doit être un
levier de contrôle, un vecteur de
transparence et un outil au service du
pilotage et de la prévision assurant une
cohérence et complémentarité absolues. Il
devrait être capable de capturer toutes les
caractéristiques d’une comptabilité de
qualité, à savoir la fiabilité, la sincérité et
l’exhaustivité et devrait permettre la
construction d’un compte de résultat et
d’établir un bilan de l’Etat recensant les
actifs et les passifs, conformément aux
normes comptables qui se rapprochent des
standards internationaux en vigueur. Parfois
en Tunisie on parle beaucoup des réformes
budgétaires et réformes fiscales et on ne
parle pas assez des reformes comptables. La
reforme comptable est très importante
puisque elle permettra d’avoir un système
qui est comparable aux systèmes
comptables des pays développés et d’avoir
des finances publiques que seront encore
plus lisibles et transparentes.

43

Islamic Finance
Accounting and Auditing Reform
Nadi Mashni
Financial Management Specialist,
World Bank

Gabriella Kusz
Senior Financial Management
Specialist, World Bank

Over the past decade, there has been a rapid
growth of interest in issues relating to Islamic
Finance. During this period, the Islamic
financial services industry has registered
remarkable growth, with Shari’ah-compliant
financial assets expanding at an annual rate
of about 10 -15 percent. Today, those assets
are estimated at over US$ 1.3 trillion. The
development of Islamic Finance offers
potential benefits for economic growth,
poverty reduction and increased shared
prosperity in many developing and emerging
countries. With its direct link to physical
assets and the use of profit- and loss-sharing
arrangements, Islamic finance encourages
the provision of financial support to
productive micro, small and medium
enterprises (MSMEs) that can increase
output and generate jobs. Islamic Finance
also emphasizes partnership-style financing,
which could be useful in improving the
access of underserved populations, such as
poor households, to financial services. In
addition, Islamic Finance can meet the needs
of those who do not currently use
conventional finance because of religious
reasons, as well as help reduce the overall
gap in access to finance, since non-Muslims
are not prohibited from using Islamic
financial services. Finally, there is existing
empirical evidence that Islamic Financial
institutions (IFI) may be more resilient to
unforeseen shocks (such as the Global
Financial Crisis of 2007-08), thereby
contributing to overall financial stability. Key
to Islamic Finance and IFI development and
growth will be the ability of these
organizations to provide reliable, credible
and transparent financial information. To
this end, the World Bank’s Financial
Accountability and Reporting (FAR) unit
encourages the development of strong
standards
of
accounting
able
to
appropriately reflect the Islamic finance
activities and transactions. The FAR unit is
proposing to conduct a Solutions Lab1, in
cooperation with the World Bank’s Islamic
Finance Development Center, to help
address the development, adoption and
implementation of these standards — as well
as the challenges and good practices
surrounding their application.

framework of IFIs. It will be conducted
by Fatih Kazan, Financial Sector
Specialist, World Bank Global Islamic
Finance
Development
Center,
Istanbul.

The proposed Solutions Lab will focus on the
adoption and implementation of accounting
and auditing standards for IFIs, and the
recent activities and reforms of the
Accounting and Auditing Organization for
Islamic Financial Institutions (AAOFI), as well
as considerations related to implementation
and application of these standards. As
accounting and auditing standards provide
the foundation upon which IFIs may
characterize and communicate financial
activities, they are fundamentally important
to their successful operation. In recognition
of this, the proposed Solutions Lab will:
outline the role of accounting and auditing
practices within the corporate governance
framework of IFIs; explain the existing
standards for accounting and auditing
practices of IFIs; and provide an overview of
the recent reforms of the AAOIFI. The
Solutions Lab will be held on October 6, 2016.
Participants will include representatives
from Islamic banks, Sharia’h Boards, central
banks, audit firms, ministries of finance and
other key organizations with an interest in
Islamic Finance and accountancy from the
MENA region. Representatives from the
various World Bank country offices
throughout the MENA region (as well as via
WEBEX live web-streaming) will also
participate. Participants will be identified
and invited by each country Financial
Management Specialist.

The Solutions Lab will be moderated in
Arabic. Following the conclusion of formal
presentations, discussions will be held at the
national level as coordinated by Financial
Management Specialists in each of the
various World Bank Country Offices
(connected via VC). The Solutions Lab will be
coordinated with the World Bank Islamic
Finance Development Center, and organized
and implemented by Gabriella Kusz and Nadi
Mashni (FAR, World Bank), with the support
of Manuel Vargas (Lead Financial
Management Specialist, FAR), and Hisham
Waly (GGP Manager), World Bank.

The Solutions Lab event will address:

FOOTNOTE

Setting the Stage: The role of
accounting and auditing practices
within the corporate governance

Taking the Snapshot: Existing
standards for accounting and auditing
practices of IFIs and the recent reforms
of AAOIFI for further development. It
will be led by Omar Mustafa Ansari,
Assistant Secretary General, AAOIFI.

The Way Forward: Challenges and
Success Factors in Applying Accounting
and Auditing Standards for IFIs. It will
be conducted by Muzammil Kasbati,
Director of Islamic Finance, Ernst and
Young, and MENA Leader.

(1) Solutions Labs form part of the Connecting Voices of
the Middle East and North Africa (CV MENA) initiative, a
regional knowledge platform to strengthen financial
management institutions. This Solutions Lab is organized
by the World Bank MENA FAR unit in coordination with

44
the World Bank Islamic Finance Development Center. This
event willutilize the Video-Conference (VC) capability of
the World Bank Country Offices.

Public Sector

Regulatory Reform
KRG-IRAQ:
Guide to Legislative Drafting
Emmanuel Cuvillier
Senior Public Sector Specialist,
World Bank

Salam Almaroof
Operations Analyst,
World Bank

The development of a legal and regulatory
framework that meets international
standards is a major concern in the Middle
East and North Africa (MENA) region, as it is
key not only to fostering economic
development, but to ensuring the wellbeing
of its citizens as well. To achieve this goal, it
is important to create a sound institutional
structure, and employ staff qualified in the
drafting of laws. In addition, efficient
procedures
for
coordination
and
consultation should be established. Finally, it
is important to ensure that the possible
impact of new legal instruments is assessed
before being adopted.

In the Kurdistan Region of Iraq (KRI),
administrative law plays a very important
role in good governance. Through its review
mechanism, the KRG (Kurdistan Regional
Government) Shura Council1 can help ensure
quality legislation, as well as regulations to
support implementation. Today, the KRG
Shura Council has become the main advisor
of the KRG in charge of reviewing draft laws
and legislation.
Iraq, which gave the world the Code of
Hammurabi3, has in modern times
developed a very complicated legal
environment as a result of its history4. This is

particularly true in the KRG. Over time, this
has led to the unnecessary proliferation of
laws and regulations. Successive political
systems with multiplicities of legislation have
exacerbated the problem5.
To enhance and support the role of the KRG
Shura Council, a guide to regulating the
legislative function of the Shura Council and
the process of drafting laws was recently
published and made official6. Accompanying
the reformist regulatory approach of the
Shura Council, this guide is a cornerstone in
attaining better regulation. It should
improve regulatory quality in the KRG and

45
help the Shura Council prepare legislation
that is to be used as a reference in drafting
legal texts. The manual of the National
Palestinian Authority (NPA)7 and the
Tunisian Guide to Legislative Drafting8
served as examples.
This new guide offers a clear methodology to
prepare and draft legislative acts submitted
to the KRG Shura Council in order to improve
their quality and ensure that they are
consistent with the current legislative order
and relevant public policies. The guide is to
serve as a compendium of sound drafting
techniques and recommendations to meet
any current challenges that legislative
drafters may face. The guide will also
contribute to consolidating legal provisions
and avoiding differences and contradictions
in interpreting legal texts, as well as in
devising provisions to simplify the task of
those dealing with them. Furthermore, the
guide also offers a vehicle for continuous
improvement of legislative drafting
techniques by consolidating in a single text
all future improvements to the initial version
which has now been published.
This guide is generally tailored to all legal
drafters in the KRG, as well as to
parliamentarians, governmental advisors
and legal departments in ministries and
departments in the KRG. The guide is
addressed in particular to councilors of the
KRG Shura Council who are in charge of
legislative drafting. The first version of the
guide9, published in Arabic (200 pages) and
English (170 pages) in April 2016, runs to a
total of 170 pages and is composed of eight
chapters as follows:

principles
for
policymaking
(called
“legislative policy” in the Kurdistan Region)
are based on specific philosophical ideas,
drawing upon Islamic thought and
democratic political values, and reflecting
the clear impact of the internal and external
political, economic and social conditions of
the Kurdistan Region of Iraq.
Chapter 4 - Draft Legislation Action Plan:
Before preparing a new piece of legislation,
a number of requirements are to be fulfilled
and several steps taken in this context. To
this end, this chapter is divided into two
subchapters. The first covers the steps of the
preliminary phase of legislation preparation
and the second covers the commencement
of legislation preparation and drafting.

Introduction
The quality of legislation is of the utmost
importance to all those members of society
who need to understand or apply the law,
both in spirit and in letter, as they cannot
plead ignorance of the law as a reason for
not being in compliance (“Ignorantia juris
non excusat”).

Chapter 5 - Legislative Structure Units: After
identifying the topic of the legislation,
drafters need to set up a plan, largely similar
to what is known as a roadmap, to distribute
its contents throughout the text; in other
words, to distribute clauses throughout the
units or components of the piece of
legislation.

Chapter 1- Fundamental Rules of Legislation
and Policy: The term “legislation” refers to
both a product and a process: the first
meaning refers to the written law
promulgated by the competent national
legislative authority, which is the strict
definition of the law; the second refers to the
process of drafting written laws by the
competent authority.

Chapter 6 - Principles and Rules for the Style
of Legislative Drafting: The most essential
characteristics of good legislative drafting
are textual clarity, accurate terminology,
beauty of expression, coordination of parts,
good arrangement and classification, and a
highly scientific and logical character.

Chapter 2 - Legislative Impact Assessment:
The feasibility of the piece of legislation to be
enacted should be confirmed through a
“legislative impact assessment”.

Chapter 7 - Legislative Drafting Flaws and
Methods to Avoid Them: The guide divides
this chapter into three subchapters; the first
discusses substantive flaws, the second,
formal flaws, and the third, methods to avoid
these flaws.

Chapter 3 - General Principles for Draft Laws
in the Kurdistan Region of Iraq: The

Chapter 8 - Preparing and Reviewing Draft
Laws in the Kurdistan Region of Iraq: It is

critical for the KRG to focus on the quality of
legislation and the KRG Shura Council has a
critical role in producing clear and accurate
laws.

REFERENCES
1 The Shura Council of the Kurdistan Region of Iraq was
established through Law No. 14 of 2008 as part of the
process of federalization in this semi-autonomous region.
It is an independent government body, but
administratively it falls under the jurisdiction of the KRG
Ministry of Justice.
3 The Code of Hammurabi is a Babylonian law code of
ancient Mesopotamia, dating to about 1754 BC. It is one
of the world’s oldest deciphered writings of significant
length.
4 As Iraq was part of the Ottoman Empire, the Ottoman
Judicial Decisions Magazine of 1869, known in Arabic as
“Majalat Al-Ahkam Al-Adlieh”, was applicable in Iraq and
was, in fact, its law. The Ottoman Empire adopted “AlMajalat”, which was based on Islamic “Sharia” law and
the Hanafi Fiqh, or jurisprudence. According to scholars,
the “Majalat” was very advanced and constituted a rich
sample for legal drafting and codification of the Hanafi
Fiqh. At that time, the rulings of the “Majalat” governed
most of the Arab countries that were under the Ottoman
Empire. However, the strong link of Iraqi law to Islamic
“Sharia” law and Fiqh through the adoption of the
“Majalat” later influenced, to a great extent, the adoption
of the new Iraqi civil law based on the Napoleonic Code,
after the independence treaty with England in 1930.
Accordingly, Iraqi civil law benefited from both the Islamic
Fiqh and Western laws in drafting and codification, unlike
that of Egypt, whose independence from the Ottoman
Empire prevented application of the “Majalat”.
5 The Iraqi Legal Database (ILD) is the first comprehensive
and electronic legal database created in the Arab region
under the supervision of the Iraqi Higher Judicial Council.
The objective is to make the entire corpus of Iraqi law
available to judges, lawyers, academics, lawmakers, and
interested individuals or institutions. The ILD was
published online in September 2008, and makes available
27,433 legal texts, including 7,136 laws, 4,265 ministerial
instructions, 3,268 regulations, 5,029 declarations, etc. It
includes every Iraqi legal text since 1917.
6 Refer to KRG Cabinet Decision No 90 of 9th June 2016.
7 Palestine: a) Legislative [or 'Legislation'?] Drafting
Manual – Ministry of Justice and Institute of Law – Bir Zeit
University (2000); and b) Secondary Legislation [or
'Legislative'?] Drafting Manual – The Institute of Law, Bir
Zeit University (2004).
8 Tunisia: Guide de Légistique (2011).
9 The publication of a second, improved version is already
envisaged for 2017.

46
The Governance Perspective
Elisabetta Marmolo
Governance Adviser, Governance Global
Practice, GGODR, World Bank

This article presents some ideas on how the
World Bank’s Governance Global Practice
(GGP) can contribute to the “lagging regions”
agenda in the Middle East and North Africa
(MENA). The MENA Regional Strategy (World
Bank 2015) identifies support for lagging
regions in MENA countries as a key
component of renewing the social contract
between
MENA
states
and
their
constituents. In alignment with this strategy,
the objective of tackling regional disparities
features prominently in the recent Country
Partnership Frameworks (CPF) for Egypt,
Jordan, Lebanon and Tunisia.
Lagging regions are broadly defined as areas
whose people have lower living standards,
that is, lower per capita consumption and/or
income, as well as less access to quality basic
services than the rest of a country (World
Bank 2009). Causes of spatial imbalances in
development differ from country to country.
In MENA, geographic factors — such as a
difficult topography or climate, or resource
endowment — are compounded by political
and social dynamics in determining why
some areas are left behind as the rest of a
country develops. Deep fissures along
religious or ethnic lines, weak and nonaccountable states, and a legacy of heavily
centralized bureaucracies marred by
corruption and patronage are among the
factors that have contributed to skewing the
development trajectory in favor of certain
areas — generally, metropolitan areas — at
the expense of others (World Bank 2011a).
Clearly, better governance needs to be a part
of the solution, but specific approaches must
be tailored to the circumstances of each
country and its lagging areas.
If it is to be relevant and attuned to the
expectations of its clients, governance work
in lagging regions must address the key
dimensions in which these areas lag, that is,
access to services and employment
opportunities for their inhabitants. Limited
opportunities
for
socio-economic
betterment contribute to a growing sense of
disenfranchisement
among
people,
particularly youth, living in lagging regions.
As such, they are a potential source of unrest
and conflict. It is significant that the event
that triggered the Arab Spring — the selfimmolation of a street vendor in response to
public humiliation by the police — took place

in Sidi Bouzid, a provincial town in one of
Tunisia’s lagging regions. Contingent events
such as the influx of refugees in Jordan and
Lebanon, for example, strain the already
limited resources of certain regions and
further weaken a fraying social fabric.
Against this context, a strategy for the
Governance Global Practice (GGP) in MENA’s
lagging regions should have two central
goals: (1) building capable and accountable
public sector institutions for better service
delivery; and (2) promoting an enabling
environment for private sector-led growth.
The key question, of course, is how these
goals can be achieved in practice.
The broad menu of interventions in lagging
regions will encompass four main issues:
decentralization; the core public sector;
accountability and transparency; and the
rule of law and justice. These will be
complemented by governance reforms with
a sector focus. Prioritization and sequencing
across these interventions will depend,
however, on specific concrete opportunities
for reform in individual countries. Lessons
from experience, briefly touched upon
below, show that in addressing complex
governance challenges in the difficult
contexts of lagging regions, the “how” of
reform —including whom and when to
engage — matters as much, if not more, than
the “what,” that is, the technical soundness
of advice.

LAGGING REGIONS

Lagging Regions in MENA

First, decentralization – to bring
services closer to citizens in
lagging regions. In places where
the
central
government’s
responsiveness to the needs of
lagging regions has been weak,
decentralization can have an
important signaling effect. It will
give more voice to constituencies
in lagging regions. It will also help
channel resources to these
regions and rebalance center/sub-national
fiscal relations. Moreover, it will better align
service delivery with local needs. However,
these results will only be realized if
decentralization
is
accompanied
by
strengthened capacity and accountability at
all levels of government (Ahmed and others
2006), as well as by the right incentives, such
as a hard budget constraint (Rodden and
others 2003). Thus, decentralization is
inextricably linked to other key elements of
the governance framework and must be part
of a carefully sequenced plan.
Decentralization reforms are complex and
require a strong political commitment. World
Bank
experience
in
supporting
decentralization reforms in difficult contexts,
such as Fragile and Conflict Situations (FCS)
(World Bank 2014), points to a number of

47

lessons, including: (i) the limitations of
focusing exclusively on the technical aspects
of reforms; (ii) the need to generate early
results and to expand the constituency for
reform; (iii) the importance of promoting
transparency, participation and internal
checks and balances as decentralization is
implemented; and (iv) the need for a multisectoral and coordinated approach across
the World Bank’s units. These lessons should
guide the work in MENA’s lagging regions.
Second, core public sector – to ensure that
public resources are best used for the
benefit of all, including citizens of lagging
regions. In the face of limited public sector
capacity in lagging regions, interventions
should initially focus on getting the basics of
public financial management (PFM) right.
This also means ensuring that the right
people, selected on the basis of merit, are
employed and retained by sub-national
governments. Building PFM capacity in
ministries of finance must be complemented
by similar efforts to strengthen budget
management and execution in line ministries
and sub-national entities to ensure more
effective service delivery.
While the Bank’s record in PFM reforms is
fairly strong, prioritization of front-line
service delivery can be a weak link,
particularly in low capacity contexts. Results
in this area are better when: interventions
include mechanisms for citizen engagement;
measures
are
taken
to
enhance
transparency; and core public sector work is
coordinated with sector initiatives (for
example, education expenditure tracking in
Azerbaijan and technical audits of roads in
Moldova). These lessons are also relevant to
MENA’s lagging regions.

Lagging regions are generally less able to
attract and retain the best talent. They are
also more susceptible to non-meritocratic
civil service selection, as well as systemic low
performance and absenteeism. A capable
civil service — whether handling the back
office, providing front-line service delivery,
or playing the role of regulator — is essential
to begin addressing the issues plaguing
lagging regions.
In spite of considerable efforts by the Bank to
engage in this area, civil service reforms have
gained limited traction in the MENA region.
These reforms are difficult to implement
because, oftentimes, there is weak client
ownership. Control over public-sector
employment remains an important source of
rents. Autocratic governments in the region
may not be willing to share power or may be
reluctant to be subjected to accountability
mechanisms. For these reasons, across-theboard civil service reforms are often too
complex, and opportunistic approaches are
susceptible to being reversed. This may be an
area where linking change to sector
interventions could offer opportunities to
root reforms more firmly, particularly in
sectors in which the Bank has more leverage
— and where there are internal champions
with the power and clout to effect sustained
change in the country.
Third, accountability – to strengthen public
sector incentives to perform. Fostering
accountability on the part of public servants
and service providers to citizens is critical to
improving the quality of public services (Brixi
and
others
2015).
Demand-side
interventions that foster transparency,
citizen participation, and oversight for the
provision of public services are important
instruments in increasing accountability.

LAGGING REGIONS

They are complemented and
supported by efforts to
develop
MENA
country
accountability institutions —
parliaments, audit institutions,
ombudsman, anticorruption
agencies — which generally
lack authority, resources and
independence. Again, success
in these areas is not only
dependent on technical factors
(for example, professional skills
or systems), but on political
incentives.

A
Governance
and
Anticorruption
Strategy
evaluation (World Bank 2011b)
found interventions in this
space to be generally less successful than
other governance reforms (with only 30
percent having achieved their objectives). In
the presence of a conducive environment,
the Bank should liaise with clients to ensure
that accountability institutions address
issues that are relevant to lagging regions in
their work; that they are present in lagging
regions, as appropriate; and that the
enabling framework for their effectiveness—
including transparency, disclosure of
information and citizen engagement—is in
place. In other cases, the Bank should
advocate for such reforms in cooperation
with internal constituencies.
Finally, rule of law and justice – to rebuild
trust. Significant variance can be observed in
the capacity of courts, enforcement of the
law, and citizen access to and trust in the
justice system within MENA countries —
with courts often not even physically present
in lagging regions. Lack of access to justice
can be viewed as a key dimension of poverty
(World Bank 2012). The presence of a strong
justice system is an important indicator of
state capacity and accountability. In lagging
regions where biased policies and neglect
have caused a breach in the social contract
between the state and its citizens, promoting
access to justice on an equal basis is a key
element of rebuilding trust in public
institutions and social cohesiveness.
The rule of law and clear definition and
enforcement of property rights are also
essential to private sector-led growth and
development in lagging regions. The justice
sector is a relatively new area for Bank
engagement.
Lessons from the experience so far (for
example, in Afghanistan) point to the need
for the Bank to: more clearly identify its niche
and comparative advantage; adequately
resource its engagement in the sector; and
track and monitor results more closely.

48

This framework for governance engagement
in lagging regions can be summarized in
figure 1 at the end of this article.
In conclusion, governance interventions are
key to the development prospects of lagging
regions, but they entail challenges and risks.
The World Bank, with its internal
reorganization, has taken concrete steps
toward addressing some of the internal
challenges, for example, by closer
coordination across teams working on the
various governance reform areas and across
sectors. This is important given the
interconnectedness of these various strands

of work. While there may be room to align
incentives and resources further, progress is
clear, as witnessed by the work of the multiGlobal Practice Maghreb Lagging Region Task
Force — on which the Governance Global
Practice is represented and whose
contributions are the subject of a companion
piece in this magazine.
The external challenges to the agenda
remain significant. Perhaps most prominent
is that of incentives for MENA governments
to promote governance changes that, by
shifting resources and power away from
them, are seen as working against their
immediate self-interest. However, it is these
reforms that are likely to lead to a significant
long-term dividend in terms of economic
growth and development, stability and
peace.
While non-state actors (non-governmental
organizations
[NGOs],
civil
society
organizations [CSOs], and elite sub-groups)
may offer an alternative or, in the case of
FCS, often the only counterpart for the Bank
to engage with, this engagement is equally
fraught with risks. Such risks may include
cooptation and political interference—risks
that need to be clearly understood and well
managed.
The Bank is increasingly using political
economy studies to improve the design of its
operations and help steer reforms in
countries more effectively. As the Bank’s
Articles of Agreement (its founding
document) prohibit interference in the
political sphere, more work is needed to
discern how these analyses can best inform
Bank operational programs — particularly in
cases where constituencies for reforms are
weak and political equilibriums are easily
upset.
Lessons from experience with governance
operations in low-capacity settings, which
are typical of lagging regions, recommend a
gradual, carefully-sequenced and long-term
approach to reform. A well-planned, long-

term engagement that expands
transparency and inclusion as it
builds performance at the central
and sub-national levels can help
build
trust
and
political
momentum for increasingly more
complex reforms. It can also help
avoid the possible unintended
consequences from unrealistic
and premature reform efforts.
While always important, careful
monitoring of progress and the
impact of reforms is particularly
critical in low-capacity lagging
regions. Indeed, reform programs
must be adapted in response to
feedback
regarding
their
effectiveness as implementation
progresses.

LAGGING REGIONS

As they strengthen service delivery, these
governance reforms will build accountability
at all levels of government, increase
transparency, and decrease opportunities
for patronage, corruption and wastage of
resources. In this manner, they will help
constrain the over-extension of MENA
governments into the productive economy,
and redirect them towards their core
functions as policy setters, regulators and
overseers. In doing so, they will create an
enabling environment for private sector
growth.
In line with the framework presented in the
2009 World Bank World Development
Report, these
foundational
reforms
complement governance interventions in
sectors that are key for lagging regions.
These
sectors
include
connective
infrastructure (transport and information
and communications technology – ICT) and
economic sectors in which lagging regions
have a comparative advantage. The key to
reshaping incentives and spurring private
sector growth will lie in: redefining the role
of public institutions in these sectors and
building their capacity; simplifying the
regulatory environment; and addressing
information and coordination failures by
providing
forums
for
public-private
coordination.

REFERENCES
Ahmad, J., S. Devarajan, S. Khemani, and S. Shah. 2006.
“Decentralization and Service Delivery.” In Ahmad, E. and
Brosio, G., eds. Handbook of Fiscal Federalism. Edward
Elgar.
Brixi, H., E. Lust, and M. Woolcock.2015. Trust, Voice and
Incentives: Learning from Local Success Stories in Service
Delivery in the Middle East and North Africa, World Bank,
Washington, D.C.
Platteau, J. 2004. “Monitoring Elite Capture in
Community-Driven Development.” Development and
Change, 35(2): 223–246.
Rodden, J., E. Gunnar, and K. Litvack, eds. 2003.
Decentralization and Hard Budget Constraints.
Cambridge, MA: MIT Press.
_______.2015. Economic and Social Inclusion for Peace
and Stability in the Middle East and North Africa – A New
Strategy for the World Bank Group. (SecM2015-0279,
September 21, 2015).
______.2014. World Bank Group Assistance to Low
Income Fragile and Conflict-Affected States – An
Independent Evaluation, Washington, DC.
______.2012. New Directions in Justice Reform,
Washington DC.
______.2011a. MENA Development Report: Poor Places,
Thriving People – How Can the Middle East and North
Africa Rise Above Spatial Disparities? Washington, DC.
______.2011b. World Bank Country-Level Engagement on
Governance and Anticorruption – An Evaluation of the
2007 Strategy and Implementation Plan, Washington DC.
______.2009. World Development Report: Reshaping
Economic Geography. Washington, DC.

Figure 1: Governance Strategy for MENA’s Lagging Regions - Source: World Bank – Author’s Figure.

Ayah Mahgoub
Urban Economist, Middle East and North
Africa, World Bank

Regional disparities in opportunities and
outcomes have posed pervasive challenges
for countries the world over. In some
instances, they have hindered the potential
of nations and their peoples. They have also
contributed to social tensions, as well as
secessionist
tendencies.
While
the
challenges are often not new, the urgency to
mitigate these disparities has increased in
some parts of the world, especially in the
Middle East and North Africa (MENA).
The Case for Mitigating Regional
Disparities
Disparities in basic standards of living are not
inevitable, even if regional disparities tend to
be a byproduct of natural tendencies for
production to agglomerate.2
Economic
production tends to concentrate, and this
concentration in and of itself is not negative.
Fighting this concentration, as some
countries
have
done,
may
be
counterproductive. Nevertheless, policy
makers need to ensure that the people in
lagging regions have access to opportunities
— and that they are assured a minimum
quality of life and the chance to thrive.
Policy makers seeking to mitigate these
disparities are confronted with two
challenges: how to define and measure
disparities and their drivers, and how to
manage the trade-off between equity and
efficiency in economic development. There
are many approaches to measuring
disparities: some countries focus on regional
gross domestic product (GDP), others on a
small set of indicators they believe capture
the key dimensions of disparity, and others
such as Colombia and Tunisia do so with
indices that offer multi-dimensional
measures of disparities.
While measuring disparities is both
important and difficult, deciding how to
balance equity and efficiency poses an even
greater challenge for many policy makers.
For example, what degree of inequality is
‘acceptable’? The objectives that policy
makers set vary by country and time.
Flagship frameworks for guiding policy
makers in setting these objectives, including
the 2009 World Development Report on
Reshaping Economic Geography, vary in

their guidance, but generally advocate the
following two goals:
(i) Closing the gap in access to opportunities
and in basic standards of living; and
(ii) Closing the gap between economic
potential and performance in a given area.
To achieve the first goal, policy makers need
geographically disaggregated measures
regarding access to opportunities (for
example, education and job market data),
and standards of living (for example, access
to basic services and infrastructure). To
achieve the second goal, policy makers can
leverage a growing number of analyses and
tools designed to identify economic
potential and compare it to a measure of
performance (for example, regional GDP).
One such tool is the Economic Potential
Index3 which has been applied to
Bangladesh, India, Pakistan, and other
countries. Other tools measure constraints
and potential associated with connectivity
(highways,
roads,
information
and
communications technology [ICT], and so
on).
With regard to the MENA region, the nature
of regional disparities and the drivers of
them vary across countries. These disparities
were analyzed in the 2010 World Bank
report entitled Poor Places, Thriving People,
and are outlined in the accompanying article
on “Governance in MENA’s Lagging
Regions”. Most MENA countries have a
legacy of substantial regional disparities and
a mixed record of government interventions
to mitigate them. Most continue to have
substantial populations located in certain
territories that have been left behind socioeconomically. In some lagging regions, large
influxes of displaced people and other
migrants have overwhelmed administrative
coping capacity to deal with the need for
education, health care, and other services. A
private sector capable of generating jobs is
also critical.
Although there are different perspectives
regarding the extent to which governments
should intervene to improve lagging regions,
two regional disparity features in MENA
make the case for mitigating interventions:
(i) Public policies have in many instances
exacerbated rather than mitigated regional
disparities.4 Some regions, such as the
northwest of Tunisia, have substantial
economic potential. However, they score at
the bottom of national rankings across many
measures of economic and social
performance; and

LAGGING
LAGGING REGIONS
REGIONS

Lagging Regions in MENA:
Intervening through a Spatial Lens (1)

49

(ii) Certain subsets of lagging
regions have demonstrated
above average growth and
performance across economic
indicators in countries such as
Egypt and Tunisia. In Egypt,
between 2004 and 2008, the
poorest region (Upper Egypt)
registered higher growth rates
than metropolitan Egypt and the
nation overall.5 higher growth
was driven mainly by agricultural
activities around urban areas. In Tunisia,
between 1980 and 2000, a set of “breakout”
governorates outperformed expectations.
The center-east
region significantly
outperformed the north-east and south
regions — two regions with which it had
comparable performance measures in
1980.6
Figure 1: Tunisia Regional Development
Index

These findings reveal that interventions to
remove
counter-productive
policy
distortions and support lagging sub-regions
with potential can help improve socioeconomic development. Moreover, when
lagging regional performance improves, the
nation as a whole also benefits.
The Case for a Spatially Integrated
Approach
Piecemeal interventions to mitigate
disparities in lagging regions might deliver
some positive returns, but some of the most
impressive transformations observed have
been driven by integrated programs that
applied a spatial lens. For example, between
1995 and 2001, China introduced an

50

integrated program in its lagging southwest
region called the China Southwest Poverty
Reduction Project.
Over this period,
absolute poverty declined from 32 to 13
percent, and the average income of
residents of the region increased by 50
percent. In Brazil, over the six-year period
from 2003 to 2009, the country applied a
series of integrated development programs
in the states of its lagging northeast. Brazil
was able to bring 22 million people out of
poverty, with poverty dropping from 60 to
44 percent in the northeast versus a more
modest decline nationally from 40 to 33
percent during the same period. In all cases,
context matters, that is, the domestic
institutions,
broader
macroeconomic
factors, and so on. However, these cases
indicate that unlocking the potential of
people in lagging territories may require
several complementary interventions that
no one set of stakeholders can realistically
deliver.
Using an integrated approach through a
spatial lens is key for diagnosing prosperityinhibiting disparities, as well as for designing
impactful interventions. Instead of focusing
on sectoral constraints to development in a
specific region, this shift in approach would
prioritize
relaxing
constraints
that
potentially limit development across
multiple sectors.
For instance, an
agribusiness-centered
analysis
and
intervention might focus on introducing a
periodic local market in a given area,
whereas a shift to a more inclusive local
development approach might lead to
investments to improve connectivity among
the territory and others for the benefit of
agribusiness — as well as for other sectors.
The World Bank’s Social, Urban, Rural and
Resilience (SURR) Global Practice, which
supports governments in improving their
spatial development and sub-national
systems, is applying this approach to support

MENA governments as they seek — with
renewed urgency — to mitigate regional
disparities. The World Bank is introducing a
cross-sectoral ‘whole-of-Bank’ approach to
increase the impact of its support to mitigate
regional disparities in MENA. This in turn will
support MENA governments in renewing
their own social contracts with their citizenry
— a key element in the new World Bank
MENA Strategy
This approach is being applied in World Bank
projects, including the recent preparation of
the Upper Egypt Local Development
Program — an integrated development
program designed to improve the business
environment
for
private
sector
development. At the same time, it will
support the strengthening of local
government capacity to deliver quality
infrastructure and services in select
Governorates in Upper Egypt. This Program
was designed with technical experts from
five World Bank Global Practices under the
leadership of the SURR Global Practice and
the Trade and Competitiveness Global
Practice. Egyptian country counterparts
included officials from two governorates,
three lead ministries, and several
accompanying ministries.
The World Bank is now seeking to scale up
and institutionalize this approach through
the recently launched Maghreb Lagging
Regions Task Force. This Task Force was
designed to enable World Bank teams to
work collectively across sectors, and to
diagnose the challenges faced by lagging
regions. The Task Force will also work with
government counterparts to design crosssectorally informed interventions. It
comprises all sectoral and country
management leads engaging in regional
development support to the governments of
Morocco and Tunisia. The Task Force is also
informing the design of several new World

LAGGING REGIONS

Bank programs currently being
prepared to support both
governments.

Mitigating regional disparities is
difficult and takes time.
However, some positive impacts
of this new regional approach
have already been noted. In
response to the establishment of
the Maghreb Lagging Regions
Task Force, the Government of
Tunisia launched a parallel task
force for Tunisian ministries and
other government agencies
involved
in
regional
development.
Government
officials have in turn asked other
development partners to participate in the
joint task force platform to enable better
collaboration across those actors involved in
supporting Tunisia’s regional development
aspirations. In Egypt, the government has
committed to piloting the integrated model
of development, as advanced through the
Upper Egypt Local Development Program.
The new program places Governorates in the
driver seat and the private sector at the
heart of creating jobs. This is a departure
from a historically centralized, governmentdriven system.
The Task Force can help the World Bank,
development partner countries, donor
organizations and others to reap further
benefits from this new approach by
supporting research and evaluation. Many
critical
questions
remain:
which
interventions best enable spatial integration
and positive spill overs? What are effective
approaches to sequencing the removal of
policy distortions? How can multi-sectoral
interventions
mitigate
rather
than
exacerbate complexity in developing
systems? Through such research and
evaluation efforts, the World Bank can
continue to adapt its approach to better
serve the socio-economic needs of those in
lagging regions in MENA and elsewhere in
the world.

REFERENCES
1 A spatial approach is oriented toward diagnosing
constraints and/or intervening to relax them on a
territorial rather than a purely sectoral basis.
2 “Reshaping Economic Geography”. World Development
Report. World Bank Group. 2009.
3 Mark Roberts. “Measuring the Economic Potential of
Indian Districts.” World Bank Policy Research Working
Paper. 2016.
4 “Tunisia Development Policy Review: The Unfinished
Revolution”. World Bank Group. 2014. See also:
“Regional Disparities in Tunisia Note”. World Bank
Group. 2015.
5 “Pathways to Shared Prosperity”. World Bank Group.
2009.
6 “Poor Places, Thriving People”. World Bank Group. 2010.

51

LAGGING REGIONS

52

Tunisia
From Secrecy to Openness:
The Government of Tunisia Heeds Citizen Calls for Transparency
In response to citizen calls for fiscal
transparency and greater government
accountability that surfaced following the
political revolution in 2011, the Ministry of
Finance in Tunisia collaborated with the
World Bank to create the country and the
region’s first open budget portal
(“Mizaniatouna” or “Our Budget”). It is
designed
to
communicate,
through
accessible and user-friendly formats, data
and information about public spending to its
citizens. The Mizaniatouna portal received
the World Bank Equitable Growth, Finance &
Institutions (EFI) vice presidency award for
2016.
Since the 2010 Jasmine Revolution, the
World Bank has been steadfast in supporting
the governance transition, taking the lead in
formulating and supporting policies that will
foster a more open and inclusive mode of
governance and improve the quality of public
services that citizens receive. This
engagement
covered
the
different
dimensions of open governance, including
access to information, fiscal transparency
and citizen engagement. Indeed, it has
resulted in Tunisia’s qualification for the
Open Government Partnership in 2014.
The Bank has since remained engaged and
supported the implementation of these new
policies, including those pertaining to fiscal
transparency. The Mizaniatouna portal, a
result of collaboration with the Government
of Tunisia over the past three years, is one
example of how World Bank support to the
country has materialized. The portal enables
citizens to understand where their
government’s money goes, how it is spent. It
represents an improvement in transparency
and accountability of key public programs
and services.
Mizaniatouna was officially launched in its
French and Arabic versions on Tuesday,
December 15, 2015, at the Eighth Meeting of
the Joint Committee on Fiscal Transparency
and Open Governance, chaired by the
Minister of Finance of Tunisia. Thus far, it has
been visited by over 7,000 new users.
Raising fiscal transparency standards in
Tunisia
Over the last few years, the Government of
Tunisia has made important strides in
releasing and publishing information.
However, it has not yet adequately
addressed barriers to consumption by nontraditional actors such as civil society.

The Mizaniatouna portal was created to
serve as a one-stop shop to obtaining fiscal
information in Tunisia. It aims to improve
accessibility as well as the quality of fiscal
data. Indeed, this is a necessary precondition
to the effective use of such data by demand
side actors, including civil society
organizations, the media, think tanks, and
the broader public. The Mizaniatouna portal
is an attempt to overcome these usage
barriers and raise the standards of fiscal
transparency in Tunisia. The portal provides
an innovative way through which
information and data on public spending are
made available in intuitive, accessible and
user-friendly formats for a variety of users.
This includes user-driven, interactive treemaps, web-based interactive tables and
dynamic visualizations of the main
expenditure and revenue patterns.

government spending and revenues into
intuitive and user-friendly visualizations and
infographics. Each tab allows for spending
and revenue figures to be cross-referenced
across years using a variety of different
categories:


Why use Mizaniatouna? Starting from 2008,
the coverage of the Mizaniatouna portal
extends to highly disaggregated data of
central
government
revenues
and
expenditures, including those from special
treasury funds and public agencies. This data
is largely drawn from the BOOST database, a
World Bank-developed tool which imports
input from the Ministry of Finance’s
expenditure information management
system. The approach of the World Bank’s
BOOST program to working with public
expenditure and revenue accounts benefits
from a consistent methodology and process
that relies on robust quality checks and
control.
How does Mizaniatouna Work? The portal is
structured around seven tabs that transform
comprehensive and detailed data on central

Aggregate
Trends Interactive
overview of the government’s fiscal
situation.
Where does the money go? – Multilevel tree map that allows users to
identify and look deeper into
government spending by administrative
and economic category.
Budget Execution – Statistics and
infographics on government current
and capital spending, with a special
focus on the composition of
government subsidies.
Funds – Infographic that allows users to
monitor the budget composition and
profile of special treasury funds.
Parastatals - Infographic that allows
users to monitor the budget
composition and profile of public
agencies.
Pivot Table – Table allows users to
access and download the entire Tunisia
BOOST database via a web-based
interactive/pivot table.

Strengthening budget participation through
the Open Budget Portal
The Mizaniatouna portal presents a unique
opportunity to improve the quality,
transparency and effectiveness of the budget
process in Tunisia. It facilitates the access
and use of fiscal data by a multitude of
stakeholders, inclusive of government, civil

53
society organizations, the media and donor
organizations.
To this end, the World Bank worked closely
with the Ministry of Finance to support and
accompany
the
Ministry’s
external
communication efforts. This includes,
notably, the production of an animated video
explaining the budget process and the
importance of fiscal transparency. The video
was launched in three languages: Arabic,
English, and French and has attracted over
38,000 views.
To facilitate learning and understanding of
the content of the Mizaniatouna portal,
several informational and learning tools
were also embedded on the website. These
include:

Glossary of terms which provides a
definition of key budget terms and
concepts.

User manual which provides guidance
and information on the structure of the
national budget and particularities of
the data.

Informational video which introduces
Mizaniatouna to the public and
provides a step-by-step guide on
navigating the pages and content of the
portal. In addition, each tab is provided
with a brief explanatory guide.

In order to facilitate the usage of this portal
and build the technical and analytical
capacity of users, the World Bank has so far
delivered, jointly with the Ministry of Finance
and other partners such as the Global
Initiative for Fiscal Transparency (GIFT),
three workshops on how to use fiscal data
and actively participate in the budget
process. Participants have included over 100
civil society members, officials and
parliamentarians. More targeted coaching
and training sessions will continue to take
place to strengthen the commitment and
capacity of these groups in using this tool for
evidence-based advocacy, as well as more
effective public participation in setting
government budget priorities.
From transparency to participation and
accountability in the budget process
Beyond these initial outreach and capacity
building efforts, the Bank aims to support the
government in ensuring that its new efforts
around fiscal transparency can indeed result
in more effective public participation and
activities around national budget issues.
Such issues can range from analysis to
advocacy to monitoring how funds get
allocated and spent at the national and local
levels.
To ensure that the government’s fiscal
transparency efforts translate into further
accountability gains, there is a strong need to
maximize multi-stakeholder interaction in

Entry point to build
capacities of stakehloders in
public finance and budget
analysis and advocacy

Budget data
dissemination in
simple and
intuitive formats

learning. Specifically, stakeholders will have
the opportunity to engage with content
clarifying the use of budget analysis and
monitoring for better policies and improved
accountability. This in turn requires
adequate levels of budget literacy among
critical information intermediaries, such as
Parliament
(both
legislators
and
parliamentary budget officers), audit
institutions, civil society organizations, and
journalists.
The Government of Tunisia, through the
Ministry of Finance, has recently requested
support from the World Bank for the
provision of a more systematic and broadbased fiscal literacy program to promote
public participation in the budget process.
The expected outcomes of this training
program are: (i) increased capacity of
accountability institutions to conduct
budget reviews and perform more
efficiently their audit and scrutiny roles; and
(ii) increased awareness of non-state groups
regarding the availability of the data,
including a basic understanding of how to
use data effectively for their analytical and
advocacy needs.
In order to ensure the sustainability of this
engagement, this fiscal literacy training
program will support curricula and training of
train It will be implemented through the
National School of Finance, the Ministry’s
training arm.

Rebuilding
citizen trust
in
government
Improved participation
and accountability in
the budget process

54

Reforms
The Political Economy of Reforms:
Bringing Interests, Institutions and History Back into the Picture
Diane Zovighian
Governance Specialist,
GGP, MENA, World Bank

Policy reforms and development projects
occur in a political world. They have
redistributive effects, and as such are fought
for, opposed, and sometimes compromised
on by political actors. Furthermore, they are
implemented by an array of formal and
informal institutions, the history and
capacities of which affect the quality of their
implementation.
Development practitioners know that
politics and institutions are determining
factors for the success or failure of social and
economic policies and projects. However,
they often lack the relevant knowledge and
tools to incorporate them into the design of
their operations. This has in turn led to
development interventions that are not
properly tailored to the political economy
context and that fail to achieve real change.
In countries where budgets are tight and the
need to eliminate poverty and boost shared
prosperity is acute, this inefficient use of
public resources is a major challenge for both
governments and international financial
institutions.
The purpose of political economy analysis is
to bring politics and institutions back into the
design and implementation of reforms and
projects by ensuring that they are not only
technically viable — but also politically and
institutionally feasible. Specifically, political
economy analysis can accomplish this by:
(1) Generating knowledge on the political
and institutional factors that matter for the
success of a given policy reform or project.
Political economy analysis helps identify the
political and institutional risks, as well as the
constraints and opportunities that affect the
choice and implementation of reforms and
policies in a given country or local context.
(2) Translating this knowledge into
operationally relevant guidance for the
design of a policy reform or project. Political
economy analysis assesses how risks can be
mitigated, and constraints and opportunities
better factored into the design of reforms
and projects to increase their development
effectiveness. Three factors that shape the
political economy of a reform or project
include interests, institutions and history.

Each are important for the success of
development operations, and should be
addressed by project teams.

reforms are feasible in a given country
context, and how they can be most
successfully implemented.

Interests
Interest heterogeneity is a basic feature of all
polities: people have different tastes,
preferences, and endowments, which lead
them to prefer different types of
redistributive policies (Drazen 2000). The
critical political economy question is how
these conflicting interests are aggregated
and how they affect the choice and
implementation of a reform or project.

Making institutions accountable.

At an operational level, knowing how policy
preferences are distributed is key. Who are
the main actors in favor of a policy or
project? Who are the main veto players and
spoilers? The distribution of power across
these groups matters, as well as the
possibilities for forming alliances and
coalitions. How well are these interest
groups organized? What access do they have
to power and resources? What potential
coalitions, whether enabling or opposing the
reform or project, might emerge? How can
these different voices be heard? And,
importantly, how can consensus around the
reform or project be built?
Institutions
Institutions serve as the channel through
which conflicts of interests are resolved, and
policy choices are made and implemented.
The accountability and effectiveness of these
institutions determines what policies and

Accountability matters for development
effectiveness. Regular elections are the main
channel through which citizens hold the
State to account. However, many other nonelectoral political channels can also
participate
in
holding
governments
accountable, such as advocacy campaigns,
protests, and citizen monitoring of budgets
and service delivery.
Understanding the patterns of accountability
in a given country context can help project
teams decide whether the timing and design
of a reform or project are appropriate. In
democracies, where elections matter, a
number of questions should be posed. For
instance, at what stage of the electoral cycle
is a reform package more politically feasible?
How does the electoral calendar affect the
reform calendar?
Debates about reforms and projects are also
likely to occur in representative institutions,
such as the parliament, or the media. In this
context, how likely is opposition? How can it
be managed and how does it affect the
feasibility of reform?
In contrast, non-democracies, or young
democracies, raise a different set of
questions, many of which relate to the

55
skewed accountability relationship between
the rulers and the ruled. In regimes that are
dominated by a few, how can space for
reforms be created to foster more inclusive
policies that help reduce poverty and
increase shared prosperity? How can risks of
capture and distortion be mitigated? How
can the voice of the ultimate project
beneficiaries — the poor and vulnerable —
be heard and their needs incorporated into
project design? What category of nonelectoral accountability mechanism might be
feasible and useful?
Making institutions effective.
Beyond the nature of political accountability
and competition, political systems also have
different levels of capacities. Existing
systems of power in World Bank client
countries are different from the Weberian
ideal of state1, as well as from the Western
European and North American states. Some
states do not have full control over their
entire territories; others have a failing state
apparatus,
including
an
inefficient
administration; many depend on a range of
informal or traditional authorities to exercise
power and redistribute resources. In short,
states often fall short of being strong,
rational, and cohesive structures. Instead,
they are a blend of pockets of efficiency and
poorly-managed and over-staffed structures;
and traditional patronage structures may
coexist with ‘modern’ institutions.
For reforms and projects to make progress,
this institutional reality must be taken into
account. Are bureaucratic capacities aligned
with reform or projects needs at different
levels of government (for example, national,
regional, and/or municipal)? How can they
be enhanced? What non-state power holders
does the State rely on and for what? What
are the risks associated with state weakness
and the reliance on non-state actors? How
can such risks be mitigated?

History
Reforms and projects do not occur in a
vacuum: they are embedded in, and inherit a
legacy of institutions and practices that tend
to be sticky and difficult to change. As
Pierson (2004) maintains, “in a context of
complex social interdependence, new
institutions and policies often entail high
fixed or start up costs and they involve
considerable learning effects, coordination
effects
and
adaptive
expectations.
Established institutions generate powerful
inducements that reinforce their own
stability and further development.” In short,
historical legacies can render change
difficult.

To be effective in bringing about such
change, development policies and projects
need to confront the history of the sector
and learn from previous reform attempts.
What institutions matter in this sector, and
how established and stable are they? Are we
at a critical juncture of the history of these
institutions (for example, are they in crisis
and ripe for reform)? What happened with
previous reforms of this sector? What did
they try to change? Where did they succeed,
and what did they fail to change? How is the
current project or reform incorporating
lessons from past attempts and what is it
doing differently?

Political Economy in Practice: The “Doing
Development Differently” Process in
Morocco and Tunisia
In Morocco and Tunisia, the World Bank
Governance Practice is piloting a “Doing
Development Differently” (DDD) process.
Country Program Frameworks for Morocco
and Tunisia both recognize the need to
better take into account the political
economy of the diverse contexts in which
Bank-supported projects and policies are
inserted, and to design reforms and projects
that are adapted to these contexts.
In this context, the DDD is designing a Filter
to assess the institutional and political
feasibility of projects at the Concept Note
and Decision stages, and to advise teams
about how best to incorporate political
economy concerns. The Filter will draw on
existing political economy work at the
country level, as well as analysis within the
country teams about what has worked well
in the past and what has not. In this context,
it will help project teams and government
counterparts incorporate these insights into
the design of operations.
The first operation to benefit from the
support of the Filter is the Programmatic
Development Policy Financing (DPF) on
Business Environment, Entrepreneurship,
Financial Inclusion and Fiscal Efficiency in
Tunisia.

the politics of development, and to take into
consideration the interests, institutions and
history to decide when, what and how to
reform.
To do so, the everyday practices of both the
World Bank and its client countries should be
rethought.2 First, time and resources are
needed during project preparation to acquire
a deeper understanding of the political
economy of the sector and to tailor projects
to the local reality. Rather than focusing on
importing and imposing best practices,
projects need to ensure that they are a “best
fit”3 to the local political economy context
(see box). Second, a long-term commitment
is required to engage on real reforms that
may be necessarily contentious and that may
proceed in a non-linear fashion. The
emphasis on short-term disbursement rates
(the main metric of results in donor agencies
such as the World Bank) to measure project
implementation obscures the fact that
change is slow. It also creates incentives for
teams to focus on ‘quick wins’, such as
statutory reforms and the building of hard
infrastructure, rather than on systemic,
institutional change. Finally, operational
flexibility and a commitment to learning-bydoing and iterative approaches are
paramount to implementing reforms and
projects that may proceed in a slow and
protracted manner. Political economy risks
can only be addressed if operations allow for
experimentation and failure — and create
the space to learn from it.

REFERENCES
Andrews, Matt. 2013. The Limits of Institutional Reform in
Development: Changing Rules for Realistic Solutions.
Cambridge: Cambridge University Press.
Bain, Kathy. The Implications for Large Aid Organisations
of Doing Development Differently: The Case of the World
Bank’s Nigeria Country Team. Draft. Overseas
Development Institute.
Drazen,
Allan.
2000.
Political
Economy
in
Macroeconomics. Princeton University Press.
Pierson, Paul. 2000. “Increasing Returns, Path
Dependence, and the Study of Politics”. The American
Political Science Review, Vol. 94, No. 2.
Pritchett, Lant. 2013. “Folk and the Formula: Fact and
Fiction in Development.” WIDER Annual Lecture, No. 16
(April).

FOOTNOTES
1 For

a discussion of this point, see Pritchett (2013).
(2016) provides an in-depth discussion of the need
to challenge the practices of lenders. She highlights the
mismatch between the “institutional culture and
incentives in large development agencies” and the reality
of how development works, which requires critical
thinking, experimentation, innovation and learning, and
offers insights from the piloting of a “Doing Development
Differently” approach by the Nigeria World Bank country
team.
3 There is an extensive literature on “best practice”
versus “best fit”, and the need to push for reforms in
“function”, not only in “form”. See in particular Pritchett
(2013) and Andrews (2013).
2 Bain

Concluding Thoughts:
Challenging the Everyday Practices of
Development Actors
Development is politically disruptive. It
redistributes power and resources. As such,
it challenges the interests of people and the
habits of institutions. The challenge for
donors and governments is to understand

CITIZEN
ENGAGEMENT

56

By Berenike Schott, under the guidance of
Najat Yamouri and Janmejay Singh.
The authors would like to thank the task
team for their valuable insights and timely
information. The findings, interpretations,
and conclusions expressed in this note are
entirely those of the authors and do not
necessarily reflect the views of the World
Bank, its Board or its member countries.
Contacts Najat Yamouri, Janmejay Singh
MNA Citizen Engagement Focal Points CE In
MENA on the Intranet

Citizen Engagement
and Public Service
Delivery in the
Context of Fragility:
WEST BANK AND
GAZA
Background
In the West Bank and Gaza, waste is piling up.
With a high population density of an average
of 713 persons per square kilometer (km²)
and several thousand tons of solid waste
generated per day, the solid waste
management system is under stress. Unless
waste is properly collected, transported and
disposed in sanitary landfills, it poses a
hazard to health and the environment. This is
why the World Bank has been supporting the
Palestinian Authority in solid waste
management in the Governorates of
Bethlehem. Of this amount, US$12 million
comes from World Bank funding and US$
15.342 million from co-financing by other
Hebron through a US$ 27.342 million
investment project.
The project includes, among other things:
strengthening the institutional capacity of
the agency tasked with waste management;
constructing a new sanitary landfill;
providing related infrastructure; and raising
awareness about ways to minimize waste
and encourage recycling and composting.
Recent discussions concern the possibilities
of deriving energy from landfill gas and an
additional grant has been made available to
strengthen financial management and
sustainability.
The project has been engaging citizens in
three main ways: through community-based

monitoring, citizen decision-making and a
grievance redress mechanism. It shows that
citizen engagement is possible in fragile
environments, and can be a catalyst for
improved services and governance when
citizens, authorities and private service
providers cooperate. It is also an example of
successfully
using
information
and
communications technology (ICT) for citizen
engagement.

Community-based Monitoring through ICT
Engaging citizens not only in consultations on
the design of a project, but also in monitoring
its implementation is essential for closing the
feedback loop. Communication between
citizens and governments during project
implementation also needs to flow both
ways to ensure that citizen feedback
effectively informs the project. In fragile
environments, it can be difficult to reach
citizens due to movements restrictions or a
lack of information about current places of
residence. However, the vast majority of
citizens in the Palestinian Territories are

connected through their mobile phones or
the internet. Capitalizing on this opportunity,
ICT can be used to overcome that challenge.
In this project, ICT was used in different ways
to spread information, receive feedback and
engage in a conversation. About 20,000
citizens were contacted over the phone to
solicit their feedback about the state of solid
waste management in their neighborhoods.
Of these, 9,401 citizens completed the
satisfaction survey. Almost a quarter of
respondents reported that the biggest
problem with waste management in their
municipalities is that trash is simply littered
in the streets. About half of all respondents
said that waste is piling up in their
neighborhood, of which a third said that it is
producing an unpleasant smell. On the
brighter side, 84.6 percent of respondents
said that it is good to sort and recycle trash,
and 86.4 percent agreed with the statement
that citizens have a role in recycling. Over
half of respondents reported reusing objects,
such as plastic bags. However, the
respondents also cited a lack of financial
incentives and appropriate containers as
reasons why they might not recycle.
The survey also included questions for
businesses and enterprises, of which over 80
percent said that the new Minya landfill
constructed under the solid waste
management program was an improvement.
Over 75 percent agreed that it contributes to
a healthier and safer environment.

CITIZEN
ENGAGEMENT

57

The outcomes of this survey reflect the
relevance of the project and underline the
willingness of citizens to become more
involved, especially as appropriate structures
are established for it.
In addition to the surveys, a Facebook page
was set up to inform citizens about the work
of the Joint Service Council for Hebron and
Bethlehem (JSC-H&B), which is responsible
for solid waste management. It provides
them with the opportunity to give feedback
and engage in a conversation through a
social media platform well known to many.
The page has over 5,400 followers and is
regularly populated with up-to-date
information. The page also links to the
website of the JSC where, among other
things, documents on the Environmental and
Social Management Plan are accessible to
the public.
Short Message Service (SMS) is another
channel being used to reach citizens. In order
to raise awareness about the solid waste
management project in particular, SMS were
sent out to 20,000 citizens in different
Governorates with key promotional
messages
related
to
solid
waste
management. The SMS are used to inform
citizens about the environmentally safe
handling of waste at the Minya landfill, in
particular the importance of and
opportunities for reducing waste and
recycling trash.
In addition, SMS were used to inform citizens
about the dangers that burning trash bins
pose both to the environment and to the
health of the citizens, as well as informing the
citizens about the closure of 18 informal
dumpsites in the Bethlehem and Hebron
Governorates. Citizens were also encouraged
through SMS messages to pay their pending
waste collection taxes and arrears to the
municipalities and village councils.
While SMS are used to convey information to
citizens, the JSC-H&B also installed a toll-free
telephone number for receiving citizen calls
related to solid waste management. In this
way, it is ensured two-way communication,
and gave citizens the opportunity to voice
concerns and report shortcomings related to
waste management in their neighborhoods.
In one neighborhood for example, an entire
road was blocked by waste. Citizens reported
it and the local municipality was able to clean
the street and reopen it.

Giving Voice and Decision-making Power to
the Poorest
Improving solid waste management and
increasing safety and hygiene also involves
closing unregulated dumps. These dumps
were attracting pests, creating foul odors
and were prone to fires. At the same time,
they served as a source of income for
informal workers, known as “waste pickers”,
who would sort through the garbage and sell
anything of value. Conscious of the threat to
their livelihood that closing these dumps
could pose, the project team decided to
conduct consultations with waste pickers,
and collectively develop an approach that
would be responsive to their needs by
securing funding to support them in building
alternative livelihoods. As part of the project
design, the livelihood component of the
project was executed by the United Nations
Development Program (UNDP) with financial
support from the Islamic Development Bank.
Former waste pickers were given the chance
to go to university, start a micro-business or
work at the new recycling center. The project
not only provided them with alternative
sources of income, but actively engaged
them in the conversation and decisionmaking around which new livelihoods they
wanted to pursue and what kind of support
they would need to do it.
Grievance Redress and Resolution
Grievance Redress Mechanisms (GRM) have
become a widely used tool for citizen
engagement, particularly in projects related
to public service delivery. Citizens can use
GRMs to report inadequate service delivery
or log other complaints related to the
project. The comprehensive GRM system
established by the JSC-H&B is being
computerized to make it more accessible to

citizens. This will also make tracking and
monitoring its performance easier.
The success of GRMs is measured by the
degree to which complaints registered
through the GRM are being addressed. For
example, in response to complaints about
the unpleasant smell from waste disposals,
the JSC organized meetings at their offices to
discuss the issue and collectively find ways to
resolve it. Such local dispute resolution
mechanisms create spaces for citizens, local
governments and private service providers
to come together and work toward
improving public services in a cooperative
manner.
Lessons Learned
Within the framework of the Solid Waste
Management
Project,
the
JSC-H&B
established a partnership with a private call
center that is responsible for conducting the
satisfaction surveys and monitoring the tollfree hotline. The call center then passes the
information on to the JSC-H&B. With this
information, the JSC-H&B and the relevant
municipalities take the necessary action to
address the issues flagged by citizens. In this
way, the JSC-H&B and the municipalities can
focus their time and energy on resolving the
issues raised, enabling the call center to
continuously monitor the hotline, as well as
the Facebook page in order to ensure that all
feedback is captured and responded to. This
partnership allows for greater efficiency and
better quality in the use of ICT for citizen
engagement.
Increased communication and cooperation
between citizens, local governments and
service providers has proven key in
improving solid waste management in the
Southern West Bank to the benefit of all.

CITIZEN
ENGAGEMENT
Using a range of different ICT channels for
citizen engagement has been another
success. The telephone calls to conduct the
satisfaction survey reached 20,000 citizens,
as did the SMS messages with information on
solid waste management and recycling. The
Facebook page has received over 5,400 likes
and the toll-free hotline number enables
anyone with access to a phone to leave
feedback and register complaints without
any cost.
As movement is restricted or complicated in
large parts of West Bank and Gaza, ICT offers
an alternative way for government to reach
citizens — and for citizens to contact and be
in
conversation
with
government
independent of their physical location. In the
Palestinian
Territories,
strengthening
capacities for service delivery at the
municipal level has been central to the World
Bank strategy.
Municipalities have historically played an
important role in governance in the region,
are closest to the citizens and provide a
constant
in
an
otherwise
fragile
environment. In addition to projects focused
on specific services such as solid waste
management, the World Bank has also been
supporting municipal development more
generally. Given this focus on municipalities,
institutionalizing citizen engagement at the
municipal level is all the more important.
Within the framework of the solid waste
management project, citizen outreach has
been done through the installation of the
toll-free number that citizens can call to
report shortcomings and provide feedback
on
waste
management
in
their
neighborhoods, as well as through the
institutionalization and computerization of
the GRM. Throughout the project, the
Palestinian counterparts have been
champions of the citizen engagement
agenda. Fragility does not have to be an
impediment to citizen engagement. To the
contrary, the World Bank experience with
citizen engagement in West Bank and Gaza
indicates that it can bear fruit, especially at
the local level.

Rebuilding Trust
between Citizens and
Government:
MOROCCO

Background
“The people want change”, Moroccans
chanted in 2011 during the protests that took
place in the context of the Arab Spring. The
Moroccan Government responded with farreaching amendments to the Constitution to
enable greater transparency, accountability
and participation. Most notably, the new
Constitution stipulates that citizens have the
right to information, the right to petition,
and should be included in the policy-making
process through public consultations.
Significant changes to the Constitution have
thus been achieved.
Translating these new constitutional
provisions into laws and implementing the
laws, however, is an ongoing process. The
World Bank has supported this reform
process through the Hakama Development
Policy Loan (DPL) series. The DPL series is
supporting governance reforms across the
public sector from the central to the local
level. In addition, the Bank has provided
policy advice and technical assistance for the
design of most policy measures and laws
supported by the DPL, with support from the
Middle East and North Africa (MENA) MultiDonor Trust Fund. A second Hakama policy
loan of US$200 million is under preparation

58

to support the concretization of the
Constitution’s new governance principles
and rights.

Walking the Talk: How the Bank Supported
Citizen Engagement in the Reform Process
Citizen engagement in the Hakama DPL
stands out in two ways: First, the DPL itself is
based on extensive public consultations in
the framework of the National Dialogue on
citizens’
new
constitutional
rights,
government consultations on different
aspects of reform, as well as online
consultations and a Nano Survey to gather
citizen feedback on the reform agenda.
Second, the DPL-supported reforms directly
enable increased citizen engagement in
Moroccan public space. Citizens are given the
opportunity to access and comment on draft
laws, submit petitions, voice their concerns
and priorities in public consultations, and
benefit from e-government services.
The National Dialogue on Citizens’ New
Constitutional Rights
The reforms and projects did not arise out of
thin air.

CITIZEN
ENGAGEMENT
Rather, they are based on the outcomes of a
one-year participatory nation-wide dialogue.
Establishing a commission on consultation
and conducting a structured, transparent
and inclusive consultation process were
required measures for the DPL. Around
10,000
Moroccans
participated
in
consultations taking place in different
regions. They also presented memorandums
through an online portal, and joined
thematic workshops on various policies.
The outcomes of these public consultations
were compiled in a book that was handed to
the head of Government and is now available
to the public. The World Bank provided
technical assistance on how to structure and
implement such a dialogue and organized
thematic workshops with practitioners and
experts from other countries in order to
enable cross-learning and inform the
development of these new citizen
engagement policies.
Following the dialogue, the Ministry in
Charge of Relations with Parliament and Civil
Society drafted laws responding to the
priorities voiced by citizens, such as the right
to petition, the right to propose legislative
motions to Parliament and the right of public
consultation. The draft laws on petitions and
legislative motions were then submitted for
Cabinet review and adoption, prior to their
submission to Parliament in June 2015 for
adoption. The right to petition local
governments and to be consulted was also
included in the new organic laws on
communes, provinces and regions to foster
more participatory local governance.
Throughout this process, the World Bank has
been providing advice and input to the drafts
based on international good practices, as
well as the outcomes of the consultations.

Use of Surveys
Morocco is marked by great differences
between urban and rural regions, between
different education levels, socio-economic
status, gender roles, and —connected to all
of these — varying degrees of access to and
use of the Internet. In addition to the
National Dialogue, which gathered citizens in
public physical spaces all over Morocco, the
World Bank developed two surveys to solicit
feedback from citizens regarding their
interest in public engagement. One was
designed for businesses and asked specific
questions about their perspective on access
to
information.
The
responses
overwhelmingly confirmed that access to
information is seen as a lever for better
economic performance due to increased
transparency, data on households and the
Moroccan economy, as well as a reduction in
costs for paying for information.
The other survey was a Nano Survey that
appeared on the screens of 15,000 randomly
selected Moroccan internet users, of which
almost 4000 responded to the questionnaire.
The outcomes highlight the fact that many
would like to participate more in the
decision-making process, and have access to
more public information, especially online.
At the same time, there is limited awareness
of the right of access to information and the
right of petition, as well as very little prior
experience in public engagement.
Thus, the results point to the relevance of
implementing the reforms and continuing
the pursuit of the open government and egovernment agendas, especially in reaching
the predominantly young and urban
population that was represented in the
sample. “The most important audience of
the reform agenda are urban educated
youth. These are the same people who went

59

to the streets in 2011. They are thirsty for
dialogue,” says a Moroccan activist and ICT
specialist. He commends the e-government
agenda, but points to important next steps:
“Online platforms for dialogue are an
important step in the right direction but they
have to correspond to their [urban educated
youth] expectations. They need a 2.0 design,
[should] be integrated into social media and
use lighter language.”
Intermediary Results
Access to Information
Access to information is a key enabler of
informed
and
constructive
citizen
engagement. It increases transparency and
opens the door for improved accountability
and participation. Through the DPL, the
World Bank has supported the drafting of an
access-to-information law. It stipulates that
public information should be disclosed
proactively, and that citizens have the right
to request information from public bodies,
with specific and common exceptions.
As soon as the law is adopted, Morocco will
be eligible to become a member to the Open
Government Partnership, a multilateral
initiative promoting transparency and citizen
participation. It will subsequently develop
action plans every two years that lay out
commitments
to
further
increase
transparency, enable greater participation
and report on progress made in opening up
Government. Even now, individuals and
associations can access a number of draft
laws and comment on them on the website
of the Secretary General of the Government
(SGG). While previously restricted to laws
related to the United States Free Trade
Agreement of 2009, the SGG has now
expanded the categories of draft laws and
regulations that are posted to its website.

CITIZEN
ENGAGEMENT
Petitions
The Arab Spring was marked by protests,
which is one possible way of mass
expression. Another, more institutionalized
avenue for mass expression in participatory
democracies is petitioning. It is a wellestablished international practice and
enables citizens to peacefully demand
change and shape policy-making from the
bottom up. Morocco has gone a step further
than many countries by including the right of
petition in its Constitution. It applies at both
the central and local levels, as well as with
the Parliament, and supersedes potential
contradictory laws.
Dr. Chafik Rachadi, Deputy Speaker of the
House of Representatives, affirms the
commitment of Parliament to these reforms:
The subject of petitions and legislative
motions is an integral dimension of
Moroccan political and social history in
regards to the [transition] towards
participatory
democracy
and
the
concretization of the new rights introduced in
the new Constitution of 2011. For the House
of Representatives, these reforms help to
reinforce the eParliament initiative which is
currently underway in Morocco, and
constitutes a fundamental pillar of Open
Parliament and public engagement. Through
the implementation of these reforms, the
House of Representatives will enter the phase
of the institutionalization of mechanisms for
citizen and civil society engagement. This is
an essential aspect of my work in advancing
legislative affairs and parliamentary
oversight.
The right has been included in the organic
law on regions and communes and in an
organic law on public petitions that has been
adopted by the Council of Government. The
World Bank will continue supporting the
development of by-laws and their
implementation through the DPL, as well as
through technical assistance. Next steps
include the establishment of a centralized epetitions platform, a petitions committee,
implementing regulations, as well as training
and guidelines for public officials and
Members of Parliament.
E-government
The reforms initiated by the constitutional
changes signify a higher involvement and
expectation of both citizens and the state.
Citizens desire to be more engaged in policymaking through access to information and an
increased voice. They also expect the state
to deliver services in a transparent and

effective manner. In the digital age, online
platforms can be an effective tool not only
for providing information and opportunities
for participation in debates and petitions,
but also for accessing services. The Moroccan
government has adopted an e-government
agenda and is currently pursuing 69 egovernment projects. One of the largest
operational projects thus far is Watiqa, a
platform for ordering birth certificates
online, which are then sent to people’s
homes through the mail. Watiqa saves
citizens time, money — and is curbing
corruption by circumventing intermediaries.

Lessons Learned
Timing and Expectations
Since 2011, Morocco has been in a state of
transition. Its experience is different from
some other countries in the region that
underwent sudden regime change, including
partially violent aftermaths. The Moroccan
leadership has focused on gradual legal,
political and socio-economic change. This
approach promises more stability, yet comes
with its own challenges. Translating
constitutional changes into laws that have to
be agreed on by various public entities, and
subsequently implementing these laws, is a
long process. It requires both patience and
persistence.
A Moroccan activist calls attention to the
careful review of draft laws: “The danger is to
focus on quantity instead of quality. Rankings
can be a great way to push an agenda, but in
the end it is about the substance of the laws.
The devil is in the detail. Now is an
opportunity to review the draft laws and
ensure they are in conformity with
international standards and citizens’
expectations.” Driving the reform agenda
forward and at the same time managing
public expectations, especially regarding
timing, is a difficult balance to strike. It
demands good communication and
transparency about how the reform process
is faring, what the next steps are, and why
the government is tackling issues in a certain
order.

60

Champions and Critics
Neither the government nor civil society are
monolithic. Rather, each of them is
comprised of diverse voices and interests.
This adds to the time that is required to come
to a consensus, as well as to the number of
possible spoilers of the reform process. Any
reform process has champions and critics
and demands a sensitive and constructive
dialogue with both. The DPL followed a
holistic and integrated approach, working
with the entire public sector from the central
to the local level in order to reach all
stakeholders and gain their support for the
reform agenda. Using a participatory process
and adding the voice of the broader citizenry
to the debate has also helped to refocus
political debates on the priorities put
forward by citizens. Thanks to the National
Dialogue and the subsequent written
compilation of recommendations, both of
which had been prior actions to the DPL, this
process was made easier.
Participation at Every Step
Citizen engagement is sometimes in danger
of becoming a “checking the box”
requirement. In the context of a political
transition to a more open system, however,
it is crucial that it is done with the most
genuine intention and diligence. Citizens in
Morocco and elsewhere in the region rose up
in 2011 to show their governments and the
world that they were deeply dissatisfied with
the way that things had been done for a long
time. These citizens will, for good reason, not
be satisfied with a one-time consultation.
Rather, they demand increased transparency
and participation at every step of the way.
While the membership to the Open
Government Partnership will be a great
achievement, it is crucial that the subsequent
action plans also be developed in a
participatory manner. “We need to build a
culture of dialogue. This is new both for the
government and for civil society, and it will
take time to build trust. Developing the Open
Government Partnership action plan in a
cooperative manner will be an opportunity
to work on this,” an activist says. The first
Hakama DPL series has sought to strengthen
citizen engagement both through the policy
reforms it supports, as well as through the
mechanisms it deploys. In the next Hakama
DPL series, the government and Bank team
will focus on the implementation of these
new policies to institutionalize citizen
engagement and build trust.

61

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Integrated Reporting <IR>
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“Value Creation through
an Integrated Thinking Process”

What?
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and sustainability in the public sector
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Why?
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Who?
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62

Cover Story
Corruption & Development

63

Big Picture 64
Participation 71
Themes 76
Views from the Field 89
Institutions 94

Sectors 101
Operations 111
Views from Outside 115
Events 120

64

BIG PICTURE

COVER STORY

Overview
Corruption: Yesterday, Today and Tomorrow
Francesca Recanatini
Senior Economist, World Bank

On October 1, 1996 James Wolfensohn, then
President of the World Bank Group,
delivered his address to the Annual Meetings
and for the first time in the history of the
World Bank, he explicitly mentioned the
cancer of corruption.

“And let's not mince words:
we need to deal with
the cancer of corruption.”
Twenty years have passed and we, as
development practitioners, find ourselves in

a very different place than our colleagues in
1996. As many of the voices and views
collected in this Cover Story emphasize, we
have made some significant progress since
then. Today, not only can we discuss this
issue more openly and frankly with policy
makers and local leaders and find solution
together, we also have a better
understanding of the complexity of this
problem.
Today, our policy dialogue can be informed
by the data that have been produced and
analyzed over the past two decades. This
wealth of information allows us to treat
corruption as a development issue and not
just a moral issue: corruption is harmful for
standards of living and the distribution of
income of citizens – reducing literacy and per
capita income, while increasing infant
mortality. 1 What’s more, corruption distorts
public expenditure and increases poverty,
thus reducing investment efficiency.2
Talking more and more openly about
corruption has also helped to profoundly
change the environment in which we
operate.
This move toward greater
awareness began in 19933 with Peter Eigen’s
founding (?) of Transparency International.
Since then, many other non-governmental
organizations and thinkers have joined this
cause. This has led to an unprecedented
degree of awareness by the public about this
problem.
Such awareness and open

discussion are creating a force outside the
government that can support our efforts and
the efforts of local policy makers. Citizens,
business people, journalists, youth and
religious groups are increasingly asking for
better public services, greater accountability
and less impunity. This demand for better
governance and less corruption is energizing
and sustaining reforms at the country level in
a way that would have not been possible in
the early 1990s.
The greater awareness and more detailed
information about the phenomenon is also
allowing reformists in the government to
design more effective solutions and make
changes with the support of citizens. It is
refreshing to talk with representatives of
Parliaments, leaders of the business
community, local leaders, judges and
common citizens about alternative solutions.
These conversations push us, development
practitioners, to listen first and to think
outside the box for solutions that require
collaboration, coordination and a fair dose of
pragmatism
mixed
with
a
good
understanding of the risks involved.
Greater knowledge and understanding of the
issue have helped in supporting reforms
which reduce the risks of corruption in
countries, governments, and sectors. And
while some progress has been achieved, 4
one only needs to read newspapers from
around the world to understand how far we

65
still are from a “world free of corruption” and
how urgent the situation really is.

“Addressing corruption has become
increasingly urgent.
This sense of urgency arises in an
environment where growth and
employment prospects in many
countries remain subdued. ... The
urgency is global in nature since
corruption is a problem that affects
both developed and developing
countries.”
IMF April 2016
The proverbial glass is still half empty. What
can we do? Where should we concentrate
our thinking and efforts? We know today
that corruption is multi-dimensional,
complex phenomenon that manifests itself
differently in different countries and affects
sectors and citizens in different ways. This
requires targeted, specific policy solutions
that take into account and address such
heterogeneity. Such targeted policy
solutions need detailed and disaggregated
information, which is not always available or
accurate. They also need a better
understanding of how corruption differs
across sectors.
We have also come to accept that corruption
is about power and that to address it
governments and citizens need to be ready
to significantly re-allocate power within the
country.
This can make reforms less
appealing to governments and more
challenging to implement unless we
strengthen our collaboration with citizens
and business leaders. Additionally, we need
to continue to emphasize the link that exists
between corruption and growth and
highlight the gains that can be achieved
when corruption is reduced.

Two decades of work in this area have also
taught us the importance of implementing
reforms that support change in behaviors
rather than change in laws and regulations.
Such changes in behavior, while necessary,
are harder to foster and to sustain over a
long period of time. We need to increase our
understanding of the system of incentives
that lies behind corrupt activities, not just
the costs and the extent of corruption. This
requires thinking and working together with
colleagues and experts from different fields.
Which brings me to my last point. If you
agree that to reduce the risk and extent of
corruption we need to change behaviors and
reallocate power, then it follows that
addressing corruption requires time and
cannot be achieved through “quick fixes”.
Such reforms will need to be sustained over
the long term. To sustain change is one of
the most challenging tasks for policy makers
and as development practitioners we need to
find new ways in which this can be achieved.
Understanding the political landscape in
which the reform will be implemented and
building coalitions with critical stakeholders
involved in the reform process is a starting
point. This should be paired with a pragmatic
approach to anti-corruption efforts that
identifies specific opportunities and “drivers”
for change and finds ways – which may be at
times unorthodox - to work together. It
should also allow for flexibility and
adaptability of the reform process to the
evolving circumstances and challenges
during the implementation.
Data, power, incentives, sustainability,
collaboration, flexibility. Some of these
elements already feature in the pieces
collected in the Cover Story that our
colleagues have shared with us. These
elements also appear in the illustration

featured on page 62. The purpose of this
Cover Story is to provide an overview of
some of the key issues development
practitioners have tackled and those which
remain. This Cover Story tries to capture
how corruption affects different parts and
stakeholders in a country, and how some
solutions may lead to more visible and longer
lasting changes.
Despite our best intentions and efforts, this
Cover Story could not include and cover all
the topics and innovative initiatives that are
happening inside and outside our
organizations. However, it is our hope that
this collection of voices and experiences will
serve as a starting point for a renewed
discussion on corruption in our work and
with both internal and external colleagues.

FOOTNOTES
1

For the purpose of this note, governance is defined as
“the traditions and institutions by which authority in a
country is exercised” (Kaufmann et al., 1999, p.1) and
corruption is defined as the use of the power of public
office for personal gain. Herein, corruption is taken to
include all (and only) activities in which “public officials,
bureaucrats, legislators and politicians use powers
delegated to them by the public to further their own
economic interests at the expense of the public good”,
(Jain, 2001, p.73). This definition embraces many
different forms of corruption from administrative
corruption to ‘state capture’ – when powerful groups buy
influence and shape the laws to their benefit.
2 See, for example: Kaufmann (2000); Knack S. and J.
Anderson (1999); Gupta S., H. Davoodi, and R. AlonsoTerme (1998); Mauro (1995); Tanzi and Davoodi (1997);
World Bank (2004); Svensson (2005).
3 https://www.transparency.org/whoweare/history
4 The Business Environment Enterprise Performance
Survey (BEEPS) data offer one of the many examples we
have. In countries in Eastern Europe and Central Asia,
policy makers have been able to reduce the extent of
administrative corruption (World Bank. 2011. Trends in
Corruption and Regulatory Burden in Eastern Europe and
Central Asia World Bank Study 2011 (Washington DC: the
World Bank).

66

Speech
Remarks by World Bank Group President Jim Yong Kim at AntiCorruption Summit 2016, London, United Kingdom
Twenty years ago, my predecessor James
Wolfensohn delivered a ground-breaking
speech in which he called on the world to
take action against the quote “cancer of
corruption.” Since his speech, we have
turned aspirations into action: committing
to zero tolerance for corruption, opening the
World Bank to scrutiny, and also influencing
governments and the private sector to take
wide-ranging steps to prevent corruption.

On behalf of the World Bank Group, I thank
the Government of the UK and Prime
Minister David Cameron for his leadership in
bringing us together to address the scourge
of corruption. All over the world, citizens are
rising in protest against governments that
are perceived as corrupt. Corruption poses
an enormous obstacle to international
development and the global goal of ending
extreme poverty by 2030, and we must
do much more to combat it.

Corruption is stealing
from the poor.
It undermines growth and
prosperity twice over – not
only in the act of siphoning
away resources from their
intended purposes, but in
the long-term effects of
services not delivered
the vaccines that are not
received, the school
supplies that are not
delivered, the roads never
built.
As I travel the world, I see the corrosive
impact of corruption on the lives of the poor
and the resulting sharp decline of trust that
citizens have in their governments.

It is now time to go further. I
join Prime Minister Cameron,
Nigerian President Buhari and US
Secretary of State Kerry in a call
to action for governments, civil
society, the private sector and
international organizations on a
new agenda that draws on
citizens’ demands for
transparency and accountability,
and one that draws on all the
partners and tools.
It’s an agenda that builds on what I call
“radical transparency” – to create and use
transparency
to
combat
corruption
wherever we can.
First, we must continue to push for more
information and greater transparency
involving public funds. In Sierra Leone,
working with the UK’s Department for
International Development (DfiD) and our
United Nations counterparts, we helped the
authorities design and implement a secure
system of transfers that ensured the right
amount of money would reach the right
people on time, transparently and with
accountability. This not only contributed to
the fight against the Ebola epidemic, but it
also built the confidence of the population in
the government’s fight against the outbreak.
The publication of the Panama Papers
reminds us of the power of transparency,
leading to calls to end tax havens for the very
wealthy who wrongly hide their money from
governments.
There is no going backward – greater
transparency in the world will be forced upon
all of us, and that will help prevent and

uncover corruption in the years ahead.
Looking forward, we stand ready to support
emerging international agreements on
building standards and systems that enhance
exchange of information between countries
to avoid illicit flow of funds.
Second, we must use innovation and
technology to drive change around the
world. Technology can help us improve
service delivery and increase scrutiny of how
resources are used. Use of biometricallybased Smart Cards in India has meant fewer
resources were siphoned off from their
intended purposes — holders received 35
percent more money for a public jobs
program than other program beneficiaries
and received their payments 30 percent
faster. In Mindanao, in the Philippines, geospatial tracking and digital photography have
contributed to timely construction of roads
in conflict-ridden areas.
Third, we must do more to get citizens and
the private sector involved.
While
information is becoming more accessible, it
is troubling that the space for citizens and
non-state organizations to voice their
objections is often diminishing. The death of
activists, such as Berta Caceres, Nelson
Garcia and so many others in Honduras, has
had a chilling effect on accountability. We
must do all we can to protect the defenders
of transparency.
And finally, we know that successful anticorruption efforts must feature multiple
leaders both inside and outside of
government, working together. While the
global dialogue on corruption has often
focused on corruption in the developing
world, recent events highlight the role of
policies and practices in developed countries
that enable corruption. Studies have
demonstrated that ill-gotten assets are often
sheltered in developed countries, which
further impoverishes developing countries.
We support Prime Minister Cameron’s call
for a coordinated global effort to fight
corruption. Our goal is to end extreme
poverty in the world and we will not allow
corruption to stand in the way. We
will rededicate ourselves to this task and
move ahead with urgency to prevent what
amounts to stealing from the poor. Thank
you.

67

Interview
Debbie Wetzel,
Senior Director, Governance Global Practice, World Bank
that change the incentives of people vested
with public authority and trust.

SAR, China to South Korea, to Uruguay,
Botswana, and Indonesia.

Some examples of this work include the
following:

Confronting corruption requires people to
work across organizations and disciplines.
While the police and courts have a critical
role to play in reducing corruption, strategies
that are effective in reducing corruption in a
sustained way are systemic and include
building
inclusive
and
accountable
organizations, and changing the behavior of
individuals. The opposite of corruption is
integrity — not anti-corruption.

Corruption is a controversial topic among
policy-makers
and
development
practitioners. Former World Bank President
Jim Wolfensohn stated during the October
1996 World Bank-IMF Annual Meetings that
“we need to deal with the cancer of
corruption”. What do you think is the role
of a development organization like the
World Bank today when it comes to
corruption? What do you think is the role of
the Governance Global Practice in
particular?
It is hard to believe it has been 20 years since
former World Bank President Jim
Wolfensohn put the need to address
corruption on the table in such a forceful
manner. There a variety of ways we and
other development organizations influence
corruption. We provide basic data,
knowledge and information that influences
thinking. We examine and demonstrate the
impact of corruption on achieving
development objectives (such as the
Sustainable Development Goals – SDGs). We
work with governments, the private sector,
and civil society on combating corruption
and enabling inclusive development. We
help connect global issues to national- and
local-level issues, and help build the capacity
of public institutions to address corruption.
Finally, we also play an important role in
ensuring that our own activities are not
affected by corruption — and when
corruption does occur — it is called out and
addressed.
The Governance Global Practice (GGP) has
played, and will continue to play, a leading
role in the World Bank’s efforts to confront
corruption – working with clients and
partners to build capable, transparent,
accountable and inclusive institutions and
systems, and by contributing to initiatives

Support to the government of Chile to
address corruption scandals, including
revised procurement rules and the
creation of an independent Observatory
to monitor public sector practices.
Examining the extent to which the
previous ruling family in Tunisia had
captured the economy and introduced
regulation and oversight reforms to
prevent such capture in the future.
Participation in the development of
governance indicators for the SDGs,
contributions to the creation of
international standards within the
Financial Action Task Force, and an
active role in the development of
international anti-corruption strategies
through work in the G20 AntiCorruption Working Group, as well as at
the recent London Anti-Corruption
Summit.
Analysis of corruption risks and vigorous
responses to any evidence of corruption
found in World Bank-supported
projects.

Twenty years have gone by since this
famous speech. Are there any lessons that
have been learned for development
practitioners and colleagues working on
governance issues that you would like to
share with us?
Corruption is a complex topic, but we know a
great deal more about it than we did 20 years
ago. We have learned that the level of
corruption can change. Countries have
succeeded in reducing corruption in ways
that spur development – from Hong Kong

Reducing corruption is not a short-term task
or one that will yield a simple and
unchanging result. Corruption is constantly
changing as those who benefit from
corruption adapt to new situations. Building
integrity
requires
information,
accountability, and engagement. The World
Bank and other development institutions can
support anti-corruption efforts, but we
cannot expect that corruption will disappear.
On a personal note, you have been working
at the World Bank and in the development
field for more than two decades. Is there a
particular event or activity that made you
realize the importance of integrating the
issue of corruption in our development
work?
Rather than an event, it was a phrase —
“corruption makes the poor pay twice” —
that really convinced me that we need to
address corruption. We often think of
corruption in terms of big ticket kick-backs or
pay-offs, which are indeed a problem. But
more pernicious is the corruption that affects
the services delivered to the poorest people
— such as counterfeit vaccines, or the
children who do not get educated because
their parents cannot afford to bribe teachers.
This is the type of corruption that erodes our

68
ability to make a difference and affects the
most vulnerable.
Engaging with countries and sub-national
governments to reduce the risk of
corruption can happen at different levels: at
the global level (through the signing and
implementation of conventions and
agreements); at the country level, at the
sub-national level and at the sector level.
This typology of engagement requires a
medium-term vision and commitment —
and often broad consultation. How can the
GGP reconcile this medium-term approach
with the desire for short-term success that
all organizations face?
Addressing corruption is not always a linear
process. As is true for most public sector
reforms, confronting corruption involves
changing how individuals and organizations
function. These transition processes take
years to accomplish, and are composed of a
large number of much smaller changes.
Reducing corruption may involve improving
the functioning of the legal system, or
changing the public procurement process, or
reshaping when and how information gets
shared. Each of these changes need years to
be implemented. Projects supported by the
World Bank can help countries take the steps
necessary for medium-term success.
However, the Bank’s project work, in areas
such as improving health or infrastructure,
generates a wealth of information about the
ground realities of governance, and are
fundamental to reality-testing broader
strategies for changing the interactions
among government and its citizens. Our
work to reach short- and medium-term goals
helps us to identify and calibrate the broader
and more long-term objectives that are
required.

This past May, the UK government
organized a conference in London on the
topic of corruption
(https://www.gov.uk/government/topicalevents/anti-corruption-summit-london2016). The Bank and our Global Practice
were involved and committed to a series of
follow-up activities. Could you please share
with our colleagues the main outcomes of
the Conference and how the GGP will follow
up on the commitments made in London?

I joined World Bank President Kim at this
Anti-Corruption Conference and it was
amazing. There was a clear recognition from
the highest political levels of the need for
more concerted and coordinated actions to
fight corruption. Many heads of state
participated, and over 40 countries
participated and committed to a set of core
principles and actions to deter corruption,
end impunity, and provide support for those
who have been harmed by corrupt actions.
International agencies, including the World
Bank, the Organisation for Economic Cooperation and Development (OECD), and the
International Monetary Fund (IMF), pledged
to support the implementation of these
commitments.
Commitments made at the Conference
emphasized a dedication to creating new
standards for transparency, especially
regarding transparency around the real
owners of companies. Countries also
committed to increased sharing of
information and collaboration in areas such
as tax payments, and the return of stolen
assets. International organizations signaled
their dedication to ensuring adherence to
the highest ethical standards in their own
work, integrating analyses of corruption into
country
programming,
increasing
information requirements in areas like
procurement, and supporting countries in
their work to enhance prevention and
detection of corruption, and the return of
stolen assets.
A great deal of work is required in order to
move from commitments to action. The
commitments we made reflect our overall
approach to confronting corruption, and
build upon our experience and expertise. We
are strengthening our assistance to countries
seeking the return of stolen assets, and
preparing to help with the implementation of
new standards adopted by the Extractive
Industries Transparency Initiative (EITI) that
require collection of information relating to
the real owners of firms operating in the
extractive industries.
Within World Bank-supported projects, we
will begin to work with clients on gathering
information regarding firm ownership for
large value contracts and exploring ways to
align our practices around Open Contracting
principles. The principles of Open
Contracting emphasize the public’s right to
information regarding public procurement.
The Open Contracting Partnership has
established an Open Contracting Data
Standard, which sets out the information
that should be made public and the forms
that make this information most accessible
and useable. For more information, see
www.OpenContracting.org. We will also
work with other stakeholders to develop

platforms and mechanisms for sharing
information across countries and donor
agencies regarding firms and individuals that
have been associated with and/or
sanctioned for corrupt behavior.
Leadership of each of these activities will be
determined based on the nature of the
effort. For example, the Finance and Markets
(F & M) Team will take the lead on work
regarding stolen assets. The Integrity (INT)
Unit will take the lead on sharing information
relating to debarment and administrative
sanctions, and our GGP will be in front on the
implementation of new procurement rules.
We will also work to integrate these new
initiatives with our on-going work, and
ensure the sustainability of the effort
through linking follow-on activities from the
London Summit with international platforms,
such as the Open Government Partnership
(OGP), the G20 Anti-Corruption Working
Group and the process for implementing the
SDGs.

Increasingly the focus has been moving
from corruption to transparency and
accountability. President Kim has suggested
embracing the concept of “radical
transparency”. What does that mean for
the GGP in practice?
President Kim has used the term “radical
transparency” to signal the transformative
power of information. We are living in the
middle of an information revolution and the
power of information and information
technology to change people’s daily lives has
been repeatedly demonstrated. Real time
analysis of data is now readily available to
help with everything from navigating traffic
to
strategically
managing
supplier
relationships and international risks. New
technologies, applications, and networks
have altered the capturing, gathering, and
sharing of information — and have opened
up entirely new possibilities in regard to
participation in governance. We need to help
unleash the power of information to change
how governments and people interact in
ways that support equitable development.
In general, the public sector has lagged in
adopting and making full use of the potential
of information technology. Public websites
are an important way of communicating

69
understanding of corruption at the local,
national, and international levels.
Many people are currently thinking about
governance and corruption indicators. We
will explore ways to work with others in
developing new ways of measuring
corruption that are robust and relevant to
individuals, leaders, and organizations. In
this way, perhaps we will gain some fresh
perspectives.
Corruption is a complex and multi-faceted
phenomenon. The GGP has been taking the
lead within the World Bank on addressing
the risk of corruption at the country level.
However, this is not a task that the GGP can
successfully carry out on its own. How do
you plan to create better collaboration with
colleagues and practitioners from other
World Bank Global Practices?
information, but they really only scratch the
surface of how information can be used to
improve public sector performance and
accountability. New initiatives, such as Open
Contracting, and the Open Government
Partnership, represent the leading edge in
improving governance and accountability
through better use of information.
The GGP currently supports work on open
government, citizen engagement, electronic
governance, and accountability. We have
helped our clients develop electronic
systems for such things as financial
management, receiving and responding to
complaints, and tracking service provision. At
the same time, we have strengthened the
ability of civil society organizations and
private sector firms to produce and use
information. As we move forward, we will
need to establish greater linkages among
these strands of work in order to fully
operationalize our move toward “radical
transparency”.
Since 2011, the countries in the Middle East
and North Africa (MENA) region have been
undergoing a significant transition. This has
created considerable instability and
tension. While the focus for the GGP has
been on supporting this transition by
strengthening institutions in general, which
areas do you think could be an entry point
for engagement on corruption in MENA?
Citizen
engagement
and
greater
transparency, as noted, are very important.
However, in the MENA region, I think the key
issue is helping governments understand
that being transparent and interacting with
civil society are something that can help
them to deliver services and to use their
resources more effectively — and is not

something to be feared. This relates to
service delivery, but if effective, it could also
play a role in strengthening accountability,
building trust and reducing corruption.
Often our engagement in corruption issues
is triggered by discussions with our
government counterparts around indicators
(and the specific ranking of a country).
While these indicators have been extremely
helpful in bringing to the broad attention of
citizens the issue of corruption, they may
not be the most effective way to begin a
discussion on corruption. What are your
views on the future of the metrics of
corruption?
It is important. People respond to numbers.
This is true of normal citizens, as well as
senior politicians. There are times when
numbers — such as the amount of money
that has been wasted on a particular project,
or the amount of money that is being lost
through illicit financial flows — can
sometimes capture attention and create an
imperative for action. It is also important to
be able to have a way of tracking corruption
trends. Is corruption getting better or worse?
People and politicians can then determine
whether new activities and actions are
required.
The challenge for the World Bank and the
international community is to find ways to
measure corruption that make full use of
data that is already being collected. There is
a wealth of data — from household surveys
to indicators based on the perceptions of
business people, to data from management
information systems and audits, to
comments and observations of the users of
public surveys — that could be harnessed to
obtain a more dynamic and detailed

Many groups within the World Bank work on
aspects of corruption. In addition to work
undertaken by the GGP, efforts to
understand and address corruption are led
by country teams, global practices, as well as
by INT. The Finance and Markets GP has been
at the forefront of work on money
laundering and stolen assets, and the Energy
and Extractives team has worked extensively
on addressing corruption in the extractives
industry.
The International Finance Corporation (IFC),
the private sector arm of the World Bank
Group, has an active program of work on
improving corporate governance and
supporting
the
development
and
implementation of ethical compliance
programs for small and medium enterprises
(SMEs). Our Trade and Competitiveness (T &
C) colleagues have an extensive program of
work on addressing international trade fraud
and improving customs. Our research group,
the Development Economics Group (DEC),
has worked to analyze corruption and has
done intensive analyses on the impact of
corruption on development and the
dynamics of illicit markets (such as the piracy
market).
Addressing corruption continues to be a
priority for the World Bank Group as a whole,
and we are reaching out across the practices
and to our partners to see what lessons we
have learned from our past experiences and
how we can better work together in the
future. We are exploring mechanisms to
enhance collaboration on anti-corruption
across the World Bank Group, which would
enable senior management to have an ongoing dialogue on how the World Bank can
most effectively contribute to efforts to build
integrity and confront corruption.

70

In Their Own Words

“If the new compact is to succeed, we must tackle the issue
of economic and financial efficiency. But we also need to
address transparency, accountability, and institutional
capacity. And let's not mince words:
we need to deal with the cancer of corruption.
… Corruption is a problem that all countries have to
confront. Solutions, however, can only be home-grown.
National leaders need to take a stand. Civil society plays a
key role as well. Working with our partners, the Bank
Group will help any of our member countries to implement
national programs that discourage corrupt practices. And
we will support international efforts to fight corruption
and to establish voluntary standards of behavior for
corporations and investors in the industrialized world.”
James Wolfensohn, October 1, 1996, Annual Meetings

71

PARTICIPATION

COVER STORY

From Village Demi-Gods to Paper Toilets:
Why Citizen Feedback is Key to Combatting Corruption
Janmejay Singh
Senior Strategy and Operation Officer
MENA, World Bank

Corruption has often been described as a
‘cancer’ for development. Like the dreaded
disease, corruption can spread through the
entire administrative system, and slowly
disrupt and/or paralyze its functioning.
Moreover, like the medical disease of
cancer, corruption can go undetected even
in the best of projects — unless mechanisms
to speak directly to citizens and communities
are put in place to uncover malpractice. Two
stories that were recently shared at a
workshop on participatory monitoring and
evaluation (PM&E), organized by the World
Bank and the Egyptian Cabinet’s Information
and Decision Support Center (IDSC).

The first story comes from my own
experience — coincidentally, from a similar
training event I had done years ago for the
Malawi Social Action Fund (MASAF).
Established in the mid-1990s to provide a
range of development support to local
communities, the MASAF was by most
accounts a very well-respected, efficient,
and ‘clean’ organization1. It gained particular
credibility for the ‘cash-for-work’ program
that it ran to provide emergency short-term
employment support to poor families
impacted by the severe drought and food
crisis that had hit Malawi in the early-1990s.
In an effort to improve its beneficiary
feedback and community monitoring, the
MASAF was interested to learn more about
PM&E tools, such as the "community
scorecard”, which solicits direct feedback
from community groups about the
performance of government services and
programs2. Indeed, this was the subject of
the World Bank-organized training workshop
for the MASAF.
As part of this training, we took MASAF
officials to one of their beneficiary villages
for an actual ‘field test’ of the community
scorecard. It was during this field test that
we uncovered a whole plethora of
corruption. We knew things were wrong
when the women in a focus group gave not
only remarkably low scores (0’s and 1’s) for
the performance of the cash-for-work
program, but were also holding back in their
discussions. After much probing and

facilitation — a key asset of participatory
monitoring and evaluation (M&E) methods
— the truth finally emerged.
It so happened that the person who was in
charge of recording and handing out the cash
payments on behalf of the cash-for-work
program had become a village ‘demi-god’!
This person was not formally a MASAF or
government official, but instead a
community volunteer. Yet by being that
critical ‘last mile’ in the cash-for-work
program supply chain, he had managed to
benefit enormously from the position for
which he had ‘volunteered’. He would not
give out cash payments when they were due.
Instead, he would lend these out at usurious
rates (of 3-5 percent per month) for 3-6
months first — and only then give the
payments out after keeping the interest
profit for himself.
Over time, the situation became worse, as he
began withholding full payments, favoring
his friends and family for work projects —
and perhaps most shockingly asking for
sexual favors before he would give people
their rightful dues. Sadly, he had tormented
and abused a large number of women in the
village and, one-by-one, these stories started
coming out in the focus group discussion for
the community scorecards. What is
important to note is that none of this would
have been known without speaking to
communities directly because the official

72
records and audits for the cash-for-work
program were all clean!
Photo: Facilitators running one of the
focus group discussions for the community
scorecard in Malawi

In his office, the junior engineer showed the
team a list of beneficiaries with all details
entered, including subsidy amounts
disbursed. However, he would not allow the
team to photocopy the list of beneficiaries
with completed toilets. A sample of a similar
list from another block is shown below.
The official stated that he had ‘personally
verified’ the completed toilets in the village.
However, when the team arrived at the
village to verify the existence of toilets, they
found that not one toilet had been built
there under the scheme. What the village
community was told —and against which
they had given their information and
signatures/ thumb prints — was that this
was required for a survey of households
without toilets, so that a toilet could be built
in their household. Yet in the administrative
data, these were recorded as ‘toilets built’.
Clearly, they were nothing but ‘paper toilets’
as Dr. Pulavarti suggested. A complete report
of the CRC is available here6

The second story that was shared at the IDSC
workshop on PM&E came from Dr. Lalita
Pulavarti, a resource person of the Public
Affairs Foundation (PAF) in Bangalore, India3.
The PAF is a global pioneer in running Citizen
Report Cards (CRCs) — another PM&E tool
similar to community scorecards. However,
it is based on a robust quantitative survey of
service users instead of just qualitative focus
group discussions4.
In 2013-14, with support from the Bill &
Melinda Gates Foundation (BMGF), the PAF
had been commissioned by the Public Affairs
Centre (PAC) to run a citizen report card in
two major Indian states regarding the central
government's “Nirmal Bharat Abhiyan"
(NBA), now called the “Swachh Bharat
Mission (SBM”) — a massive subsidy
program to build toilets in rural India. Given
that over 600 million people in India still do
not have access to proper toilet facilities5,
the sanitation sector remains a top priority
for the government.
As Dr. Pulavarti recounted, when the PAF
team began planning for the CRC on the
Nirmal Bharat Abhiyan program, one of their
initial activities was a field scoping visit to
gather feedback to inform the questionnaire
for the proposed survey. In selecting sites for
the field visit, they chose one village, which
according to official records, had scores of
beneficiary households with toilets built
under the subsidy program — a great place
to get user feedback, one would imagine.

What both of these stories highlight is the
importance of seeking direct, actual user
feedback from citizens and communities
regarding the performance of public services
through the use of PM&E tools, such as the
community scorecard or the citizen report
card survey. Not only can these tools help to
reveal actual on-the-ground realities, but the
process of participating in M&E efforts,
obtaining information about ongoing
government programs (for example, for
toilet subsidies), and simply having one’s
‘voice’ heard can be very empowering for
communities. Furthermore, there is
evidence that, when done right, these
mechanisms for citizen feedback can have
strong development results.
In Uganda, for instance, a randomized
impact evaluation of a community
monitoring initiative in the health sector
found large increases in utilization and

improved health outcomes — including
reduced child mortality and increased child
weight— in ‘treatment’ communities a year
after the intervention7 Likewise, in India, a
randomized evaluation of information
campaigns and community engagement
around education in three states led to
improved learning outcomes and a
substantial reduction in the wastage of
public resources, specifically by reducing
teacher absenteeism and increasing teacher
effort in classrooms8.
Investing in greater citizen engagement and
beneficiary feedback through the promotion
of PM&E tools, such as the CRCs and
community scorecards, must therefore
become a priority for any government that is
serious about combatting corruption. This is
particularly important for the countries of
the Middle East and North Africa (MENA)
region, which have historically ranked poorly
in terms of both voice and accountability and
control of corruption.9
The World Bank has therefore placed a
strong emphasis on mainstreaming citizen
engagement in all of its work across the
globe, and in particular in the MENA region10
Through these efforts, and in collaboration
with influential local partners such as the
IDSC in Egypt, there will hopefully be a
greater uptake in citizen engagement and
PM&E approaches in the MENA region. Time
will tell how regarding how successful these
efforts will finally be in wiping out the cancer
of corruption in the region.

Figure 1: Example of official records
showing beneficiary names and subsidy
details for construction of toilets under the
Nirmal Bharat Abhiyan (from PAF
presentation at May IDSC Workshop)

73
The author would like to thank Dr. Pulavarti
and the PAF for verifying and correcting the
details of the Nirmal Bharat Abhiyan (NBA)
story, as well as for sharing the associated
photos.
FOOTNOTES
See for instance: World Bank (2010): Good Practice Note
- Governance and Anti-Corruption Innovations in the
Malawi Social Action Fund Project, Social Development
Note No. 131, June 2010.
2 For more information on community scorecards, see:
World Bank: Rapid Feedback: The Role of Community

Scorecards in Improving Service Delivery, How-to-Note
Series, 2011.
3 PAF is an Indian think tank dedicated to gathering
citizen feedback to help improve public service delivery.
For more information on the PAF visit, see:
www.pafglobal.org.
4 For more information on citizen report cards, see:
http://www.citizenreportcard.com.
5 See WaterAid (2015): It’s No Joke – State of the World’s
Toilets, 2015.
6 http://pacindia.org/wpcontent/uploads/2016/06/Implementation-of-a-CitizenReport-Card-CRC-1.pdf.
7 Bjorkman, M. and Svensson, J.: Power to the People:
Evidence from a Randomized Field Experiment on

Community-Based Monitoring in Uganda, Quarterly
Journal of Economics, 124 (2): 735-769, 2009.
8 Pandey, P., Goyal, S. and Sundararaman, V.: Does
Information Improve School Accountability? Results of a
Large Randomized Trial, South Asia Human Development
Discussion Paper Series, Report No. 49, Dec. 2011.
9 MENA had an average rank in the 25th percentile on
voice and accountability and 44th with regard to control
of corruption in the World Governance Indicators in
2014.
10 World Bank Group (2014): Strategic Framework for
Mainstreaming Citizen Engagement in World Bank Group
Operations. Washington, DC. World Bank.

Photo: Not one toilet on the ground. But an Official claims to have ‘personally verified’, and sends the PAF team to the village!
Villagers are angry and demand the official’s phone number.

Open Government
Transparency and Open Government for Accountability
Stephanie E. Trapnell
Consultant, Governance and
Public Sector Group

Transparency can be defined as
the availability of information,
both to the general public and to
the individuals that comprise the
government workforce. It also
refers to clarity about those
government processes, rules,
and decisions. The responsibility
of administering transparency
involves not only disclosure, but
also demystification and
dissemination of information to
stakeholders.
Transparency in the public sector facilitates
a process of opening government that can
lead to a number of beneficial outcomes.
Several studies have demonstrated the
importance of transparency to government
financial management, including its effect on

the prevention of financial crises (Gelos and
Wei 2005; Rahman 1998), performance in
international financial markets (Erbaş 2004;
Gelos and Wei 2002; Shin and Glennerster
2003), stable credit ratings (Arbatli and
Escolano 2012; Hameed 2005), improved
governance (Islam 2003, 2006), and reduced
corruption (Kaufmann and Bellver 2005).
However, transparency entails more than
just access to information. It also involves
citizen participation in the policy process and
service delivery, as well as various forms of
accountability with regard to specific
outcomes.
Transparency and accountability initiatives
are a means of making government more
responsive (to external actors), and
responsible (through internal mechanisms)
about its decision-making and activities.
Accountability is often understood through
the lens of the principal-agent model. The
relationship is conceived in terms of
Westphalian-type
incentives
and

74
expectations: does an agent (government)
act in the best interest of a principal (citizen)
who has conferred upon him some decisionmaking authority? If not, accountability
mechanisms are strengthened, usually
horizontally through oversight institutions or
audits.
This definition of accountability is common
in bureaucracies, where institutions are held
to account by an external forum. However,
these models are also reflected in conflict of
interest restrictions that allow governmental
organizations to hold their employees to a
certain standard expected of public office
holders. Similarly, financial disclosure
systems monitor the behavior of officials for
conflicts that may compromise their
integrity and/or instances of illicit gain.
Principal-agent models such as these focus
on a theory of change that involves setting
standards, obtaining information about
behavior, making judgments about whether
such behavior violated accepted norms, and
applying effective sanctions for violations
(Moore and Teskey 2006; Schedler 1999).
Transparency can serve as a foundation for
streamlining procedures that eliminate or
curtail discretionary behavior by public
officials and elected politicians. Proactive
disclosure of data or information allows for
data “mash-ups” or comparative analysis
that plays an important role in the scrutiny
of government operations (from allocation
of public resources, delivery of services and
the formation of laws and regulations). This
is particularly important for the monitoring
of public management systems such as
budgets, expenditures, procurement and
revenue mobilization. Access to information
is often the first step in exposing corrupt
behavior — allowing both civil society and
enforcement agencies to investigate

wrongdoing that influences public sector
results.
While transparency in public management
systems can eliminate opportunities for
abuse of office for personal gain, it is the
right to information that enables oversight
institutions and an engaged civil society to
uncover instances of corruption (Lindstedt
and Naurin 2010; Peisakhin and Pinto 2010).
Furthermore, effective enforcement is
essential to holding those corrupt officials to
account. The right to demand information
from the government serves as a solid
foundation for investigations that lead to the
exposure of corruption and malfeasance.
Governments
are
gatekeepers
of
information and will refuse to provide
information as it suits them.
Given the state of the political system, the
timing of elections, and/or even the
widespread existence of clientelism within
government,
political
leaders
and
bureaucrats may refuse to conduct their own
investigations. A right to information system
allows individuals and organizations sitting
outside the halls of government to make
claims over access and to invoke their rights
regarding information that the government
holds. This can serve as a mechanism of
public accountability, and it is often
strengthened
if
combined
with
dissemination of information through the
media and civil society organizations
(Lemieux and Trapnell 2016). So too, it
should be accompanied by the enforcement
of penalties through effective oversight
institutions that function as horizontal forms
of accountability.
REFERENCES
Arbatli, Elif, and Julio Escolano. 2012. Fiscal
Transparency, Fiscal Performance and Credit Ratings.

Washington, DC: International Monetary Fund. Working
Paper.
http://www.imf.org/external/pubs/cat/longres.aspx?sk=
25996.
Erbas, S. Nuri. 2004. Ambiguity, Transparency, and
Institutional Strength. International Monetary Fund. IMF
Working Paper.
http://ideas.repec.org/p/imf/imfwpa/04-115.htm).
Gelos, R. Gaston, and Shang-Jin Wei. 2002. Transparency
and International Investor Behavior. Cambridge, MA:
National Bureau of Economic Research. Working Paper.
http://www.nber.org/papers/w9260.
———. 2005. “Transparency and International Portfolio
Holdings.” Journal of Finance 60(6): 2987–3020.
Hameed, Farhan. 2005. Fiscal Transparency and
Economic Outcomes. Washington, DC: International
Monetary Fund. IMF Working Paper.
http://ideas.repec.org/p/imf/imfwpa/05-225.html.
Kaufmann, Daniel, and Ana Bellver. 2005.
Transparenting Transparency: Initial Empirics and Policy
Applications. Rochester, NY: Social Science Research
Network. SSRN Scholarly Paper.
http://papers.ssrn.com/abstract=808664.
Lemieux, Victoria L., and Stephanie E. Trapnell. 2016.
Public Access to Information for Development: A Guide to
Effective Implementation of Right to Information Laws.
Washington, D.C.: World Bank.
Lindstedt, Catharina, and Daniel Naurin. 2010.
“Transparency Is Not Enough: Making Transparency
Effective in Reducing Corruption.” International Political
Science Review 31(3): 301–22.
Moore, Mick, and Graham Teskey. 2006. The CAR
Framework: Capability, Accountability, Responsiveness.
What Do These Terms Mean, Collectively and
Individually? A Discussion Note for DFID and Conflict
Advisers. Institute of Development Studies.
http://www2.ids.ac.uk/gdr/cfs/pdfs/CARframeworkDRC
web.pdf.
Peisakhin, Leonid, and Paul Pinto. 2010. “Is Transparency
an Effective Anti-Corruption Strategy? Evidence from a
Field Experiment in India.” Regulation & Governance
4(3): 261–280.
Rahman, M. Zubaidur. 1998. “The Role of Accounting
Disclosure in the East Asian Financial Crisis: Lessons
Learned.” Transnational Corporations (7).
Schedler, Andreas. 1999. “Conceptualizing
Accountability.” In The Self-Restraining State: Power and
Accountability in New Democracies, Edited by Andreas
Schedler, Larry Diamond, and Mark F. Plattner. Boulder
and London: Lynne Rienner Publishers, 13–28.
Shin, Yongseok, and Rachel Glennerster. 2003. Is
Transparency Good for You, and Can the IMF Help?
Washington, DC: International Monetary Fund. IMF
Working Paper.
http://ideas.repec.org/p/imf/imfwpa/03-132.html.

75

76

THEMES

COVER STORY

PFM
The Impact of Corruption on Public Finance
Michael Schaeffer
Senior Public Sector Specialist, World Bank

and the transparency of rules, laws, and
process — as well as the severity of the
penalty system if caught1. We present
here, in some detail, the relationship
between public revenues and expenditures
and governance in general, and corruption
in particular.
The Fiscal and Public Finance
Management Dimension

What is the nature of corruption as it affects
public finance? There are many different
definitions of this concept. The simplest,
and broadest, definition is “the misuse of
public position for direct or indirect
personal gain.” Various factors contribute
to corruption. Factors that have a direct
impact
include:
regulations
and
authorizations; complex tax systems;
government spending decisions; public
provision of goods and services at below
market prices; and situations in which
public employees have discretionary
power over economic decisions. Among
the indirect causes of corruption that
must be included are the following: the
professionalism of the civil service; the
level of public wages; institutional controls;

In order to perform the roles expected by
its citizenry, governments (both national
and sub-national) need to collect
resources from the economy in an
efficient and appropriate manner, and
allocate those resources responsively and
efficiently. An important dimension in
assessing the extent and efficiency of
g o o d public finance is how the authority
to tax and spend is distributed between the
central (national) and local governments.
This raises a complicated set of issues
because there are many different types
of taxes and expenditures, as well as many
different ways in which (economic)
jurisdictions can be defined. In addition,
tax expenditure assignments can be
divided among different jurisdictions.
Particular types of governmental activities
often create fertile ground for corruption.
We examine here the fiscal aspects of
governmental function, specifically: the
incentive effects of fiscal decentralization,

taxation, public expenditures, and the
general provision of goods and services.
Incentive Effects of Fiscal Decentralization
The
governance
outcomes
of
decentralization efforts largely depend on
the design of fiscal transfers from the
central government. These fiscal transfers
m a y take many forms, including block,
conditional and matching grants, as well as
the assignment of shares of taxes collected
by the central government (revenuesharing taxes). The variety of central
government transfers and tax-sharing
schemes comprise an equally wide array
of incentive effects. Discretionary transfers
frequently may depend on the loyalty of
lower-level governmental officials. As a
result, discretionary transfers may tend to
strengthen the patronage networks of
national political systems.
In many countries, grants and political
mandates arise from centrally- (or
nationally-) determined policy priorities.
The centrally-determined priorities may
advance national priorities equally across
the country. Sometimes, however, these
centrally-driven priorities may deviate
from, conflict with, or distort the political
and fiscal initiatives that are being driven at
the local level. Thus, fiscal policy distortions
between central- and locally-driven
priorities may create incentives for
corruption.

77
Areas of Tax Corruption
Taxes based on clear laws —including those
not requiring direct contacts between
taxpayers and tax inspectors — are less
likely to lead to corruption. Tanzi (1998)
notes that corruption is likely to be a
problem in tax and customs administration
when laws are difficult to understand, and
can be interpreted differently so that
taxpayers need assistance in complying with
them.2 In addition, when the administrative
procedures (for example, the criteria for the
selection of taxpayer audits) lack
transparency and are not closely monitored
within the tax or customs administration,
the potential for corruption is likely to
increase. Most importantly, public sector
corruption will be pervasive when acts of
fraud on the part of the tax administrators
are ignored, not easily discovered, or when
discovered — penalized, but only mildly.
Tax and customs departments are often the
locus of major fraud and corruption, and
should therefore be potential candidates
for inclusion in national strategies to
combat corruption. Malfeasance in the tax
and customs departments can be
addressed by potentially providing greater
managerial freedom to the revenue
agency (through the hiring and firing of
personnel), and by establishing a meritbased public sector employment system —
while, at the same time, subjecting the
agency’s performance to close scrutiny. By
controlling the possibilities for theft, good
financial management systems c a n
change the economics of bribery. The
computerization of t h e tax and customs
administration is also an important
element of capacity building and revenue
administration, and can help in reducing
corruption.
Tax
computerization
projects
are
effectively tax administration projects.
Their timing depends on the status of legal
and administrative reforms of the tax
system. As a result, tax policy reforms
during the installation of an information
technology system could negatively affect
the potentially positive impacts of
developing a computerized system.3
Ideally, tax computerization should follow
and support tax policy reform.
Public Expenditure Management
Public expenditure management is
instrumental to effective public service
delivery and lowering the potential for
corruption. Access to information about the
content and performance of government
expenditures is critical to achieving
government accountability. The public
needs to know what goods and services are
provided, how well they are provided, who
the beneficiaries are, and how much they
cost.
To
promote
government

accountability, government budgets and
expenditure programs need to be disclosed
to the public. However, many developing
countries have weak or inadequate
mechanisms for citizens to monitor
government actions.
Periodic public sector audits are one
possible mechanism that be used to
promote transparency and accountability
with respect to good public finance. Despite
the effectiveness of this mechanism, many
developing countries fail to utilize an
independent public sector audit as a
benchmark for enhancing public sector
accountability. Critical pre-conditions for
restraining corruption include: the
creation/existence of physical audit
requirements; sanctions for late submission
or data manipulation; and making audit
reports available to the public.
Government contracting and procurement
procedures play a significant role in public
service provision, and also account for a
significant share of resource leakage and
corruption. The provision of goods and
services to local communities poses special
problems of information and monitoring.
These challenges include, but are not
limited to: bid-rigging and collusion;
manipulation of engineering specifications;
over-invoicing or undersupplying of
materials; and the wholesale diversion of
funds. Administrative oversight and
auditing can help in preventing
procurement corruption.
Corruption and Investment
Large capital investment projects have
frequently been subject to acts of highlevel corruption. Often, public officials have
a significant degree of discretion in
influencing the scope and magnitude of
public investment projects such that the
type of public spending can become

distorted. Public investment projects have
frequently been developed to provide
opportunities for some individuals or
political groups to gain concessions. In
general, this form of corruption has
resulted in projects and expenditures that
may not have been justified on the basis of
objective investment selection criteria.
Public finance corruption may adversely
affect investment in a number of ways
including: the total amount of investment;
the amount of foreign direct investment;
and the size and quality of public
investment. In this regard, Mauro (1997)
has shown that corruption can have a
significant negative impact on the ratio of
total investment to gross domestic product
(GDP).4. Indeed, the author demonstrates
that a reduction in corruption could
significantly increase the investment/GDP
ratio. Mauro estimated that a reduction in
corruption that is equivalent to 2 points on
the corruption index would raise the annual
growth rate by about 0.5 percent through
its positive effect on the investment/GDP
ratio. The obverse is also true, namely that
corruption can cause a drop in the
investment/GDP ratio, thereby negatively
impacting growth.
Reducing Corruption in Public Finance
In keeping with the three primary
objectives
of
public
expenditure
management, the budget process should
aim to: (i) ensure that the budget conforms
to macroeconomic policies and resource
constraints; ( i i ) allocate resources in
conformity with government policies; and,
( i ii ) provide conditions for
good
operational management. In minimizing the
corrosive influence of corruption on public
financial management, it is essential that
these three objectives for effective budget
preparation be improved. The coverage of
the budget should be comprehensive,

78
including all revenues and expenditures
of the government, whatever the
arrangements may be for managing some
particular programs. Operational efficiency
requires taking into account the specific
characteristics of different expenditure
programs
when
designing
budget
management rules (for example, rules
concerning transfers of resources from one
budget item to another).
Unclear lines of accountability and overlaps
in the distribution of responsibility can all
contribute to increases in corruption with
regard to public financial management.
Mechanisms for budgeting and policy
formulation should be explicitly designed to
reinforce coordination and cohesion in the
decision-making process. Strengthening the
budget preparation process requires
improvements as follows: (i) decisions that
have a fiscal impact should be scrutinized
together with direct expenditure programs;
(ii) spending limits must be built into the
budget formulation process from the very
start, and should be consistent with policy
priorities and resource availability; and (iii)
operational
efficiency
requires
line
ministries to be held accountable for
implementing their programs. However,
they can be held accountable only if they
have participated in designing the programs
and have authority for managing them. In
this context, a number of countries will
need to review and revise the distribution of
responsibilities in their budget preparation
processes.

Improvements in the public financial
management system are largely a function of
a government possessing sufficient political
will to develop and sustain reforms and make
institutional changes. However, it is the
distinction
between
institution
and
organization and the interplay between the
two, which is the key to understanding how
the public financial management system can
be improved. Budgeting and public financial
management organizations can be improved,
but economic, social and political behavior
will not change unless the rules and
procedures change (and are internalized) as
well. The reverse is also true: rule
modification is unlikely to produce results in
an operationally meaningful time frame
unless organizational improvements proceed
apace. Thus, improving public expenditure
management
requires
institutional
(regulatory and procedural) reform and
organizational development.
Stand-alone efforts to tackle administrative
corruption in public administration and
finance are likely to have limited impact.
Each country must diagnose the problem
and develop country-specific interventions.
There is no one simple formula for the
proper sequencing of these anti-corruption
activities. Nevertheless, the sequencing of
reforms should be designed to enhance the
credibility of the leadership and the
program to ensure early tangible results.
This type of approach, in turn, effectively
strengthens the constituency for reform.

FOOTNOTES
Asian Development Bank (ADB), (1999). “Governance,
Corruption and Public Financial Management,” p. 6.
2 Vito Tanzi (1998). “Corruption around the World.” IMF
Staff Papers. Vol. 45, Number 4.
3 Vito Tanzi (1998). “Corruption around the World.” IMF
Staff Papers. Vol. 45, Number 4, p. 37.
4 Paulo Mauro (1997). “Why Worry About Corruption?”
International Monetary Fund.

REFERENCES
ADB (Asian Development Bank). 2005 “Asian
Development Outlook 2005” Manila, Philippines: ADB.
______. 2004. “Country Strategy and Program Update
2005-2006 Republic of Azerbaijan.” Manila, Philippines:
ADB.
______. 2003. “Country Strategy and Program Update
2004-2006 Republic of Azerbaijan.” Manila, Philippines:
ADB.
______. 2001. “Improving Public Administration in a
Competitive World,” edited by S. Schiavo-Campo and
P.S.A. Sundaram. ADB Press
______. 1999. “Governance, Corruption and Public
Financial Management,” edited by S. Schiavo-Campo ADB
Press.
______. 1998. “Anticorruption: Our Framework Policies
and Strategies.” Manila, Philippines: ADB.
Mauro, Paulo. 1998. “Corruption: Causes, Consequence,
and Agenda for Further Research.” Washington D.C.:
International Monetary Fund.
______. 1997. “Why worry about corruption?”
Washington D.C.: International Monetary Fund.
Tanzi, Vito. 2000. “A Primer on Tax Evasion” in Tanzi, V.
(2000) ‘Policies Institutions and the Dark Side of
Economics’, Cheltenham pp. 154–170.
______. 1998. “Corruption Around the World: Causes,
Consequences, Scope, and Cures.” IMF Staff Papers. Vol.
45, Number 4. Washington, D.C.: IMF.
Tanzi ,Vito and Hamid Davoodi. 1998. “Corruption,
Growth, and Public Finances.” IMF Working Paper.
Washington D.C.: IMF.

Tax Administration
Designing an Anti-Corruption Strategy
for Tax Administration
Raul Felix Junquera-Varela
Lead Public Sector Specialist, World Bank

Corruption undermines tax administration
performance, either by impairing revenue
collection or by raising tax administration or
taxpayer compliance costs. Corruption can be
broadly defined as the misuse of public office
for private benefit. Common manifestations
are voluntary or coercive bribes (collusion),

patronage, or misuse of public assets (James
2009).
Corruption comes in many shapes, forms and
guises. A taxonomy of corruption divides
corrupt
practices
between
external
corruption (between tax officials and
taxpayers) and internal corruption (tax
officials alone). External corruption includes
extortion of taxpayers, collusion over valueadded tax (VAT) refunds, or technical
contraband, such as incorrect classification of
merchandise for customs tariffs. Examples of
internal corruption include corrupt practices
in tax audits or embezzlement of revenues
(Fjeldstad 2002).
Given the diversity of corrupt practices, a
multi-channel approach to intelligence
gathering is needed to discover and address
corruption — with punitive sanctions that
recognize diverse actors and motivations.

(James 2009) Anti-corruption strategies
should not only focus on ex-post
interventions that minimize the impact of
corrupt practices. They should also seek to
prevent corrupt practices that undermine the
administration of the tax system. Simplifying
the tax regime is an important means by
which corruption in tax administration can be
reduced. It can be achieved by lowering tax
rates
and
eliminating
distortionary
exemptions (World Bank and PwC 2007).
Reducing the complexity of the tax system is
a powerful instrument to minimize
corruption, as the certainty and stability of tax
norms are strengthened. An effective anticorruption strategy is also critical, and should
include ex-ante measures aimed at limiting
opportunities and motives for corruption.
Some experts (Das-Gupta, Engelschalk, and
Mayville 1999) identify a set of institutions

79
that can potentially reduce
motives and opportunities for
corruption (World Bank 2009).
Institutions can address the
motives for corruption through
transparent
budget
procedures, competitive base
pay, and effective sanctions.
Institutions can also design low
and few tax rates with limited
exemptions, limited contact
with taxpayers and suppliers,
computerization
and
automation, or independent
internal and external audits
(see Table 1).
Technology also plays a key
role in helping to achieve the
objectives of an anti-corruption strategy.
Automation of core business processes limits
contacts between taxpayers and tax officials
and reduces administration and the costs of
compliance. It can also help enable tax
administrations to better control key
procedures, such as taxpayer registration,
VAT refunds, or selection of tax audits. As a
result, tax administrations are less exposed to
corrupt practices.
Political economy variables and cultural
norms also play a key role in the design of an
effective anti-corruption strategy. In some
countries, cultural norms foster patronage.
For instance, political interference in civil
service appointments and career paths can
undermine the independence of the public
service. In many cases, patronage is
considered to be an obligation of tax officials
and widely accepted as normal behavior. In
light of this, cultural elements have to be

well as streamlining revenue
administration. As a result of
these actions, the number of
taxes and rates of key taxes
were reduced and tax
collections increased. The taxto-gross domestic product
(GDP) ratio rose from 12
percent in 2003 to 25 percent
in 2007, and has remained
sustainably at this level. The
share of e-filing rose from 0
percent in 2003 to 70-80
percent by September 2010.

taken into account in the design of anticorruption strategies.
Anti-Corruption in Practice: The Case of
Georgia
The case of Georgia illustrates how a
comprehensive and well-designed anticorruption strategy can yield positive results.
In 2002, Georgia suffered from rampant
corruption and bribery. Borders were
unprotected and smuggling was easy. Taxes
were stolen both before and after reaching
the budget. Further, the State was unable to
pay pensions or salaries. According to the
Minister of Finance at the time, corruption
became an accepted way of life and everyone
engaged in it.
Beginning in 2003, anti-corruption reforms in
tax administration were implemented to alter
this mindset and change staff incentives. Key
objectives included simplifying the tax
legislation and broadening the tax base, as

Georgia’s
anti-corruption
strategy demonstrates the
‘Ten Tenets’ of success. These
ingredients
include:
a
foundation of strong political will; establishing
credibility early; launching a frontal assault on
corruption; attracting new staff; limiting the
role of the State; adopting unconventional
methods; developing unity of purpose and
close coordination; tailoring international
experience to local conditions; harnessing the
use of technology; and using communications
strategically.
REFERENCE
Das-Gupta, Arindam, Michael Engelschalk, and William
Mayville. 1999. An Anticorruption Strategy for Revenue
Administration, PREM Note 33, Washington, DC: The World
Bank.
Fjeldstad, Odd-Helge. 2002. Fighting Fiscal Corruption: The
Case of the Tanzania Revenue Authority. CMI Working
Paper.
James, Sebastian S. 2009. A Handbook for Tax
Simplification. Washington, DC: World Bank.
World Bank. 2012. Fighting Corruption in Public Service:
Chronicling Georgia's Reforms. Directions in development:
public sector governance. Washington, DC: World Bank.

Table 1: Anti-corruption Tax Administration Institutions

Institutions that address motives
Basic motivation
Mission and vision statements
Elite ethos and esprit de corps





Positive incentives
Organizational autonomy
Transparent budget procedures and performance-linked budgets
Performance-linked compensation
Competitive base pay
Transparent and non-arbitrary reward procedures






Negative incentives
Effectives sanctions for corruption
Stronger taxpayer voice through independent surveys
Citizen review and oversight
Supply-side elements
Effective sanctions for bribe payers
Independent institutions to protect taxpayers from harassment and
extortion
Publicity for penalties

Source: Das-Gupta, Engelschalk, and Mayville 1999.












Institutions that address opportunities
Tax structure reforms
Low and few rates and limited exemptions
Withholding and presumptive taxes
Non-discretionary penalties
Organization and management
Functional organization
Increased use of third-party data
Limited contact with taxpayers and suppliers
Arm’s-length, transparent, and non-discretionary business procedures
Transparent human resource, procurement, and budgetary procedures
Computerization and automation
Privatization of selected functions
Internal and external checks
Independent internal and external audits
Effective management supervision procedures

Uncertainty as a Factor in Investment Decisions

80

The Case of the Russian Federation’s Regions1
Irina A. Levina
Research Fellow, National Research
University, Higher School of Economics,
Russia

Gregory V. Kisunko
Senior Public Sector Specialist, World
Bank

Israel I. Marques
Research Fellow, National Research
University, Higher School of Economics,
Russia

Andrei A. Yakovlev
Director, Institute for Industrial and
Market Studies at the National
Research University Higher School of
Economics, Russia
Which is more important for business
investment decisions — the magnitude of
the regulatory burden placed on them or the
consistency with which regulations are
enforced? On the one hand, a large body of
work built on the theory of transaction costs
(Coase 1960) suggests that excessive
regulation can serve as a barrier to
investment. On the other hand, an emerging
body of work has pointed to regulatory
uncertainty — that is, uncertainty about how
regulation will change or be enforced as a
key barrier to investment. To answer this
question, we focused on:
(1) Levels of well-ordered and predictable
corruption, which may be seen as an
expected part of the cost of doing business,
similar to an administrative burden; and
(2)Differences in region-specific variation of
experiences
with
decentralized
and
unconstrained (that is, “administrative”)
corruption, which follow from rent-seeking
by low-level officials and can therefore be
seen as a proxy for uncertainty of existing
rules.
Levels of predictable corruption can be
viewed as any other business expense,
whereas variations in the experience of
corruption
can
inhibit
economic
development because greater differences in
firms’ experiences with intraregional
corruption provide less certainty about the
enforcement of regulations. We then posed
the following two hypotheses:
Hypothesis 1: The greater the regulatory
burden on firms, the less likely they are to
invest.

Hypothesis 2a.: Variation in intra-regional
use of informal payments/procedures
creates uncertainty over when, and for
whom, regulations will be enforced and
government services provided. Intraregional variation in informal payments
should decrease investment.
Hypothesis 2b.: A higher volume of business
attacks on other businesses’ property rights
increases regulatory uncertainty, which
should decrease investment.
These hypotheses were tested using a
combination of unique datasets about firm
behavior and regional policy changes, among
them: the Russian Firms in a Global Economy
Survey (RuFIGE 2014); the European Bank for
Reconstruction and Development (EBRD)World Bank Business Environment and
Enterprise Performance Survey for Russian
Regions (2102); the World Bank ‘Doing
Business in Russia’ survey (2012); and the
Center of Public Procedures “Business
Against Corruption” (BAC), reflecting the
number of “raider” attacks2 in Russian
regions in 2011-2013.
Both the “bribe incidence” variable,
indicating the dispersion of corruption, and
the “bribe tax” variable, indicating the
average bribe paid, are not significant at
conventional levels in any of the tested
models. This suggests that absolute levels of
corruption are not significantly related to the
investment decisions of firms. This
interpretation is consistent with the idea that

corruption is regarded by firms as a tax, like
any other, to be planned around (Mauro
1995).
The results show that the proxy for
regulatory uncertainty is negative and
statistically significant, as expected by
Hypothesis 2a, suggesting that unpredictable
bribery is indeed likely to decrease the
probability of investment by firms. This result
is in line with the literature on regulatory
uncertainty, which has almost always found
that uncertainty in the enforcement of
written regulations leads to declines in
investment (Barradale 2010; Bittlingmayer
2001; Engau and Hoffmann 2009; Fabrizio
2012; Hallward-Driemeier and Pritchett
2015; and Lyons and Mayo 2005;). Where the
new results differ, however, is that past work
examined not the difference between de jure
and de facto written regulations, but the
predictability of informal practices —
specifically corruption — that are indelibly
tied to them.
Similarly, when raider attacks were
introduced into the model, results indicate
that these attacks have a negative and
significant effect on investment decisions.
This finding indicates that as raider attacks
increase, firms are less likely to invest. This
finding is consistent with Hypothesis 2b.,
which suggests that a higher volume of raider
attacks decreases the probability of
investment due to uncertainty by firms about
the sanctity of their property rights. Figures

81
1 through 4 illustrate the significance of
these results.
Figure 1 shows that an increase in the
average regional percentage of firms
reporting that they paid a bribe from low to
high results in a decrease in the probability of
investment of about 8 percentage points.
Figure 2 indicates that a change in the
average reported bribe tax from low to high
results in an increased probability of
investment of about 3 percent.

Figure 1: Firm's
Probability to Invest as a
Function of Bribe
Incidence by Region
50%
40%
30%
20%

43%

39%

35%

low

average

high

Figure 2: Firm's
Probability to Invest as a
Function of Bribe Tax
Levels by Region
50%
40%
30%
20%

38%
low

39%
average

41%
high

Source: World Bank, 2016.
Figures 3 and 4 illustrate the substantive
effect of measures of regulatory uncertainty,
variation for bribes paid (variation in “bribe
tax”) and raider attacks, respectively. Figure
3 indicates that going from a low level of
variation in “bribe tax” to a high level makes
the average firm 11 percent less likely to
invest. Similarly, going from a standard
deviation below the regional average
number of raider attacks to one standard
deviation above results in a decline in the
probability of investment of about 15
percent, that is, firms’ propensity to invest
decreases by about a third. Both of these
effects are not only significant, but also large
and indicate the importance of regulatory
uncertainty in the investment decisions of
firms.
These results suggest that there is great
value added from decreasing the
unpredictability of regulatory enforcement.
In particular, decentralized, unpredictable
corruption decreases the incentives of firms
to invest. In Russia, much of the
unpredictability of corruption and of
regulatory enforcement stems from a lack of
information on the part of regional
authorities (and, for that matter, federal
authorities) about the activities of lower
level bureaucrats in the regions. Such

information could potentially be provided
using collaborative institutions built between
regional governments and businesses that
can serve to alert authorities to problems
(McCubbins and Schwartz 1984; McNollgast
1987). Examples of such “fire alarm”
institutions could include regular meetings
between regional governors and business
representatives,
consultative
groups
attached
to
regional
government
institutions, and so on.

Figure 3: Firm's
Probability to Invest as a
Function of Bribe Tax
Variation by Region
50%
40%
30%
20%

45%

low

39%

average

34%

high

Figure 4: Firm's
Probability to Invest as a
Function of Frequency of
Corporate Raiders' Attacks
by Region
50%
40%
30%
20%

47%

low

39%

average

32%
high

Source: World Bank, 2016.
These results also suggest that generally
greater oversight of local officials by higher
level authorities might also be helpful,
although centralizing power may not restrain
lower level bureaucrats if the logic of such
centralization is mainly political (Magaloni
2008; Reuter 2016).
One possible way to address these issues
would be to modify the ways in which law
enforcement officials are evaluated for
promotions to better incentivize them to
protect the property rights of businesses. A
data-driven approach to promotions and
retention among regional authorities is
similar to human resource practices carried
out at the regional level in China, where such
policies were critical to aligning the
incentives of lower level bureaucrats with
the promotion of local economic
development (Landry 2008).
REFERENCES
Barradale, M.J. 2010. “Impact of Public Policy Uncertainty
on Renewable Energy Investment: Wind Power and the
Production Tax Credit.” Energy Policy 38: 7698–7709.
Bittlingmayer, G. 2001. “Regulatory Uncertainty and
Investment: Evidence from Anti-trust Enforcement” Cato
Journal 20(3): 295–325.

Engau, C., and V.H. Hoffmann. 2009.“Effects of Regulatory
Uncertainty on Corporate Strategy - An Analysis of Firms’
Responses to Uncertainty about Post-Kyoto Policy.”
Environmental Science & Policy 12(7):766–777.
Fabrizio, K.R. 2012. “The Effect of Regulatory Uncertainty
on Investment: Evidence from Renewable Energy
Generation.” The Journal of Law, Economics, and
Organization 29(4):765–798.
Firestone, T. 2010. “Armed Injustice: Abuse of the Law and
Complex Crime in Post-Soviet Russia.” Denver Journal of
International Law & Policy, 38: 555–580.
______.2008. “Criminal corporate raiding in Russia.”
International Lawyer 42 (4): 1207–1230.
Hallward-Driemeier, M. and L. Pritchett. 2015. “How
Business Is Done in the Developing World: Deals versus
Rules”. Journal of Economic Perspectives 29 (3): 121–140.
Handley, K. 2014. “Exporting Under Trade Policy
Uncertainty: Theory and Evidence.” Journal of
International Economics 94: 50–66.
Kazun, A. 2015. “Violent Corporate Raiding in Russia:
Preconditions and Protective Factors.” Demokratiizatsiya:
The Journal of Post-Soviet Democratization 23(4): 459–
484.
Landry, P. 2008. Decentralized Authoritarianism in China:
The Communist Party’s Control of Local Elites in the PostMao Era. New York: Cambridge University Press.
Lyon, T.P. and J.W. Mayo. 2005. “Regulatory Opportunism
and Investment Behavior: Evidence from the U.S. Electric
Utility Industry.” The RAND Journal of Economics 36(3):
628–644.
Magaloni, B. 2008. “Credible Power-Sharing and the
Longevity of Authoritarian Rule.” Comparative Political
Studies 41 (4-5): 715–741.
McCubbins, Matthew, and Thomas Schwartz. 1984.
“Congressional Oversight Overlooked: Police Patrols
Versus Fire Alarms.” American Journal of Political Science
28 (1): 165–179.
North, D. 1990. Institutions, Institutional Change, and
Economic Performance. Cambridge: Cambridge University
Press.
North, D., and B. Weingast. 1989. “Constitutions and
Commitment: The Evolution of Institutions Governing
Public Choice in Seventeenth Century England.” Journal of
Economic History 49: 803–832.
Reuter, O. J. 2016. The Origin of Dominant Parties. Book
Manuscript.
World Bank. 2016. “Uncertainty as a Factor in Investment
Decisions: The Case of the Russian Federation's Regions.”
World Bank Policy Research Working Paper No. 7806.
______. 1997. World Development Report 1997: The State
in a Changing World. New York: Oxford University Press.

FOOTNOTES
1

This note is based on the research paper prepared as a
background paper for the Russia Systematic Country
Diagnostic. The full paper is available at:
http://documents.worldbank.org/curated/en/66633147
2570249124.
2 One of the major peculiarities of Russia is the nature
and extent of the “corporate raiding” phenomenon.
Speaking in 2008, the American jurist Thomas Firestone
noted: “The illegal takeover of businesses, commonly
known in Russian as "reiderstvo" (raiding), has become a
major threat to domestic and foreign investors in Russia.
"Reiderstvo" differs greatly from U.S. hostile takeover
practice in that it relies on criminal methods such as
fraud, blackmail, obstruction of justice, and actual and
threatened physical violence. At the same time, though,
"reiderstvo" is not just simple thuggery. In contrast to
more primitive criminals, Russian "reideri" rely on court
orders, resolutions of shareholders and boards of
directors, lawsuits, bankruptcy proceedings, and other
ostensibly "legal" means as a cover for their criminal
activity. "Reiderstvo" is also more ambitious than classic
protection schemes in that it seeks not just a portion of
the target business' profits but the entire business itself…
In short, it is a new and sophisticated form of organized
crime.” (Firestone 2008, 1207).
3 This and other charts were generated by placing all
variables at their mean values and fixing the variable(s)
of interest at their mean for “average” values, mean
minus one standard deviation for “low” values, and
mean plus one standard deviation for “high” values.

Wasta
A key Challenge for Iraq’s Civil Service
Anya Vodopyanov
Governance Expert, World Bank

Middle East and North Africa (MENA)
regional average (Figure 3).
The recruitment of unqualified personnel
through political and nepotistic channels has
had many pernicious effects. In addition to
the unsustainable growth of the civil service
(World Bank 2014), it has led to a marked
weakening of state institutions. The declining
technical capacity and discipline of the cadre,
in turn, has led to deteriorating public service
delivery and low citizen trust in the state
(Brixi and others 2015).

International experience has shown that a
technically capable, motivated, and public
service-oriented
bureaucracy
is
a
cornerstone of a country’s development. As
the chief implementer of government
policies, the civil service shapes what the
government does: how equitably and
broadly it distributes vital public services;
how fairly and constructively it regulates the
country’s economic and business life; and
ultimately how much trust in the state it
generates among citizens and the private
sector. How effective the civil service is
hinges on its ability to recruit and promote
the best and brightest, that is, on its
emphasis on merit as the basis for
recruitment and career advancement.
One of the key challenges facing Iraq’s civil
service today has been the use of nonmeritocratic recruitment and promotion
mechanisms, particularly wasta – Arabic for
“intermediation” or pulling strings or utilizing
connections.
Reliable data is scarce, but available surveys
suggest that wasta in Iraq’s government
employment is pervasive. Figures 1 and 2
reveal that over the past 30 years the use of
informal networks to place candidates in
government jobs has grown exponentially,
while centralized appointment systems and
formal selection processes have declined. So
prevalent is wasta in Iraq’s public sector that
its meritocracy and favoritism ratings
measure poorly not only against
Organisation for Economic Co-operation and
Development (OECD) countries and other
Upper-Middle Income Country (UMIC)
comparators, but also when compared to the

Iraq lags significantly behind comparator
states on cross-national measures of quality
and accessibility of basic social services
(Figure 4) – a challenge reflected in local
public opinion polls, where over 50 percent
of Iraqi respondents rate basic public
services such as electricity, sanitation, and
health care as either “bad” or “very bad”
(UNDP 2013). Similarly, Iraq’s complex, nontransparent regulatory system made up of
approximately 22,500 laws2 compares poorly
to comparators, with strong negative effects
on the business environment. The World
Bank’s Doing Business Surveys for 2016
reveal that in most areas requiring
interactions with the government, Iraqi
businesses face more hurdles than
businesses in other MENA or UMIC
comparator states (Figure 5).
What explains the pervasiveness of wasta in
Iraq’s public sector? It is impossible to place
all of the blame on the legacy of Saddam
Hussein’s regime, since historical data

82

appear to suggest a greater emphasis on
meritocratic recruitment during his rule. The
source of Iraq’s wasta problem appears to be
more recent, and can be traced to 2003
when, in the aftermath of the country’s
liberation from Saddam, the main political
blocs representing the country’s major
identity groups (Shiites, Sunnis, and Kurds)
agreed on an informal sectarian “quota
system” — or muhasasa in Arabic — to guide
the apportionment of high-level government
positions. Under the muhasasa system –
much like under the confessional political
system in modern-day Lebanon — Iraq’s
cabinet posts, along with the positions of
prime minister, president, and the speaker of
parliament have been allocated in line with
an ethno-sectarian formula that also takes
into account the number of seats won by
each group’s political parties in elections.
While intended to ensure the various groups
a “fair” representation in government — the
muhasasa system has become a tool for
corruption. Since 2003 it has been widely
used by political parties and religious-ethnic
groups to “capture” the largest possible
share of the state’s resources by packing
“their” ministries with political loyalists and
co-ethnic cronies through clientelistic
appointments. Under the present system,
the individuals who are most likely to enter
the civil service without a rigorous objective
selection process are those receiving
informal assistance from their political party,
sect, or family (UNDP 2013).

83
The fundamental challenge with regard to
Iraq’s wasta epidemic is the limited
incentives that key actors have now in Iraq to
change the existing arrangements. (Mansour
and Jabar 2016). Political elites and political
parties supported — and even reinforced —
the status quo because building clientelistic
networks through wasta has been key to
growing their own personal prestige and
wealth.
Dislodging
the
present
unwelcome
equilibrium will be challenging and may take
a long time. Still, the ingredients for positive
change do exist, and can deliver results if
deployed strategically. One very important
ingredient is Premier Haider Abadi’s
commitment to reform. A reformist drive at
the center of government is essential for

dislodging the entrenched muhasasa system
— and Abadi’s persistence in pushing for
parliamentary approval of a technocratic
cabinet is a particularly important move in
this regard. The measure would help to build
the foundations of a more meritocratic civil
service committed to the substantive
mission of their ministries.
The second and perhaps even more
important force — though still largely
untapped — on the side of reformers is the
Iraqi public. The public’s fury at the
deteriorating quality and scarcity of public
services opened the political space for Abadi
in mid-2015 to put on the table a range of
sensitive and difficult reforms, even in the
face of resistance from an uncooperative
Parliament.

The same popular energy can be reaped
strategically to propel reforms in the future.
This can be achieved by focusing on reforms
that are gradual, justifiable, and that tangibly
enhance citizens’ lives through improved
service delivery. Although ordinary Iraqis
have come to depend on government jobs,
the ongoing popular protests since mid-2015
suggest that they also care deeply about the
quality of public services and rooting out
corruption in public life. Reforms should
leverage this outlook by emphasizing
improvement in the quality of the public
administration. However, these reforms will
take time.
The best place to start is by eliminating the
most blatant forms of corruption that
unambiguously impose a visible drag on

service delivery. A step in this direction is the
government’s recent effort to upgrade
ministries’ payroll systems such that all
salaries are paid through secure direct
deposit into bank accounts, and that all
payees be biometrically verified. By phasing
out cash payments and validating payroll
lists, these systems can prevent theft and
weed out payees that draw salaries illegally –
cases that are estimated to number in the
tens of thousands and are closely linked to
clientelistic recruitment practices.3 By
keeping unproductive individuals off the
payroll, the government can raise the overall
quality of the civil administration and free up
more funds for service delivery. Gradually,
this will lead to a virtuous cycle that restores
citizen trust in the state and mobilizes
support for deeper civil service reforms that

can put Iraq on a path of sustainable growth,
stability, and shared prosperity.

REFERENCES
Brixi, Hana, Ellen Lust, and Michael Woolcock. 2015. Trust,
Voice, and Incentives: Learning from Local Success Stories
in Service Delivery in the Middle East and North Africa.
Washington, DC: World Bank.
Mansour, Renad and Faleh A. Jabar. 2016. “Abadi’s
Gamble with Technocracy.” Carnegie Endowment for
International Peace. http://carnegiemec.org/syriaincrisis/63447
UNDP. 2013. “Corruption and Integrity hallenges in the
Public Sector of Iraq: An EvidenceBased Study.”
United Nations Office on Drugs and Crime.
World Bank. 2015. Iraq - Emergency Fiscal Stabilization,
Energy Sustainability, and State-Owned Enterprise
Transparency Development Policy Financing Project.
Washington, D.C.: World Bank Group.
______. 2014. Republic of Iraq Public Expenditure
Review: Toward more efficient spending for better service
delivery. Washington D.C.: World Bank Group.

FOOTNOTES
1

The survey on Working Conditions, Job Satisfaction and
Integrity of Civil Servants of Iraq (ICS Survey) polled more
than 31,000 Iraqi civil servants from both the federal and
Kurdistan Region Government ministries/institutions.
2 World Bank calculations, 2014.
3 A comprehensive government-wide audit of wage and
pension payrolls by the Federal Board of Supreme Audit
(FBSA) is currently under way to identify the fraudulent
payees. In 2014, a more limited government
investigations uncovered over 80,000 of fraudulent
payees on government payroll and public pension rolls;
their elimination resulted in savings of $180 million by
end 2015 (World Bank 2014, World Bank 2015).

84
Figure 1. Percent of Polled Civil Servants Receiving Help for
Recruitment from Different Sources (by year of recruitment)

Figure 2. Percent of Polled Civil Servants Selected by Different
Recruitment Procedures (by year of recruitment)

Source: International Civil Service (ICS) Commission Survey 2011 in
United Nations Development Program (UNDP) 2013.1

Source: ICS Survey 2011 in UNDP 2013.
Note: CV= curriculum vitae.

Figure 3. Meritocracy and Favoritism in Public Sector)
Employment. Scale from 0 (low) to 4 (high).
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

Figure 4. Quality and Accessibility of Public Services.
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

0.0
Importance of merit to upward
social mobility
OECD

UMIC

Quality of public services

Role of networks in the
selection of senior leaders
MENA

Iraq

OECD

Territorial coverage of public
services

UMIC

MENA

Iraq

Source: Institutional Profiles Database 2012.

Source: Institutional Profiles Database 2012.

Figure 5. Hurdles to doing business and interacting with government (low=best, high=worst).

200
180
160
140
120
100
80
60
40
20
0
Ease of Doing
Business Rank

Starting a
Business

Dealing with
Construction
Permits

Getting
Electricity

Registering Getting Credit
Property

UMIC Average
Source: Doing Business 2016.

Protecting
Investors

MNA Average

Paying Taxes Trading Across
Borders

Iraq

Enforcing
Contracts

Resolving
Insolvency

85

David and Goliath:
Corruption in State-Owned Enterprises
Lydia Habhab
Public Sector Analyst, World Bank

a good governance framework, and when
coupled with a weak rule of law
environment, the opportunities for Goliaths
abound.
How big of a problem is corruption? Globally,
illicit financial flows — including corruption,
bribery, theft and tax evasion — cost
developing countries US$1.26 trillion per
year, which is equivalent to the economies of
Belgium, South Africa and Switzerland
combined. This amount could lift the 1.4
billion people living in poverty, that is, on less
than $1.25 a day, above this threshold for at
least six years.2

As in the larger-than-life biblical tale of David
and Goliath, and reinforced through
Malcolm Gladwell’s book of the same title1,
the strength and assets of Goliath must not
be overestimated. Seeming
advantages
can
become
disadvantages, and vice versa.
Such is the case when stateowned enterprises (SOEs) — at
the intersection of business
and politics — are combined
with the discretionary use of
power, money, and resources.
SOEs are embedded in
economies through partial or
full government ownership
and have varying degrees of
commercial,
social,
and
political objectives. Some are
run just as well and efficiently,
if not better, than their private
sector counterparts, whereas
others have been deemed a
haven for corruption and patronage of
favors. Some companies play by the legal
and institutional ‘rules of the game’. Some
take advantage of making money and
making the rules, thereby creating David and
Goliath-type conditions and putting at stake
a lot of money, jobs, and citizen trust.
The “Goliath” SOEs flourish when the playing
field is not level and the rules are set in their
favor. They have preferred access to
financing, and policies are used as vehicles
for rent creation, market distortions,
creation of a monopolistic environment,
unfair competition, and lots of decisionmaking discretion. This leads to a squeezing
out of the private sector — including
potential for foreign investments and
sustainable development. In the absence of

SOEs, then, hold a delicate place in society.
They have the ability to ‘do good’ by
generating revenues for the government,
and providing services in industries too
expensive upon entry to be attractive to the
private sector — or be tailored to a segment

of the population not targeted or otherwise
reached. They can also be a huge detriment
to society when space is left open for
corruption. Society as a whole does not
evolve, progress, or transform by having
Davids and Goliaths battling for livelihoods
on terms that are established to benefit the
few.
In the Middle East and North Africa region,
SOEs account for 20-25 percent of economic
value-added across the region, and close to
30 percent of total employment.3 This is not
dissimilar to other regions of the world. The
reasons behind the creation of SOEs vary:
historical legacy, national security, natural
monopoly or social or political objectives,
and so on. Arguably, one of the key factors
of the Arab Spring came from an

environment in which political involvement
in the economy, and in exploitation of SOEs,
was to the detriment of the private sector,
jobs, and growth. Many protest cries were
against the system of cronyism, which
rewarded the elite few, as well as the
demand for social justice. Essentially, David
was created. The citizens that rose up in the
culmination of a perfect storm refused to be
passive. Many had nothing to lose. As with
David, their weakness then became their
strength.
To mitigate the prospects of such
detrimental
situations,
an
enabling
environment with safeguards against market
distortion and the misuse of public funds
should be coupled with a de facto and de jure
SOE Corporate Governance Framework. As
outlined in the Organisation for Economic
Co-operation and Development (OECD)
Corporate Governance Framework4 and the
World Bank Toolkit5 on SOE
Governance, this entails: (i)
separation of the state’s role as
an owner and regulator; (ii)
autonomy of the SOE vis-a-vis
the State; (iii) independence of
the Board of Directors; (iv)
transparency and disclosure
practices on SOE governance
structures, financial (and
where possible non-financial)
reporting, relationships to
other SOEs (such as public
banks
and
financial
institutions), and obtaining any
state grants or guarantees, to
name a few.
Poor governance of SOEs can
make them as formidable as
Goliath in size, resources, and
power. However, eventually, they become
stumbling blocks when their size outweighs
their efficiency, and stifles job opportunities,
growth and competition.
REFERENCES
Gladwell, Malcom, David and Goliath: Underdogs,
Misfits, and the Art of Battling Giants. 2013
2 Global Financial Integrity ‘Illicit Financial Flows from
Developing Countries over the Decade Ending 2009’
(2011) p. i. World Bank ‘World Bank Indicators
Database’ (2011); Oxfam Discussion papers, ‘A safe and
just space for humanity’. 2012. p. 5.
3 OECD, Towards New Arrangements for State
Ownership in the Middle East and North Africa, Paris:
OECD. 2012.
4 OECD, OECD Guidelines on Corporate Governance of
State Owned Enterprises, Paris: OECD. 2015.
5 World Bank Toolkit for Corporate Governance of
State-Owned Enterprises. The World Bank Group.
January 2014.

Global Issue

86

Illicit Financial Flows
Joel Turkewitz
Lead Public Sector Specialist, World Bank

Over the last year, there has been a great
deal of public and private discussion about
issues that have long existed on the margins
of the anti-corruption agenda — concerns
about foreign money driving real estate
markets in New York or London, or about the
value and costs of counterfeit medicines, or
how firms have been able to evade paying
taxes through a variety of hard-to-track
mechanisms. These stories highlight the
international movement of money illegally or
illicitly generated across countries, often
away from developing countries to
developed countries. Political and social
leaders from around the world have
recognized the problem, inveighed against
the practice, and demanded change. A global
commitment to reducing Illicit Financial
Flows (IFFs) is contained in Goal 16 of the
Sustainable Development Goals (SDGs),
alongside complementary commitments by
Groups such as the G7 and the G20.
The prominence of IFFs in international
dialogue is partially due to their estimated
size. Global estimates indicate that IFFs are
substantial and growing. IFFs are inherently
difficult to measure, given the illegality of the
flows and their underlying activities. Global
Financial Integrity (GFI) estimates that
developing countries lose almost US$ 1
trillion per year — a number that is perhaps
most usefully seen as suggesting the scale of
the phenomenon.1
The United Nations Economic Commission
for Africa (UNECA) has used trade statistics to
estimate that, between 2001 and 2010,
African countries lost up to US $407 billion
from trade mispricing alone (African Union
and others 2015). While these estimates are
difficult to verify (and are not always
consistent), they indicate that the amounts

involved are significant and pose widespread
problems, particularly in resource-rich
countries and fragile and conflict-affected
states (African Development Bank and others
2015). Regardless of the exact numbers, both
GFI and UNECA estimates show an upward
trend for IFFs from the years 2001 to 2013.
The existence of IFFs raises important
questions about the integrity of international
financial systems, the role of illegal groups
and illegal trade in national and regional
economies, and the ability to meet a global
challenge with actions that combine countryspecific
efforts
with
international
collaboration. IFFs are symptomatic of other
issues that constrain poverty reduction and
shared prosperity, such as vested interests,
and weak transparency and accountability.
The developmental challenge raised by IFFs
is compounded by the specific details of the
movement of money, which often serves to
transfer wealth from developing countries to
developed countries. Further, the activities
that generate IFFs, such as illegal logging,
fishing, or mineral extractive processes, can
impoverish
local
communities
and
economies.
Reducing IFFs represents an enormous
challenge which can only be achieved
through a concerted and coordinated global
effort. Although the foundations for
effective action already exist, taking them to
a scale with greater impact will require a

different level of collaboration among
developed and developing countries, as well
as between state and non-state actors at the
local, national, and regional levels. A
comprehensive engagement
by the
international community will encompass
strengthening financial regulations and
enforcing anti-money laundering rules, to
combating organized crime, to enhancing
border controls and tracking revenues
related to mineral extraction. It will need to
ensure that policies designed to stop IFFs do
not have unintended consequences, such as
creating barriers for remittances or reducing
access to banking services among poorer
communities. No single actor has the scale
and scope to be effective across the entire
breadth of engagements, but it is vital for
each party to identify what it is doing about
the issue and to determine how it can best
contribute in future.
Experience with the enforcement of antimoney laundering rules and enhanced
financial regulation has demonstrated the
power of these approaches, as well as their
limitations. Work in the anti-corruption
arena has also demonstrated the importance
of a balanced approach that includes
institutional
strengthening
because
increasing the power and authority of law
enforcement agencies in countries with
weak governance sometimes yields mixed
results and does not always promote the rule
of law.2

87
The World Bank, like many other
organizations, has been and continues to be
engaged in the area of IFFs. Indeed, it has
substantial experience working on antimoney laundering and asset recovery issues.
It has an extensive portfolio of activities to
help clients design and implement reforms
that address the activities that generate
illegal revenues. These engagements
encompass assistance to clients in
strengthening
accountability
and
governance
to
support
improved
management, control, and oversight of
specific activities. Core engagements include
support for anti-corruption efforts and
improved auditing, and assistance on policies
relating to the transparency of public
finance, tax evasion, public procurement,
trade facilitation and border crossing, natural
resource management and economic
regulation. (See Box 1).
The World Bank’s work provides an informed
perspective on what is needed in order to
promote change and address the challenges

in reducing IFFs and their impact on
development.
The World Bank will continue to provide
support to clients in three principal areas:
measuring IFFs; preventing the activities that
give rise to IFFs; and stopping the flow of
illicit funds and returning stolen assets. This
effort will continue to feature efforts at both
the country and international levels, and
include analytical work (for example,
measuring flows or assessing governance in
the extractive sector), and support for
enhancing the capacity of government, the
private sector, and non-governmental
organizations to implement new policies and
practices (for example, improving tax
administration and customs).
FOOTNOTES
1

GFI (2014) Illicit Financial Flows from Developing
Countries:
2003-2012.
http://www.gfintegrity.org/report/2014-global-reportillicit-financial-flows-from-developing-countries-20032012/. See also “Illicit Financial Flows: The Most Damaging

Economic Condition Facing the Developing World,” GFI,
Sept 2015, for GFI’s recent analysis on the quantum of
illicit flows and their impact.
2 See Huther and Shah, 2000, for a discussion of
differences in anti-corruption strategies.

REFERENCES
African Development Bank, the Asian Development Bank,
the European Bank for Reconstruction and Development,
the European Investment Bank, the Inter-American
Development Bank, the International Monetary Fund, and
the World Bank Group. 2015. “From Billions to Trillions:
Transforming Development Finance. Post-2015 Financing
for Development: Multilateral Development Finance.”
African Union and United Nations Economic Commission
for Africa. 2015. Report of the High Level Panel on Illicit
Financial Flows from Africa.
Global Financial Integrity. 2015. “Illicit Financial Flows:
The Most Damaging Economic Condition Facing the
Developing World.”
______. 2014. “Illicit Financial Flows from Developing
Countries:
2003-2012.”
http://www.gfintegrity.org/report/2014-global-reportillicit-financial-flows-from-developing-countries-20032012/
Huther, Jeff and A. Shah. 2000. “Anti-Corruption Policies
and Programs: A Framework for Evaluation.” World Bank
Policy Research Working Paper Series, No. 2501.
World Bank. 2016. “The World Bank Group’s Response to
Illicit Financial Flows: A Stocktaking”. Board Paper.

Box 1: Revealing Ownership—The Challenge of Implementing Constructive Beneficial Ownership Rules
Determining the true identity of the owners of companies is increasingly central to the efforts to stop money laundering, recover stolen assets,
and prevent international fraud and corruption. In the vast majority of cases involving high-value financial crime, criminals or their accomplices
will employ a legal entity (company or foundation) or arrangement (trust) to conceal their interest in the illegally acquired asset. Thus, it is
important that countries’ laws provide for the transparency of the so-called beneficial owners of those entities and arrangements if they wish
to fight crime. Uncovering the ownership of firms is also central to efforts to “know your client” in areas such as tax administration, procurement,
and anti-corruption.
Determining true ownership is often neither simple nor easy, especially for agencies with little experience and information sources in such
efforts. The World Bank is increasingly working with countries in this effort. A large component of Bank assistance is the technical support offered
to countries in defining and implementing rules regarding beneficial ownership within the context of anti-money laundering and asset recovery.
This is especially important in smaller international financial centers that serve a large non-resident client base.
In 2015, the Stolen Asset Recovery initiative supported a small international financial center on the transparency of International Business
Companies (IBC). This activity included both a diagnostic on the current status, as well as practical recommendations for improving the
transparency of the regime for the establishment of IBCs. As such, it could serve as a model for support to other jurisdictions facing problems
identifying beneficial owners of their corporate vehicles. Additional work on beneficial ownership is being done as part of our efforts on tax
evasion, governance in extractives industries, and in procurement.
Source: World Bank 2016.

In Their Own Words

88

"Here is a conjecture: corruption is a way for many economists and policymakers to talk
about bad political outcomes without talking about politics. As long as the discussion is not
about politics, there can always be a simple, non-political solution, often designed and
operated by some impartial clever politicians, advisers or economists. If there is corruption,
then maybe bureaucrats should be paid a higher wage (to create better incentives), or
more clever remuneration and promotion schemes should be designed (and yes you
guessed it by some well-meaning impartial policymakers and economists), or maybe better
information can detect them being corrupt. Corruption is thus viewed as a malfunction,
just like a market failure, which can be solved by a clever intervention, without
fundamentally changing the political economy — or the politics — of a society. Corruption
is an attractive talking point for both politicians and many economists because it is
fundamentally viewed as apolitical. But poverty, alas, is not."
Daron Acemoglu and James Robinson, Authors of Why Nations Fail.

VIEWS FROM THE FIELD

COVER STORY

89

Interview
Asad Alam,
World Bank Country Director for Egypt, Djibouti and Yemen

What do you think is the role of a
development organization like the World
Bank today when it comes to fighting
corruption?
I think that fighting corruption is a
development imperative, and we should be
very concerned by corruption and its harmful
effects on development. This is very clear to
me for three reasons. First, it is obvious that
corruption diverts resources from their
developmental purposes. If, for example,
there is a program providing cash transfers to
people, corruption may divert resources
from its poor beneficiaries into the pockets
of a few, thereby undermining development.
Second, it is clear that corruption benefits
the elite and the people connected to power
in a country, while it is much more harmful
for the poorer segments of the population.
Whether it is an “under-the-table” payment
for a health service — which a poor person

may not be able to afford, while a richer
person may have access to better
alternatives and have the resources to pay —
or other types of corruption, it is often the
poor that are penalized most. Thus, for an
organization like the World Bank, which is
focused on fighting poverty and inequality —
our twin goals — it becomes central to focus
on the issue of corruption.
Third, and finally, there is a more narrowly
defined reason for the World Bank to focus
on corruption — that is, a fiduciary reason to
ensure that the money we receive is used for
the intended purposes. So, from a narrow
but very important point of view, the
fiduciary dimension has become extremely
important for us to ensure the integrity of
our work and the flow of funds.
What is your advice on bringing the issue of
anti-corruption to the policy table and
finding constructive ways to work with
government officials?
Governments generally have the fight
against corruption as one of their objectives.
It is something that it is ubiquitous.
However, the real situation on the ground
may be very different depending on the
country. My own experience — working in
many countries across different regions — is
that, by and large, most government officials
want to do the right thing. They want to
serve the citizens of their country, and they
want to provide services to their people. Yet,

the same government officials may not be
empowered, and the political environment
may not be conducive to progress in
addressing the corruption issue.
What I have found very useful is to engage on
three levels. First, I think it is useful to
demonstrate the costs of corruption. What is
the country losing because of corruption?
What are the people and the citizens losing
in terms of lost opportunities and/or
benefits? The more we can bring this
evidence to the table, the more support we
can generate in combatting corruption.
Second, I think it is very helpful to share with
government officials some examples of
successful experiences on how other
countries have dealt with corruption.
Bringing these stories from other countries,
specifically regarding the “how-to”, can be
very beneficial. It can bring confidence that
these are things that can be done. These
examples should really focus on the “howto”, on how people thought about the issue
and came up with solutions.
Some years ago, I was part of an effort that
led to a book about Georgia and its efforts to
fight corruption in the period after the Rose
Revolution. In this case, we documented the
work and the experiences of the people on
the front lines — specifically those
practitioners who were fighting corruption
— regarding the policy and institutional

90
changes, as well as the specific
administrative measures and reforms that
were introduced to root out corruption in
many areas of the public sector. I think that
in general we need to share a lot more of
these experiences and connect the
practitioners across different countries and
regions.
Third, when we engage with governments on
issues of corruption and propose
recommendations, we need to be careful
that we do so in a way that is applicable to
that country’s context. It has to be very
specific and focus on things they can actually
do. Now, we at the World Bank like to think
in terms of simple frameworks that can be
used. These frameworks can be very helpful
when talking about corruption, whether we
are promoting transparency, or enhancing
voice and participation, or fostering
accountability. We should then use these
frameworks to come up with solutions that
are real, tangible and practical. This becomes
extremely important when we engage with
government officials.
What do you think the Bank’s approach and
priorities should be when dealing with the
issue of corruption in fragile or post-conflict
environments?
I think every country is different, thus we
need to think very carefully about the
specific country context — especially those
that are fragile or post-conflict. We need to
base our diagnosis and recommendations on
the evidence at hand. For example, what is
the type of corruption we are talking about?
Are we talking about a political regime that is
the source of corruption? Are we talking
about a system that has very closed
connections to the powers that be? Or are
we talking about petty corruption or
corruption that comes from distorted
economic policies? This would help us
develop an approach that is very country
specific, addressing the fundamental drivers
of corruption, and developing very tailored
recommendations for the country.
One of the things I found in my work in
several countries is that the incentives for
corruption often arise from excessive
government interventions in the economy,
which often lead to distortions and economic
inefficiencies. If economic incentives are
distorted
and
create
rent-seeking
opportunities — going back to classical
economic development literature on
corruption and rent-seeking behavior — and
if we can eliminate those policy distortions,
we can eliminate the problem of corruption
itself. Thus, I think that a precise diagnosis of
the problem is very helpful as a starting point
for any engagement, especially when
conditions on the ground are challenging and
fragile.
However, regardless of what the diagnosis is,
there are a set of actions that are always

good to perform.
Transparency and
accountability in the public sector should be
promoted. This, in my view, cannot be overexaggerated because of the importance
these factors can have. The transparency of
the public accounts, the transparency of the
procurement process, the transparency of
audit reports, the transparency of the
government budget — all these aspects are
absolutely key because it is through
transparency that a whole system or culture
of accountability can be unleashed
throughout the society. This will help
promote voice and participation too. This
will necessarily take time, but it is essential in
order to promote good governance.
Therefore, transparency, accountability and
participation should be at the center of our
efforts.
You witnessed firsthand and supported the
institutional reform efforts that took place
in Georgia and South Africa. Are there any
lessons from these experiences for our
colleagues working in the MENA region?
From our own work on institutional reforms
and fighting corruption in the countries you
mentioned and some of the other countries
where I have worked, there are some lessons
that are ubiquitous and can be applied to
different countries.
First, one cannot
underscore enough the importance of
leadership, broadly defined. I am stressing
this aspect because we often talk only about
political leadership, which is of course

important. However, from a recent book we
did on South Africa, looking at inclusive
institutions and what has worked in South
Africa, we found that leadership plays an
important role at different levels, and not
only at the highest political level. It can
involve leadership within a line ministry,
within an agency, or at the level of the
executive officials. Therefore, I believe that
a culture of leadership in governments is very
important at all levels of the government.
Indeed, this is a lesson close to my heart.
Second, when countries undertake a process
of fighting vested interests, eliminating
corruption and changing behavior, it is about
transforming society in significant ways. This
requires efforts at promoting a virtuous cycle
of change. This is not easy to do. Often we
look for a “big bang” approach that can lead
to quick results. However, in many cases,
changes come from a cluster of small
changes that, when taken together, produce
substantial results. This strategy also helps
to demonstrate quick results and benefits to
the population. This, in turn, can help create
the popular support that is necessary to
sustain anti-corruption efforts — especially
when tackling powerful vested interests. If
we can develop mechanisms that can
produce results quickly, and make the
benefits from them very tangible and visible
to the population, this can create the popular
support that is needed for the reform
process. Reformers also need to learn from
what works, and what does not, and make

91
necessary adjustments to the reforms. This
will help create a virtuous cycle of change
which would sustain the reform process.
Third, it is key to ensure that the incentives
in the system are aligned in a way that is
sustainable over time. Sometimes, you may
have a very special effort to address
corruption in a particular sector or in a
particular project which is driven from a high
level. Then, the energy disappears. If instead
you create a system of governance, a system
of public service delivery, for instance, that
has a set of incentives that are mutually
reinforcing and supporting the right types of
results, then the anti-corruption efforts
would have a greater chance of achieving
success and being sustainable. Now, this
may seem self-evident, but in some ways
these ‘back-to-basics’ aspects are forgotten.
Some people may also think that this is just
common sense. However, so much of good

policy-making is good common sense, but
unfortunately not that common!
The World Bank Group recently launched a
new strategy for MENA. How do you see
efforts to fight corruption within this
strategy?
The MENA strategy focuses on achieving the
twin goals through peace and security in the
MENA region and what we call the “4 Rs” —
(i) renewing the social contract which has
ceased to serve its purpose; (ii) promoting
greater resilience of institutions; (iii)
fostering recovery and reconstruction; and
(iv) promoting regional cooperation. None
of these objectives can be served if
corruption is rampant. Therefore, fighting
corruption is intrinsic to all four Rs.
We cannot create resilient institutions if we
are not able to address the issue of
fundamental incentives that institutions

need and to ensure that corruption is not
undermining our efforts. We know that
corruption is one of the factors of citizen
dissatisfaction with the status quo in general,
and of dissatisfaction with public service
delivery in particular. From my point of view,
this issue goes to the heart of a lot of the
incentives related to job creation and service
delivery.
Corruption erodes and undermines recovery
and reconstruction efforts, and will also
undermine any efforts toward regional
cooperation. Therefore, I do not think that
fighting corruption is something that can be
done in a particular, narrow segment of the
society. Rather, it has to really be something
that society embraces — a zero tolerance for
corruption. In this way, I think that the
success of the Bank’s MENA strategy really
depends on a zero tolerance to corruption
through the work on the four Rs.

Interview
Jesko Hentschel,
World Bank Country Director, Argentina, Paraguay and Uruguay

Corruption is a controversial topic among
policy-makers
and
development
practitioners. Former World Bank President
Jim Wolfensohn stated during the October
1996 World Bank-International Monetary
Fund (IMF) Annual Meetings that “we need
to
deal
with
the
cancer
of
corruption”. What do you think is the role
of a development organization like the
World Bank today when it comes to
corruption?
The World Bank and international
organizations have a very important role to
play when it comes to corruption. In
particular,
I
believe
international
organizations can and should focus on three
separate areas for engagement when it
comes to corruption. First, there is what I
would call the “awareness and advocacy”
category. Here the World Bank and other
international organizations can do a lot to
raise the awareness of citizens, of business

people and of those working within the
public sector about corruption and the
implications of corruption, including its costs
for a country and its population. There is
today a new awareness among citizens and
stakeholders of the implications of
corruption — not only that services are more
expensive and that people have to pay more
taxes — but because corruption penalizes
the weakest when the quality of services
deteriorates. More importantly, corruption
harms the social fabric of a country and
undermines trust between citizens and
institutions. So, awareness and advocacy is
the first area in which the Bank should be
engaged.
Second, there is clearly the category I would
label “analytics”. With the current tools and
types of data collection that are now
available, we can facilitate the gathering of
information from opinion surveys to
quantitative household surveys. We can
estimate how much people actually pay for
services and compare it to how much they
should be paying. We can also conduct
institutional analysis to understand the
incentive system within the public sector and
the relationship between the public and the
private sectors. This helps to deepen our
understanding of how corruption is
manifesting itself, who is most significantly
penalized by it, and how it could be most
effectively addressed through a set of policy
reforms.
Third, the Bank (and indeed any financing
organizations) needs to engage at the
operational level. What I mean is the ability

we have to introduce into our operations —
and agreed to by the governments — are
measures geared toward reducing or
eliminating corruption.
Consider for
example the tool for concurrent audits. If we
introduce such a tool into our operations, the
likelihood of services not being delivered
would be significantly reduced because you
have a monitoring mechanism, which is most
often being out-sourced and hence
independent of existing, and surely
important, auditing systems. If we start to
have
result-based
operations
with
transparency linked to them, then citizens
and beneficiaries have the possibility of
monitoring what was done with the
resources received. Another tool is the type
of cost exercises that we do both ex-ante and
ex-post with regard to our projects, whereby
we can analyze and compare costs, especially
in infrastructure projects. Linking such
analysis of operational realities to
procurement options and methods can help
to significantly reduce the risks for
corruption.
In sum, there are three big roles for the
World Bank: advocacy, analytics and
operations.
In your current position as a Country
Director for Argentina, Paraguay and
Uruguay, you work closely with government
officials from three very different
countries. How do you bring the issue of
corruption to the policy table in such diverse
environments? How do you find

92
constructive ways to work with our
counterparts?
I am in the lucky position of working with
three governments that have prioritized anticorruption efforts as one of the key areas to
work on with the World Bank. In Argentina,
with the recent change of government, the
Macri administration has placed a strong
emphasis on transparency and anticorruption. President Macri says that, in a
couple of years, he wants Argentina to be
among the top ten countries in the world in
terms of transparency. There is a new office
of Anti-Corruption that has been established
and empowered. A strong public official has
been appointed and takes the job very
seriously, going after and examining
corruption scandals of the past —but also
thinking about the incentive system to root
out corruption in the public sector today.
Uruguay is considered to be one of the top
countries in Latin America when it comes to
good governance. The government is very
open to highlighting Uruguay’s success in
fighting corruption and promoting good
governance.
Two months ago, the
government, together with the Bank,
organized a large conference “Cuentas
Claras” (“Clear Accounts”), inviting AntiCorruption agencies and Ministry of Finance
representatives from the region to talk about
effective ways to improve governance and
deal with corruption. This is the type of open
space in which the World Bank is operating in
Uruguay. In Paraguay, where historically
there are more challenges when it comes to
governance as many indicators highlight, the
current government has advanced with
important transparency and access-toinformation measures. We were able to
support an important access-to-information
law through a Development Policy Loan
(DPL) and significant accompanying technical
assistance. Today, we are working in the
country on the demand side of transparency
with different agencies and nongovernmental organizations (NGOs) that are
using the new Information Law. Moreover,
the Law has already had quite an impact on
improving accountability. For example, the
Rector of the National University of Asunción
had to resign last year because of allegations
of improper use of public funds. This Law has
created several new entry points where we
can now engage. Such developments in the
Southern Cone are part of a general wave in
the Latin America and Caribbean (LAC) region
and globally of a different relationship
between citizens and their elected officials. I
think that when we started to talk about
accountability and good governance 20 years
ago, it was something new and unknown.
This created a lot of hesitation among public
policy-makers. Now it is almost the opposite.
Indeed, we are living in an environment in
which we almost have a consensus about the

necessity for good, effective and equitable
state institutions. Such institutions can
provide a platform for accountability and
transparency; without them, development
will be undermined. Thus, today it is much
easier to address corruption issues than in
the past.
The recently elected government of
Argentina is focusing more and more on the
issue of corruption. What do you think could
be the role of the World Bank with regard to
the new government as it seeks to address
issues of corruption?
I think it is important to go back to the three
areas I mentioned at the very beginning –
awareness and advocacy, analytics and
operational support. Here in Argentina we
have witnessed such strong interest from the
new government and from the head of the
Anti-Corruption agency to work with the
Bank. From the very early stages, their
demands have been very clear. First, they
asked the Bank to help link them with other
LAC agencies using the networks that we
have already established in the region.
Second, there is a quest for data and
information that organizations like ours can
provide. Over the past couple of years, as
part of our public infrastructure program, we
started analytical work benchmarking
Argentina against other countries. In large
road construction projects, for example,
what is the average cost per kilometer
rehabilitated? How do bids come about and
which types of companies participate in the
bidding process? Our comparative market
analysis can help all of us understand where
markets function in an uncompetitive way.
Third, there is a demand for specific
operations. Linked to my previous point is
the area of competition policy – and the
detection of oligopolistic markets in which
consumers are charged overly high prices.
This is also an area in which the Bank can
offer its technical expertise. In Argentina, we
are now supporting the competition agency
with practical anti-cartel work and advice.
Thus, there are quite few entry points in
terms of providing analytics and linkages to
other countries.
We are also working with the Argentinian
government in other areas. The government
has asked us for a modernization program,
which includes e-services, feedback
mechanisms and social accountability, eprocurement and procurement reform.
Hence, we have a broad set of tools we can
use to support the country’s reform efforts.
For countries in other regions, I would like to
emphasize that it would be important to find
an entry point in working with newly-elected
officials to help them advance their own
goals and mandates. Given different entry
points, I am sure there is one angle that can
be found to engage with new counterparts —

and this could then create a signaling effect
that can spread more broadly. For example,
about 12 years ago, we started to use
concurrent auditors in Argentina for Bank
projects. This was a very powerful tool to
provide accountability not only to the Bank
— but especially to governments and their
citizens. It also provided a strong incentive
for public officials to deliver on their
promises of concrete results. Today, the use
of such concurrent audits has spread to quite
a few other internationally financed
programs in the country.
You have worked in many difficult
environments,
for
example
in
Madagascar. Is there any advice you would
share with our readers working in similar
environments when it comes to thinking
about and addressing corruption?
I started working in Madagascar in 2000. At
that time, we could not use the words “good
governance” or “corruption”. The agenda
has moved forward globally since then in big
strides, in all regions of the world and in all
country types. Entry points for fighting
corruption and promoting good governance
can be found everywhere. This could take
the form of a project coordinator, a secretary
of a Ministry, a mayor, or a community
organization seeking to help its constituency.
For example, in Madagascar, one of the
things we did was to begin using Expenditure
Tracking Surveys (or PETS) to find out
whether the money the government had
spent on education actually made it to
faraway villages. This turned out to be a very
powerful demonstration tool, especially to
civil society and academics. Using this tool,
we were also able to build awareness among
some public officials. Perhaps these were
not exactly the ones that we needed to
reach, but using these tools and finding the
audience that will use them for further
awareness and advocacy is, I believe, key —
especially if you can show real data and real
results.
A widely accepted recipe to reduce the risk
of corruption builds on the Transparency,
Accountability and Participation or “TAP”
approach. What would you add or modify to
this approach based on your first-hand
experience?
I would propose to make it “TAPA”, if you
allow me, where the second “A” stands for
awareness and advocacy. Awareness is for
me a core ingredient that should be added to
the TAP principles. It helps to motivate
people to demand transparent and
accountable governments. Therefore, in
order to encourage participation, we need
such awareness — and also advocacy. These
go together and can be viewed as an
important ingredient to our approach to
building better governance.

93

In Their Own Words

“As opposed to the scandals making the headlines, ‘quiet corruption’ refers to the failure of public servants
to effectively deliver goods and services, which have previously been paid for by the government or donors.
The most prominent examples are absentee teachers in public schools and absentee doctors in primary
clinics. Quiet corruption also refers to the black markets and the cases when sanitary material or medicines
‘disappear’ before being used for patients, or when fertilizer gets watered down in many rounds before it
gets –by then rather uselessly—to the fields it was allocated for. Those affected are often the most
vulnerable.”
Shantayanan Devarajan, Chief Economist of the World Bank’s MENA region.

94

INSTITUTIONS

COVER STORY

Parliament and Corruption
A Multifaceted Approach to Anti-Corruption
Lida Bteddini
Public Sector Specialist, World Bank

Introduction
For the World Bank, corruption is considered
a major challenge to institutional goals of
ending extreme poverty by 2030 and
boosting shared prosperity for the poorest
40 percent in developing countries1. Anticorruption efforts are also at the heart of the
recently
established
Sustainable
Development Goals and achieving the
ambitious targets set for Financing for
Development. This concerted effort to
address corruption head-on requires the
active involvement of all key stakeholders for
a sustained improvement in governance. It
also necessitates the pro-active engagement
of key oversight institutions in reducing
avenues for corruption.
International experience has illustrated the
importance of effective and representative
legislatures in strengthening governance
systems and in improving democratic

processes2. The parliament is undoubtedly
an essential player in any effort to link
institutional, legal, political, and economic
variables to foster sustainable growth.
Parliamentary oversight is thus one of the
cornerstones of good governance and an
essential link in the overall accountability
chain.
Such oversight is particularly important in
ensuring that governmental policies and
programs are implemented and achieving
the desired impact. It is also important in
shedding light on governmental functioning
through parliamentary debates, ensuring
budget oversight to improve the efficiency
and
effectiveness
of
government
expenditures, and the upholding of the rule
of law.
The Role of Parliament
As the only institution with constitutional
authority to oversee the government and to
actively engage in budget oversight, the
parliament is an integral component of a
viable accountability framework. The
parliament is particularly integral in the fight
against corruption because it is an institution
that cuts across both vertical and horizontal
accountability chains — that is, it practices
horizontal accountability in that it has the
ability to hold government to account
through its oversight function. It also ensures
vertical accountability by providing citizens
and civil society with the means to seek the
support of members of parliament (MPs) to
redress grievances and intervene in cases of

inadequate action by government. In this
regard, it is also a vehicle for citizen
engagement through the use of public
hearings, petitions, and so on.
The legislative role is one of the key
functions of parliament, providing the
institution with the means to promote
integrity and accountability in governance. In
this vein, parliament has a critical role to play
in anti-corruption efforts by enacting
appropriate laws to counter corruption and
improve the country’s broader governance
framework — particularly with regard to
public access to information, and public
engagement in the decision-making process.
In this legislative role, parliamentarians are
able to play a major part in creating an
environment that is less prone to corruption.
However, it is the role they assume in
ensuring implementation that will help
determine the effectiveness of such legal
frameworks.
Parliament also plays an important function
in ensuring adequate oversight of the
executive branch of government. This
includes parliament’s participation in the
budgetary process, and the exercise of
parliamentary oversight through anticorruption and investigative commissions.
The effectiveness of entities such as anticorruption commissions is in turn contingent
on the level of their independence,
autonomy, and resources. The parliament’s
cooperation with other oversight actors such

95
as supreme audit institutions, civil society,
and the media is also an important
dimension to the oversight function.
Furthermore, many parliaments have the
constitutional mandate to promote
transparency of government through such
mechanisms as public hearings. Citizens and
the media can also play a significant role in
reinforcing the role of parliament in its
oversight effort. For example, in the case of
Malawi, the investigations of the Public
Accounts Committee were publicized to the
media and public to help reinforce the
impact of such efforts3.
The function that parliament has in
overseeing the budget is integral to anticorruption efforts. The role of the legislature
in most countries is to scrutinize and
authorize revenues and expenditures, and to
ensure that the national budget is properly
implemented. It is in the national budget
that decisions about tax levels, spending
priorities, and policy prioritization is

determined. Thus, parliament’s financial
oversight function represents a powerful
tool for stronger accountability by providing
safeguards against government misuse of
public funds and resources.
While the parliament helps to ensure
oversight of the government, its work is
often challenged by weak governance
frameworks. For example, this is particularly
the case when it comes to issues of access to
information, which is a prerequisite for many
parliamentary anti-corruption efforts. With
regard to financial controls, only accurate,
timely and accessible information will help to
ensure an effective analysis and evaluation
of the budget. Thus, proper access to
financial data is essential.
As evidenced by international experience,
corruption can have a significant impact on
economic growth and development. As
corruption is often a symptom of
breakdowns in the broader governance

environment, it is evident that any strategy
to tackle corruption must be holistic. This
means that a successful strategy must
involve a wide range of actors, comprising
various approaches both with respect to
prevention and enforcement. Parliament has
an important role to play in this effort
through its legislative, oversight, and
representative functions — as well as a
responsibility in doing so as the primary link
between citizens and the government that
serves them.
REFERENCES
Anticorruption Brief, the World Bank, 2016.
<http://www.worldbank.org/en/topic/governance/brief
/anti-corruption>
2 The Role of Parliament in Curbing Corruption, edited by
Rick Stapenhurst, Niall Johnston, Riccardo Pelizzo, The
World Bank, 2006.
3 Good Practice Guide for Public Accounts Committee
Clerks in Southern and East Africa, 2014 PAN PAC
<panpac.pac-networks.org>.

SAIs
Strengthening the Role of Supreme Audit Institutions in the Fight
against Fraud and Corruption
Mona El-Chami
Senior Financial Management Specialist

Francis Grogan
Consultant

Manuel Vargas
Lead Financial Management Specialist
World Bank
How are Global Actors Working to Fight
Corruption?
Corruption is at the heart of so many of the
world’s problems. It erodes public trust in
government, undermines the rule of law, and
may give rise to political and economic
grievances that may, in conjunction with
other factors, fuel violent extremism.
Tackling corruption is vital for sustaining
economic stability and growth, maintaining
security of societies, protecting human
rights, reducing poverty, protecting the
environment for future generations and
addressing serious and organized crime1.
Global actors have been trying to address
corruption for decades. Through their
efforts, a number of milestones have been
reached including the adoption of the United
Nations Convention against Corruption in
2003 which aimed to promote and

strengthen measures to prevent and combat
corruption more efficiently and effectively,
as well as to promote integrity,
accountability and proper management of
public affairs and public property. Another
key milestone has been the May 2016
London Anti-Corruption Summit where
world
leaders
and
international
organizations
announced
a
global
declaration against corruption.

Is the Role of Supreme Audit Institutions
Recognized?
The London Summit Declaration recognized,
in effect, the role of Supreme Audit
Institutions (SAIs) in fighting corruption and
called for further strengthening and
supporting the independence of SAIs, as well
as for the publication of audit findings.
However, it is important to note that SAIs
have been active partners in the fight against
corruption long before the 2016 Summit.

96
The International Organization of Supreme
Audit Institutions (INTOSAI), of which the
World Bank is an associate member, has
supported SAIs in strengthening their
capacity to fight corruption through various
policy positions, initiatives and programs.
Most important among these has been
INTOSAI’s advocacy of the independence of
SAIs. Supporting SAI independence allows
the entities to more fully hold governments
to account for their use of public funds and
provides them with greater latitude in regard
to strengthening public management.
To reinforce both the concept and practice of
SAI independence, INTOSAI has developed
and defined a set of prerequisites and
conditions that should be in place to secure
that independence. Its Mexico Declaration
codified these and was subsequently
endorsed by the United Nations in special
Resolutions of the General Assembly and by
the Global Initiative for Fiscal Transparency.
INTOSAI’s Mexico Declaration stipulates that
SAIs should have statutory independence
from the executive branch of government, as
well as the mandate, access to information,
and appropriate resources to audit and
report publicly on the raising and
commitment of public funds. SAIs need to be
able to operate in an independent,
accountable and transparent manner.
INTOSAI has also recognized that
independence alone is not sufficient to
securing effective and impactful SAI
performance. A strong professional ethos
and capacity, as well as the application of
professional audit methods and practices,
are necessary as well. Accordingly, in recent
years, INTOSAI has done much to develop,
adopt and promote the use of common
international
auditing
standards
(International Standards of Supreme Audit
Institutions, ISSAIs), and to generally help
improve the quality of public audits available
to parliaments and citizens. However, SAI
capacities vary. Attention must be given to
SAIs that lack the skilled staff to implement
the new auditing standards and the
independence and powers to produce timely
audit reports, which can then be made

available to parliaments and citizens within a
reasonable time.2
The World Bank’s Role in Supporting SAIs
SAIs have long been important counterparts
for the World Bank as their role and function
actively supports the World Bank’s mandate
to help client countries implement sound
public financial management arrangements
to ensure that public funds are used for their
intended purposes, with due attention to
economy and efficiency. The World Bank has
just embarked on a new program to analyze
and promote the effectiveness of SAIs in its
client countries in the context of the post2015 development agenda, specifically the
Sustainable Development Goals (SDGs). The
Bank expects this work to influence the
global debate and understanding of how,
under proper conditions, SAIs can contribute
to achieving the SDGs.
Strengthening the Role of SAIs in the fight
against fraud and corruption is one of the
first set of ‘frontier topics’ under research.
An important focus of the initiative is to
encourage SAIs to make better, more
effective use of technology and innovative
techniques such as data analytics, for
example, the application of techniques such
as data matching, data mining, the use of
open source data to identify errors,
irregularities and prima facie instances of
fraud and corruption, new ways of visualising
data to help form and identify the questions
or issues that audits should address, as well
as presenting audit results in a more
impactful and insightful way.
How SAIs have Enhanced their Effectiveness
in Preventing Fraud and Corruption
In reviewing preliminary data collected by
the World Bank’s Strengthening the Role of
SAIs in the Fight against Fraud and
Corruption Frontier Topic conceptual
framework, it was noted that most SAIs have
adopted more traditional approaches to
detecting and preventing fraud and
corruption. These are built around the core
principle incorporated in international audit

standards that responsibility for preventing
fraud and corruption rests with those
responsible
for
management
and
governance of the audited entity — and not
with the external auditor. Consequently, in
broad terms, their audit approaches and
methods tend to have two dominant
characteristics. The first is the use of a
systems-based audit approach that aims to
ensure that audited entities have proper
systems of financial and management
controls in place to mitigate the risk of fraud
and corruption having a material impact on
the entities’ financial statements. Building on
this, the second principle involves the
implementation of effective, professional
financial and compliance audit methods and
processes that in turn can serve to identify
cases of error and irregularity and possible
instances of fraud and corruption.
A limited number of SAIs have recognized the
possibilities created by data analytics
techniques to enhance the effectiveness of
their audit methods and procedures,
particularly in relation to the prevention and
detection of fraud and corruption. In
particular, the SAIs of Brazil, China and India
have each embraced these new approaches.
In addition, other SAIs are making effective
use of the opportunities provided by
technology to create new ways in which they
can engage with citizens and civil society. In
this way, they are attempting to improve
their methods for detecting potential fraud
and corruption by encouraging citizens to
report instances of abuse. Some SAIs are also
extending this process to enable citizens to
contribute to, and even participate in, the
work of the SAI. For example, the SAIs of
Chile, the Philippines and Oman are
developing and implementing this type of
approach (Box 3).

REFERENCES
1

https://www.gov.uk/government/uploads/system/uploa
ds/attachment_data/file/522791/FINAL__AC_Summit_Communique_-_May_2016.pdf
2
http://www.intosai.org/news/130516-12-anticorruption-summit-in-london.html

Box 3: SAI Brazil – SAI Oman
Brazil’s SAI has significantly advanced its thinking in relation to exploiting
the possibilities created by information technology, specifically the use
of techniques that fall under the umbrella term of data analytics. Its
strategic plan for the period 2015–2021 provides for the development of
a ‘comprehensive organizational competence to work with emerging
technological resources and analyzing large databases (Big Data)’.

The SAI of Oman provides a useful example of a SAI that is using
information technology to enhance the way in which it interacts
with citizens. In 2013, SAI Oman launched its e-window through
Smartphone applications. This project won first place in the 2013
United Nations Public Service Award (UNPSA) for the category
‘Preventing and combating corruption in the public service’.

Source: Concept Note on Strengthening the Role of SAIs in the Fight against Fraud and Corruption.

97

Ombudsman
Corruption and the Role of Ombudsman
Elin Bergman
Governance Specialist, Governance Global
Practice, World Bank

Fighting corruption is usually not the main
function of an Ombudsman. Yet, through its
work in enforcing accountability in
government by holding public servants
responsible for their actions, the Ombudsman
has significant potential to contribute toward
this goal. As an independent intermediary
between the government and the citizens, the
Ombudsman occupies a unique position in a
country’s accountability framework. This
position gives the institution the flexibility
needed to effectively complement other
accountability institutions and add a layer of
oversight and checks and balances. As the
role of the Ombudsman is shifting toward a
stronger focus on addressing the underlying
systemic issues generated by complaints from
citizens, the potential of the institution to
contribute to the fight against corruption is
increasing.
Although mandates vary widely across the
Office of the Ombudsman, the core function
of the institution is to investigate complaints
from citizens about shortcomings in
government decision-making and service
delivery — and to make recommendations
about actions to be taken to correct these
shortcomings. Hence, the existence of an
Ombudsman sends the message to public
officials that anything they do is subject to
public scrutiny and can investigated by an
independent office.
An Ombudsman often has extensive powers
to investigate complaints submitted to it, but
only limited enforcement powers. This means
that it can apply only “soft” pressure to
ensure
its
recommendations
are
implemented. The lack of enforcement and
formal sanctioning powers are sometimes
used as an argument to question the

effectiveness of the institution. However,
experience from existing Ombudsmen shows
that the “soft” pressure, which includes
publication of recommendations and
submission of reports to Parliament, is often
enough to get the recommendations
adopted. When the Ombudsman has good
relations
with
other
accountability
institutions and the media, its chances of
success increase even further.
Recognizing the potential of the Ombudsman
in contributing to the fight against corruption,
some countries including South Korea and the
Philippines, have provided their Ombudsmen
with a specific mandate to curb corruption. As
such, these Ombudsmen operate as
combined Ombudsmen and Anti-Corruption
Agencies. Their functions include overseeing
the conduct of senior public officials,
collecting and reviewing asset and income
declarations, investigating instances of
alleged or suspected corruption, and
educating and informing the public regarding
issues related to corruption. Some “AntiCorruption Ombudsmen” have far-reaching
mandates in terms of investigatory and
prosecution powers. Some even have the
powers to impose administrative sanctions
against public officials found guilty of
corruption.
Regardless of whether or not the
Ombudsman has a specific anti-corruption
mandate, its potential to contribute to the
fight against corruption is increasing because
the role of the institution is shifting toward a

stronger focus on investigating underlying
systemic issues generated by public
complaints. Through analyzing patterns in the
complaints received, the Ombudsman is well
placed to identify systemic weaknesses in
processes, procedures and institutions within
the public administration. Therefore, it is
becoming
increasingly
common
for
Ombudsmen to initiate their own
investigations when they suspect that there
may be systemic problems in certain
government agencies or administrative areas.
This trend provides the Ombudsmen with
new opportunities to sustainably contribute
to reducing corruption vulnerabilities in the
public sector.
In the Middle East and North Africa region,
the concept of the Ombudsman is still
relatively new. Nevertheless, a few countries
including Jordan — which established an
Ombudsman in 2008 — have recognized the
values that the institution can have in terms
of increased government accountability. In a
region dominated by strong Executive
branches of government, the Ombudsmen
can arguably play a particularly important role
by providing an added layer of checks and
balances. However, countries considering
establishing an Ombudsman’s Office should
recognize that the role of the Ombudsman in
fighting corruption is complementary. Indeed,
the Ombudsman institution is just one of
many actors needed to ensure accountability
and reduce public sector corruption.

Anti-Corruption Agencies

98

An Effective Tool to Curb Corruption?
Francesca Recanatini
Senior Economist, World Bank

The increased focus by international
organizations regarding the link between
effective institutions, corruption and growth
led to a proliferation of international
agreements
in
the
1990s,
which
recommended the creation of AntiCorruption Authorities (ACAs) — including
the Organization of American States InterAmerican Convention Against Corruption
(IACAC) adopted in 1996; and the African
Union Convention on Preventing and
Combating Corruption, adopted in July
2003). In addition to the variety of regional
conventions that have emerged since 1996,
the United Nations Convention Against
Corruption (UNCAC) was adopted in 2003. It
has been ratified by more than 130
countries, and is the most extensive anticorruption convention.

studies has begun to provide the
foundations for a more comprehensive
framework to review ACA effectiveness,
accountability and impact (Meagher 2005;
Heilbrunn 2004; Council of Europe 2004,
2005; UNDP 2005; and Doig and others
2005). This article summarizes the results of
new cross-country evidence regarding ACAs,
and
provides
some
initial
policy
recommendations (Recanatini 2011).

but also ministers and directors of public
agencies need to support the work of the
ACA. This observation calls for a new
approach to anti-corruption reforms, one
that seeks to change the incentives of middle
management.
Incentives
should
be
structured so that middle management also
acts to improve transparency and promote
accountability as part of a strong
commitment to the reform process.

These findings are based on an initiative
launched by the World Bank in late 2009 in
collaboration with the United Nations Office
on Drugs and Crime (UNODC), the United
States State Department, and the European
Commission. The joint initiative aimed at
gathering more systematic data and
information from and about ACAs. The
World Bank, for its part, conducted a survey
to collect basic information about ACAs since
2010.

Once political support is in place, the next
step is the introduction of a clear and
comprehensive legal framework to support
anti-corruption work. Such a legal
framework, although necessary, is also not
sufficient. In this regard, laws and
regulations need to be applied to make a
difference.
Furthermore,
inter-agency
coordination and cooperation among
different jurisdictions are required to
enhance the investigative capacity (and
effectiveness) of ACAs. The clarity of the
legal mandate and inter-agency coordination
is especially important for investigative and
prosecution work. The best solution occurs
when the power to investigate lies with the
anticorruption agency, and the power to
prosecute with the Attorney General or
another official. Furthermore, the two
agencies need to establish close working
relations to ensure that cases are smoothly
handed off from the agency to the
prosecutor. As this arrangement is not
always possible, some countries, such as
Indonesia and Thailand, give their anticorruption agencies the power to prosecute
a case if, within a specified period of time,
the prosecutor refuses to do so.

As of June 2016, about 68 ACAs have
completed this short survey, and about onethird of these have completed it multiple
times, allowing the team to compile the first
time series database for ACAs. The World
Bank also carried out seven in-depth case
studies of selected ACAs in Africa, Asia, and
Eastern Europe to complement the survey
data. All of the information collected is
available to practitioners at the following
portal: www.acauthorities.org. These data
provide new and more detailed evidence of
the complexity of these institutions, as well
as the variety of factors that can impact their
effectiveness.
Factors influencing ACA Effectiveness

When drafted, the UNCAC reflected the
prevailing wisdom that specialized ACAs
would be the optimal means of addressing
rampant corruption (Pope 1999; Doig 1995
and 2009). Almost two decades later — and
since the beginning of this recent wave of
anti-corruption efforts — ACAs are now
struggling to show a significant reduction in
corruption. Indeed, they are generally not
regarded as an effective policy tool in the
fight against corruption (Doig 2009;
Hussmann 2007; Huther and Shah 2001).
Nevertheless, these institutions continue to
exist and operate in many countries.
The question then becomes: What makes
ACAs an effective policy tool to address
corruption? Conversely, what are the factors
that may help reinforce the ability of ACAs to
resist
efforts
to
undercut
their
effectiveness? A range of comparative

Three sets of factors, in particular, appear to
have a direct impact on ACA effectiveness:
strong political support, the introduction of a
clear and comprehensive legal framework,
and adequate resources and a clear role and
position within the country’s institutional
system. First, strong political support from
the country's leadership emerges as the
cornerstone of significant anti-corruption
efforts and ACA effectiveness. As
practitioners have long recognized, without
a clear commitment and support from the
top leadership, anti-corruption efforts are
short lived and often doomed to fail.
According to several of the ACAs
interviewed, support from the top
leadership is a necessary, but not sufficient
condition. In order to promote real change,
middle management needs to work for
change as well. Thus, not only the President,

Finally, ACAs require adequate resources
and a clear role and position within the
country’s institutional system in order to
make significant progress in the fight against
corruption. The legislative mandate of the
ACA should take into consideration, and also
address, the division of authority between
central and state government agencies to
avoid duplication of efforts and inefficiency.
Without a well-defined legislative mandate
specifying ACA powers and its relationships
with other entities responsible for
anticorruption policy, its effectiveness can
be greatly undermined. Ad hoc and
impulsive policy responses driven by
dramatic corruption scandals that coincide
with political-economic conflicts within the
country have contributed to the emergence
of underfunded ACAs. Such ACAs often have
multiple and poorly defined functions and
operate in an unclear legal environment.

99
Other, less often emphasized factors can
affect ACA effectiveness. The existence of a
broad anti-corruption policy and an
adequate budget that is independently
managed can help sustain ACA efforts. The
work of the ACAs should be closely linked
and relied on with regard to ongoing anticorruption efforts.
There is also a growing consensus that an
essential part of an anticorruption effort
involves establishing a program requiring
senior public officials — cabinet ministers,
legislators, judges, and top level civil
servants and judges — to disclose their
income and assets to competent authorities,
including identifying and managing potential
conflicts of interest. While the better
practice is to vest responsibility for the
management of this issue with an ethics unit,
the anticorruption agency should also have a
needs-based access to all materials
submitted by filers. In this regard, it should
also establish close working relationships
with the ethics entity.

Investing in programs to establish good
relationships and communications with the
public that are based on clear and relevant
impact indicators has helped several ACAs to
fend off political pressures and survive
attacks aimed at undermining them and
their work. Clear and comprehensive
performance indicators, however, are often
unfamiliar concepts to ACA officials.
Therefore, ACAs may be unable to regularly
highlight their progress and achievements —
thereby making them more vulnerable to the
fluctuations
introduced
by
political
campaigns and elections. To address some of
these issues, several ACAs have established
oversight boards of distinguished jurists and
civil society activists to oversee their
activities and to provide advice on both
technical legal issues and policy matters.

Measures promoting the ACA’s own
accountability and relationship with citizens
and the media (including the emerging social
media) can be powerful tools in creating an
enabling environment for ACAs, particularly
when facing faltering political support. ACAs
should set an example and make themselves
accountable for their work by regularly
sharing the outcome of their efforts and
initiatives.

Three policy lessons emerge from this
ongoing work. Given the variation observed
among ACAs and their institutional and
political environments, local policy-makers
should exercise caution in attempting to
“replicate successful experiences”. They
should do so only after carefully
understanding and integrating countryspecific factors into their approach. In
addition, local policy-makers should ensure

the coordination of anti-corruption functions
and activities among different agencies
within their own country and promote a
medium-term view. In this context, they
should focus on building local capacity and
promoting the sustainability of anticorruption efforts within the country. Finally,
individual countries should establish a clear
and comprehensive set of performance
indicators in the beginning to guide
performance and to capture the impact of
ACAs activities — beyond the number of
cases investigated and/or prosecuted. Only
in this way will local policy-makers and
citizens be able to appreciate and evaluate,
in a more meaningful and objective way, the
effectiveness of their own ACAs over time.
REFERENCES
Council of Europe. 2005. Strengthening Anti-Corruption
Services in Southeastern Europe: Current Status and
Needs for Reform. July.
Doig Alan. 1995. “Good Government and Sustainable
Anti-Corruption Strategies: A Role for Independent AntiCorruption Agencies?” Public Administration and
Development 15:151–165.
_______. 2009. “Matching Workload, Management and
Resources: Setting the Context for ‘Effective’ AntiCorruption Commissions.” In Luis de Sousa, Peter
Larmour, and Barry Hindess. Governments, NGOs and
Anti-Corruption: The New Integrity Warriors. London:
Routledge.
Doig, Alan, David Watt, and Robert Williams. 2005.
“‘Measuring ‘Success’ in Five African Anticorruption
Commissions: The Cases of Ghana, Malawi, Tanzania,
Uganda, and Zambia”. U4 Research Report. Bergen: Chr.
Michelsen Institute.
Heilbrunn, John R. 2004. “Anti-Corruption Commissions:
Panacea or Real Medicine to Fight Corruption?” World
Bank Institute Working Paper Series: 37234.
Hussmann, Karen. 2007. “AntiCorruption Policy Making in
Practice: What Can Be Learned for
Implementing Article 5 of UNCAC?”
U4 Report 2007: 2. Bergen: Chr.
Michelsen Institute.
Huther, Jeff and Anwar Shah. 2001.
“Anticorruption Policies and
Programs: A Framework for
Evaluation,” World Bank Policy
Research Working Paper: 2501.
Meagher, Patrick. 2005.
“Anticorruption Agencies: Rhetoric
versus Reality,” Journal of
PolicyReform 8(1): 69–103.
Pope, Jeremy. 1999. “The Need and
Role of an Independent AntiCorruption Agency”, Working Paper
13. Berlin, Transparency
International.
Recanatini, Francesca. 2011. “AntiCorruption Authorities: An Effective
Tool to Curb Corruption?” In
International Handbook on the
Economics of Corruption, edited by
Susan Rose-Akerman and Tina
Soreide.
United Nations Development
Program. 2005. “Institutional
Agreements to Combat Corruption:
A Comparative Study,” UNDP
Regional Center in Bangkok.

100

“Corruption has in many ways become the defining issue of the 21st century,
just as the 20th century was characterised by large ideological struggles
between democracy, fascism and communism.
Today a majority of the world’s nations accept the legitimacy of democracy
and at least pretend to hold competitive elections.
What really distinguishes political systems from one another is the degree to which
the elites ruling them seek to use their power in the service of a broad public interest
or simply to enrich themselves, their friends and their families.”
Francis Fukuyama
Senior Fellow at Stanford University
Director of its Center on Democracy, Development and the Rule of Law.

In Their Own Words

101

SECTORS

COVER STORY

Service Delivery
Lessons from the MENA Region
Jumana Alaref
Research Analyst

Hana Brixi
Practice Manager, Social Protection,
Labor and Jobs Global Practice, World
Bank
“We are often forced to pay bribes and give
out gifts to get our paperwork done at
governmental departments, especially the
traffic and real estate departments, where
corruption is rampant.” This was one of
many comments received on the World
Bank Middle East and North Africa (MENA)
Facebook page during online consultations
for its Trust, Voice and Incentives report
(Brixi and others 2015) examining
governance and service delivery in the
region. “Citizens have a role to play in
changing the current reality of institutions
by fighting all forms of corruption and
bribery. Service delivery problems will not
be resolved when citizens keep giving bribes
to public officials.”
Corruption partly explains why quality
improvements in service delivery have been
so difficult to achieve in spite of often wellcrafted government strategies and policies
— as well as large public expenditures. The
link between poor outcomes and corruption
has been established empirically, as well as
theoretically, in many countries around the

world (Azfar and others 2005; Davis 2003;
Pritchett 1996; and Reinikka and others
2005). Corruption, in its many forms, distorts
incentives and reduces resources allocated
to services for the poor, hurting the poor
both in terms of lower service quality and a
higher financial burden in accessing services.
As documented in the Trust, Voice, and
Incentives report, the quality of services in
MENA lags behind its potential and falls
short of international benchmarks and
citizen expectations. Student educational
performance is low, and the quality of health
care is characterized by long waiting times,
absenteeism, a lack of privacy, and
inadequate provider effort. One in three
people in the region are dissatisfied with the
performance of their governments in
improving basic public services (Arab
Barometer 2010–2011).
Corruption in service delivery is relatively
high and takes many forms that are often
anchored in the broader institutional
settings in the region. Evidence points to the
prevalence of informal payments within the
public sector, which is plagued by opacity
and weak accountability. On average, 33
percent of firms make informal payments to
public officials to “get things done” in the
areas of customs, taxes, licenses,
regulations,
and
services
(World
Development Indicators 2013). Moreover,
22 percent and 30 percent of people report
making payments of informal fees in the
education and health sectors, respectively.

This constitutes a serious detriment to
citizen welfare with regard to equal access to
services and the quality received (Global
Corruption Barometer 2013).
Evidence also points to corruption in the
form of possible theft and official pocketing.
In Morocco, for example, two-thirds of
shipped medical drugs were not reaching
designated health centers. In Egypt, schools
in the Luxor and Ismailia Governorates
received only 0.3 and 1.7 percent of
textbooks per student, respectively (Public
Expenditure Tracking Survey 2011).
Citizens also experience other forms of
exclusion and clientelism that are embedded
within existing social norms. “Wasta” is one
example of corruption that has deep
historical roots in a tribal system, and which
remains particularly influential in much of
the MENA region because of its weak states
and administrative institutions. Defined in
Arabic as “intermediary” (referring to the
person) or “intercession” (referring to the
act), wasta allows anyone with personal and
powerful connections to obtain public
services and receive preferential treatment.
Services, therefore, are adequately delivered
to those who are socially and politically
connected, but poorly to the rest of citizenry
as a whole.
In Jordan, for example, 67 percent of citizens
believe that it is almost essential to have
wasta in order to obtain a job. Those who

102
have “wasta” can gain university admission,
obtain a business license, and manage more

If service delivery is to improve, MENA
countries will need to tackle the institutional

2)

Strengthen
monitoring,
internal
controls and performance management
in the public sector.
Introduce
mechanisms to collect user feedback
and
disseminate
disaggregated
performance information to provide a
rigorous basis for citizen action.

3)

Modify mechanisms for selecting,
encouraging, and rewarding leaders,
public servants and service providers so
as to internalize norms of personal
responsibility,
professional
accountability, and public service.

Progress on this front would help enhance
not only service delivery but also citizen trust
in public institutions. This, in turn, would
reduce citizen reliance on bribes and wasta
in accessing services. Furthermore, citizens
may be more likely to put pressure on the
state to improve performance with respect
to public service provision.

REFERENCES
Azfar, Omar, and Tugrul Gurgur. 2005. “Does Corruption
Affect Health and Education Outcomes in the
Philippines?” Social Science Research Network Working
Paper. Available at:
http://unpan1.un.org/intradoc/groups/public/document
s/APCITY/UNPAN024529.pdf
Brixi, Hana, Ellen Lust, Michael Woolcock. 2015. Trust,
Voice, and Incentives: Learning from Local Success
Stories in Service Delivery in the Middle East and North
Africa. Washington, DC: World Bank.
Davis, Jennifer. 2003. “Corruption in Public Service
Delivery: Experience from South Asia’s Water and
Sanitation Sector.” World Development 32 (1): 53–71.
Meles, Meshal. 2007. “Understanding People’s Attitudes
towards the Use of Wasta.” Master’s Degree Thesis,
Cranfield School of Management, Bedford, U.K.
Pritchett, Lant. 1996. “Mind your P’s and Q’s: The Cost of
Public Investment is Not the Value of Public Capital.”
Policy Research Working Paper 1660. Washington, DC:
World Bank.
Reinikka, Ritva, Jacob Svensson. 2005. “Fighting
Corruption to Improve Schooling: Evidence from a
Newspaper Campaign in Uganda.” Journal of European
Economic Association 3 (2-3): 259 –267.
World Bank. 2014. The Unfinished Revolution: Bringing
Opportunity, Good Jobs, and Greater Wealth to All
Tunisians. Washington, DC: World Bank.

DATA SOURCES

easily a wide array of other daily tasks. As
Meles (2007) notes, “Wasta has now
become a right and an expectation in Arab
societies”. In the economic sphere, wasta is
considered a form of “crony capitalism”, in
which success in business depends on a close
relationship between business owners and
government officials. As documented in
Egypt and Tunisia, this takes the form of
favoritism, tax breaks, legal permits, and/or
other forms of state intervention (World
Bank 2014).

problems at the root of corruption and
incentive distortions. In this respect, the
Trust, Voice and Incentives report shows the
urgent need in MENA countries to:
1)

Develop
effective
accountability
institutions such as courts, independent
auditors, and ombudsmen to monitor
and subject to public scrutiny the
performance of service providers and
public servants — as well as provide
tools for the resolution of citizen
complaints and grievances.

Arab Barometer. 2010-2011. (Wave II),
http://www.arabbarometer.org/instruments-and-datafiles
Global Corruption Barometer. 2013. Transparency
International,
http://www.transparency.org/research/gcb/overview
Public Expenditure Tracking Survey. 2011. World Bank.
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTSOCIALDEVELOPMENT/EXTPCENG/0,,contentMDK:205
07700~pagePK:148956~piPK:216618~theSitePK:410306,
00.html
World Development Indicators (database). 2013. World
Bank, http://data.worldbank.org/data-catalog/worlddevelopment-indicators

103

Construction
The Construction Sector Transparency
Initiative (CoST):
Corruption and the Role of Ombudsman
Promoting Greater Efficiency in Public Infrastructure

Christiaan (Chrik) Poortman
Chair of the Board, CoST Initiative

The world's current infrastructure needs are
enormous.
Indeed,
infrastructure
investment
underpins
socioeconomic
development. It is the delivery vehicle for
crucial physical assets such as roads,
railways, water supply and sewage
treatment and power generation, as well as
critical social infrastructure such as hospitals
and schools.
Promoting infrastructure investment has
recently become a major focus of
international development — the G-20's
Global Infrastructure Initiative, the European
Union’s Infrastructure Fund, the newly-

created Asian Infrastructure Investment
Bank, as well as the Global Infrastructure
Forum
comprised
of
multilateral
development banks, including the World
Bank. The emphasis on infrastructure
investment is welcome. However, every
precaution should be taken to ensure that
such investment generates maximum
growth and benefits for society.
Studies by Transparency International, the
Organisation for Economic Co-operation and
Development (OECD) and the American
Society of Civil Engineers have highlighted
infrastructure construction as one of the
sectors most prone to corruption. They
estimate that 10-30 percent of public
infrastructure investment is lost through
mismanagement and corruption. Apart from
increasing costs, this can also lead to
unsuitable, defective and dangerous projects
that can result in the loss of human life.
Dealing effectively with these issues will
determine how successful today's global
challenges will be met — be it economic
recovery, the Sustainable Development
Goals (SDGs), climate change or disaster
relief. Addressing inefficiency and lack of
integrity in infrastructure is thus a global
challenge.
Part of the solution is a regulatory and
business environment that is conducive to
the efficient allocation of resources. Robust
public procurement policies promoting

higher levels of competition and greater
scrutiny in the awarding of contracts is also
essential. Of equal importance, however, is
an environment of transparency and
accountability in which there is full
disclosure of all public infrastructure
projects. The availability of, and access to,
relevant project information — excluding
information of a truly sensitive or
confidential nature — enables stakeholders
to make informed judgments about the cost
and quality of the projects concerned.
Transparency
leads
not
only
to
accountability, but can also be a strong
catalyst for reducing mismanagement and
corruption.
Construction Sector Transparency Initiative
(CoST)
CoST was launched as a global initiative in
October 2012 with the support of the
Department for International Development
of the United Kingdom (UK) and the World
Bank. Since then, CoST has grown to fifteen
countries with Botswana, El Salvador,
Honduras, Uganda, Afghanistan, Thailand
and Ukraine joining since the launch.
CoST grew out of the lessons learned from a
three-year pilot program, which tested the
viability of a new transparency and
accountability process in eight countries. The
pilot countries represented four continents
and a mix of country types:




Low-income
countries
(Malawi,
Tanzania, Zambia);
Developed economies (UK);
Post-conflict
states
(Ethiopia,
Guatemala);
Societies with an advanced civil society
and transparency agenda (Philippines);
and
Countries with low civil society
participation (Ethiopia, Vietnam).

Source: Construction Sector Transparency Initiative
(http://www.constructiontransparency.org)

Information made available should cover all
stages of the project cycle from initial
identification through project selection,
planning, preliminary and final design, as
well as construction. Most of the limited
information that is currently made available

104
is centered on the tender requirements, with
information from the implementation phase
almost never disclosed. In this context, then,
procurement reform needs to be
complemented by enhanced project
disclosure information.
The Construction Sector Transparency
Initiative (CoST) is designed to promote the
disclosure of relevant infrastructure project
information. It comprises three core features
which provide a global standard for
transparency and accountability in the
delivery of public infrastructure. First, CoST
discloses forty data points at key stages
throughout the project cycle, as set out in
the CoST Infrastructure Data Standard (IDS).
Over time, a national CoST program
establishes a disclosure requirement for
public infrastructure that is appropriate to
local conditions and that can achieve a
credible and substantial level of compliance.
Second, CoST promotes accountability
through an independent review of the
disclosed data. Using this "assurance"

process, CoST validates technical data,
interprets it into plain language and
identifies issues of concern. This helps
stakeholders to understand the main issues,
and serves as a basis for holding decisionmakers accountable. Third, in each country,
CoST is directed by a Multi-Stakeholder
Group (MSG) that comprises representatives
of government, the private sector and civil
society.
By providing a neutral forum, CoST helps key
stakeholders pursue shared objectives to
improve the value, efficiency and
effectiveness in public infrastructure
including, very importantly, the reduction of
opportunities for corruption. Transparency
reduces the frequent distrust between the
parties and ensures that all adhere to the
same rules.
There are currently 15 countries
participating in CoST. Nearly all have seen
progress in the form of both institutional and
project-related benefits. Specifically, there

have been significant time and cost savings
in project execution through better project
surveillance and project redesign. In some
cases, cancellations of excessively expensive
or inappropriately formulated project
proposals have occurred.
In the longer term, broad benefits should be
generated for all stakeholders. For
governments, benefits should come in the
form of greater efficiency in public spending
and an enhanced reputation for integrity in
the allocation of government resources. For
the private sector, the greatest benefits are
the improvements in the investment
climate, that is, a level playing field providing
fair and equitable competition, and a
predictable business environment creating
trust and confidence. For civil society,
greater transparency and accountability
provides for voice and participation in critical
project decisions, better value for money in
infrastructure services, and more effective
checks and balances to mitigate corruption.

Justice
Corruption and the Justice Sector:
The Role of an “Independent” Judiciary
David S. Bernstein1
Lead Public Sector Specialist, World Bank

Corruption in any branch of government
usually means that the
ministry,
administration or agency cannot function
properly. It will be unable to deliver fairly
and/or effectively the public services that its
clients — the citizens and businesses of a
country — demand and expect. Corruption
in the justice sector amplifies this problem
because of the broader societal role that the
justice sector plays.

Judicial corruption weakens the justice
system’s ability to decide criminal and civil
cases impartially — the very services that a
judiciary should provide to its citizens. More
importantly, since a country’s judicial system
plays the larger role of protecting human
rights and fundamental freedoms,2 a corrupt
judiciary can impact the security and safety
of citizens. In this regard, some citizens may
feel it necessary to take “justice” into their
own hands.
A fair and effective court system is necessary
to resolve commercial disputes and protect
property rights. A corrupt judiciary can
interfere with the efficient functioning of a
country’s economy by favoring some
enterprises over others. Unlike a corrupt
agency or public administration, a corrupt
judiciary can undermine the application of
the rule of law in a country, thereby eroding
citizen trust in the effective operations of
their government.
Corruption within a country’s justice system
will also have a direct impact on its overall
ability to fight corruption. Anti-corruption
efforts focused on punishing corrupt acts
require the coordinated work of all three
branches of government. In this regard, the
legislative branch must pass the necessary

criminal laws and create investigative and
prosecutorial institutions. The executive
branch must have the political will to
investigate and bring charges against corrupt
officials, businesses and individuals.
The judicial branch must conduct fair and
impartial trials, thereby ensuring that there
is sufficient evidence to impose sanctions on
corrupt behavior. As a result, even if there is
a political will to fight corruption at the
highest levels of government —and the
legislature has provided the necessary legal
and institutional tools — a corrupted
judiciary can impede efforts to impose
sanctions in cases of corruption. Hopes may
be raised among the citizenry regarding the
imposition of vigorous anti-corruption
efforts, only to find those hopes denied by a
captured judiciary that excuses corruption
allegations or refuses to convict corrupt
officials. Where this occurs, a vicious cycle of
impunity arises.
One way to address pervasive corruption in
a country’s justice system can be illustrated
by Indonesia’s efforts to create an
independent
anti-corruption
system

105
following the fall of the Suharto government.
In 2002, following the example of a number
of Asian countries, the Indonesian
government created an independent anticorruption
agency,
the
Corruption
Eradication Commission, or KPK.3 The KPK
was given broad authority to both
investigate and prosecute high-level
corruption cases. In light of the culture of
corruption that permeated Suharto’s court
system, Indonesia went a step further and
created an independent anti-corruption
court in the capital Jakarta. This anticorruption court was given special
jurisdiction over all KPK prosecutions in
order to ensure that cases brought by the
KPK would receive an impartial hearing.
Working in this new court, the KPK earned a
100 percent conviction rate for the first 86
cases that it brought to the court.4 At the
same time, the creation of a new court (and
eventually a series of provincial anticorruption courts) was costly. It also raised a
number of concerns regarding the anticorruption court’s protection of the rights of
those accused of corruption by the KPP and
the equal treatment of those accused of
corruption by the general prosecutors in
other Indonesian courts.5
In most countries, the universal safeguard
for a fair, impartial and uncorrupted judiciary
is to ensure that the judiciary is
“independent” from the other branches of
government and from commercial interests
and corrupt individuals. At the same time,
an independent judiciary must remain
accountable for its actions and decisions.
But what exactly do we mean by ensuring
the “independence of the judiciary”? What
does an “independent” judiciary look like
and how do we measure “independence”?
More to the point, what sort of
independence should a country create for its
justice system to provide comfort to its
citizens that the system will be able to
withstand corruption internally and, at the
same time, actively and effectively combat
corruption by impartially adjudicating
corruption cases brought into the court
system?
An independent justice system generally has
some degree of three different types of
independence:
de
jure
or
legal
independence, structural independence and
operational independence.
The United
Nations
Basic
Principles
on
the
Independence of the Judiciary note that
judicial independence should be “enshrined
in the Constitution or the law of the
country.”6 Such de jure independence can
usually be found in Constitutions or judicial
codes. It is the usual starting point when
trying to determine whether a country has a
justice system that can be impartial and
combat corruption.

The Basic Principles go on to note that
judiciaries should be “impartial” and free of
“unwarranted interference”, and mentions
“judicial independence” or independence of
judges in a number of other articles.7
However, the practical definition or
application of this independence is not
spelled out in the Basic Principles. A number
of organizations have developed indicators
that attempt to measure the level of
independence in a country’s judicial system.
These primarily rely on subjective perception
surveys (Gallup World Poll, Eurobarometer)
or expert assessments (World Justice
Project, Bertelsmann Transformation Index,
World
Economic
Forum’s
Global
Competitiveness Report).
Looking more deeply into a justice system to
identify the two other types of
independence — structural and operational
— can help to clarify the characteristics of a
judiciary and define its level of
independence. Legal safeguards provide a
justice system with structural independence;
such safeguards are often also found in a
country’s Constitution or judicial code.
Structural independence is established
initially through a formal separation of
powers or the division of the government
into separate and equal executive, legislative
and judicial branches. As noted in the Council
of Europe’s Recommendation: “the
separation of powers is a fundamental
guarantee of the independence of the
judiciary.”8
A number of countries, primarily those in
Europe and Latin America, have taken this
legal protection a step further through the
creation of an independent institution, the
“judicial council” or another judicial body
with executive/administrative authority that
is tasked with safeguarding a judiciary’s

independence.
In
the
European
Commission’s European Union (EU) Justice
Scoreboard9, the key characteristics of a
judicial council — including its composition
and powers — are measured to identify the
level of structural independence in each EU
member state’s judiciary. According to the
EU Justice Scoreboard, key powers that
judicial councils should exercise to help
ensure the independence of the judiciary
are: the discipline and removal of judges; the
setting of ethical standards; and the
management of court administration.
Although judicial councils may also play a
role in the appointment of judges, the other
branches of government can and usually do
have primary authority in this area.
Beyond the legal and institutional
safeguards, in order for a judiciary to be
considered impartial and free of outside
influences, it should also be able to exercise
a level of functional or operational
independence.
Such
operational
independence usually includes the power to
administer its own rules, as well as to
manage its human and financial resources
and infrastructure. According to the EU
Justice
Scoreboard,
the
European
Commission has defined operational
independence by identifying a number of
situations
in
which
a
judiciary’s
independence may be at risk or
compromised by interference from other
branches or from outside influences. The
Commission uses the Scoreboard to identify
and measure whether an EU member state
judiciary
has
sufficient
operational
safeguards in these situations. The situations
covered by the EU Justice Scoreboard
include:

control over the transfer of judges
without their consent;
dismissal of judges;


106
withdrawal and recusal of judges from
specific cases; and
allocation of cases across judges in a
court.10

In each of these situations, judges (usually
through judicial councils or another
executive judicial body) should have
sufficient control over their own operations
to make decisions regarding transfers,
dismissals, recusals and case allocation
without interference from other authorities.
Interestingly, the Justice Scoreboard notes
that only in a minority of EU member states
do judges have the authority to define their
own budget criteria. One final operational
independence safeguard that the EU Justice
Scoreboard measures is whether a country
has in place a procedure that the judiciary,
individual judges or prosecutors can use if
they feel that judicial independence is being
threatened.
Finally, judicial corruption carries with it two
costs to a society: a judiciary that does not
provide fair and effective adjudication of civil

and criminal cases for its citizens, and a
justice system that is not likely to be able to
hold corrupt officials accountable for their
actions. As a result, countries need to ensure
that their justice systems are established
with sufficient de jure, structural and
operational independence to combat efforts
to improperly or unduly influence judicial
decisions
and
operations.
Legal
independence as described in a Constitution
is unlikely to be sufficient; judiciaries need to
have structural safeguards and adequate
authority to manage their own operations
and functions so that they can operate in an
impartial, fair and uncorrupt manner. A truly
independent judiciary is one that remains
accountable for its own actions and
decisions — both externally to the citizens
that it serves, and internally through an
effective integrity system.
FOOTNOTES

40/32 and 40/146 (1985); European Convention for the
Protection of Human Rights and Fundamental Freedoms;
Council of Europe Recommendation CM/Rec (2010)12,
Judges: Independence, Efficiency and Responsibilities
(2010).
3 Komisi Pemberantasan Korupsi;
http://www.kpk.go.id/id;
https://en.wikipedia.org/wiki/Corruption_Eradication_C
ommission
4 Norimitsu Onishi, "Corruption Fighters Rouse
Resistance in Indonesia", New York Times, 25 July 2009
5 U4 Brief, The Indonesian Court for Corruption Crimes:
Circumventing judicial impropriety,
http://issuu.com/cmi-norway/docs/130926075256884ab3bf71d84c38b32c46e33075d001/4?e=0 (2013)
6 UN, Basic Principles on the Independence of the
Judiciary, Art. 1, endorsed by GA Res 40/32 and 40/146
(1985)
7 UN, Basic Principles on the Independence of the
Judiciary, Articles 2, 4, 6, 8 and 11.
8 Council of Europe Recommendation CM/Rec (2010)12,
Judges: Independence, Efficiency and Responsibilities,
Explanatory Memorandum, para. 13 (2010).
9 EU Justice Scoreboard 2016 at
http://ec.europa.eu/justice/effectivejustice/files/justice_scoreboard_2016_en.pdf
10 EU Justice Scoreboard 2016 at
http://ec.europa.eu/justice/effectivejustice/files/justice_scoreboard_2016_en.pdf

The author is grateful to Amit Mukherjee (World Bank)
and Georgia Harley (World Bank) for their comments
and inputs.
2 United Nations Basic Principles on Independence of
Judiciary, United Nations General Assembly Resolutions

Policy Capture
Privilege-Resistant Economic Policy-Making in the
Middle East and North Africa Region
Syed Akhtar Mahmood
Lead Private Sector Specialist

Meriem Ait Ali Slimane
Private Sector Specialist

Najy Benhassine
Practice Manager,
World Bank
Unemployment rates in the Middle East and
North Africa (MENA) region are among the
highest in the world, especially for young
graduates.
Indeed,
regional
youth
unemployment rates range from 15 to 25
percent. Recent empirical work suggests that
an important reason for this is a policy system
that is vulnerable to capture by a small
number of politically-connected firms that
enjoy a variety of privileges (World Bank
2009). Studies done in Egypt and Tunisia have
documented the existence of politicallyconnected firms and the nature of privileges
obtained by them (Diwan, Keefer and
Schiffbauer 2013; Rijkers, Freund, Nucifora
2014; World Bank 2014).
A recent flagship report explores the
economic consequences of this phenomenon

and argues that restrictions on entry and the
post-entry privileges generate a substantial
cost advantage for the politically-connected
firms that dilutes incentives to be more
productive. Other firms, potentially more
efficient, are either unable to enter the
activity or are relegated to low-productivity
niches — with little prospect to grow and
create jobs (World Bank 2015).
The entry points for forces that lead to
capture, discretionary treatment and noncompetition in the marketplace lie in the
overall mechanism of policy formation. They
are explicitly manifested both in the policies
and regulations as written (de jure) and in the
manner in which they are implemented (de
facto). Policy areas affected include: (i)
regulatory policies, service delivery and
compliance enforcement (such as in business
entry, customs and tax administration,
licensing, and inspections); and (ii)
government interventions, incentives and
support to businesses (such as access to
finance, state-owned land and public
procurement contracts). In this regard, a
myriad of technical weaknesses in policies
and institutions can be exploited at all levels
— resulting in discretion, arbitrariness, and
privileges for the few.

The resulting non-competitive outcomes in
the marketplace can be redressed by
instituting an effective competition policy
framework that curbs anti-competition
behavior by powerful incumbents. Strong
public accountability arrangements also help.
By restricting potential conflicts of interest
and encouraging financial disclosure and the
right to information, privilege seeking and
giving can be curbed. However, where these
mechanisms are weak and policy deficiencies
remain
unaddressed,
rent-seeking
incumbents become stronger and more able
to influence subsequent government
decisions. A vicious cycle is thus generated.
How can one make a dent in such systems and
move toward a policy framework that
encourages competition and productivity
growth? The complex political economy
underlying policy capture and privilegeseeking may appear to be an intractable
problem. However, recent literature on the
dynamics of policy change point to windows
of opportunity within a complex political
economy setting that allow for incremental
improvements with an attendant substantial,
cumulative effect over time (Levy 2014;
Rodrik 2014; World Bank 2014, 2015).

107
Inspired by this and building upon previous
work on policy capture, ongoing work in the
World Bank’s MENA region (PrivilegeResistant Economic Policy) seeks to answer
the following question: What good
governance features should be instilled in
private sector policy and institutions to help
shield them from capture, discretion and
arbitrary implementation? It applies the
motto “What gets measured gets done” to
the private sector governance space, and
attempts a systemic measurement of various

dimensions of policy-making that could lead
to discretionary and unfair behavior. Based
on a conceptual framework, it develops a
check-list of good governance policy features
in selected areas of private sector
development policy. (Figure 1 lists the
categories of policy features). Furthermore, it
benchmarks eight MENA countries in terms of
how much of these policy and good
governance features are prevalent, and offers
operational guidance on how this policy
agenda can be moved forward.1

It is hoped that this work will move the
debate forward, going beyond the rhetoric on
privilege, capture and cronyism and toward
the creation of the kinds of reforms needed
at the policy and institutional levels to
achieve a level playing field. The work will be
completed in the second quarter of fiscal year
2017. Box 1 presents an example of the type
of results generated by the study, including its
operational implications.

Stakeholder
consultation

Rule-based (non-discriminatory) decisionmaking

Grievance redress
mechanisms

Public information
sharing

Figure 1: The Categories of Privilege-Resistant Policy Features

Integrity
mechanisms

Policy, legal and institutional framework
Source: Staff modelling of privilege-resistant policies.

Box 1: Privileged Access to Investment Incentives: Why they persist in the MENA Region
Politically-connected businesses often obtain privileged access to investment incentives, such as tax breaks and subsidies. The likelihood of such
privileged discretionary awards is increased by the lack of a good policy framework that clearly articulates the principles of the award process.
To counteract this activity, provisions should be made for: (i) publishing information regarding the incentives offered; (ii) a periodic review of
the incentive regime in order to assess results; and (iii) reform of the incentive regime when and as needed. The first provision makes the award
process transparent, thereby constraining the ability to award incentives on a purely discretionary basis. The latter two provisions may help
prevent perpetuation of a flawed or outdated incentive regime. Examples of questions that should be asked with regard to investment incentives
include the following:

Does the government have an incentives policy in place stating clearly and publicly the objectives of the incentives regime?


Does the government perform a regular review of the relevance and appropriateness of the incentives policy in pursuing its investment
policy objectives?

Does the government make the results of the review available to the public?

Does the government conduct an assessment of the fiscal costs associated with the incentives regime (for example, reviewing tax
expenditures and the cost of financial incentives) on a regular basis?
Figure 2 shows how MENA country scores progressively decline as one moves from the existence of an incentive policy, to the quality of that
policy (on paper), to the actual implementation of the policy.
The operational implications are clear. There appears to be three broad agendas. For Jordan, Lebanon and Oman, putting a good de jure incentive
policy into place appears to be the immediate agenda. For Algeria, Morocco and Tunisia, it is about ensuring de facto implementation. Finally,
for Egypt and Kuwait, it is about further deepening the de facto implementation.

108
Figure 2: Incentive Regime and the Legislative Framework

Incentive regime: legislative framework
100

% score

80
60
40
20
0

Morocco

Tunisia

Algeria

Incentive policy

Egypt

Review and transparency: de jure

Kuwait

Lebanon

Jordan

Oman

Review and transparency: de facto

Source: Privilege-Resistant Economic Policy Making in MENA, forthcoming.
Note: Oman scores zero on these dimensions.
REFERENCES
Levy, Brian. 2014. Working with the Grain: Integrating Governance and Growth. Oxford University Press.
Rodrik, Dani. 2014. “When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations.” Journal of Economic Perspectives 28(1): 189–208.
Rijkers, Bob, Caroline Freund, and Antonio Nucifora. 2014. “All in the Family: State Capture in Tunisia.” Policy Research Working Paper 6810. Washington, DC: World Bank.
Diwan, I., Keefer, P. and Schiffbauer, M. 2013. “Pyramid Capitalism: Political Connections, Regulation, and Firm Productivity in Egypt” Washington, DC: World Bank.
World Bank. 2016. Making Politics Work for Development: Harnessing Transparency and Citizen Engagement. Washington, DC: World Bank.
______. 2015. Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa. Washington, DC: World Bank.
______. 2015. Mind, Society and Behavior. World Development Report. Washington, DC: World Bank.
______. 2014. Jobs or Privilege: Releasing Prosperity in the Middle East and North Africa. Washington, DC: World Bank.
______. 2009. From Privilege to Competition: Unlocking Private-Led Growth in the Middle East and North Africa. MENA Development Report. Washington, DC: World Bank.
FOOTNOTE
1

Algeria, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Tunisia and four comparator countries (France, Italy, Portugal and Spain). Although the study is focused on the MENA region,
its methodology and insights are likely to have broader geographic relevance.

Are Politically Connected Firms More Likely to Evade Taxes?

Evidence from Tunisia
Hassen Arouri
Business Statistician,
Institute of Statistics

Tunisian

National

Leila Baghdadi
Associate Professor, WTO Chair, Tunis
Business School

Gael Raballand
Senior Public Sector Specialist, Global Tax
Unit, Tax Administration Group, World Bank

Bob Rijkers
Economist, Trade
and
International
Integration Unit, Development Research
Group (DEC), World Bank

Ending abuse of power by the ruling elites
was one of the chief demands of those who
took to the streets during the Arab Spring
protests. Our new research papers unveil the
scale of such abuse in Tunisia. They
document evidence suggesting that firms
owned by former president Ben Ali’s family
were 5 percent more likely than nonconnected firms not to report to the tax
authorities — in spite of being active. They
were also 8 percent more likely to declare

anomalous sales when they did report. In
addition, connected firms circumvented at
least US$1.2 billion worth of import tariffs on
account of their political connections
between 2002 and 2009. Unfortunately,
whereas tariff evasion by firms previously
owned by the Ben Ali family seems to have

subsided since the Jasmine Revolution,
overall tax evasion in Tunisia has escalated.
Why should we care?
Tax evasion is not only unfair.
It
shortchanges government revenues. It is
also inefficient because it gives the

109
perpetrators a cost advantage over those
who are compliant — an advantage that is
not based on performance.
Detecting Tax Evasion
Verifying tax declarations is notoriously
difficult, since objective information on what
firms should declare is typically not available.
In Tunisia, information-sharing between (and
within) different government agencies was
extremely limited during the Ben Ali era. Yet,
Tunisia has a wealth of administrative data,
which it is now being used to combat tax
fraud. This in turn
facilitates testing for
tax evasion through
an examination of
discrepancies
between
declarations made to
different
government
agencies.
More
specifically,
triangulating reports
made to the social
security and customs
administrations with
tax records enables
us to assess the
prevalence of nonand under-reporting.

Missing
declarations.
Non-reporting is
widespread; 9
percent of non-connected firms did not
submit a tax declaration, despite being
economically active. This is defined as
reporting the hiring of at least one
worker to the social security
administration, and/or registering an
import and/or export transaction with
customs. Non-reporting is even more
widespread among active Ben Aliowned firms; with other conditions
remaining the same, they are 4.6
percentage points more likely than nonconnected firms to have a missing tax
declaration in spite of being active.

Underreporting. Among those firms that are
active and that submitted tax declarations,
we can check whether the sales they declare
to the tax authorities are consistent with
their reports to the social security and
customs administrations. We consider their
tax declaration anomalous if the sales
reported are lower than either the wage bill,
total imports or total exports.( The results
also hold true when we use more stringent

definitions of anomalous sales.) No less than
15.3 percent of non-connected firms submit
a tax declaration in which they claim their
sales were lower than their wage bill, total
exports or total imports. All else being held
equal, connected firms are 8.4 percent more
likely to submit such an anomalous
declaration.
To summarize, connected firms were less
likely to report to the tax authorities, and
more likely to report anomalous levels of
output when they did, suggesting they were
more likely to evade taxes.

Tariff Evasion
Mirror Statistics. In addition to assessing
domestic tax evasion, we examined evasion
of import tariffs by comparing import
transaction records with counterpart
declarations by exporters, who have limited
incentives to lie about how much they have
sold abroad. If imports are reported
correctly, they must be very close to exports
reported in countries that send goods to
Tunisia. However, if imports are declared
incorrectly — or not at all — then so-called
“evasion gaps” may arise. These are
measured as the difference between exports
reported in countries selling goods to Tunisia
and imports of those same goods reported in
Tunisia; the higher this difference, the more
imports are “missing” and the less revenue
Tunisian customs collects. Such evasion gaps
are typically largest for goods subject to high
tariffs, where evasion is most lucrative. In
this context, they have become a standard
proxy for tax evasion.

In Tunisia, evasion gaps were highest for
products imported by Ben Ali-owned firms,
and especially large when such products
were subject to high tariffs. These gaps were
due to the under-reporting of prices. Indeed,
the evidence suggests that connected
entrepreneurs were the main perpetrators.
Ben Ali-owned firms reported significantly
lower prices than their competitors for the
same goods imported from the same country
(and consequently paid less tax for those
goods), with the gap between Ben Ali prices
and other firms’ prices widening with the
tariff rate.
What happened
after
the
Revolution? The
ousting of Ben Ali
during the Jasmine
Revolution led to a
reduction in tax
evasion and the
under-reporting of
unit prices in
product lines in
which the Ben Ali
family had been
active. However, it
sparked
an
increase in overall
tariff evasion. In
spite of curtailed
capture by the Ben
Ali
clan,
on
average
tax
evasion gaps have
risen by 5 percent, in part reflecting the rise
in informal trade. Thus, if anything,
corruption seems to have intensified since
the Jasmine Revolution.
What can be done?
Given Tunisia’s limited fiscal space and
mounting debt, combatting tax evasion is an
important priority. Increasing data-sharing
across institutions, simplification of tax laws,
and more effective enforcement are
important steps in creating a tax system that
is both more efficient and equitable — and
less susceptible to capture by the ruling
elites.

REFERENCES
Rijkers, Bob, Leila Baghdadi, and Gael J.R.F. Raballand.
2015. Political Connections and Tariff Evasion:
Evidence from Tunisia. World Bank Economic Review.
Rijkers, Bob, Hassen Arouri, and Leila Baghdadi. 2016.
Are Politically Connected Firms More Likely to
Evade Taxes? World Bank Economic Review, ABCDE
Supplement.

110

111

OPERATIONS

COVER STORY

Integrity
The Role of the World Bank’s Integrity Unit
in Addressing Corruption in Bank Projects
Mohamed El Maini
Senior Investigator, Integrity Vice Presidency
World Bank

Over the last decade, I have been working in
international investigations for a United
Nations humanitarian agency and the World
Bank Group, with a focus on the Middle East
and North Africa (MENA), as well as the Africa
region. As an international investigator, I have
had a chance to witness first-hand how our
development institutions can have a positive
impact — and how fraud and corruption can
adversely affect people. Corruption poses an
enormous obstacle to economic and social
development and to our goal of ending
extreme poverty by 2030. Since former World
Bank President Jim Wolfensohn’s groundbreaking speech in which he called to take
action against the “cancer of corruption”, the
World Bank has made significant strides that
underscore its commitment to preventing

corruption and investigating potential fraud
and corruption risks.
About the World Bank’s Integrity Unit (INT)
INT’s mandate is to ensure that World Bank
funds are used for their intended purposes.
When
companies,
non-governmental
organizations
(NGOs),
or
individuals
participate in Bank-financed projects, they
commit to adhere to the highest ethical
standards. Specifically, this includes not
engaging in the five sanction areas provided
for in the Bank’s legal framework, namely:
corruption, fraud, collusion, coercion, and
obstruction. INT usually receives most of its
complaints from World Bank staff. However,
complaints can also come from outside our
institution, including concerned citizens, civil
society organizations, bidders, project
officials, and so on. Complaints can be
received by telephone, email, and through a
web form on the Bank’s website
(www.worldbank.org/integrity)
and
are
treated as strictly confidential. After
confirming it has jurisdiction over the issues
raised in the complaint, INT then conducts an
initial assessment to determine its credibility,
relevance, and to assign a level of priority. At
the conclusion of the preliminary review, INT
decides whether to open an investigation or to
close a complaint. In this context, it will also
work with operational staff or other
interlocutors to address the issues raised.
While the outcome of an investigation can

lead to sanctions, that decision is made by the
Office of Suspension and Debarment and the
Sanctions Board, as INT’s role is that of a
neutral fact-finder. Sanctions are not the only
outcome of INT investigations. Investigative
findings are often leveraged to strengthen
internal controls, exercise additional due
diligence, and identify and address risks
during the life of a project.
INT and MENA Bank Operations
Working arrangements between INT and the
World Bank Operations Policy and Country
Services (OPCS) group provide for periodic
meetings with MENA operations counterparts
to update them on the progress of open
complaints and investigations. Task Team
Leaders and Practice Managers are kept
informed of the main investigative steps
undertaken by INT. The risk databases
managed by the procurement team offer an
opportunity for Bank staff to engage with INT
to make timely and informed decisions
involving integrity risks to their projects.
Based on its experience, the sectors in which
INT has conducted the most significant
investigations are the energy and water
sectors. As noted in other regions, INT
investigations have encountered corruption
schemes involving third-party agents.
Companies often hire third-party agents to
help them understand the business
environment of a local market, assist with
finding local sub-contractors, and liaise with

112
project officials during tendering and project
implementation. The Bank requires that
bidders disclose their use of third-party
agents, as well as the fees that such agents are
paid. However, some companies intentionally
hide the use of these agents or fail to
accurately report fees paid to them — which
in turn makes it easier for agents to act as
conduits for bribe payments and manipulate
contract awards and amendments. Other
schemes investigated by INT revealed that
bidders
submitted
fraudulent
bank
guarantees or inflated financial information.
In one case involving a multi-million dollar
project, the project implementation unit was
unable to cash multiple false bank guarantees
submitted by a contractor at the bidding
stage. The contractor had failed to implement
its obligations, resulting in an important loss
for the project that could not even be partly
compensated. In cases where bidders inflate
their financial capacity, there is the risk that
the contractor may not have the ability to
implement the contract. It may even go
bankrupt while executing the contract,
thereby
endangering
the
project’s
development objectives. Other issues
encountered involved project officials
soliciting bribes from bidders and contractors,
the submission of fraudulent experience
certificates by bidders, contractors delivering
substandard works or equipment, and the
misuse and/or mismanagement of project

assets and funds by
implementation agency.

the

project

INT and National Authorities in the MENA
Region
INT’s practice is to refer its investigative
findings to relevant member governments
when INT’s findings identify evidence that
their national laws may have been violated.
INT provides this information so that client
governments can conduct their own
independent investigations to determine if
any of their domestic laws were violated. INT
has been making referrals to the various
member countries in the MENA region as
cases arise. INT also regularly interacts with
national authorities to explore the possibility
of sharing operational information pertaining
to investigations, as well as participate in
capacity-building/training activities. These
interactions have taken place in coordination
with the World Bank Governance Global
Practice (GGP), or as part of a bilateral
memorandum of understanding between INT
and the concerned national authority. For
example, INT is engaged in a long-term
cooperative relationship with the Saudi
National Anti-Corruption Commission, or
Nazaha. INT designed and provided an
investigations training program for Nazaha
employees, and will receive two Nazaha
investigators to work with it on a secondment
basis. INT also took advantage of this special

relationship to introduce Nazaha to other
capacity-building services and programs
offered by the Governance Global Practice.
The Way Ahead: Forensic Audits?
The World Bank is shifting its approach to
smarter risk taking by adopting more
programmatic approaches that finance high
volumes of low-value transactions across large
geographical regions and remote locations;
provide for a greater emphasis on fragile
states; and include an increased reliance on
countries’ own systems. In this context, the
use of forensic methodology1 in proactive
fiduciary reviews, carried out in partnership
with the Governance Global Practice, can
establish early warning systems that help to
ensure high-risk operations meet their
objectives. These forensic reviews delve
deeper into issues and provide actionable
information. This approach can also involve
national authorities, but has not yet been tried
in the MENA region. However, it could be an
area to explore to use synergies and different
skill sets/levels to prevent and deter
corruption in World Bank-financed projects

FOOTNOTE
1

A forensic audit is generally only used in cases of
suspected fraud to substantiate whether or not the
suspected fraud actually occurred and, if so, to gather
evidence that could be presented in a court of law.

Latin America & Caribbean
Entry Points in the Fight Against Fraud and Corruption
Lisa Bhansali
Advisor and Focal Point on (INT) caseload
for Latin America & Caribbean, World Bank

One of the notable advantages that the
World Bank offers in addressing corruption
risks in Bank-financed operations is the
number of different entry points and
opportunities to work with various partners.
Since the Governance and Anticorruption
(GAC) Strategy was first adopted in 2007,
staff and management have worked hard to
integrate their focus on the risks posed by

fraud and corruption (F/C) at every stage of
an operation, including after a project is
closed.
As the former GAC Advisor in the Latin
America and Caribbean region (LCR), one of
my main tasks was to supervise the integrity
of the lending portfolio. An important entry
point for this work was to improve how well
we dealt with INT (Integrity Vice-Presidency)
cases, specifically how well task teams in the
LCR region reported allegations and
responded with remedial measures. This
challenge usually entailed taking actions
while a particular project was still being
implemented. In this regard, the LCR region
needed to maintain a constructive dialogue
with country clients, even though INT was
still conducting its investigation. It is at this
point where operational experience was
fundamental.
One operational entry point is to examine
the procurement process in cases of alleged
corruption. In just about every INT
investigation, a procurement issue is

involved. This requires the Regional
Procurement Manager and procurement
colleagues (including Task Team Leaders) to
be more vigilant. For example, they might
recommend mis-procurement or even the
cancellation of funds in some instances.
Country Directors / Managers and
Operational Advisors necessarily become
more involved since their specific portfolios
are affected. As a result, the LCR region has
invested time and effort in training its staff
and management — both formally and
informally — on how to react when F/C fraud
materializes or poses a risk to a Bankfinanced operation. Publications such as
Corruption Warning Signs: Is Your Project at
Risk (2007) raised awareness about red flags
and pointed to the need for continuous
learning. Another publication, an Update of
the Warning Signs, is forthcoming.
Beyond management of the INT caseload,
another entry point is "risk management" in
general. Here, an understanding of where a
project may be vulnerable to F/C is essential.
Is corruption in a country's sector an issue in

113
and of itself? Are there numerous press
articles about corruption in government, or
does there exist a 'coziness' (for instance, too
close a tie between government and the
private sector, implying a conflict of interest)
with private sector entities? Does a
proposed operation include a large number
of contracts for civil works of high value?
Based on previous projects (even those
funded by other donors), is there a likelihood
of leading to F/C allegations? Was there an
INT investigation in the same country and
sector? If so, were sanctions initiated? The
design of any new operation needs to ask
and answer these questions. While "risk" is
on the agenda at decision meetings for
authorizing
project
appraisal
and
negotiations, it is almost always the last item
to be discussed. Indeed, only in exceptional
circumstances — or with an exceptional
Chair —does it get the attention it deserves.
Another entry point and natural partner are
Project Implementing Units (PIUs), which can
be either allies or a cause for concern. For
example, is the same project manager who
was implicated in an INT investigation still in
charge of a new project? The Bank's
mandate does not include the sanction of
public officials, and PIU staff may or may not
be seen as "public officials". Nonetheless,
PIUs and Bank staff alike are too frequently
uninformed about the application of the
Bank's Anti-Corruption Guidelines (ACGs) on
preventing and combating fraud and
corruption. The ACGs for investment lending
(that is, Investment Project Financing- IPF)
were originally adopted in 2006 (and revised
in 2011 and July 2016). It is troubling that
many task teams do not seem to even know
of the existence of these Guidelines, even
when their own projects are being
investigated.

but those that have never had an allegation.
In doing so, not only did we raise the
awareness about the ACGs, but we also
ensured that PIUs themselves had a sense of
accountability about reporting allegations —
including an understanding that their own
conduct may be investigated. Incorporating
the ACGs in Operational Manuals is now
considered good practice across the World
Bank.

Part of the LCR region's preventive work has
been to reach out to PIUs and make
important linkages to the Operational
Manual. As a result, working with the Legal
Vice-presidency (LEG) and Operations Policy
and Country Services (OPCS), the LCR region
translated the ACGs into local languages. It
also focused attention on training not only
the PIUs whose projects had investigations,

Still other entry points include the Bank's
diverse lending instruments, such as the
Program for Results (PforR). The PforR
instrument offers a real opportunity to
conduct a systemic review in preventing F/C
from technical, fiduciary, environmental and
social entry points. In short, it takes an
integrated risk approach. The focus may be
systemic, but it also needs to target the

The Systemic Operations Risk Rating Tool
(SORT) is another entry point. This
instrument takes into account two important
aspects of both political and governance
categories. The first focuses on political risk
through a fundamental change of
government, while the second focuses on a
governmental reforms and its own
management of resources. This also includes
legislative changes to enhance transparency.

Solutions and Innovations in Procurement Group, Governance Global Practice, World Bank

vulnerabilities of the specific objectives of
the Program. Hence, it is important that
anyone preparing the fraud and corruption
inputs to the various assessments realize the
specific objectives that will define areas of
F/C vulnerabilities—in other words, not just
any F/C is relevant to a PforR operation.
Again, the specific ACGs for PforR operations
(2012; revised 2015) offer guidance to
teams, as do OPCS colleagues with practical
experience.
Unsurprisingly, the clearest lesson learned is
that corruption tends to flourish in cases in
which organizational checks are unbalanced
— and when weak internal controls are
allowed to continue. Unbalanced power is a
symptom of institutional weakness and
usually leads to a lack of responsibility and
excessive discretionary power. Bank Task
Teams in the Global Practices, together with
Country Directors and Regional VicePresidencies, need to raise the importance
of “good management” with counterparts
on a regular basis. Governance Global
Practice staff, particularly in Procurement
and Financial Management, are excellent
resources in this effort to prevent
corruption. Indeed, it is a reliable way to
ensure that development is inclusive and
beneficial for all.

In Their Own Words

114

“Many countries are stuck in a political tragedy of the commons. Corrupt systems require people to act as if they
thought bribery were good, extortion were permitted, and cheating were the norm. Once corrupt behavior is
embedded, an individual may have little choice but to go along. When we encounter a corrupt equilibrium, it is wrong
and ineffective to decry the culture of those stuck in that equilibrium. Wrong, because their individual ethics may be
superior to our own; their culture in that sense is not necessarily what needs changing. Ineffective, because the
structure of payoffs makes “pay the bribe” the dominant strategy. We need to change structures, not cultures.”
Robert Klitgaard is a University Professor at Claremont Graduate University in California.
Formerly a professor at Harvard and Yale and Dean at the RAND Corporation

115

VIEWS FROM OUTSIDE

COVER STORY

Interview
Susan Rose Ackerman,
Henry R. Luce Professor of Jurisprudence Law School and
Department of Political Science, Yale University
Interview
conducted
by
Francesca
Recanatini, Senior Public Sector Specialist,
World Bank

years after that initial call to action, what
role should development organizations,
such as the World Bank, play in confronting
corruption issues today?
Let me start by stressing a basic point: If
corruption is pervasive, the programs and
activities of the World Bank will not
accomplish their goals. In those cases, what
can the Bank do? Here it is important to
distinguish between issues and challenges
that are generic to the overall development
agenda and those that are tied to the details
of specific projects. To address the first set
of issues, development organizations should
support activities such as:
 Summarizing information about the costs

Corruption is a controversial topic among
policy
makers
and
development
practitioners. In 1996, then World Bank
President Jim Wolfensohn stated during the
World Bank-International Monetary Fund
(IMF) Annual Meetings that “we need to
deal with the cancer of corruption”. Twenty

of corruption and providing it to countries
that implement Bank projects so that they
can understand the way corruption
conflicts with development goals; Helping
to support and implement global
initiatives, both globally and at the
country level —for example, the
Organisation for Economic Co-operation
and Development [OECD] Treaty, the
Extractive Industry Transparency Initiative
[EITI], the Stolen Asset Recovery Initiative
[StAR], and other similar international
efforts aimed at reducing illicit financial
flows;

 Promoting the creation and maintenance

of professional and business networks of
people who are affected by the costs of
corruption, both inside countries and
across international borders;
 Supporting countries in launching internal
anti-corruption
reforms.
Here,
cooperation from people inside the
country is essential as the World Bank
cannot accomplish reform on its own. If it
acts in isolation from domestic actors, it
will be criticized for “flying in and out” of
the country — without understanding the
reality on the ground. Communication
and collaboration with those in the
country who are leading the reform
process is a critical requirement.
Assuming the World Bank can establish
such links, its staff should help carry out
diagnostic exercises to identify areas
where, on the margin, limits on corruption
and self-dealing can have the greatest
impact on citizens. Clearly, the most
promising areas for reform and the set of
policies chosen will vary across countries.
This diagnostic exercise, already part of
many World Bank efforts, should help to
define the Bank’s programs and activities.
For instance, reform could focus on a
specific sector, such as education or
health, or on a specific process, such as
procurement.

116
 Fostering a more transparent financial

system. The Bank can be a global force
that advocates for greater international
control in the area of money laundering,
as well as supporting mechanisms that
make it easier and more transparent to
follow money trails across borders.

Corruption and Government, that was
published in 1999, and which built on my
earlier book. However, the new book aimed
at reaching a broader audience beyond
those with training in economics.

Twenty years have passed since I was at the
Bank and began work on the first edition.
The publication of the first edition coincided
with a surge of interest in the topic, including
the creation of Transparency International.
Since then, many other changes have taken
place, and many more people began doing
research in this area.

You are known as one of the pioneers
among economists and legal scholars
regarding the issue of corruption, with your
first publication on this issue dating back to
1978. What triggers your interest and
thinking in this area? What led to the
publication of the first edition of your book,
Corruption and Government, in 1999?
My interest in the topic was triggered by
observations of corruption within the United
States and its federal housing programs in
the 1970s. More people were eligible for
these programs than there were funds and
housing units available. This, in turn, led to
queues to obtain the housing benefits — and
then to the payment of bribes to get to the
head of these queues. This situation made
me realize that the basic economics of
scarcity could have helped to inform policy
makers about the risks of corruption
embedded in the law. Inadvertently, the law
had built-in incentives for people to get
around the law through payoffs.
Integrating economic thinking into the
design and implementation of the program
would have been helpful and would have led,
in my view, to a more effective public policy
designed to mitigate (perverse) incentives
for payoffs. I then built on that example to
locate other cases where scarcity and
discretion produced corrupt incentives. The
result was my first book on the topic:
Corruption: A Study in Political Economy,
published in 1978.
Following this initial work, I had the
opportunity to be a visiting scholar at the
World Bank in 1995-96. This was a very
important opportunity for me to learn about
problems of economic development and the
way in which the Bank was dealing with
them. Corruption at that time was an issue
that people discussed over coffee and lunch,
but not openly or publicly in formal Bank
discussions. This was the first year of James
Wolfensohn’s presidency.
It was clear that many Bank staff were
concerned about the impact of corruption on
Bank programs and on the broader problem
of poverty and weak development. I gave
several seminars while at the Bank, and I
talked with colleagues working at the sector
level — especially those in forestry, who
were very upset by the level of corruption in
the implementation of Bank projects. My
year in Washington led to the book,

What do you think has changed since the
early 2000s when it comes to thinking about
the issue of corruption? Are these changes
the reason behind the publication of the
second edition of Corruption and
Government this year?

Corruption and Government:
Causes, Consequences and Reform
by Susan Rose-Ackerman and
Bonnie J. Palifka. Cambridge
University Press.
The book analyzes the research
explosion that accompanied the fall
of the Berlin Wall, the founding of
Transparency International, and the
World Bank's decision to give anticorruption policy a key place on its
agenda. Time has vindicated RoseAckerman's
emphasis
on
institutional reform as the necessary
condition for serious progress. The
book deals with routine payoffs and
with corruption in contracting and
privatization.
It gives special attention to political
corruption and to instruments of
accountability. The authors have
expanded the treatment of culture
as a source of entrenched corruption
and added chapters on criminal law,
organized crime, and post-conflict
societies. The book outlines
domestic conditions for reform and
discusses international initiatives including both explicit anticorruption policies and efforts to
constrain money laundering.

When I started to work on corruption, there
was not much empirical work by those with
a background in economics. There were
some colleagues studying the topic from
other points of view, including sociology,
political science, psychology, but very few
with an economics background. Since then,
there has been an explosion of research,
both empirical and theoretical. Some of the
research is at the field level and focuses on
how corruption operates in particular
sectors. As someone who started out in
microeconomics with a public policy interest,
this seems to me an extremely important
body of work that has produced many useful
results
So, one motivation for the second edition of
the book was to incorporate some of the
newer literature. Another motivating factor
was to urge researchers to move away from
cross-country research. That research put
the issue on the table, but real progress from
a policy point of view requires a more finely
grained approach. For example, we need to
know more about how corruption works in
education, health, banking and finance,
national defense, and so on.
An additional motivation came from my coauthor on the second edition, Bonnie Palifka,
a Professor at Monterrey Tech in Mexico.
She really pushed me to talk about organized
crime, and about the link between violence
and corruption — especially in post-conflict
societies. She also advocated research into
money laundering and its link to corruption.
In addition, she has used the book in several
courses that she has taught in Mexico and at
the Yale summer school. As such, she had
excellent ideas about ways to reach a
broader audience.
What would you say to recently elected
policy makers when asked about how to
address the issue of corruption in their
country?
The starting point for policy makers is to
reflect on where corruption is having the
most effect in their country. The size of the

117
bribe that is paid is not the only measure.
The real effect of corruption is not just that
money changes hands, but rather that the
bribe is buying something of value. Policy
makers need to ask themselves: What losses
are imposed on society by this exchange of
money? By the beneficial projects that are
never completed or are carried out in very
inefficient and costly ways? By the rules and
regulations that are undermined by payoffs?
Furthermore, reformers need to ask if some
rules have become pure bribe generators;
they may not make policy sense and may be
overly complex. Such rules could be repealed
and replaced by others that are simpler and
more transparent. Where is corruption
causing the biggest losses for society and for
the country?
The second condition for reform is
identifying allies. No one can deal with
corruption alone. It is important to identify
the windows that exist in any country to fight
corruption. To do so, reformers must
identify their allies and supporters and enlist
them in the effort.
There are cases from the history of Great
Britain, some Latin American countries, and
the United States in which reformist
governments were able to make major
changes. The reformers had allies who were
ideological allies (progressive reformers who
cared about a clean, democratic government
and who would work hard to make it
happen). However, change only occurred
because policy makers also had support from
other portions of society, such as business

leaders who felt disadvantaged by the
existing corruption. Business leaders saw
others getting favors, paying bribes, not
complying with rules and avoiding taxes.
These business leaders were harmed by
corruption and they became strong allies in
anti-corruption efforts.
Thus, there are two key aspects of a reform
program. The first has to do with strategic
thinking that is, locating the places where
tangible success is possible and that can be a
base on which to build. Second, reformers
need to identify allies who will provide
strategic support for reforms.
In your long career and exchanges with
colleagues, practitioners and policy makers,
is there anyone that stands out in your
memory for the challenges he/she faced or
the solutions he/she proposed? Why?
The people who come to mind are not so
much heads of states because their records
are often rather mixed. I think that Peter
Eigen’s
creation
of
Transparency
International (TI) was a very important step.
Regardless of how much one may criticize
the TI Corruption Perceptions Index, having
a strong international institution dedicated
to fighting corruption has been very
important and helpful. More importantly,
these efforts and thinking have been
institutionalized and have gone beyond
Eigen’s own individual person and charisma.

Many journalists have risked arrest and
violence to engage in serious investigative
reporting. Some civil society groups combine
investigation and advocacy. Here, I would
especially
mention
another
nongovernmental organization called Global
Witness. It was founded by Patrick Alley and
his friends who started their work by
pretending that they were timber
purchasers in the borderlands of Southeast
Asia. They wrote an ‘exposé’ of what they
learned. Since then, they have maintained
their investigative edge and combined it with
a
willingness
to
expose
corrupt
governments, individuals, and business
dealings and to push for systemic reforms,
especially in developed countries such as the
US.
Another person is Mark Pieth, a Swiss
lawyer, who was extremely important in the
drafting of the OECD convention against
corruption that generalized the United
States Foreign Corrupt Practices Act. The
countries that ratify the treaty must legally
make it an offense for firms to pay a bribe to
obtain business abroad. We know that
holding firms and their managers
responsible for payoffs is not a
comprehensive answer to the problem of
overseas bribery. However, it is a start. At
least, it changes the dialogue and debate
over international bribery and makes it less
easy for corporations to justify the payment
of a bribe as the “culturally sensitive” option.

Interview
with Alina Mungiu-Pippidi, Professor of Policy Analysis and
Democracy, Hertie School of Governance, Berlin
Interview conducted by Francesca
Recanatini, Senior Public Sector Specialist,
World Bank

Corruption is a controversial topic among
policy
makers
and
development
practitioners. In 1996, President Jim
Wolfensohn stated at the World BankInternational Monetary Fund Annual
Meetings that “we need to deal with the
cancer of corruption”. What do you think is
the role of a development organization like
the World Bank today when it comes to
corruption?
As a social psychologist I take a realistic view
about human nature. Corruption is inherent
in social life. We are all tempted to take more
than our fair share from joint resources and,
of course, whoever has more power can take
always more. Rather than having a narrow
judicial-minded approach to corruption, I
think we should be aware of corruption in
anything that we do in development. We

should organize things so as to prevent
everyone, including ourselves, from being
corrupt. If corruption is allowed to happen,
its repression is far more difficult because of
its deep linkage with power. Let me give you
an example. The Genoan governors of Black
Sea colonies in the thirteenth century had to
be outsiders of the city. They had mandates
of only one year and these were not
renewable. They were only paid by
reimbursement after an audit checked them
and found that they had governed correctly.
Moreover, they were always asked to leave
with their staff by the same ship that brought
in their successor and his people. I think it is
only rational to design temptation-proof
institution of this kind even today.
For a more personal question, you have
been working in the governance field for
more than two decades. Is there a

118
particular event or activity that made you
realize the importance of integrating the
issue of corruption in development work?
When I returned from my Harvard studies to
my first public office in my post-communist
country, I eventually had to deal with my first
big contract to allocate. It was for the offsourcing of advertising for public
broadcasting, which was still very strong at
the time. It involved a rent on all counts, due
to the nice commission out of guaranteed big
sales. And it was at that point when I saw the
situation get out of control. I had calls from
everybody, not just the usual ministers who
had interests in companies, but even
ambassadors of major Western powers who
alluded that my country would not be
accepted to join the North Atlantic Treaty
Organization (NATO) unless I granted the
contract to a company from their country.
When placed in a situation in which
influence-peddling
shapes
outcomes,
everyone will make calls and all developing
countries are like this. Competitive markets
should not be presumed. Indeed,
asymmetrical power has always determined
who gets what. In old democracies, a system
of reciprocal constraints enables fairer
competition, and gains from open abuse of
influence disappear. But the drive for undue
profit never goes away.
You have an unusual background and
training, including a medical degree and a

career as a journalist. How much do you
think these experiences have affected your
view on corruption and possible solutions
to it?
I emerged from the revolution of 1989 with
the revolutionary feeling that everything can
be changed, despite the fact that I knew how
much the general conformity and the
compliance of the population had made
Ceausescu’s Romanian dictatorship worse
than it would have otherwise been.
Everything I have done since was with the
awareness that evil is not external. It is really
not enough to find a bad guy and shoot him;
evil is internal and comes out mostly in social
forms. So, I am a trained psychiatrist who
became a social psychologist, civic activist,
reformer of the public sector, public
journalist and even an amateur lawyer who
sues a government. All these paths were
needed at some point to outsmart social
inertia and prevent social dilemmas from
closing in.
Policy makers often suggest that possible
cures for corruption span from increasing
civil servants’ wages to promoting
transparency
and/or
increasing
competition. Based on your current work
and recent new book what do you think are
some of the critical tools that policy makers
should try to adopt to reduce the risk of
corruption?

What my book offers is a self-diagnosis
instrument, not a universal cure. On top of it,
we offer the most practical product of our
academic efforts so far, that is, a statisticallytested and fully objective index to measure
the capacity to control corruption in a
country. More specifically, this includes the
institutional framework of public integrity
(see: integrity-index.org). It has six
components, from the digital empowerment
of citizens (e-citizens) to freedom of the
press to administrative discretion in the form
of red tape or fiscal transparency. Any
country can see how it ranks globally
alongside other countries on all dimensions.
Furthermore, both governments and civil
societies can use this evidence as a starting
point for their reform strategies — if they
really want to change something.
In your long career and exchanges with
colleagues, practitioners and policy makers,
is there anyone who stands out in your
memory for the challenges they faced or the
solutions they encountered? Why?
Mart Laar, the Estonian Prime Minister,
whom I interviewed is one. He is the closest
of anyone I have ever met who has really
built a virtuous circle, showing that
economic rewards only follow brave political
reformers.

The Quest for Good Governance:
How Societies Develop Control of Corruption
By Alina Mungiu-Pippidi
Why do some societies manage to control corruption so that it
manifests itself only occasionally, while other societies remain
systemically corrupt? This book is about how societies reach that
point when integrity becomes the norm and corruption the
exception in regard to how public affairs are run and public
resources are allocated. It primarily asks what lessons we have
learned from historical and contemporary experiences in
developing corruption control, which can aid policy-makers and
civil societies in steering and expediting this process. Few states
now remain without either an anticorruption agency or an
Ombudsman, yet no statistical evidence can be found that they
actually induce progress. Using both historical and contemporary
studies and easy to understand statistics, Alina Mungiu-Pippidi
looks at how to diagnose, measure and change governance so
that those entrusted with power and authority manage to defend
public resources.

119

In Their Own Words

“Traditionally, public officials have been somewhat nervous about discussing corruption
openly. Over the past several years, however, I have been struck by the extent to which
world leaders are now willing to talk candidly about this problem. It is not just that the
economic costs have become self-evident. It is also because there is an increasing demand
for change. In a recent global survey, corruption was regarded as the ‘topic most frequently
discussed by the public’, ahead of poverty and unemployment. Given that both poverty
and unemployment can be symptoms of chronic corruption, my view is that the priority
given to this problem by the public is entirely justified.”
Christine Lagarde, Managing Director, IMF

120

EVENTS

COVER STORY

Upcoming Anti-Corruption Events and Meetings
Event

5th Annual Anti Bribery &
Corruption Forum
October 13-14, 2016,
London, United Kingdom
This two-day program provides an invaluable
opportunity to learn about the latest
international and domestic anti-bribery and
corruption developments, discuss fresh
approaches to new and on-going issues with
peers from the United Kingdom, Europe and
further afield. The Forum brings together
leading stakeholders from the United
Nations Office on Drugs and Crime (UNODC),
the Organisation for Economic Co-operation
and Development (OECD), the International
Criminal Court (ICC), the United States (US)
Foreign Corrupt Practices Act (FCPA)- US
Department of Justice, the US Federal
Bureau of Investigation (FBI), Home Office,
Global Witness, Transparency International,
law enforcement as well as industry experts
from BAE Systems, Barclays, Bank of
Montreal (BMO), BP, Credit Suisse Americas,
Lloyds Banking, and so on. This event is
organized by the Anti Money Laundering
Professionals (AMLP) Forum, a cross-industry
association with an Advisory Panel
comprised of leading anti-corruption and
financial crime practitioners.
http://www.amlpforum.com/abc-forum/
Event

Anti-Corruption Collective
Action Conference

The conference, organized by International
Centre for Collective Action (ICCA) at the
Basel Institute on Governance, will address
the latest in research and practice on anticorruption collective action through highlevel panel discussions, workshops and key
note speakers with distinguished experts and
practitioners. The conference will include
sessions on the following:

Recent research on anti-corruption
collective action; is there a formula for
success?

What are the incentives to engage in
anti-corruption collective action in
challenging markets?

Can the corruption risks in public
procurement be cured by collective
action?
http://www.collectiveaction.com/conference2016/overview
Event

International Bar
Association (IBA) AsiaPacific Regional Forum on
Anti-Corruption, Compliance
and Enforcement Conference
November 3-4, 2016,
Seoul, South Korea
The International Bar Association conference
will address the following topics:

October 20-21, 2016,
Basel, Switzerland

Law enforcement and the private sector: Are
collaborative efforts possible?

Recent trends and updates on anticorruption regulatory and enforcement
environment in the Asia-Pacific region.





Mergers and Acquisitions and anticorruption due diligence, including third
party risks.
The rise of whistleblowers and implications
for corporations – managing your own
employees.
How to set up effective compliance programs
and robust controls.
Update on the latest United States Foreign
Corrupt Practices Act investigations and
changing landscapes of global cooperation.
Is it possible to draw a fine line between
hospitality and bribery? Gift and
entertainment practices?

http://www.ibanet.org/Conferences/conf74
5.aspx
Event

5th Asia-Pacific Summit on
Anti-Corruption
November 14-17, 2016,
Singapore, Singapore
The American Conference Institute’s fourth
annual Asia-Pacific Summit on AntiCorruption,
Compliance
and
Risk
Management will address innovations in
compliance, and discuss the best risk
mitigation strategies and provide updates on
the rapidly evolving anti-corruption
landscape in the region, with in-depth
discussions of China, India, Indonesia,
Malaysia, Myanmar, the Philippines, and
Vietnam.
http://fcpaconference.com/singapore/

Event

2nd Andean Summit on
Anti-Corruption, Compliance
and Enforcement
November 16-17, 2016,
Bogotá, Colombia
Anti-corruption
compliance
and
enforcement have in recent years become
increasingly important for companies, both
local and international, that pursue business
endeavors in the Andean region. Following
its successful premiere in 2015 that drew
panelists and delegates from North and
South America, the 2016 Andean Summit will
build on this momentum through practical
and interactive panels that offer the
opportunity to benchmark what it takes to
successfully conduct business in compliance
with both international and local laws and
regulations.
http://www.canadianinstitute.com/2ndandean-summit-on-anti-corruptioncompliance-enforcement-978l17bog/http:/www.canadianinstitute.com/2ndandean-summit-on-anti-corruptioncompliance-enforcement-978l17-bog/
Event

International Conference on
the Foreign Corrupt
Practices Act
November 29 -December 2, 2016,
Washington, DC, United States
Some 600+ members of the anti-corruption
community from the U.S. and abroad will
gather to network and benchmark with
government decision-makers, industry
executives and outside counsel involved in
the most high-profile cases in recent
memory. Speakers include representatives
from the U.S. Department of Justice, U.S.
Securities and Exchange Commission, US
Federal Bureau of Investigation, Serious
Fraud Office (UK), and the Organisation for
Economic Co-operation and Development
(OECD).
http://fcpaconference.com/

121
enforcement updates from around the
world. Regional experiences that will be
shared including: Brazil: The Anti-Corruption
Compliance and Enforcement Landscapes;
China:
Anti-Bribery,
Whistleblower
Complaints and Reporting Obligations:
Status and Impact of Legislative and
Regulatory Changes, and the New Judicial
Interpretation; Southeast Asia: Critical
Updates and Risk Factors; South Korea: New
Requirements for Gifts and Entertainment;
Eastern Europe: Updates on Heightened
Corruption Enforcement Activity and the
Evolving Regulatory Landscape; Argentina,
Colombia and Mexico: New and Ongoing
Legal, Regulatory and Political Changes
Affecting Your Local Anti-Corruption
Compliance Status; and the United Arab
Emirates and Saudi Arabia: New AntiCorruption Initiatives and the Increased
Regional Focus on Compliance.
http://fcpaconference.com/seminar.html

Event

December 2, 2016 ,
Washington, WA, United States
The event will include discussions of the
most critical anti-corruption regulatory and

Event

Meetings

Event

17th International AntiCorruption Conference
(IACC)
December 1-4, 2016,
Panama City, Panama
The
International
Anti-Corruption
Conference is the world’s premier global
forum for bringing together heads of state,
civil society, the private sector and others to
tackle the increasingly sophisticated
challenges posed by corruption. In addition
to 6 high-level plenaries, the 17th IACC
features between 50-60 thought-provoking
workshops related to and inspired by the
umbrella Conference theme Time for Justice:
Equity, Security, Trust, and the Five Agenda
Tracks. This year’s conference will be hosted
by
the
Panamanian
Government,
represented by the Panamanian National
Authority of Transparency and Access to
Information, and organized by the IACC
Council and Transparency International.
http://iaccseries.org/workshop-proposals/

Meeting of the OECD Working Group on
Bribery (October 3-7, 2016, Paris, France)
3rd Meeting of the G20 Anti-Corruption
Working Group (October 16-19, 2016, Paris,
France)

21st Steering Group Meeting and 14th
Regional Seminar of the Asian
Development
Bank/OECD
AntiCorruption Initiative for Asia and the
Pacific (November 8-10, 2016, Thimphu,
Bhutan)


Resumed 7th session of the
Implementation Review Group of the
United Nations Convention Against
Corruption (UNCAC) (November 14-15,
2016, Vienna, Austria)
Conference of the States Parties to the
United
Nations
Convention
against
Corruption, Open-ended Intergovernmental
Expert Meetings to enhance International
Cooperation, Fifth session (November 17-18,
2016, Vienna, Austria)

16th International Anti-Corruption
Conference (December 1-4, 2016, Panama
City, Panama)
Meeting of the OECD Working Group on
Bribery (December 5-9, 2016, Paris, France)

4th session of the Assembly of Parties of
the
International
Anti-Corruption
Academy (November/December
2016,
Vienna, Austria)

Event

Global Regulatory and
Enforcement Update
Seminar

organizations to share experiences and
advance an open government global agenda.
The OGP is a multilateral initiative that brings
together 69 member states, civil society
representatives and other stakeholders to
promote and reinforce open, transparent
government through participation, public
integrity and action against corruption, as
well as support for access to technology to
foster democracy, promote innovation and
stimulate progress. The Summit's agenda will
be determined based on an open call for
proposals from the open government
community and will be announced in
September 2016.
https://en.ogpsummit.org/osem/conferenc
e/ogp-summit

Open Government
Partnership Global Summit
December 7-9, 2016,
Paris, France
The Open Government Partnership (OGP)
The Open Government Partnership (OGP)
Global Summit will bring together
representatives from governments, civil
society, academia and international

For more information about these events,
see:
http://www.acaforum.org/board.do?command=searchDetai
l&menuId=080204
Also, some events organized by this the C5
Grouphttp://www.c5online.com/conferences/

122

Events
Quality Financial Reporting – A Catalyst for Growth
An Overview of the 2016 Ministerial Conference
Organized by the
World Bank’s Centre for Financial Reporting Reform

On 27 April 2016, the biennial Ministerial
Conference hosted by the World Bank’s
Centre for Financial Reporting Reform
(CFRR) addressed the impact that quality
financial reporting can have in catalyzing
growth by fostering an environment of trust
and transparency and spurring investment
and lending. Around 240 delegates from
around 30 countries attended the
Conference, including ministers of finance,
senior government representatives, and
representatives of the business, professional
and academic communities from across
Europe and Central Asia (ECA) and beyond,
along with experts from key international
organizations.
Reiterating Austria’s support for the reform
agenda, Hans Jörg Schelling, the Austrian
Minister of Finance, welcomed participants
through a video message: “We care about an
enabling environment for growth and
stability in our neighbouring countries.
Strong corporate financial reporting systems
contribute to private sector growth, financial

markets development and thus to financial
stability.”
In view of the current economic situation
and the key role that the private sector
needs to play in creating jobs to boost the
economy, speakers repeatedly stressed the
importance of enhancing the quality of
financial information to achieve greater
transparency and, as such, act as a catalyst
for growth. The key benefits of reliable
financial reporting identified throughout the
Conference were financial stability, private
sector
development,
and
public
administration reform.
Cyril Muller, Regional Vice President for ECA
at the World Bank, explained how two
programs being implemented by the CFRR —
Strengthening Auditing and Reporting in the
Countries of the Eastern Partnership
(STAREP) and the Road to Europe: Program
of Accounting Reform and Institutional
Strengthening (EU-REPARIS) — are helping
to “create building blocks that together form

a more conducive and predictable policy
environment and an effective institutional
framework for corporate reporting in
participating countries. In European Union
(EU) candidate and potential candidate
countries, this has involved aligning relevant
legislation and institutions with EU
requirements, which represent not only a
benchmark of international good practice,
but also facilitate greater integration and
better access to EU markets.”
Katarína Mathernova, Deputy Director
General,
Directorate
General
for
Neighbourhood
and
Enlargement
Negotiations at the European Commission,
highlighted the significance of the EUREPARIS and STAREP programs to economic
growth and transparency in both public and
private sector finance. Stressing the
importance of sustaining the reform
momentum, she informed participants that
reliable financial information can provide
the basis for comparability that enables
access to finance.

123

From left to right: Hans Hoogervorst,
Chairman,
International
Accounting
Standards Board (IASB); Cyril Muller,
Regional Vice President, Europe and Central
Asia, World Bank; Katarina Mathernova,
Deputy
Director-General,
DirectorateGeneral
for
Neighbourhood
and
Enlargement Negotiations (DG NEAR),
European Commission; and Soukeyna Kane,
Practice Manager, Governance Global
Practice, Europe and Central Asia, World
Bank.
Ministers of Finance from Bosnia and
Herzegovina, the Federation of Bosnia and
Herzegovina, Kosovo and Serbia discussed
how high-quality financial reporting can
enhance confidence, transparency and trust
– which in turn promote sustainable
economic growth, job creation and
development throughout the region. The
four ministers described the opportunities
and challenges of using financial information
for economic development in the region,
and outlined the progress made so far.
Common priorities include job creation,
closing the gap between accession countries
and the EU, providing opportunities for
private entrepreneurs, creating incentives to
encourage fair financial reporting and
ensuring that such reporting is enforced
properly, and tackling the corporate
governance of state-owned enterprises.

.
From left to right: Dusan Vujovic, Minister of
Finance, Serbia; Avdullah Hoti, Minister of
Finance, Kosovo; Jelka Milicevic, Minister of
Finance, Federation of Bosnia and
Herzegovina; Vjekoslav Bevanda, Minister of
Finance and Treasury, Bosnia and
Herzegovina: and Samia Msadek, Director,
Governance Global Practice Group, World
Bank (Moderator).

Dusan Vujovic, Minister of Finance of the
Republic of Serbia: “I would say we have
made significant progress in developing
institutions to assure reliable financial
reporting. But we have not completed our
reform process yet. We have ambitious
plans and want to build an international
reputation for Serbia as a model of business
transparency. This will increase the
attractiveness of Serbian businesses for
investors from our European partners and
beyond.”
Avdullah Hoti, Minister for Finance of the
Republic of Kosovo: “In working with our
partners and peers and we believe that we
are making significant progress with our
reform agenda. Kosovo is committed to
engage even further in professional
development in the field of accounting and
auditing in order to increase the reliability
of financial statements as a significant
factor for attracting investors and
investments from abroad.”
Jelka Milicevic, Minister of Finance, and
Federation of Bosnia and Herzegovina:
“Measures have already been taken to
increase the number of young people in
employment: between 6,000 and 7,000
young people will get jobs as part of this
process. It would not have been possible to
embark on this reform agenda without the
assistance of the World Bank, the
International Monetary Fund and the EU.”
Vjekoslav Bevanda, Minister of Finance and
Treasury of Bosnia and Herzegovina:
“Bosnia and Herzegovina has taken further
steps toward its commitment to EU
membership by submitting its application
on February 15, 2016. A coordinated
alignment of its accounting and auditing
laws with the new EU Directives are an
important step toward accession and
supporting enhanced economic growth in
the country.”

During a panel discussion comprising
representatives of the finance, investment
and credit industries, panelists described the
critical contribution of high-quality financial
information to more efficient investment,
lending and business decisions. This
message was reinforced in a video shared by
Hans Hoogervorst, Chairman of the
International Accounting Standards Board
(IASB), which provided a clear correlation
between sound financial information and
decisions of investors.

From left to right: Ellen Goldstein, Regional
Director for Southeast Europe, World Bank
(Moderator); Monika Lukacs, Operations
Partner, Bancroft Private Equity; Richard
Golden, Executive Director, Investment
Banking
Division,
Raiffeisen
Bank
International AG; Natalia Yalovskaya ,
Director, Financial Institutions Ratings,
Standard and Poor’s Rating Services Group;
Elena Voloshina, Senior Country Officer for
Ukraine, International Finance.
Panelists also explored the role of public
accounting
reform
in
promoting
governmental
transparency
and
accountability, managing fiscal risk, and
spurring inclusive growth. Soukeyna Kane,
Practice Manager, Governance Global
Practice at the World Bank, outlined how the
World Bank is helping to address some of the
challenges that are prevalent in public
accounting, such as shortcomings in
institutional frameworks, limited technical
capacity, a lack of data availability and
inadequate information technology systems.
The Ministerial Conference took place at the
Hofburg Vienna conference and event
centre. Formerly the imperial residence,
parts of the building date back to the 13th
century.
In the final session, policy makers from the
countries covered by the EU-REPARIS and
STAREP regional programs outlined key
priorities and challenges in financial
reporting reforms. Discussions also focused
on ways to enhance the investment climate
in the region over the next two years.
Some of the main challenges facing
countries in the ECA region are:

Completing the reform process beyond
legal reform by putting them into
practice;

Building the capacity of practitioners
and users; and

Establishing a public oversight system
that is functional and fit for purpose.

124

The World Bank team.
From left to right: Henri Fortin, Global Lead,
Corporate Governance and Financial
Reporting, Word Bank (Moderator); Maxim
Yermolovich , First Deputy Minister, Ministry
of Finance, Republic of Belarus; Irena Beqiraj,
Deputy Minister, Ministry of Finance,
Albania; Ana Krsmanovic , Director General
of Directorate for Central Harmonization,
Ministry of Finance, Montenegro; and Giorgi
Tabuashvili, First Deputy Minister of Finance,
Director General of the Revenue Service,
Ministry of Finance, Georgia.
Henri Fortin, Global Lead, Corporate
Governance and Financial Reporting at the
World Bank, commended participating
countries for helping each other by sharing
and learning from experiences in the area of
financial reporting reform. He also stated
that the World Bank and its Governance
Global Practice team is committed to
providing further assistance to client
countries at the global level.

The CFRR also organized two special events
related to the Ministerial Conference in
Vienna the same week. The Senior Officials’
Workshop took place on April 26, 2016. It
convened around 100 senior officials leading
accounting and auditing reforms in the 12
countries taking part in the two programs
being implemented by the CFRR: STAREP
and EU-REPARIS . The purpose of this
workshop was to share reform progress and
exchange experiences of recent initiatives in
the area of accounting and auditing within
these two programs. The workshop also took
a broader look at a number of key crosscutting issues and considered the impact of
financial
reporting
on
economic
development.
On April 28, 2016, representatives of over 20
Professional Accountancy Organizations
(PAOs) met with experts from the World
Bank, the International Federation of
Accountants (IFAC), and the IASB. The aim of

the third regional PAO Forum was to discuss
the contribution of PAOs to economic
growth, and in particular, to small and
medium-sized
enterprises
that
are
generating jobs by helping them to take
advantage of changing economic conditions.
The event was “a unique opportunity for
knowledge exchange and a good example of
the World Bank going global,” according to
the World Bank’s Soukeyna Kane.
The CFRR's partners under the EU-REPARIS
program are the European Commission (EC)
and the Western Balkans Enterprise
Development and Innovation Facility. Its
partners under the STAREP program are as
follows: the EC; Austrian Development
Cooperation; the Ministry of Finance of
Luxembourg; and the Swiss Confederation.
More information about the work of the
World Bank’s CFRR is available at:
http://web.worldbank.org/WBSITE/EXTERN
AL/COUNTRIES/ECAEXT/EXTCENFINREPREF/
0,,contentMDK:21462724~pagePK:6416842
7~piPK:64168435~theSitePK:4152118,00.ht
ml
CFRR partners include:
http://web.worldbank.org/WBSITE/EXTERN
AL/COUNTRIES/ECAEXT/EXTCENFINREPREF/
0,,contentMDK:23650584~menuPK:975522
7~pagePK:64168445~piPK:64168309~theSit
ePK:4152118,00.html

FOCAL III Conference
Accountants in Latin America Discuss Best Practices and
Challenges in the Modernization of Public Sector Accounting
Xiomara A. Morel
Lead Financial Management Specialist,
Latin America and Caribbean Region,
Governance Global Practice, World
Bank

FOCAL is the regional (Latin America and the
Caribbean – LAC) Accountants General
Network launched in 2014 with the support
of the World Bank, the International
Monetary Fund (IMF) and the InterAmerican Development Bank (IDB). The
FOCAL network is comprised of Argentina,
Bolivia, Brazil, Chile, Colombia, Costa Rica,
the Dominican Republic, Ecuador, El
Salvador, Guatemala, Honduras, Mexico,
Nicaragua, Panamá, Paraguay, Perú, and
Uruguay. The Network’s goal is to serve as a

125
regional catalyst in support of the
modernization of public sector accounting
and financial reporting practices for its
member countries. The Network aims to
achieve this goal by facilitating learning and
knowledge exchanges, strengthening and
fostering peer-to-peer collaboration, and
identifying cost-effective solutions. In these
ways, the Network helps members deal with
public sector accounting challenges as they
implement accounting and financial
reporting reform within the larger
framework of adopting international
accounting
and
financial
reporting
standards.
The FOCAL III conference took place in
Asuncion, Paraguay from July 27- 29, 2016. It
was held jointly with the VII Annual Forum of
the Government Treasurers of Latin America
Network (FOTEGAL). In fact, this year was the
first time that both networks events, (FOCAL
and FOTEGAL), were held jointly. The
conference brought together the regional
treasurers and accountants general with the
aim of learning and exchanging knowledge
and best practices on topics of common
interest, including fiscal policy and its
regional challenges, and information
technology and other tools for building a
modern, efficient and more transparent
management of public finances.
Conference participants included treasurers
and government accountants from 15
countries in Latin America, as well as
representatives and specialists from the IDB,
IMF and World Bank. Other participants
included the President of the International
Public Sector Accounting Standards Board
(IPSASB) and other international experts.
The opening ceremony was attended by the
President of the Republic of Paraguay, Mr.
Horacio Cartés; the Minister of Finance,
Santiago Peña Palacios; former Finance
Minister of Uruguay, Mr. Fernando Lorenzo;
representatives from the IMF, IDB, the World
Bank's Country Director, J. Humberto López,
the Bank’s Resident Representative for
Paraguay, Ms. Celia Ortega Sotés, as well as
international experts and specialists from the
three multilateral development institutions.
In the opening ceremony, Minister Peña
emphasized that "… Our interest in hosting
both forums together is to exploit the
synergies which are generated in this
exchange of experiences on treasury and
governmental accounting topics …”
A first plenary session on the Challenges of
Fiscal Policy in the World Economic and
Regional Context was held with the
participation of Finance Minister of
Paraguay, Mr. Santiago Peña Palacios;
former Minister of Economy and Finance of
Uruguay, Mr. Fernando Lorenzo; and World
Bank Country Director for Central America,
Mr. J. Humberto López.

In discussions, Director, J. Humberto López,
said that Paraguay, like Chile and Peru, is
considered to be one of the three countries
in the LAC region with low debt and deficit
levels. As such, there is fiscal space available,
which in principle, will help given the
complicated economic scenario.

López also highlighted the need to determine
whether Latin America is currently in the low
part of a cyclical fluctuation — or most likely
in a transition. To the extent that the region
may be in a transition, traditional countercyclical policies may not be adequate. Fiscal
policy efforts may need to focus on how to
smooth the adjustment to a new equilibrium.
In this context, he noted the rich and diverse
typology of countries in the region. When
considering respective fiscal space and fiscal
buffers, then, the same policy prescriptions
may not be valid for every country.
He also stressed the need for efficiency and
transparency in the use of public resources
when collecting, spending, and reporting on
them. Without such transparency, the
legitimacy of the government would be in
question. So too would support for efforts to
help the population at a time when many
families are being negatively affected by the
second year of an economic contraction.

The former Minister Fernando Lorenzo
discussed the politics behind fiscal policy and
how important it is to emphasize the
objectives of any national budget. Further,
he noted that fiscal policy is the main
instrument used to address the region's
infrastructure needs, as well as high levels of
inequality.
Lorenzo highlighted the fact that while there
may be limited availability of resources in the
current global context, the people do not
have limited needs. He also referred to the
possibility of relying on Public-Private
Partnerships (PPPs) to compensate for the
lack of available public resources. However,
he warned that when private companies face

high interest rate spreads over national
treasuries, a PPP may be a sub-optimal
investment choice both socially and
economically.

For his part, Minister Santiago Peña
emphasized the need to continue the
modernization of fiscal policy, highlighting
that it cannot be disconnected from the
objective of economic development. He also
discussed the macroeconomic situation in
Paraguay, noting the low deficit and debt
levels in the country. He stressed the need to
advance public sector modernization and
fiscal transparency, noting the positive role
of the country’s fiscal responsibility law.
Finally, he underscored the important role of
fiscal policy, given the high volatility levels in
Paraguayan economic growth rates.
Overall, the three panelists made specific
references to the relevance of accountability
and transparency as fundamental elements
for managing and allocating public resources
— especially within the context of economic
development and fiscal stability.
Ms. Celia Ortega Sotés, Paraguay Resident
Representative, addressed the participants
in the opening session of the FOCAL parallel
sessions. The Agenda included discussions
among the participants on themes such as
the implementation challenges of the
International Public Sector Accounting
Standards (IPSAS) related to: (i) property,
plant and equipment; (ii) PPP/service
concession arrangements; (iii) contingent
liabilities; and (iv) consolidation issues. There
were combined presentations by several
country officials regarding their respective
experiences, as well presentations by other
experts
concerning
international
experiences.
Other initiatives were presented. For
example, the IMF introduced the analytical
Fiscal Risk Assessment Model (P-FRAM)
developed jointly by the IMF and the World
Bank to assess PPP fiscal risks. The IDB
presented a regional study being conducted
on the status of IPSAS implementation in LAC
countries. The World Bank team discussed
the preliminary results of a regional study on
the importance of management and
accounting of fixed assets, which included
the first draft of a comprehensive
methodology and guidelines on fixed assets
stock taking, valuation, and recording.

126

Cross-Cutting

Syrians
Will Forcibly Displaced Syrians get their Land Back?
Paul Prettitore
Senior Public Sector Specialist,
World Bank
With half of the population of Syria forced
from their homes as a result of the five-yearlong civil war, and now living either as
refugees or internally displaced persons
(IDPs), many are asking, “Will we be able to
return to our original homes?” Recent
changes to the legal framework in Syria
governing the sale and purchase of private
land raise concerns — both for the
protection of land owned or long-occupied
by displaced persons and for the
development of any post-conflict land
restitution process. Such regulations may
also compound post-conflict reform of land
administration
practices,
and
bring
uncertainty to one of the few economic
assets of displaced households.
Even before the conflict, Syria’s private land
administration was not particularly effective.
According to rough pre-war estimates by the
Ministry of Local Government, only about 50
percent of land in Syria was officially
registered. Another 40 percent had
boundaries demarcated, but had not yet
been registered. The multiple land registries
were paper-based and often not properly
stored. Plans for automation and
simplification of registration procedures
were interrupted by the conflict.
Popular practices at times undermined the
accuracy of the land registries and weakened
the security of land tenure. Land passed
through inheritance was not always
subdivided among heirs and registered
accordingly. Married couples did not

routinely register land titles jointly, denying
many married women the advantages of
joint
ownership.
Informal
tenure
arrangements—mostly
community-type
arrangements in rural areas—functioned in
parallel to the formal system. Government
programs involving expropriation of private
land for housing and security purposes were
not necessarily fair, particularly in terms of
compensation, thereby creating a group of
aggrieved former owners.
Security of land tenure has been further
weakened by the conflict. Paper land
registries have reportedly been damaged or
destroyed. Falsification of land documents,
leading to fraudulent land transactions, is
allegedly common in areas of fighting.
Refugees and displaced persons, particularly

those in female-headed households, may
have difficulty providing evidence to support
ownership or other land tenure rights.
Furthermore, there are increasing rumors
that the homes and land of displaced persons
are being used to resettle local or foreign
fighters.
The recent changes to the legal framework
are affecting land tenure security of the
displaced in the following ways. First, a
security clearance is now required for all
transactions involving private land in Syria.
Regime security services must approve sales
and purchases of land through the Ministry
of Interior. Many displaced persons would be
unwilling to seek permission from the
Ministry of Interior to conduct land
transactions for fear of identifying
themselves as displaced, which may lead to

127
them being labeled as anti-regime.
Moreover, government forces are alleged to
be involved in the confiscation of property
belonging to the displaced.
Second, the Ministry of Local Development
has the power to suspend private land
transactions in conflict-affected areas. In
such instances, the official land registry
would be frozen and new transactions would
instead be registered in a supplemental daily
record of transactions. This means recording
in institutions inside government-controlled
territory any transactions in private land
located outside of government control. It
remains unclear what legal and procedural
protections would be afforded displaced
land owners. Anyone objecting to the
authenticity of an entry in the record would
need to file an appeal in a local court, again
presumably
in
government-controlled
territory.
There is a legitimate state interest in
suspending land transactions in areas of
conflict, for example, to prevent transactions
conducted through fraud or duress. Similar
action was taken by the Colombian
government to protect the land of its

displaced. However, in the Syrian context,
suspending such transactions also opens the
possibility for manipulation of land records
to the detriment of displaced persons viewed
as supporters of opposition forces — with
the displaced having little practical recourse
to challenge the results.
Third, full legal validity is being extended
beyond the paper-based land registries to
include digitized copies. Digitizing paper land
records could be an effective protection
against damage or destruction. Providing a
digital backup of the paper registries can
protect against loss of land records and offer
evidence of land rights in a post-conflict
setting. However, the current paper
registries are not completely accurate.
Again, this raises the question as to how the
land tenure rights of displaced persons
would be handled in the process. Anyone
wishing to challenge the accuracy of the new
digital record would need to do so at a local
court where the records are held within a
period of roughly five years, which may not
be possible or practical for displaced
persons. Digitization of inaccurate paper
land records further puts rights at risk and

would complicate any post-conflict land
restitution process.
Together these measures and the obstacles
they create could form a basis for de facto
expropriation of land belonging to displaced
persons through de jure means. One need
only look at Bosnia and Croatia, where
conflict-era legislation on property issues
was used to disenfranchise the displaced in
an attempt to cement ethnic/confessional
displacement and resettlement.
Having been the property law coordinator at
the Office of the High Representative in
Sarajevo for several years after the signing of
the Dayton Peace Agreement, I can
personally attest to the difficulties of
untangling the knot of land tenure in the
post-conflict setting—as well as its
importance, given the links to physical return
of refugees and the internally displaced and
the social and economic consequences of
access to land and housing.
This blog originally appeared on Future Development of
The Brookings Institution on July 21, 2016’ Link:
https://www.brookings.edu/blog/futuredevelopment/2016/07/21/will-forcibly-displaced-syriansget-their-land-back/

Syrians
International Community Endorses New Initiative to Support
Refugees, Host Communities, and Recovery and
Reconstruction in the Middle East and North Africa
In April 2016, 8 nations and the European
Commission pledged a package of more than
US$1 billion — including US$141 million in
grants, US$1 billion in soft loans, and US$500
million in guarantees — to a World Bank-led
financing initiative in support of Syrian
refugees and host communities in Jordan
and Lebanon, as well as recovery and
reconstruction across the region. The
package means that the new facility will be
able to generate up to US$800 million in
concessional loans in the next year.
Canada, France, Germany, Japan, the
Netherlands, Norway, the United Kingdom,
the United States, and the European
Commission each pledged their initial
financial contributions to the New Financing
Initiative to Support the Middle East and
North Africa Region. The pledging occurred
at a ministerial conference co-chaired by the
President of the World Bank Group, the
Secretary General of the United Nations and
the President of the Islamic Development
Bank Group. The conference brought
together ministers from the G7, Gulf
Cooperation Council, European and Middle

East and North Africa (MENA) countries, as
well as the heads of various multilateral
development banks and international
organizations.
“Today’s strong show of support for the
people of the Middle East and North Africa is
an example of how the international
community can come together to address
major challenges,” said World Bank Group
President Jim Yong Kim. “These grants mean
we can now begin expanding programs to
help Jordan and Lebanon cope with the
impact of the Syrian refugee crisis, while
guarantees
will
allow
multi-lateral
development banks to increase their
financing in support of countries across the
region
confronting
the
multiple
consequences of instability. I am confident of
mobilizing additional support for recovery
and reconstruction, and reaching our goal of
raising US$1 billion in grants over the next
five years, which we will leverage to create
US$3 to 4 billion in much needed
concessional financing.”
The new financing initiative was launched
jointly by the World Bank Group, the United

Nations and the Islamic Development Bank
Group in October of 2015. The goal of the
initiative is to rally the international
community and improve coordination
among international organizations, to meet
the scale of both the MENA region’s
humanitarian and development needs. The
three organizations formed a working group
which — together with representatives of 26
supporting and benefitting countries, as well
as nine regional and international
organizations — has focused on developing
the structure of the initiative and a roadmap
for its implementation.
“The Syrian conflict continues to cause
massive
death,
destruction
and
displacement. As we search for a political
path towards peace, we also need a wellcoordinated humanitarian and development
response,” said United Nations SecretaryGeneral, Ban Ki-moon. “The new MENA
Financing Initiative will help neighboring
countries provide services for Syrian refugees
and their own citizens, while also addressing
the development impact of the crisis.
Together, we can restore human dignity,

128
ensure access to education and lay the
foundations for sustainable peace and
stability.”
Through innovative financing, the initiative
plans to provide concessional financing to
Lebanon and Jordan, the middle-income
countries most severely impacted by the
Syrian refugee crisis, expand the funding
available to countries struggling with slow
growth and high youth unemployment as a
result of instability, and to prepare for postwar reconstruction. An open platform will be
established for the financing of programs,
bringing together multilateral development

banks and the UN for more coordinated and
effective support to benefitting countries.
Islamic Development Bank Group President,
Dr. Mohamed Ali Al-Madani, said: “The
region faces enormous challenges, and our
development assistance is needed now more
than ever, but it is critical that we unite to
leverage
our
various
comparative
advantages. This approach received a
resounding endorsement today, and it will
guarantee that our assistance has maximum
impact and that it addresses the full scope of
the challenges.”

Over 15 million people in the MENA region
have been forced from their homes over the
past five years due to conflict and instability,
taking an enormous humanitarian and
economic toll. Along with the human
suffering, immense pressures have been
placed on the resources of host countries
that were already facing significant economic
challenges. In addition to the immediate
costs, estimates to rebuild the war-torn
areas are in the hundreds of billions of
dollars. Ongoing instability has also
contributed to a regional economic
slowdown, even in countries not directly
affected by conflict.

Information
Does Superior Information Make Us More Discerning?
What Uber Drivers Can Teach Us
About Learning And Rationality
Roxanne Bauer
Communications Associate, World Bank
In 1957, Herbert A. Simon (Nobel Prize in
economics 1978) introduced the concept of
bounded rationality that recognizes that in
decision making, human rationality is limited
by the information we have, our own
cognitive biases, our training and experience,
and the finite amount of time we have to
make a decision. Individuals and firms do the
best they can with the information they
have, and since they don’t have time to
evaluate and rationally pick the optimal
solution, they simplify their choices and go
with one that is satisfactory rather than
rationally optimal—this is calledstastificing.
Behavioral economics accounts for this by
attempting to incorporate psychological
insights. While most economists agree that
there are some limits to the reasoning
capabilities of individuals and firms, there
has been much discussion about where and
how to account for bounded rationality. On
the spectrum between perfect rationality
and the total absence of it, where are
humans?
To explore this question, let’s take a look at
cabdrivers and Uber drivers.
Economists have long argued how cabdrivers
and other similar professions, like farmers or
small business owners who regulate their
own hours, decide how much to work each
day. This question gets to the bottom of
whether humans are fundamentally rational
— in this case, whether they earn their
incomes efficiently. The question has also

taken on added importance as the gig
economy, or shared economy, continues to
grow and more people must decide how
many tasks to perform each day.
On one side are behavioral economists who
have found evidence that many taxi drivers
work longer hours on days when business is
slow and shorter hours when business is
brisk— the opposite of what rationality
would seem to prescribe. On the other side
are more orthodox economists who affirm
the traditional view of rationality argue that
this irrational habit diminishes after
analyzing more precise data that shows
drivers generally work longer hours when
business is good, allowing them to capitalize
on fare returns (pun intended).

In a recent working paper, Michael Sheldon
of the University of Chicago uses Uber’s
proprietary data to analyze nine months of
data in which independent drivers freely
choose their hours and receive a fixed
commission for every trip they complete.
Unlike cabdrivers, whose hourly rate reflects
how busy they are and does not change
unexpectedly due to changes in fare prices,
the hourly wage of Uber drivers reflects both
busyness and rates, since Uber can increase
prices when demand is high, also known as
surge pricing. The paper’s main conclusion is
that there was little evidence that drivers
drove less when they could make more per
hour than usual. Most Uber drivers tried to
capitalize on surge pricing and worked longer
when those prices were in effect.

129
However, this was not true for a large portion
of new drivers who appeared to have an
income goal in mind and stopped when they
were near it, regardless of price changes.
These drivers finished sooner when their
hourly wage was high and to worked longer
when their wage was low.
Sheldon did find, though, that this behavior
decreased with experience, suggesting that
income-targeting behavior, if present, was
only temporary. “A substantial, although not
most, fraction of partners do in fact come
into the market with income targeting
behavior,” but the behavior is then “rather
quickly learned away in favor of more
optimal
decision
making.”
Greater
experience teaches most drivers how to get
the most out of their shifts and encourages

them to abandon an income target, a goal
not generally in their self-interest.
Essentially, Sheldon’s research suggests that
rationality is developed, not innate — at least
with regard to Uber driving.
Key to this idea of a learning curve is the
provision of information. Cabdrivers, who
must rely on rules of thumb that tell them,
for example, that more people will call cabs
when it’s raining or that there will be high
demand around a sports complex at the end
of a sporting event, and inexperienced
drivers are more likely to fall back on an
income target because they have less
information about what they could be
earning if they kept driving. In contrast, Uber
drivers are informed when surge pricing

comes into effect— sometimes for
unexpected reasons like emergencies or
traffic accidents.
So, it seems that humans can be found at
different points on the spectrum between
perfect rationality and the total absence of it,
depending on how bounded their rationality
is. We may start a new activity without
enough information or expertise and fall
back on heuristics, like an income target, to
guide our behavior. This approach may not
be optimal, but it satisfices our immediate
goals. As we become more experienced and
receive more feedback, our behavior evolves
so that it hopefully converges towards
rationality.

Interview
Renaud Seligmann,
New Governance Practice Manager for the Middle East
and North Africa (MENA) Region, World Bank
management in Egypt with you, Hisham, so it
is really nice to come full circle.
You joined the MENA region after spending
years in the Africa region. What are the
lessons from the Africa experience that
might be useful to MENA countries?

Congratulations on your new post as the
Governance Practice Manager in MENA.
How does it feel to move to the MENA
region?

I would say that the first lesson is that ‘readyto-wear’ (or a pure ’best practice’ approach)
does not work well in development — you
have to go for ‘made-to-measure’ (or a more
tailored approach). While it is really
important to know what has been tried, as
well as what has succeeded and failed in
other countries to solve common challenges,
it is even more important to really take the
time to understand the local context. Who
are the players, and what are the historical,
geographic, social and political forces at
play?

I feel both excited and somewhat humbled.
The MENA strategy provides a unique
opportunity to help address the underlying
causes of conflict and violence in the region
that has arguably had the biggest impact on
global stability. This is an incredibly exciting
challenge, but it is also immensely complex.
So I would like to approach it with
determination to make a difference,
combined with a good dose of humility.

This is certainly relevant in MENA, where
there is a very diverse set of clients, from
conflict-affected to oil-producing and
transition countries. In this respect, I have
found that the Bank tends to under-utilize
the depth of knowledge of the local context
that locally recruited staff have. Tapping into
this resource, and connecting it with global
expertise of the World Bank is certainly going
to be critical to success.

On a personal level, my first job for the World
Bank a decade ago was as a short-term
consultant working on public financial

Another key lesson is the importance of
focusing on the ‘how’ of reforms, not just on
the ‘what’. Knowing what should ideally be

done to reduce extreme poverty and boost
shared prosperity requires analytical rigor,
and we generally know how to do it well. The
difficult part is figuring out how to
implement these reforms in the real world.
This is an issue that I have grappled with
extensively in middle-income, low-income,
resource-rich and fragile country contexts.
So, I look forward to applying some of this
knowledge in MENA, while also sharing
experiences with others and learning from
our clients and staff.
A number of countries in the MENA region
are affected by conflict. What are your
thoughts on advancing governance reforms
in such difficult circumstances?
Some of my most fulfilling professional
experiences have been in fragile, conflictand violence-affected States, for instance
working on the Ebola response in Guinea,
Liberia and Sierra Leone; on governance in
Somalia; on the first re-engagement
Development Policy Operation in Guinea
after four decades of authoritarian rule; or
on reconstruction and recovery in the
Nigerian North-East affected by Boko Haram.
Failed states are not a fatality. Indeed,
progress is possible over time, but it requires
staying the course, adapting to constantly
evolving political and security contexts. It
also requires innovation in the Bank’s
approach to post-conflict intervention. Just
to take two examples, if you compare

130
Somalia today to 10 years ago, or the Central
African Republic to what it was like in 2013,
it is clear that very significant progress has
been made. This is in large part due to the
incredible work of the teams working on a
daily basis in very risky environments. This is
of course an unfinished agenda, but the
progress we have seen is hugely rewarding
and impactful.
I see governance and institutions as an
essential foundation for the package of
interventions needed to strengthen state
legitimacy and move toward reconstruction,
recovery and reconciliation. Of course,
governance interventions are needed to
build core public sector institutions that
function at a basic level — collecting taxes
and spending these funds for the public
good, for example, by paying teachers,
health workers, security personnel and other
civil servants.
Ultimately, good public
financial management and public sector
reforms are at the core of building state
legitimacy.
Inclusive governance is also a critical
complement. It is essential to move away
from decades of neglect of certain groups or
geographic areas that have led to grievances
and a sense of exclusion. This requires an
open mind with regard to service delivery
models, and a strong focus on inclusion,
voice and accountability for service
performance. This should be conducted and
supported in partnership with the World
Bank’s multiple Global Practices and CrossCutting Solution Areas.
A sound fiduciary assurance framework is
also essential in high-risk environments. It
plays a key role in helping build development
partner confidence and ensuring that
projects achieve their objectives. This needs
to be designed with an eye for the long-term
sustainability of international development
assistance. Thankfully, our teams have a lot
of experience in this area.

The cover story of this issue of Connecting
Voices is “Corruption and Development.”
What are your views on this topic?
The corrosive impact of corruption on
growth, equity and state legitimacy is well
documented. However, the abuse of public
resources for private gain also plays a social
function, as it can be used to ‘buy-off’ certain
parts of the population and consolidate the
power of the elite. When corruption is part
of the social fabric, the demand for control of
corruption is also weak. This makes it very
tricky to effectively implement anticorruption strategies or build credible anticorruption institutions.
The risk is to create weak copies of formal
Organisation for Economic Co-operation and
Development (OECD) institutions (including
supreme audit institutions, anti-corruption
agencies, anti-money laundering legislation,
and so on) that mimic their form, but do not
perform any meaningful function. This does
not mean that these institutions and actors
should not be supported, but in doing so we
should pay attention to the actual function
they perform.
In parallel, helping create greater demand
for accountability at the same time as we
build the supply-side institutions of
governance is a very important aspect of how
we can approach the issue. For instance, the
emergence of the middle-class in Brazil has
played an important role in increasing the
demand for accountability at a time when
the Supreme Audit Institution and the
judiciary were also becoming increasingly
independent and assertive. This is the
context in which the Petrobras scandal was
uncovered, as well as the accounting tricks
that eventually led to President Dilma’s
impeachment.
Of course, the rise of the middle class plays
out in different ways across MENA. In this
context, public sector transparency has the
potential to become both more radical and
less controlled in the era of the ‘Panama

papers’ and Wiki-leaks. This is why many
governments in MENA see a strict State
control of digital communications as
essential to maintaining social order. The
question however is the extent to which this
will be technologically, socially and
economically sustainable. The upcoming
World Development Report on Governance
and the Law (World Bank 2017) should shed
some interesting light on this issue.
Another important aspect of what we can do
is to push for more inclusive public sector
institutions. Increasing the number of groups
and individuals who are included with regard
to access to quality public services should
help stimulate citizen expectations in
relation to public sector performance and
accountability. Exclusion in access to public
services takes many different forms, but at
its core it reflects the belief that some have a
right to public resources while others do not.
So in a sense, corruption can be conceived as
an extreme case of social exclusion.
Therefore,
building
more
inclusive
institutions is an important part of what we
can do to fight corruption.
I would add that some of the most critical
opportunities to work on anti-corruption
may be in sectors. Working with the World
Bank Global Practices from the three
clusters, our team has the skills to help
identify institutional and governance
bottlenecks to service delivery, including
corruption and weak accountability. One of
the most useful roles we can play is to
connect Ministries of Finance to their sector
counterparts to help diagnose and solve
difficult problems affecting governance in
sectors.
Any concluding thoughts?
I would just like to take this opportunity to
thank you personally, Hisham, and the whole
MENA team for the great welcome I have
already received, and to wish you all the best
for the journey ahead in Africa!

PROFILE
Renaud Seligmann is currently Practice Manager in the Governance Global Practice of the World Bank, where he works on the Middle East and
North Africa Region.
A French national, Renaud started his career as a member of the Court of Accounts, the French Supreme Audit Institution, where he focused on
aggregate fiscal risk in the public sector, performance budgeting and the evaluation of public sector reforms. He then became Deputy Director
of External Audit at the United Nations (UN) Board of Auditors, where he led the first UN-wide audit of the response to the South Asian Tsunami
and was in charge of the audit of the UN Secretariat, United Nations Children's Fund (UNICEF) and other funds and programs. He joined the
World Bank in 2007 and was based in Washington, DC and Pretoria, South Africa and worked mostly on public financial management. From 2011
to 2015, he was a Sector Manager for Financial Management, and then Practice Manager in the Governance Global Practice, working on the
Africa region.
Renaud holds a Bachelor of Arts Degree (honors) in Philosophy, Politics and Economics from Oxford University, a Master's Degree in Political
Sociology from Sorbonne-Paris I University and a Master's Degree in Public Policy from the Paris Institute of Political Studies (Sciences-Po). He is
also a graduate of the French National School for Administration (ENA) Executive Leadership Program. Renaud is on the faculty of the Harvard
Kennedy School of Government’s “Public Financial Management in a Changing World” executive education course led by Matt Andrews. He is
also an Honorary Fellow, as well as a Council Member of the Chartered Institute of Public Finance Accountancy (United Kingdom).

BOOK REVIEW
Selection

131

Rules on Paper, Rules in Practice: Reducing Discretion and
Enforcing Laws in the Middle East and North Africa
by Edouard Aldahdah, Cristina Corduneanu-Huci, Gael Raballand, Ernest Sergenti, and Myriam Ababsa. World Bank.
The primary focus of this book is on a specific outcome of the rule of law: the practical enforcement of laws and policies,
and the determinants of this enforcement, or lack thereof. Are there significant and persistent differences in
implementation across countries? Why are some laws and policies more systematically enforced than others? Are “good”
laws likely to be enacted, and if not, what stands in the way? These questions are answered using a theoretical framework
and detailed empirical data and illustrate with case studies from Morocco, Tunisia and Jordan. Rule of Law is a theoretical
concept social scientists use to describe a political order where laws are predictable and applied equally to all citizens,
regardless of their political or economic influence. However, the drafting and implementation of laws and regulations
compatible with principles of the Rule of Law depend on the incentives that lawmakers, implementing agencies, and ruling
elites have. Realigning the incentive structures among key actors and organizations is therefore necessary to improve the
chances for Rule-of-Law institutions to take root. Building the capacity of organizations without first changing institutional
incentives is likely to lead to perverse outcomes, with the capacity ultimately channeled toward goals the reformers never
envisioned. This book tells the story of how Rule of Law is applied in some countries in the Middle East and North Africa
region.

World Bank Reports
World Development Report 2016 : Digital Dividends
Digital technologies have spread rapidly in much of the world. Digital dividends—that is, the broader development
benefits from using these technologies—have lagged behind. This report on Digital Dividends assembles the best
available evidence on the Internet potential impact on economic growth, on equity, and on the efficiency of public
service provision. The report analyzes what factors have allowed some governments, firms and households to benefit
from the Internet, and identify the barriers that limit gains elsewhere.
Migration and Remittances Factbook 2016, World Bank, Third Edition.
The Migration and Remittances Factbook 2016 attempts to present numbers and facts behind the stories of
international migration and remittances, drawing on authoritative, publicly available data. It provides a snapshot of
statistics on immigration, emigration, skilled emigration, and remittance flows for 210 countries and 15 regional and
income groups. The Migration and Remittances Factbook 2016 updates the 2011 edition of the Factbook with
additional data on bilateral migration and remittances and second generation diasporas, collected from various
sources, including national censuses, labor force surveys, population registers, and other national sources.
World Development Indicators: 2016. World Bank.
The World Development Indicators (WDI) team aims to produce a curated set of indicators relevant to the changing
needs of the development community. The new edition includes indicators to help measure the 169 targets of the 17
Sustainable Development Goals (SDGs) - these build on the 8 goals and 18 targets of the Millennium Development
Goals we focused on in previous editions, but are far wider in scope and far more ambitious. A complementary
Sustainable Development Goals data dashboard provides an interactive presentation of the indicators we have in the
WDI database that are related to each goal.
Making Politics Work for Development: Harnessing Transparency and Citizen Engagement
Too often, leaders fail to adopt and implement policies that they know are necessary for sustained economic
development. Encumbered by adverse political incentives, they run the risk of losing office should they do the right
thing. This book is about how to make politics work for economic development rather than against it. The confluence
of transparency and political engagement can be a driving force for countries to transition toward better functioning
public institutions.

General Economics, Development Economics and Aid, Banking and Finance

132

Global Inequality: A New Approach for the Age of Globalization, by Branko Milanovic. Harvard University Press.
Global Inequality takes us back hundreds of years, and as far around the world as data allow, to show that inequality
moves in cycles, fueled by war and disease, technological disruption, access to education, and redistribution. The
recent surge of inequality in the West has been driven by the revolution in technology, just as the Industrial
Revolution drove inequality 150 years ago. But even as inequality has soared within nations, it has fallen dramatically
among nations, as middle-class incomes in China and India have drawn closer to the stagnating incomes of the middle
classes in the developed world. A more open migration policy would reduce global inequality even further.

Why Save the Bankers? And Other Essays on Our Economic and Political Crisis, by Thomas Piketty. Houghton Mifflin
Harcourt.
Why Save the Bankers? brings together selected columns, now translated and annotated, from the period bookended by the September 2008 collapse of Lehman Brothers and the Paris attacks of November 2015. In between,
writing from the vantage point of his native France, Piketty brilliantly decodes the European sovereign debt crisis, an
urgent struggle against the tyranny of markets that bears lessons for the world at large. And along the way, he weighs
in on oligarchy in the United States, wonders whether debts actually need to be paid back, and discovers surprising
lessons about inequality by examining the career of Steve Jobs.

The Only Game in Town: Central Bankers, Instability and Avoiding the Next Collapse, by Mohamed A. El-Erian,
Random House.
In The Only Game in Town, El-Erian casts his gaze toward the future of the global economy and markets, outlining the
choices we face both individually and collectively in an era of economic uncertainty and financial insecurity. Beginning
with their response to the 2008 global crisis, El-Erian explains how and why our central banks became the critical
policy actors—and, most important, why they cannot continue is this role alone. They saved the financial system from
collapse in 2008 and a multiyear economic depression, but lack the tools to enable a return to high inclusive growth
and durable financial stability. The time has come for a policy handoff, from a prolonged period of monetary policy
experimentation to a strategy that better targets what ails economies and distorts the financial sector—before we
stumble into another crisis.
Inequality: What Everyone Needs to Know, by James K. Galbraith
Inequality expert James K. Galbraith has compiled the latest economic research on inequality and explains his findings
in a way that everyone can understand. He offers a comprehensive introduction to the study of economic inequality,
including its philosophical and theoretical origins, the variety of concepts in wide use, empirical measures and their
advantages and disadvantages, competing modern theories of the causes and effects of rising inequality in the United
States and worldwide, and a range of policy measures.

Progress and Confusion: The State of Macroeconomic Policy,
by Olivier Blanchard, Raghuram Rajan, Kenneth Rogoff, and Lawrence H. Summers. The MIT Press.
What will economic policy look like once the global financial crisis is finally over? Will it resume the pre-crisis
consensus, or will it be forced to contend with a post-crisis “new normal”? Have we made progress in addressing
these issues, or does confusion remain? In April of 2015, the International Monetary Fund gathered leading
economists, both academics and policymakers, to address the shape of future macroeconomic policy. This book is the
result, with prominent figures—including Ben Bernanke, Lawrence Summers, and Paul Volcker—offering essays that
address topics that range from the measurement of systemic risk to foreign exchange intervention.
The Pursuit of Development: Economic Growth, Social Change and Ideas
by Ian Goldin, Oxford University Press.
This is a concise account of what development means and how it can be achieved. The book identifies how our
understanding of development has changed as the pendulum has swung from arguments for state-led development
to a preoccupation with market forces. It examines the role of governments, international institutions, business and
civil society, and explores how the notion of development itself has evolved from a preoccupation with incomes and
economic growth to a much broader understanding of development.

Middle East and North Africa

133

The Morning They Came for Us: Dispatches from Syria, by Janine Di Giovanni. Liveright.
The Morning They Came for Us bears witness to one of the most brutal, internecine conflicts in recent history.
Drawing from years of experience covering Syria, di Giovanni gives a tour de force of war reportage, all told through
the perspective of ordinary people―among them a doctor, a nun, a musician, and a student. What emerges is an
extraordinary picture of the devastating human consequences of armed conflict, one that charts an apocalyptic but at
times tender story of life in a jihadist war zone.

Unfinished Revolutions: Yemen, Libya, and Tunisia after the Arab Spring, by Ibrahim Fraihat. Yale University Press.
Post-revolution states often find that once a transition process begins, challenges can arise, such as political
polarization and the threat of civil war. A respected commentator on Middle Eastern politics, Ibrahim Fraihat
compares three countries grappling with political transitions in the wake of the Arab Spring: Yemen, Libya, and
Tunisia. He argues that to attain enduring peace and stability, post-revolution states must engage in inclusive national
reconciliation processes which include a national dialogue, a truth seeking effort, the reparation of victims’ past
injuries, dealing with the former regime, and institutional reform. Women, civil society, and tribes, among other
social forces, can support the transition process. His research shows how some aspects of transitions have been
politicized and that each country has taken a specific approach, raising or diminishing the chances of civil war or a
healthy transition.
Uneven Odds, Unequal Outcomes: Inequality of Opportunity in the Arab Region, by Nandini Krishnan, Gabriel Lara
Ibarra , Ambar Narayan , Sailesh Tiwari, and Tara Vishwanath.
Perceptions of eroding living standards and low life satisfaction are widespread in the Middle East and North Africa
region today, along with pessimism about prospects for economic mobility. Conventional measures of economic wellbeing offer little in the way of explanation. In most countries in the region, extreme poverty is low and declining and
economic inequality is lower than in other parts of the world.

Circling the Square: Stories from the Egyptian Revolution, by Wendell Steavenson. Ecco.
Circling the Square is the extraordinary story of the recent Egyptian Revolution as experienced by Cairo’s citizens.
Steavenson takes us to the heart of the Revolution and paints indelible portraits of ordinary Egyptians grappling with
hope and change amid violence and bloodshed. He captures the cacophony of dizzying events as violence and
elections ebbed and flowed around the revolution, tipping it towards democracy and then back into the military’s
hands. Mixing reportage and memoir, anecdotes and incidents and conversations, he shows how the particular and
the personal can illuminate more universal questions: What does democracy mean and what happens when a
revolution throws everything up in the air?

The Reawakening of
the Arab World:
Challenge and
Change in the
Aftermath of the
Arab Spring, by
Samir Amin.
Monthly Review
Press.

Al Qaeda, the
Islamic State, and
the Global Jihadist
Movement: What
Everyone Needs to
Know, by Daniel
Byman. Oxford
University Press.

A History of the
Modern Middle
East: Rulers, Rebels,
and Rogues, by
Betty Anderson.
Stanford University
Press.

Breaking the Oil
Spell: The Gulf
Falcons’ Path to
Diversification, by
Reda Cherif, Fuad
Hasanov, and Min
Zhu. IMF.

A Rage for Order:
The Middle East in
Turmoil from Tahrir
Square to ISIS, by
Robert F. Worth.
Farrar, Straus &
Giroux.

Egypt: Contested
Revolution, by Philip
Marfleet. Pluto
Press.

Governance, Civil Society and Participation

134

Thieves of State: Why Corruption Threatens Global Security, by Sarah Chayes. Norton.
The world is blowing up. Every day a new blaze seems to ignite: the bloody implosion of Iraq and Syria; the East-West
standoff in Ukraine; abducted schoolgirls in Nigeria. Is there some thread tying these frightening international
security crises together? In a riveting account that weaves history with fast-moving reportage and insider accounts
from the Afghanistan war, Sarah Chayes identifies the unexpected link: corruption.
Through deep archival research, Chayes reveals that canonical political thinkers such as John Locke and Machiavelli,
as well as the great medieval Islamic statesman Nizam al-Mulk, all named corruption as a threat to the realm. In a
thrilling argument connecting the Protestant Reformation to the Arab Spring, Thieves of State presents a powerful
new way to understand global extremism. And it makes a compelling case that we must confront corruption, for it is a
cause—not a result—of global instability.
Public Access to Information for Development: A Guide to the Effective Implementation of Right to Information Laws
by Victoria L. Lemieux and Stephanie E. Trapnell, Directions in Development Series. World Bank.
With more than 100 right to information (RTI) laws (also called freedom of information or access to information laws)
now in place globally, there is a distinct need to ensure that laws are implemented effectively. This guide, published by
the World Bank in 2016, explores the historical development of RTI laws, the factors that drive passage and effective
implementation of these laws, the operation of the laws, and the impact of these laws in different country contexts
and sectors. Also included is a discussion of sequencing reforms and specific operational and monitoring issues within
the public sector. It is based on two years of research studying how RTI has been implemented in countries in different
regions and with varying income levels. The research aimed to develop a theoretical framework to identify the drivers
of effective implementation of RTI laws and to support the measurement of effective implementation.
IMF Staff Discussion Note - Corruption: Costs and Mitigating Strategies
In an environment in which growth and employment prospects in many countries remain subdued and a number of
high-profile corruption cases have fueled moral outrage, and amid a growing consensus that corruption can seriously
undermine a country’s ability to deliver inclusive economic growth in a number of different areas, addressing
corruption globally—in both developed and developing countries—has become increasingly urgent. When corruption
impairs government functions, it can adversely affect a number of important determinants of economic performance,
including macrofinancial stability, investment, human capital accumulation, and total factor productivity.
Transformation Index BTI 2016:Political Management in International Comparison
Managing the peaceful transition of authoritarian states to democracy and a market-economic system represents a
tremendous challenge. Whether it comes to reconstituting the coherency of the state following armed conflict,
expanding participation rights and the rule of law in emerging democracies, overcoming corrupt structures, fighting
poverty and inequality, or establishing clear rules for stable market-economic competition, the requirements are
enormous, and the pressure on responsible leaders is intense. After all, the quality of political management makes an
essential contribution to the success or failure of transformation processes.

Governance, Natural Resources and PostConflict Peacebuilding,
6/e, by Carl Bruch, Carroll Muffett, and
Sandra S. Nichols. Routledge.

Corruption in Public Administration
An Ethnographic Approach
Edited by Davide Torsello.
Despite the growth in literature on political
corruption, contributions from field research
are still exiguous. This book provides a timely
and much needed addition to current research,
bridging the gap and providing an innovative
approach to the study of corruption and
integrity in public administration.

Is Decentralization Good for Development?
Perspectives from Academics and Policy
Makers.
Edited by Jean-Paul Faguet and Carol Poschl

Sin Tax Reform in the Philippines:
Transforming Public Finance, Health,
and Governance for More Inclusive
Development
by Kai Kaiser, Caryn Bredenkamp, Roberto
Iglesias

Comic Relief

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