Global Issues Seminar Series November 14, 2006 Governance and Corruption Vinay Bhargava, Director International Affairs, The World Bank

Slide# 1: Governance & Corruption – Not the Same state The manner in which the state acquires and exercises its authority to provide public goods & services publicprivate Use of public office for private gain Governance Corruption Corruption is an outcome – a consequence of the failure of accountability relationships in the governance system

Sldie#2: Key Dimensions of Governance Core Governance Public financial management Multi-donor PEFA initiative (including Switzerland) Administrative & civil service reform Governance in Sectors Transparency Participation Competition in service provision Sector-level corruption issues Demand for Governance State oversight institutions (parliament, judiciary, SAI) Transparency & participation (FOI, asset declaration) Civil Society advocacy Competitive private sector Local Governance Community-driven development Local government transparency Downward accountability Private Sector Development Competitive investment climate Two faces of the private sector Coalition building

Slide 3: Corruption is present in all countries in the worldpervasiveness varies TI 2005 Corruption Perceptions Index

Slide 4: Consequences corruption lowers incentives for investment

Slide 5: Consequencescorruption affects the personal lives of citizens and hurts the poor the most

Slide 6: Consequencescorruption undermines trust in institutions

Coalitions with civil society, private sector, parliamentarians, and others to combat entrenched corruption networks MDB collaboration in high-risk settings to avoid mixed-signals; coordinated donor action to support demand-side initiatives Slide 7: Global Collective Action Against Corruption Global Conventions (OECD, UNCAC) need to be enforced to curb transnational corruption & facilitate asset recovery

Slide 8: Globalization of the Fight Against Corruption UN Oil-for-Food Scandal More than 2,200 companies involved Humanitarian kickbacks from 66 countries Oil surcharges paid by companies form around 40 countries.

Slide 9: Forces Shaping Evolution of Corruption as a Global Issue Demand: Policies to increase transparency in public, corporate, and international finance arenas; research supplying credible information Supply: Anticorruption measures national and international Institutions: Speed at which national and international governance institutions mature Integrated financial systemsharder to monitor; increases risks of corrupt behavior

Slide 10: International Actions to Combat Corruption Ensuring that loans and grants to developing countries are used effectively Bolstering donor support for reform Reducing the incentives for multinational businesses to pay bribes Promoting international programs to control organized crime and the flow of illicit funds Improving the institutional framework for resolving international disputes

Slide 11: International Actions to Combat Corruption UNCAC: 133 signed; 30 ratifications to enter into force reached on Sept. 15, 2005preventive measures, criminalization and law enforcement, international cooperation, asset recovery OECD Convention Against Bribery: all 30 OECD members and 6 non-members have complied with making it a punishable offense to bribe an official in a host country; as of 2005, only 4 have prosecuted more than 1 case; uses a 2-step peer review system FATF: national and international policies vs money laundering and terrorist financing; 30 countries + HK, EC, and Gulf states are members

Slide 12: Civil Society Initiatives Transparency International EITI: 8 countries implementing; 14 more have endorsed; IFIs, donors, mining and oil companies, NGOs included Global Witness: investigative org to break link between natural resource exploitation and the funding of conflict and corruptionled to demise of Khmer Rouge, now active in Asia and Africa Global Organisation of Parliamentarians Against Corruption (GOPAC): 400 parliamentarians from 70 countries fighting corruption

Slide 13: Business Sector Initiatives International Accounting Standards: 10 countries in 1974 to over 70 countries to date International Chamber of Commerce: published Rules of Conduct to Combat Extortion and Bribery in 1977 (revised in 1999) Publish What You Pay (George Soros, 2002): now a coalition of over 280 NGOs worldwide Partnership Against Corruption Initiative: WEF in 2004 Global Compact: 10 th principle against corruption added in 2004hundreds of companies have committed to the compact which urges them to lobby for ratification and implementation of the UNCAC and collaborate with other anticorruption efforts

Slide 14: Key Elements of World Bank Strategy Project Level Combating corruption in Bank operations Country Level CAS-centered Approach, deepening support to countries to strengthen governance Global Level Working with development partners, sharing experience & addressing transnational issues

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