The World Bank Governance & Anticorruption Core Course, page 1 Improving Governance in Developing Countries Presented by: Sanjay Pradhan Director Public Sector Governance Board The World Bank Governance & Anticorruption Core Course Presented to:

The World Bank Governance & Anticorruption Core Course, page 2 Focus for Today: Outline  Importance of Good Governance & Anticorruption  Governance: Framework & Measurement  Priority Areas for Improving Governance  Operational Strategy on Anticorruption  Importance of Good Governance & Anticorruption  Governance: Framework & Measurement  Priority Areas for Improving Governance  Operational Strategy on Anticorruption

The World Bank Governance & Anticorruption Core Course, page 3 Governance – Good and Bad Lessons from the last 50 years Governance – Good and Bad Lessons from the last 50 years  Some governments have helped deliver substantial improvements in income, health and education outcomes (East Asia)  In other countries, governmental action has resulted in wasted resources, weak investment and growth, and entrenched corruption

The World Bank Governance & Anticorruption Core Course, page 4 The direction of causality …  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 living standards encourage more open, tolerant and democratic societies Growth causes governance to improve... … and better governance causes growth  Using measures of rule of law, bureaucratic 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  Other studies have dealt with the potential for 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 …

The World Bank Governance & Anticorruption Core Course, page 5 Focus for Today: Outline  Importance of Good Governance & Anticorruption  Governance: Framework  Priority Areas for Improving Governance  Operational Strategy on Anticorruption  Importance of Good Governance & Anticorruption  Governance: Framework  Priority Areas for Improving Governance  Operational Strategy on Anticorruption

The World Bank Governance & Anticorruption Core Course, page 6 Governance & Corruption – Not the same thing! State The manner in which the State acquires and exercises its authority to provide public goods and services public Using public office for private private gain Governance Corruption Corruption is an outcome – a consequence of the failure of accountability relationships in the governance system

The World Bank Governance & Anticorruption Core Course, page 7 Governance Systems: Supply and Demand Governance Systems: Supply and Demand  Supply-side  Supply-side: Capacities and organizational arrangements – leadership, skills, human resource and financial management systems – embodied in state institutions to deliver public goods and services  Demand-side  Demand-side: Institutions and accountability arrangements – elections, political parties, parliaments, judicial systems, free press, civil society organizations, accountable local governments – that enable citizens and firms to hold state institutions to account

The World Bank Governance & Anticorruption Core Course, page 8 Two Governance Patterns Two Governance Patterns  Good (enough) governance  Good (enough) governance : Developmental orientation of political leadership, functional check & balances, system not highest performing but mutually reinforcing and self-correcting  Clientelist  Clientelist : Political leaders use authority to maintain their power base or are captured by powerful private interests. Leaders bypass check and balance institutions and use bureaucracy for patronage.

The World Bank Governance & Anticorruption Core Course, page 9 Operational Implication: Unpack Governance Operational Implication: Unpack Governance  What are the specific governance problems of concern?  Corruption? If so, where is it concentrated? Health? Education? Financial sector? Procurement?  Poor delivery of public services? If so, which one?  Weak credibility for private investment?  What are the specific drivers of poor outcomes?  Powerful interests purchasing state policy for private interest  Kick-backs in public procurement  Lack of citizen voice to influence service delivery  Weak checks and balances to constrain arbitrary action  What are the priorities for governance reform?  Public regulation and financing of political parties  Transparent, competitive procurement  Strengthened legislative oversight, independent judiciary  Meritocracy in public administration

The World Bank Governance & Anticorruption Core Course, page 10 Two Approaches to Measuring Governance Two Approaches to Measuring Governance  Broad and Aggregated  Broad and Aggregated : Broad measures to measure governance at more aggregated levels. Help reveal systematic patterns – and basis for monitoring trends over time.  Specific and Disaggregated  Specific and Disaggregated : Specific measures of quality of key governance subsystems, including using “actionable indicators” to benchmark and track reforms.

The World Bank Governance & Anticorruption Core Course, page 11 Priority Areas for Improving Governance Priority Areas for Improving Governance  Strengthening Public Management Systems  Strengthening public finance management & accountability  E-procurement for greater transparency and competition  Improving front-line service provision  Instituting citizen report cards and monitoring  Strengthen community monitoring and oversight  Strengthening Leadership & Ethics for good governance  Strengthening global checks and balances:  Instituting transparency in extractive industries  Strengthening global initiatives to curb transnational corruption

The World Bank Governance & Anticorruption Core Course, page 12 Leadership & Ethics  Beyond accountability systems, leadership and ethics in public service shape standards of governance and anticorruption  Leaders set standards for integrity, catalyze politically difficult change  Way forward is to empower and develop critical mass of reform-minded leaders committed to integrity  Innovative pilots in transformational leadership to engender paradigm shift: Madagascar, Burundi, Kenya  Global Integrity Alliance: Peer support network of public officials committed to ethics in public service

The World Bank Governance & Anticorruption Core Course, page 13 Addressing Corruption in CAS’s Systematic diagnosis of the nature & drivers of corruption Aid amount linked to level of corruption Actions to address the most significant development risks posed by corruption : Reducing corruption in key sources of growth, service delivery Actions to mitigate reputational risk from grand corruption: Transparency in major procurement deals, asset declaration, Actions to mitigate fiduciary risk: Enhanced fiduciary safeguards in projects, PFM assessment for using budget support Political economy assessments to identify feasible actions Coordinated donor action for complementarities and collective impact

The World Bank Governance & Anticorruption Core Course, page 14 Russia (customs/treasury) Colombia (diagnostics & civil society) Jordan (civil society) Major programs launched… Pakistan (devolution) Ghana (PE accountability) Albania (public admin.) Guatemala (diagnostic to action program) Tanzania (PSR) Ethiopia (decentralization) Cambodia (PE; forestry) Ukraine (tax admin) Gabon (water/electricity) Kyrgyz Republic (governance reform)Latvia(inspections) India – Andra Pradesh (power; e-gov); Karnataka (right to info) Indonesia (local governance) Uganda(education) Philippines (procurement) Bangladesh (NGOs in social sectors) …with some evidence of success

The World Bank Governance & Anticorruption Core Course, page 15 Lessons learned: Deeper challenges in high-risk countries These appear to be working when the underlying environment is conducive:  Committed leadership  Coalition for reform  Capacity These appear to be working when the underlying environment is conducive:  Committed leadership  Coalition for reform  Capacity  State capture and corrupt leadership in clientelistic states  Powerful vested interests and political obstacles  Weak ‘demand’ pressures for reform – limited voice, media freedoms, civil rights, etc.  Political drivers of corruption (e.g., lack of political competition, party financing)  State capture and corrupt leadership in clientelistic states  Powerful vested interests and political obstacles  Weak ‘demand’ pressures for reform – limited voice, media freedoms, civil rights, etc.  Political drivers of corruption (e.g., lack of political competition, party financing) Strong on PFM diagnostics Emphasis on core public management reforms Good at technocratic solutions and design Deeper underlying challenges

The World Bank Governance & Anticorruption Core Course, page 16 Reducing corruption in high-risk countries: Priorities for action in the next stage Better understanding and management of political economy of reforms Tackling political corruption (e.g. party finance, electoral corruption, etc. ) with partners Partnerships and new instruments to support demand-side initiatives: working with civil society, media, parliamentarians Tackle political drivers of governance challenges in sectors (e.g., power, ports, EI) Develop operational strategies to engage with corrupt leadership in clientelist, captured states

The World Bank Governance & Anticorruption Core Course, page 17Q&A