___________________________________________________________________________

2009/SOM1/ACT/WKSP/006
Session: 2

Governance and Development

Submitted by: World Bank

Workshop on Governance in Public and

Private Sectors and Its Impact on Anti-
Corruption
Singapore
24-25 February 2009
 Governance and Development*

Presented to: * This presentation has

been prepared by Ed
APEC ACT Workshop Campos, Governance
Singapore Adviser for Bangladesh
February 2009 South Asia Region

The World Bank has come a long way . . .

State in a O.P.
Changing Mainstreaming PSG
World (97) AC in CAS Implementation
Governance (99) Update (02)
Strategic Pillar - CDF
JDW Compact Governance
(98) Strategy (00)
“Cancer of (97)
Corruption” • Diagnostic/Data/
TI CPI Speech Anti- Gov/A-C Monitoring Tools
(5/95) (10/96) corruption Diagnostics • Public Financial
Strategy start (98) Management and GAC
(97) Procurement
• Administrative & Civil
The ‘Prohibition’ Era Broadening & Service Reform
• Civil Society Voice,
Mainstreaming Transparency, & CDD
• State Capture
• Legal & Judicial
Reform

Internal AC 1st set of

unit created firms Board
in WB (98) Debarred Formalization endorses PW Bank
from WB (99) of INT (01) Integrity President
Strategy (04) (05)
1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

1
 Governance and Development:
Lessons of Global Experience

• An effective state is crucial for growth and poverty

reduction (WDR ’97)
• For an effective state, good governance is a
cross-cutting priority for:
– Building a sound investment climate for growth
(macroeconomic stability, rule of law, regulatory system,
physical & financial infrastructure)
– Empowering people to make growth inclusive through
effective delivery of basic services (education, health,
social protection)

Good Governance matters for

investment and growth
% Investment share in GDP Income per capita Growth Rate
20% 2%

1.5%

1%

0.5%
15%
0%

-0.5%

-1.0%
10% -1.5%
High Medium Low High Medium Low

Governance Quality
Governance Quality measured by perception of 4000 firms in 67 countries on: (i) protection of property rights; (ii) judicial
reliability; (iii) predictability of rules; (iv) control of corruption. World Development Report Survey 1997

2
 th &
Good governance is pro-poor
w ce
ro n
G rna
e
ov
G

5 (richest) 0.16 increase

by 20 24
points
income quintiles

4 0.22

increase
3 0.21 by 15 18
points
2 0.21
increase
1 by 10 12
0.33 points
(poorest)

0 0.1 0.2 0.3 0.4 0 10 20 30

Additional annual income growth due to Reduction in the percentage of
an increase in the quality of governance population living on less than
(ICRG composite index) by 1 point $2/day due to the increase in the
quality of governance (ICRG
Source: Knack, 2002 composite index)

The direction of causality …

Growth causes governance to … and better governance causes
improve ... growth

 Using measures of rule of law, bureaucratic

 Burkhart and Lewis-Beck (1994) found
that while higher per capita incomes
foster democracy, democracy in turn
does not foster higher incomes
 B. Friedman (2005) argues that higher
 Other studies have dealt with the potential for
living standards encourage more open,
tolerant and democratic societies
quality and corruption, Chong and Calderon
(2000) found significant causality from good
governance to growth and vice versa – i.e.
“good governance” both contributes to and
results from strong economic performance
reverse causation by using exogenous
instruments for the governance indicators and
concluded that good governance has a
significant and strong causal impact on
economic performance …

… but the debate on causality continues …

3
Governance and Corruption
Not the same thing!
The manner in which the State
acquires and exercises its
Governance authority to provide public
goods and services

Using public office for

Corruption
private gain

• Corruption is an outcome – a consequence of weak or bad

governance
• Poor delivery of services and weak investment climate are
other outcomes of bad governance

Poor Governance

Lack of Weak Voice & Monopoly Wide

Transparency Inefficiency
Accountability Power Discretion

Corruption

4
 Administrative Corruption:
Private payments and other benefits to public officials
in connection with the implementation of government
policy and regulations

Nepotism & Patronage:

Favoritism shown to narrowly targeted interests by
Corruption those in power such as granting favors, giving
contracts or making appointments to office in return
for political support

State Capture:
Influence of powerful economic interests in the
public and private sectors in the formation of laws,
regulations, policies through illegal provision of
private benefits for public officials

Governance has many dimensions

Citizens/Firms

Political Accountability
• Political competition, broad-based political parties
• Transparency & regulation of party financing
• Disclosure of Parliamentary votes
• Declaration/publication of assets, liabilities, income

Formal Oversight Civil Society & Media

Effective Public • Freedom of press, FOI
Institutions
Citizens/Firms

Sector Management • Civil society watchdogs

Citizens/Firms

• Independent, effective • Report cards, client survey

judiciary • Beneficiary participation in
• Legislative oversight • Public financial projects
(PACs, PECs) management
• Independent oversight Private Sector
institutions (SAI) • Civil service meritocracy & Interface
• Global initiatives: UN, adequate pay • Streamlined regulation
OECD Convention, • Public-private dialogue
anti-money laundering • Service delivery and • Extractive Industry
Transparency
regulatory agencies in • Corporate governance
sectors • Collective business
associations
• Decentralization/local
public management
• Ethics & leadership Outcomes:
Services,
Regulations
Citizens/Firms

5
 Governance has many dimensions
Citizens/Firms

Political Accountability
• Political competition, broad-based political parties
• Transparency & regulation of party financing
• Disclosure of Parliamentary votes
• Declaration/publication of assets, liabilities, income

Formal Oversight Effective Public Civil Society & Media

Institutions • Freedom of press, FOI

Citizens/Firms
Sector Management • Civil society watchdogs
Citizens/Firms

• Independent, effective • Report cards, client survey

judiciary • Public financial • Beneficiary participation in
• Legislative oversight projects
(PACs, PECs) management
• Independent oversight • Civil service Private Sector
institutions (SAI) Interface
• Global initiatives: UN,
meritocracy & adequate
• Streamlined regulation
OECD Convention, pay • Public-private dialogue
anti-money laundering • Service delivery and • Extractive Industry
Transparency
regulatory agencies in • Corporate governance
• Collective business
sectors associations
• Decentralization/local
public management
• Ethics & leadership Outcomes:
Services,
Regulations
Citizens/Firms

When Governance Breaks Down . . .

Citizens/Firms

Political Accountability
• Political competition, broad-based political parties
• Transparency & regulation of party financing
• Disclosure of Parliamentary votes
• Declaration/publication of assets, liabilities, income State
Capture

Effective Public Civil Society & Media

Formal Oversight
Institutions Sector Management • Freedom of press, FOI
Citizens/Firms

• Civil society watchdogs

Citizens/Firms

• Independent, effective • Public finance • Report cards, client survey

judiciary • Beneficiary participation in
• Legislative oversight management & projects
(PACs, PECs) procurement
• Independent oversight
institutions (SAI)
• Civil service Patronage & Private Sector
• Global initiatives: UN, meritocracy & adequate Interface
Nepotism • Streamlined regulation
OECD Convention, pay • Public-private dialogue
anti-money laundering • Extractive Industry
• Service delivery and Transparency
• Corporate governance
regulatory agencies in • Collective business
sectors associations
• Decentralization/local
Administrative public management
Corruption • Ethics & leadership Outcomes:
Services,
Regulations
Citizens/Firms

6
 Diagnostics: Drilling Down the
Governance Landscape
• Diagnosing Governance as a whole
• Assessing the incidence of particular forms of
corruption:
corruption where are the most affected areas?
• Evaluating corruption at the sector level,
level e.g.
education
• Evaluating corruption in cross cutting
government processes,
processes e.g. procurement
• Identifying corruption vulnerabilities at the
project level

Governance:
Country Level

7
 “Measuring” Quality of Governance and
Corruption at the Country Level
(Kaufmann-Kraay indices:)

• Rule of law
• Political stability
• Voice and accountability
• Government effectiveness
• Regulatory quality
• Control of corruption

http://www.worldbank.org/wbi/governance/pubs/govmatters4.html

Control of Corruption: Cross country Comparisons

8
Governance Indicators: Bangladesh

http://www.openbudgetindex.org/

9
 http://www.globalintegrity.org/
S e le c t a Co u n tr y

FEEDBACK PRINT THIS PAGE

TANZANIA

Tanzania: Integrity Scorecard

Overall Score: 59 - Very Weak

Category I Civil Society, Public Information and Media 63 Weak

I-1 Civil Society Organizations 88 Strong
I-2 Media 81 Strong
I-3 Public Access to Information 19 Very Weak

Category II Elections 56 Very Weak

II-1 Voting & Citizen Participation 80 Moderate
II-2 Election Integrity 72 Moderate
II-3 Political Financing 17 Very Weak

Category III Government Accountability 48 Very Weak

III-1 Executive Accountability 58 Very Weak
III-2 Legislative Accountability 54 Very Weak
III-3 Judicial Accountability 31 Very Weak
III-4 Budget Processes 49 Very Weak

Business Environment and Enterprise

Performance Survey
http://info.worldbank.org/governance/beeps2002/

The BEEPS II Interactive Dataset: Enterprise Survey in Transition, 2002

The Business Environment and Enterprise Performance Survey (BEEPS) II is jointly owned by the European Bank for
Reconstruction and Development (EBRD) and the World Bank and in all its uses should be referred to and referenced as
the EBRD-World Bank Business. It is a survey of managers and owners of firms across the countries of Eastern Europe, the
former Soviet Union, and Turkey designed to generate comparative measurements of the quality of governance, the
investment climate and the competitive environment, which can then be related to different characteristics of the firm and to
firm performance. The first round of the BEEPS was conducted in 1999 and the data is accessible on
http://info.worldbank.org/governance/beeps/. The second round of the survey (BEEPS II) was conducted in 2002 and the
results are available through this interactive dataset (follow instructions below). For more information on the survey, the
BEEPS research project and related papers, click on http://www.worldbank.org/wbi/governance/pubs_statecapture/.You can
download the BEEPS II survey questionnaire.
This interactive dataset is intended to make the BEEPS II results available to a wide range of different users. Please follow
the simple step-by-step instructions to get data, produce charts and do simple comparative analyses on the questions and
countries that interest you. Just follow these four steps:

STEP 1: CHOOSE A QUESTION - Select the question(s) you are interested in organized according to a list of subject
categories and sub-categories.
STEP 2: CHOOSE A COUNTRY - Select the countries for which you would like to see results. You can aggregate the
results for all countries in the survey, choose to see the results on a single country or compare results across several
countries.
STEP 3 (ADVANCED OPTION): CHOOSE FIRM CHARACTERISTICS - The BEEPS II dataset includes a wide range of
different types of firms. You can choose to "filter" the results according to the responses of different types of firms, such as
size, location, or ownership structure. Users can even define their own categories of firms based on any question in the
survey.
STEP 4: GET RESULTS: DATA & CHARTS - The results will be presented in a numerical table and graph that can be
downloaded.To start your BEEPS data analysis, click Go To Questions.

10
 PEFA’s Performance
Measurement Framework
Budget
BudgetRealism:
Realism:
IsIsthe Accountability
Accountabilityand
and
thebudget
budgetrealistic,
realistic, Transparency:
and
andimplemented
implementedas as Transparency:
intended Are effective external
intendedininaa Are effective external
predictable financial
financialaccountability
predictablemanner?
manner? accountability
and
andtransparency
transparency
arrangements
arrangementsininplace?
place?
Comprehensive,
Six PFM
Comprehensive,
Policy-based,
Policy-based,budget:budget: System
Does
Doesthethebudget
capture
captureall
budget
allrelevant
relevant
Aspects Control:
Control:
fiscal IsIseffective
effectivecontrol
controland
fiscaltransactions,
transactions,and
and stewardship
and
isisthe
theprocess,
process,giving
giving stewardshipexercised
exercised
regard ininthe use of public
regardtotogovernment
government the use of public
funds?
policy?
policy? funds?

Comprehensive
ComprehensiveFiscal
Fiscal Information:
oversight: Information:
oversight: IsIsadequate
Are adequatefiscal,
fiscal,revenue
revenueand
andexpenditure
expenditure
Arethe
theaggregate
aggregatefiscal
fiscal information
information producedand
produced anddisseminated
disseminatedtoto
position
positionand
andrisks
risksare
are meet decision-making and management
monitored and managed? meet decision-making and management
monitored and managed? purposes?
purposes?

OECD DAC Procurement Indicators

11
 Governance:
Across Areas

Forms of Corruption: Assessing State Capture

Proportion of firms
affected by capture of …

30
Parliamentary Votes
Presidential Admin. Decrees 25

Civil Court Decrees 20

15

10

Hungary Estonia Russia Ukraine

12
Forms of Corruption: Administrative Corruption
Service Delivery: Composition of Total Bribes Paid by Households in
Cambodia

Forms of Corruption: Administrative Corruption

The “Bribe Fee”
Fee” List: Unofficial Payments by Firms in Ukraine
Enterprises
Type of License/Service/”
License/Service/”Favor”
Favor” Average fee required admitting need to pay
(1996) “unofficially”

Enterprise registration $176 66%

Each visit by fire/health inspector $42 81%
Tax inspector (each regular visit) $87 51%
Telephone line installation $894 78%
Lease in state space (square ft. per month) $7 66%
Export license/registration $123 61%
Import license/registration $278 71%
Border crossing (lump sum) $211 100%
Border crossing (percent of value) 3% 57%
Domestic currency loan from bank on 4% 81%
preferential terms (percent of value)
Hard currency loan on preferential 4% 85%
terms (percent of value)

13
 Forms of Corruption: Patronage & the Market for Public Office
Public Officials Surveys: Purchasing Public Positions
60
Customs inspectors 48
41

Tax inspectors 52
41
25
Natural resource 43
licensers 33
27
39
Judges 32
16
Albania
Ordinary police 25
40 Georgia
23
Investigators/ 32 Latvia
prosecutors 33
14
24
Local officials 21
18 Based on 1998 World Bank surveys of public
officials in these countries: 218 public
5 officials in Latvia (with Latvia Facts); 350
Ministers 10 public officials in Georgia (with GORBI); and
19 97 public officials in Albania (with ACER).

0 20 40 60 80
Percent of public officials believed to have purchased their positions
positions

Governance:
Sector Level

14
 Sector Level: The Value Chain
& Corruption Risk Mapping

Health Sector -- Delivery of Essential Drugs

Distribution Service
Registration
Registro Selection Adquisición
Procurement
Delivery

• Efficacy • Determ ine budget • Determ ine m odel • Receive and • Consultation with
• Labeling • Assess m orbidity of supply/ check drugs health
• M arketing profile • distribution with order professional
• Use • Determ ine drug • Reconcile needs • Ensure • In-patient care
needs to fit and resources appropriate • Dispensing of
• W arnings transportation
m orbidity profile • Develop criteria pharm aceuticals
• Full registration and delivery to
• Cost/benefit for tender • Adverse drug
• Reevaluation analysis of drugs • health facilities reaction
of older drugs Issue tender
• Consistency with • • Appropriate m onitoring
Evaluate bids storage
W HO criteria • Award supplier • Patient
• Good com pliance with
• Determ ine inventory prescription
contract term s control of
• M onitor order drugs
• M ake paym ent • Dem and
• Quality assurance m onitoring

Health Sector: Delivery of Essential Drugs

Tackling decision points vulnerable to corruption

Manufacturing Competition &

Transparency
Registration Tracking
systems
Random Selection
inspections User
surveys
Monitoring
Procurement
based on
transparent & Media Distribution
uniform coverage
standards of drug Prescription &
selection Disbursement
committee
meetings

15
 Governance: Cross
Cutting Areas

Public Procurement: Process Flow &

Corruption Risk Mapping
Procurement Planning

Preparation
Stages of the
Advertisement
Procurement
Process Pre-qualification

Bid Evaluation

Award of Contract

Contract Implementation

16
 How can we improve
governance and
reduce corruption?

Improving Governance Systems

Supply and Demand
 Supply-
Supply-side
Strengthen capacities and organizational
arrangements – leadership, skills, human resource
& financial management systems – embodied in
state institutions to deliver public goods and
services
 Demand-
Demand-side
Strengthen accountability arrangements that
enable citizens and firms to hold state institutions
and officials responsible for decisions and
outcomes:
State institutions --elections, political parties, parliaments,
judiciaries
Non-state institutions -- free press/media, civil society
organizations

17
 Enhancing Transparency

The Power of Transparency and Monitoring:

PETS & Primary Education in Uganda

Source: Reinikka and Svensson (2001), Reinikka and Svensson (2003a)

18
 BIR Officials Amass Unexplained
Freedom Wealth
by Tess Bacalla
Of Philippine Center for Investigative Journalism
Information
The three-part series concludes by looking at the breakdown in the system of checks and
balances in the BIR and the lack of transparency, oversight and accountability that contribute to
making the bureau one of the most corrupt government agencies.

Lucien Sayuno, Makati regional director of the BIR lives in this

house in posh Ayala Alabang Village. Parked in his garage are a
Ford Expedition, a Toyota Land Cruiser, and a brand new BMW.
[PCIJ Photo]

LIKE MANY of its neighbors, the house at 266

Cuenca St. in posh Ayala Alabang Village looks like
a multimillionaire's home. Expensive orchids adorn
its landscaped front lawn while the house itself is
imposing, the use of the best materials evident.
Recently seen parked in its garage were luxury vehicles, including a white Land Cruiser, a blue
Ford Expedition and a new blue BMW.

The occupants of 266 Cuenca, however, are not movie stars or business moguls. Instead, it is the
home of a government official whose annual salary is less than P300,000.

Enhancing Accountability

19
 The Accountability “Triangle”

Politicians/Policymakers

Political Managerial/internal
accountability accountability

Voters/Citizens Social Bureaucracy

accountability

What is Social Accountability?

… is an approach towards building

accountability

• that relies on civic engagement,

• where ordinary citizens and/or their
organizations participate directly or
indirectly in exacting accountability
• It is ‘demand-driven’ or “bottom-up”
• and complements non-effective, formal
accountability systems

20
The Report Card: Improving Public
Services in Bangalore
100 94 92 96
90 85
78 77
80 73 73 73
67
70
% satisfied

60
47
50 41 42
40 34 34 32 32
30 25
20 16 14
9
10 5 6 4
n/a 1 n/a
0
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ity
i ty
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ty

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es

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e
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on

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ec

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ho

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ity

le
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bl

rt
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at

nd
ic
C

Pu

po
W

bl

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Pu

ns
a
Tr
1994 Agencies
1999 2003

Source : PAC

Increasing Competition &

Reducing Discretion

21
 Public Procurement

Using ICT: Chile Engaging CSOs:

CSOs: Philippines
 All supplier companies Legal
register, indicating areas of Legalfoundation
foundationaamess
messwith
withover
over
100
100laws
lawsand
andregulations
regulations
business (e.g., IT,
New
Newomnibus
omnibuslaw
lawneeded
neededfor
forclarity
clarity
construction, furniture)
and
andpredictability
predictabilityin
inthe
theprocess
process
 Public agencies submit New
tenders through internet Newlaw
lawin
in2003
2003with
withdetermined
determined
efforts
effortsof
ofreform
reformminded
mindedpublic
public
 Automatic e-mail to all officials
officials allied withstrong
allied with strongand
and
companies in selected area unified
unifiedadvocacy
advocacyefforts
effortsofofCSOs
CSOsto to
offset
offsetentrenched
entrenchedvested
vestedinterests
interests
 Online information on name, For
position of official in-charge Forcredible
credibleenforcement:
enforcement:
requirement
requirementthatthatall
allbids
bidsand
andawards
awards
 Online information on results: committees
committeesmust musthave
haveatatleast
leastone
one
who participated, proposals observer
observerfrom
fromaacertified
certifiedCSO
CSO
made, scores received, who Extensive
won bid, historical record of Extensivetraining
trainingofofCSOs
CSOsnownow
under
underway
way
agency’s purchases and
contracts

Corruption poses three risks

Development
Development
Effectiveness Risk
Effectiveness Risk

That corruption will

undermine the impact of
development efforts in
general and in Bank-
supported projects

Reputational Risk
Reputational Risk Fiduciary Risk
Fiduciary Risk

That Bank lending That Bank resources

in countries with will be misappropriated
corrupt leaders and in some cases
will tarnish the loans may not be
Bank’s reputation repaid

22
 Desired Impact

Development Outcomes

Corruption

What might happen with

over zealous ring fencing?
Development Outcomes

X*

Corruption

23