The World Bank Page 1 Presented by: The Public Sector Group The World Bank Our Difficult Climb: Initial Progress and the Ascent Ahead Transparency International—World Bank Combating Corruption Workshop Washington, DC March 21, 2003

The World Bank Page 2 A promising start … Explosion of activity, cutting- edge diagnostics Major programs launched, with some early successes Overview … but we are also facing formidable challenges To have major impact, need to tackle deeper issues Tremendous increase in awareness Possible Paths …

The World Bank Page 3 The ‘Prohibition’ Era WDR on Institutions 1982 JDW “Cancer of Corruption” Speech (10/96) State in a Changing World (97) Public Expenditure, Financial Mgt. & Procurement Reforms Diagnostic/Data/ Monitoring Tools Administrative & Civil Service Reform Civil Society Voice, Accountability, Media & Transparency Mechanisms State Capture/Corporate Governance Legal/Judicial Reform Broadening & Mainstreaming The initial ascent … getting to base camp … TI CPI (5/95) Anti- corruption Strategy (97) Governance Strategy (00) 1st set of firms Debarred from WB (99) Formalization of INT (01) Strategic Compact (97) O.P. Mainstreaming AC in CAS (99) Governance Pillar - CDF (98) Internal AC unit created in WB (98) Gov/A-C Diagnostics start (98)

The World Bank Page 4 Institutional Checks & Balances Independent, effective judiciary Legislative oversight Decentralization with accountability Global initiatives: OECD Convention, anti- money laundering, WCO Institutional Checks & Balances Independent, effective judiciary Legislative oversight Decentralization with accountability Global initiatives: OECD Convention, anti- money laundering, WCO Civil Society Voice & Participation Freedom of information Public hearings on draft laws Media/NGOs Community empowerment Report cards, client surveys Civil Society Voice & Participation Freedom of information Public hearings on draft laws Media/NGOs Community empowerment Report cards, client surveys Political Accountability Political competition, credible political parties Transparency in party financing Disclosure of parliamentary votes Asset declaration, conflict-of-interest rules Political Accountability Political competition, credible political parties Transparency in party financing Disclosure of parliamentary votes Asset declaration, conflict-of-interest rules Competitive Private Sector Economic policies Restructuring of monopolies Effective, streamlined regulation Robust financial systems Corporate governance Collective business associations Competitive Private Sector Economic policies Restructuring of monopolies Effective, streamlined regulation Robust financial systems Corporate governance Collective business associations Good governance has many dimensions & “entry” points Public Sector Management Meritocratic civil service with adequate pay Public expenditure, financial management, procurement Tax and customs Frontline service delivery (health, education, infrastructure) Public Sector Management Meritocratic civil service with adequate pay Public expenditure, financial management, procurement Tax and customs Frontline service delivery (health, education, infrastructure) GOOD GOVERNANCE GOOD GOVERNANCE

The World Bank Page 5 Latvia (anticorruption) Russia (customs/treasury) India – Andra Pradesh (power; e-gov); Karnataka (right to info) Colombia (diagnostics & civil society) Indonesia (local governance) Uganda (PRSC; education) Jordan (civil society) Explosion of activities: Examples of major programs launched across countries Pakistan (devolution) Philippines (transport) Ghana (PE accountability) Bolivia: (public admin.) Albania (public admin.) Guatemala (diagnostic to action program) Tanzania (PSR) Ethiopia (decentralization) Cambodia (PE; forestry) Ukraine (tax admin) Bangladesh (civil society) Gabon (water/electricity) Kyrgyz Republic (governance reform)

The World Bank Page 6 Latvia (Anticorruption) India – Andhra Pradesh (Power; E-governance) Indonesia (Community Empowerment) Uganda (Education, Capacity Building-Action Learning/Core AC Course) Ghana (Public Expenditure Accountability) Gabon (Water/Electricity) Some approaches that appear to be working …

The World Bank Page 7 Source: ICRG, Subject to margins of error, as it is based on only one source. Poor Good But on average, no evidence of significant improvement on control of corruption …

The World Bank Page 8 Business Environment & Enterprise Survey (BEEPS) in ECA Some signs of initial progress in some regions… 0 Perceived Impact of State Capture Frequency of active capture by firms Bribe frequency Low High … though variations across different dimensions … How significant are these obstacles to your business?

The World Bank Page 9 Some programs that have stalled – and why…   The challenge of politics:   No political ‘buy-in’ – despite plethora of diagnostics and pressure from civil society: Bangladesh   Difficulties in sustainability when there is no political traction: Georgia judiciary   The need to anticipate political obstacles: Action Oriented Learning Program in AFR – Malawi vs. Uganda   Opposition from powerful vested interests in Cabinet & bureaucracy: India, Karnataka – right to information

The World Bank Page 10 Lessons learnt, broader implications … a long way to go … These appear to be working when the underlying environment is conducive:   Committed leadership   Coalition for reform   Capacity   Enhance ‘demand’ pressures for reform   Overcome vested interests against reform   Reverse the “culture” of corruption in the public sector   Tackle political drivers of corruption (e.g., party financing)   Within WB, mainstream across sectors and countries   Enhance ‘demand’ pressures for reform   Overcome vested interests against reform   Reverse the “culture” of corruption in the public sector   Tackle political drivers of corruption (e.g., party financing)   Within WB, mainstream across sectors and countries Excellent at diagnostics Good at technical solutions and design 0 0 Good at addressing the ‘surface’ manifestations But, struggling to address ‘deeper’ underlying issues

The World Bank Page 11 CORRUPTION Shrinking the time horizon 10? New New approaches New Strengthening the “demand” for reform Improving the “supply” of reform World Bank Partners (e.g. TI, bilaterals) Partnerships Lending AAA 7. The way forward … shortening the journey CORRUPTION CORRUPTION  25? Years

The World Bank Page 12 Strengthening the “demand” for reform The Way Forward: Strengthening the “demand” for reform CORRUPTION Strengthen international pressure for reform Use international bully pulpit to re-energize the agenda: JDW Say “no” when warranted: Indonesia? Kenya? Use the international platform to highlight good and bad governance countries: TI, CPIA, KKZ, BEEPS indicators Strengthen global anticorruption initiatives: OECD Convention, Anti- Money Laundering Enhance domestic pressures for reform Assist civil society in monitoring governance reforms: Slovakia, TI Support CSOs & FBOs that mobilize citizens in favor of government performance: PAC, Bangalore; Action Learning Programs, LAC Help SMEs to organize & mobilize MNCs against capture by large vested interests: ECA Strategically support responsible media on anticorruption: Philippines Center for Investigative Journalism

The World Bank Page 13 Enhancing the “supply” of reform The way forward: Enhancing the “supply” of reform Help tackle political drivers of corruption   Address issue of party finance disclosure & regulation: UK DFID, TI?   Work with media & Parliaments on political corruption: WBI, others   Develop better tools to understand state capture, market for influence & networks DEC, WBI, others   Work with future leaders: WBI Youth Program Reverse the “culture” of corruption afflicting the public & private sectors   Understand the norms permeating public-private corruption networks & how to combat them: Peru   Support CSOs/FBOs working towards a transformation of values/ethics in the public sector: AP, India   Support enforceable conflict of interest rules: Latvia   Promote better corporate governance & codes of conduct: TI business principles for countering bribery   Strengthen capacity building & institutional reform efforts: More robust lending & AAA   Strengthen evaluation for ‘scaling up’: DEC, OED, WBI; partners   Emphasize change mgt & design programs to defuse opposition: Education reform, LAC   Support AC efforts that improve service delivery that citizens can observe: Jordan Help reformist governments overcome obstacles

The World Bank Page 14 Strengthen staff fortitude and incentives to say “no” when warranted Internal incentives The way forward … Deepen and enhance leadership and ownership of anticorruption agenda across sectors – beyond PREM/ WBI/ OPCS/ LEG World Bank

The World Bank Page 15 Q&A and Discussion