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GOVERNANCE AND ANTI-CORRUPTION (GAC) IN PUBLIC PROCUREMENT
Public Procurement Forum Issyk-kul, Kyrgyz Republic April 21-24, 2009
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WHY IS GAC IMPORTANT FOR PROCUREMENT
Poor Governance Leads to Inefficient Use and Mismanagement of Public Funds and Higher Project Cost Direct Impact on Country's Economy (on Average 15-20% of GDP is Spent on Public Procurement) GAC is Part of World Bank’s Development Agenda to Build Country Systems and its Capacity
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GOVERNANCE AND CORRUPTION NOT THE SAME THING!
Good Governance translates into more effective use of public resources to deliver quality services Corruption is the use of public office for private gain Corruption is an outcome – a consequence of weak or bad governance Poor delivery of services and weak investment climate are other outcomes of bad governance
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GOVERNANCE IN PROCUREMENT
PROCESS SIDE — Country Has Sound Financial Management & Procurement Systems, Financial Management & Procurement Laws, Regulations, Policies and Procedures INSTITUTIONAL SIDE — Strong Capacity, Transparency and Accountability of Institutions that Implement and Exercise Procurement Authority and Strong Public Financial Management
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CORRUPTION IN PROCUREMENT
General Definition: “Corruption is Use of Public Activity for Private Gains” WB Definitions of Fraud and Corruption are provided in the following documents: WB Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants (October 15, 2006) WB Guidelines on Procurement Under IBRD Loans and IDA Credits (May 2004, Revised October 2006) WB Guidelines on Selection and Employment of Consultants by WB Borrowers (May 2004, Revised October 2006) WB Standard Bidding Documents and RFP
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WB F&C DEFINITIONS Corrupt practices: the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party Fraudulent practices: any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation Collusive practices: an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party Coercive practices: impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party Obstructive practices: (i) deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making false statements to investigators, or (ii) acts intended to materially impede the exercise of the Bank’s contractual rights of audit or access to information
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CORRUPTION IN PROCUREMENT
Public Procurement is the Most Vulnerable Government Activity Prone to Corruption Frequency of Bribery in Procurement is high
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CORRUPTION IN PROCUREMENT Public Procurement has been identified as the government activity most vulnerable to corruption (OECD 2007)
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SOME WB DIAGNOSTIC TOOLS
CPAR (Procurement) and CFAA (Financial Management) Assessments at Country Level OECD/DAC “Methodology for Assessment of National Procurement System” – Version 4, July 17, 2006 WB Board Approved Tool For Piloting Use of Country System Based on OECD/DAC Benchmark at Country and Project Level PEFA Assessment at Country Level Joint Fiduciary Assessments at Sector and Project Level Capacity Assessment at Project Level
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OECD/DAC BENCHMARKING A Typical Performance Score Chart
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THE WORLD BANK’S FIDUCIARY RESPONSIBILITY
Borrowers are responsible for the proper use of World Bank funds… BUT: WB is required to make arrangements to ensure that the proceeds of any loan/credit/grant are used only for the purposes for which the loan was granted…THUS: WB and its staff have a fiduciary responsibility to prevent fraud and corruption in projects financed
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The World Bank’s Mission & GAC Development Effectiveness Risk
That corruption will undermine the impact of development efforts in general and in Bank-supported projects Reputational Risk Fiduciary Risk Poor governance and corruption undermine the Bank’s core mission of poverty reduction: The poor can’t access critical services because delivery systems fail, or they can’t pay bribes. In the long term, there is a major development dividend from good governance and controlling corruption. Stakeholders in recipient and donor countries are demanding better governance and corruption control Prospect of significant scaling up of aid – requires strengthening governance systems That Bank lending in countries with corrupt leaders will tarnish the Bank’s reputation That Bank resources will be misappropriated and in some cases loans may not be repaid
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THE WORLD BANK’S GAC STRATEGY Country Level Global Level Project Level
Key Elements of WBG GAC Strategy Country Level Deepening support to countries to strengthen governance Global Level Working with development partners, sharing experience & addressing transnational issues Project Level Combating corruption in World Bank Group operations Reflecting the evolution of the Bank’s work in this area, a new strategy was prepared (Strengthening World Bank Engagement on Governance and Anti-Corruption) and adopted by the Board on March 20, 2007 [LINK]. This new strategy has three main pillars: · At the country level, the focus of the Bank’s work will be on strengthening the effectiveness, transparency and accountability of our borrowers, and will involve support for initiatives to improve governance and reduce corruption as a means to higher growth rates and enhanced delivery of services, especially to the poor; · At the operational level, the strategy aims to improve the development impact and integrity of Bank-funded projects, and will focus on strengthening country systems (as part of the long-term solution) and measures to enhance project design, supervision, and evaluation (as part of the short-term solution); and · At a global level, the Bank will support the harmonization of approach with other international actors, coordination of action in countries where governance issues pose a significant challenge for development, and support for international conventions like the OECD Anti-bribery Convention, the Extractive Industry Transparency Initiative, and the Stolen Asset Recovery (StAR) initiative.
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WORLD BANK CAN HELP COUNTRIES IMPLEMENT THEIR GAC AGENDA
Key Principles of World Bank GAC Assistance GAC work must be country driven GAC implementation adapted to individual country circumstances Creation of a capable and accountable state as the best “remedy” against corruption Strengthening, not by-passing, of country systems Engagement with a broad array of stakeholders Working with governments, donors & other actors at the country & global levels GAC Strategy paper “Strengthening World Bank Group Engagement on Governance and Anticorruption” was unanimously endorsed by the Board on March 20, Paper incorporates feedback from consultations with governments, civil society, the private sector and development partners in over 50 countries. An Implementation Plan was launched by President Zoellick in December 2007. 1. The World Bank Group focus on GAC follows from its mandate to reduce poverty-a capable and accountable state creates opportunities for poor people, provides better services, and improves development outcomes. 2. The country has primary responsibility for improving governance. Country ownership and leadership are key to successful implementation, and the WBG is committed to supporting a country's own priorities. A country's government remains the principal counterpart for the WBG. 3. The WBG is committed to remaining engaged in the fight against poverty, and seeking creative ways of providing support, even in poorly-governed countries. "don't make the poor pay twice" 4. The form of WBG engagement on GAC will vary from country to country, depending on specific circumstances-while there is no 'one-size-fits-all', the WBG will adopt a consistent approach towards operational decisions across countries, systematically anchored in national strategies, supported by WBG Country Assistance Strategies, with no change in the performance-based allocation system for IDA countries or IBRD resource allocation system. 5. Engaging systematically with a broad range of government, business, and civil society stakeholders is key to GAC reform and development outcomes-so, consistent with its mandate, the WBG will scale up existing good practice in engaging with multiple stakeholders in its operational work, including by strengthening transparency, participation, and third-party monitoring in its own operations. 6. The WBG will strive to strengthen, rather than bypass, country systems-better national institutions are the more effective and long term solution to governance and corruption challenges and to mitigating fiduciary risk for all public money, including that from the Bank. 7. The WBG will work with donors, international institutions, and other actors at the country and global levels to ensure a harmonized approach and coordination based on respective mandates and comparative advantage-"the WBG should not act in isolation."
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WORLD BANK SUPPORT FOR GOOD GOVERNANCE
Self Standing Capacity Building Project Technical Assistance IDF Grants DPLs (Procurement as Part of the Policy Reform) Capacity Building Component as Part of Investment Project
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GAC AT SECTOR LEVEL Value Chain Analysis:
Creation of a generic model of a sector’s value chain – the series of critical points where decisions are taken or “value added” is created Define measures to address corruption risks at the weakest spots along the value chain
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GAC AT SECTOR LEVEL
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GAC AT PROJECT LEVEL Integrating Governance and Anticorruption in Projects: “Governance and Anti-Corruption is everybody’s business” “Smart” Project Design; Risk-Based Approach Anti-Corruption Action Plan Enhanced Disclosure Civil Society Oversight Mitigation of Collusion Risks Mitigation of Forgery & Fraud Risks Complaint Handling Systems Sanctions and Remedies
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GAC AT PROJECT LEVEL Indonesia - Kecamatan Development Project: Incentives for Corruption – Risk Identification
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SOME KEY INSIGHTS ON FIGHTING CORRUPTION EFFECTIVELY
Make it difficult – Design control mechanisms and activities; implement & monitor closely Make it visible – Asset declarations; third party oversight; complaints’ mechanisms; beneficiary surveys Make it detectable – Segregation of duties; supervision; reporting Make it provable – Documentation; audit trail Make it costly to the perpetrator – Zero tolerance policy; penalties if applicable
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CANCER OF CORRUPTION Thank You!
Corruption is a cancer of development that steals from the poor, eats away at governance and moral fiber, and destroys trust. Let’s join forces to fight corruption! Thank You!
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