Governance and Integrity Prepared for Bali Workshop Infrastructure in East Asia and Pacific – the Way Forward Alex Sundakov Copyright Castalia. All rights reserved. Castalia is not liable for any loss caused by reliance on this document. Castalia refers to members of the worldwide Castalia Advisory Group and its staff

Main themes Infrastructure places particular demands on the integrity of processes Integrity of transactions is decided within an institutional and governance framework Accountability and reduction of corruption are key components of such a framework Key objectives: Extend time horizon for decision-making Improve quality of decisions Improve sustainability of decisions

Analytical Framework

Corruption Dynamically destructive Affects both public and private sectors Infrastructure particularly susceptible Fight against corruption also has negative aspects In the extreme – state capture

Accountability To whom and for what? Every sector needs to be accountable Confusion between accountability and independence External vs. organic accountability

Political Stability and Property Rights Obvious need for stability However, predictability does not necessarily lead to good social outcomes Genuine rule of law and government accountability may create uncertainty The need to consult and reach accommodation with wide interests adds to the costs There may be a trade-off between greater certainty and higher quality of decisions.

Government effectiveness Competence of public sector policy-making is critical Policy-making - processes and institutions through which policy decisions at various levels of government are made, including the policy advice and analysis role of the public sector. Policy implementation - processes and institutions, which ensure the implementation of public policy, such as the application of regulatory principles to individual cases. Private sector participation in the infrastructure sectors imposes additional demands on government effectiveness.

Approach to Case Studies

The Way Forward Governments Whistleblower protection Information disclosure Open hearings Civil Society Better information on consumer needs Clear rules of standing Private Sector Donors Address conflict between policy and transaction focus