Measuring Progress with Governance Indicators: Wizards, Words, or Wisdom? Governance Flagship Course Poul Engberg-Pedersen PRMPS, April 23rd 2003

Using Governance Indicators The politics and industry of governance indicators: Different purposes and multiple actors – The risk of capturing indicators for inappropriate purposes Public sector governance = PEM + PAR + CAB; but a moving target with both processes and outcomes Strategic choices on how to monitor progress: Local / national / global level? Purpose-specific or general indicators? Linking reforms, aid and capacity in country monitoring? Methodology: Assessments / Approximations / Perceptions? Ownership: Client / Bank / Development community? Time perspective: Basic governance change, or right direction? PSG monitoring in CAS results framework 4/30/2019 Governance Flagship Course, April 2003

The Politics of Governance Indicators: Different Purposes Diagnostics without politics: Identifying problems in public sector management Diagnostics with politics: Identifying state capture & political drivers of corruption Decisions on aid allocation and debt relief: The need vs. performance paradox Designing PSG operations and reforms Accountability and results management: Progress monitoring and lessons learned 4/30/2019 Governance Flagship Course, April 2003

GOVERNANCE INDICATORS AND TOOLS TO FIT EVERY PURPOSE National public sector governance structures and processes GOVERNANCE INDICATORS AND TOOLS TO FIT EVERY PURPOSE HIPC CPIA SURVEYS PERCEPTION-BASED GOVERNANCE INDICATORS INSTITUTIONAL AND GOVERNANCE REVIEWS GOPIs Purpose: Designing reforms in public sector governance Understanding challenges in public sector governance Allocating aid / relief based on governance performance Mobilizing public opinion & action against corruption Enhancing accountability and demonstrating results in development cooperation 4/30/2019 Governance Flagship Course, April 2003

The Business of Governance Indicators: Multiple Actors MDGs: UN and IFIs compete – with governance as the unknown factor Aid, debt, global deals: Bilaterals, IFIs, WTO – with good governance as part of deal FDI, loans: Private risk assessments, ICRG Politics: TI, Freedom House, WBI Accountability: IDA outcome monitoring and results management (HIPC tracking) Client countries: Need for PSG diagnostics 4/30/2019 Governance Flagship Course, April 2003

Governance: A moving target MDGs Governance National politics Results Governance Implemen- tation PRSP Governance Governance progress is about process and outcome 4/30/2019 Governance Flagship Course, April 2003

Multiple success levels / types Outcomes, e.g. people’s good health and education Events, e.g. policies/legislation or establishment of institutions Processes & standards, e.g. budgeting, accounting, hearing Impact, e.g. empowerment 4/30/2019 Governance Flagship Course, April 2003

The Bank’s Country Policy and Institutional Assessment, CPIA 20 indicators in four clusters (economic management; structural policies; social inclusion/equity; public sector management and institutions). Scored 1-6 (low->high) for each client country, annually by Bank staff. So far, not made public or shared with clients. #16: Property-rights and rule-based governance #17: Quality of budgetary and financial management #18: Efficiency of revenue mobilization #19: Quality of public administration #20: Transparency, accountability and corruption in the public sector 4/30/2019 Governance Flagship Course, April 2003

Three fields of public sector governance Public financial management Aggregate fiscal discipline Allocative efficiency: Strategic prioritization Operational / technical efficiency Public admin. reform: External accountability to oversight bodies and partners Internal accountability within the Executive Human & institutional capacity Structural coherence and alignment within Executive Institutional checks and balances: Constitutional balance of power Oversight by legislature and supreme audit institutions Rule of law and legal / judicial reform Institutionalized stakeholder participation 4/30/2019 Governance Flagship Course, April 2003

PUBLIC FINANCIAL MANAGEMENT Regional administrations JUDICIARY LEGISLATURE DONORS: AID Supreme audit inst. President / Cabinet ALLOCATIVE EFFICIENCY & PRIORITIZATION AGGREGATE FISCAL DISCIPLINE Core ministries LINE MINISTRIES SERVICES Regional administrations TECHNICAL / OPERATIONAL EFFICIENCY LOCAL GOVERNMENTS SOCIETY: TAXES & FEES 4/30/2019 Governance Flagship Course, April 2003

PUBLIC ADMINISTRATION REFORM STRUCTURAL ALIGNMENT DONORS: AID CIVIL SOCIETY: DEMANDS SERVICES POLICIES LEGISLATURE President / Cabinet Core ministries LINE MINISTRIES Regional administrations LOCAL GOVERNMENTS JUDICIARY Supreme audit inst. EXTERNAL ACCOUNTABILITY HUMAN AND INSTITUTIONAL CAPACITY INTERNAL ACCOUNTABILITY 4/30/2019 Governance Flagship Course, April 2003

INSTITUTIONAL CHECKS AND BALANCES INSTITUTIONALIZED PARTICIPATION: CIVIL SOCIETY, COMMUNITIES ELECTORATE, STAKEHOLDERS, LEGISLATURE: OVERSIGHT JUDICIARY: RULE OF LAW CONSTITUTIONAL BALANCE OF POWER Supreme audit inst.: Oversight President / Cabinet Core ministries LINE MINISTRIES Regional administrations LOCAL GOVERNMENTS THE EXECUTIVE 4/30/2019 Governance Flagship Course, April 2003

Strategic questions on progress measuring Are ‘universal’ benchmarks available? Do countries have to go through ‘stages’ of PSG reform? Shall we look at the reforms or also at the reformers? How do we capture political reform processes? Is there a difference between PEM, PAR, and CAB with respect to benchmarks and indicators? Can survey- and perception-based indicators be used in progress measuring? If recurrent assessments are needed to capture governance outcome of Bank-supported operations, who can and should do them? 4/30/2019 Governance Flagship Course, April 2003

Basic and advanced public administration reforms PSG reform issues Basic: Enhancing discipline Advanced reforms Aggregate cost reductions Hardening budget constraints Block or frame budgeting Efficiency improvements Line-item budgeting: Inputs Plan-oriented budgets Accounting reforms Cash accounting Double-entry book-keeping Auditing reforms Compliance auditing Performance auditing Career management Enhancing job security Decreasing tenure Unity of the civil service Cadre with common terms Diversify pay arrangements Individual incentives Standard promotion / reward Annual performance targets Openness Closed career development Lateral entry in career system Public agency size Simplify ministry structures Single-purpose agencies Contractualization Few performance contracts Extensive use of contracts Political decentralization Few changes in responsibility Reallocation to sub-national Service shredding Minor reductions in services Shredding government tasks Contracting out Easy support tasks only Strategic tasks, too Is this possible? How does it relate to reform processes / drivers of reform? 4/30/2019 Governance Flagship Course, April 2003

Contents and drivers of PSG reforms CONTENTS OF PSG REFORMS Advanced Reforms: Block / frame budgeting Diversify pay and tenure Performance targets Major decentralization Basic Reforms: Discipline in budgets Enhanced job security Simplified gov. structure Security / Survival: Effective service delivery DRIVERS OF PSG REFORMS National Organizations: Central/local civil service Parliament Nation-wide political parties Interest organizations Champions of Reform: Reform entrepreneurs Networks of reformers in and outside bureaucracy “Doers” All authorities / CS / private 4/30/2019 Governance Flagship Course, April 2003

Governance capacities Linking PSG reforms, aid and capacity: Need for country-specific progress monitoring Implementation organizations Reform champions outside government Reform champions inside government Basic public sector reform Basic and advanced public sector reform Advanced public sector reform Governance reforms Good <-> Medium Bad Governance capacities Effective types of aid Budget support to government Basket funding, e.g. SWAPs Programs for social services delivery Zero-generation reforms Support through civil society Humanitarian assistance projects 4/30/2019 Governance Flagship Course, April 2003

PSG monitoring in CAS results framework     Globally available governance indicators: Perception-based (WBI, TI, ICRG, Freedom House); CPIAs; PEM tracking; 2nd generation.   Client develop-ment objectives   CAS objectives PSG objectives and activities PSG features and challenges  Monitoring of PSG progress Progress within CAS framework CAS revisions: New PSG objectives  New PSG objectives, activities   PSG objectives within CASs, e.g.: Effective services; Accountability; Anti-corruption; Decentralization and voice PSG challenges in three fields: *Public fin. man. *Public admin. *Institutional checks&balances Info. for GOPIs: *Independent assessments *Quantitative indicators *Existing assessments 4/30/2019 Governance Flagship Course, April 2003

Governance Flagship Course, April 2003 Governance Operations Progress Indicators: Three options – or a mixture? Independent assessments Quantifiable proxies More detailed CPIAs Extend PEM benchmarking to more countries Establish similar benchmarks for public admin. reform, checks & balances Establish joint assessment system with clients – Who? Add supplementary questions to each of CPIA #16-#20 Apply 1-6 ratings for each of the more detailed questions Establish joint assessment with clients and/or publicize ratings? Regulation of entry Budget volatility Revenue source volatility Trade tax Telephone faults Telephone waiting Contract enforcement 4/30/2019 Governance Flagship Course, April 2003