1 Improving Governance & Public Administration: Improving Governance & Public Administration: Frontier Areas of Reform Presented to: The New Reform Agenda of the New EU Member States October 19, 2009 Sofia, Bulgaria Presented by: Florian Fichtl Country Manager The World Bank

2 Governance and Corruption Not the same thing! The manner in which the State acquires and exercises its authority to provide public goods and services public The use of public office for private private gain Governance Corruption Corruption is an outcome – a consequence of the failure of accountability relationships in the governance system Poor delivery of services and weak investment climate are other outcomes of bad governance Good governance is the door to less corruption, better services and better investment climate …

3 Strengthening Governance Systems: Balancing Supply and Demand Supply-side Strengthen the state’s bureaucratic capability – leadership, skills, human & financial resources, management, monitoring and evaluation systems – to deliver public goods and services Demand-side Strengthen accountability arrangements – elections, political parties, parliaments, judiciary, media, civil society, business and labor organizations, local governments – that enable citizens and firms to hold state institutions to account Transparency

4 The Governance System Political Governance Political Parties Competition, transparency Executive-Central Govt Service Delivery & Regulatory Agencies Subnational Govt & Communities Formal Oversight Institutions Parliament Judiciary Oversight institutions Civil Society & Private Sector Civil Society Watchdogs Media Business Associations Cross-cutting Control Agencies (Finance, HR) Citizens/Firms Outcomes: Services, Regulations, Corruption, Informality

5 Good Governance matters for investment and growth 10% 15% 20% High MediumLow % Investment share in GDP HighMediumLow -1.5% 0% 1% 2% 1.5% -0.5% -1.0% 0.5% Income per capita Growth Rate Governance Quality Governance Quality Governance Quality measured by perception of 4000 firms in 67 countries on: (i) protection of property rights; (ii) judicial reliability; (iii) predictability of rules; (iv) control of corruption. World Development Report Survey 1997

6 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 …

7 Improving Governance & Public Administration: Examples from Bulgaria Business climate –Regulatory Reform, RIA –Review of State Fees –ROSC A&A –ROSC Corporate Governance; adoption of Corporate Governance Code by Stock Exchange –ROSC on Financial Services and Consumer Rights Public services / managing public resources –Education: per capita financing and delegated budgets; accountability for outcomes (independent assessments; PTA); tertiary education reform: governance structures incl. private sector involvement; resource management; appointments; –Science / R&D: transparency and competition; evaluations; private sector orientation –Health: NHIF IT system; private payments; pharmaceutical policy; collective bargaining –Judiciary: PEIR –Agriculture: PER –MoF: PBB and PFM –Infrastructure: Institutional capacities (Roads, Railways); performance based contracts; information for maintenance and repairs –Forestry: policy note –Revenue Administration: Information system; institutional strengthening; –Cadastre and Registration: Information system –Social Sector: multi-topic hh surveys to analyze impact of social spending; piloting new strategies with rigorous impact evaluations –Cross-cutting: strengthening evaluation to allow outcome-based policy dialogue New priorities –Customs –Forestry –Administrative Reform

8 Concern: % of firms identifying corruption as a major constraint in the New EU Member States (2009) Source: World Bank Enterprise Survey 2009

9 Concern: % of firms believing the court system is fair, impartial and uncorrupted (2009) Source: World Bank Enterprise Survey 2009

10 Concern: % of firms identifying practices of competitors in the informal sector as a major constraint (2009) Source: World Bank Enterprise Survey 2009

11 Concern: % Senior management time spent in dealing with requirements of government regulation Source: World Bank Enterprise Surveys (2005, 2009).

12 Frontier Areas for Reform Ensure rule-based public administration practices are in place: –Internal audit & control –Monitoring of merit-based recruitment, promotion, transfers –Indicators for rule-based compliance: Public Expenditure and Financial Accountability or PEFA indicators; Human resource management (HRM); Actionable Governance Indicators (AGIs) Strengthen ethical responsibility: –Asset declaration requirements –Codes of ethics for public officials –Strengthen commitment to values and ethics in public service: transformational leadership at individual & collective levels –Coalitions of integrity to combat entrenched networks and attitudes towards corruption

13 Frontier Areas of Reform (cont.) Enhance availability of information –Monitoring and posting of information on activities, outputs and results –Right-to-Information Enhance participation & monitoring by civil society & media –Stakeholder consultations in policy development process –Bring state closer to people: Decentralization –Posting of information on organizational budgets, standards and performance –CSO monitoring of public sector performance (e.g., Report Cards) –Media monitoring of asset declarations E-Government –Online tax payment reduces corruption and increases overall tax compliance –Computerized cadastre and land registration records –E-Procurement Multistakeholder coalitions for reform –Needed to combat entrenched networks of corruption –Examples: EITI, FLeG –Global collective action to combat transnational corruption (e.g. StAR)

14 Improving Governance & Public Administration: Frontier Areas of Reform Sources: The Many Faces of Corruption: Tracking Vulnerabilities at the Sector Level, Edited by J. Edgardo Campos and Sanjay Pradhan, English Paperback 480 pages 7 x 10, Published April 2007, Washington, D.C. The World Bank, ISBN: , ISBN-13: Budgeting and Budgetary Institutions, Edited by Anwar Shah, Governance Matters 2009, Worldwide Governance Indicators, , Thank you for your attention.