1. The World Bank Presented to: World Bank Staff Core Course on Public Sector Governance PREM Knowledge & Learning Week Washington, DC April 23, 2007 Presented by: Sanjay Pradhan Director Public Sector Governance Poverty Reduction & Economic Management (PREM) Strengthening World Bank Group Engagement on Governance & Anticorruption

2. The World Bank Page 2 Sanjay Pradhan Public Sector Governance CourseOutline A. Context B. The World Bank’s Governance & Anticorruption Strategy 1.Country Level 2.Project Level 3.Global Level C. Implementation

3. The World Bank Page 3 Sanjay Pradhan Public Sector Governance Course An Unprecedented Global Consensus AFR Burkina Faso, Botswana, Cameroon, Kenya, Mauritania, Mozambique, Republic of Congo, Rwanda, Senegal, Tanzania, Uganda LAC Argentina, Bolivia, Dominican Republic, El Salvador, Guatemala, Mexico, IACC EAP Australia, Cambodia, China, Japan, Indonesia, Lao PDR, Mongolia, New Zealand, Philippines, Thailand, Vietnam MNA Egypt, Jordan (planned), Morocco, Tunisia (planned), Yemen ECA Albania, Bulgaria, Georgia, Moldova, Russia Europe Brussels, the Hague, London, Madrid, OECD, Paris, Rome, Stockholm North America Ottawa, Washington DC (IMF, MDBs, US Government, CSOs, private sector, unions) SAR Bangladesh, India, Nepal Consultations held in 35 developing countries, 12 donor countries, & four global events, reaching more than 3,200 people Proactive engagement & unanimous endorsement by the Board

4. The World Bank Page 4 Sanjay Pradhan Public Sector Governance Course Governance is the door to anticorruption The manner in which the state acquires and exercises its authority to provide public goods & services Use of public office for private gain Governance Corruption Corruption is an outcome – a consequence of weak or bad governance Governance reform – strengthening capacity & accountability – helps combat corruption by addressing its underlying causes

5. The World Bank Page 5 Sanjay Pradhan Public Sector Governance Course Consistent Approach: While there is no ‘one-size- fits-all’, the World Bank will apply a consistent approach across countries & continue to allocate more aid to better governed environments (PBA) Consistent Approach: While there is no ‘one-size- fits-all’, the World Bank will apply a consistent approach across countries & continue to allocate more aid to better governed environments (PBA) Seven Guiding Principles Seven Guiding Principles Governance & Anticorruption for Poverty Reduction: Poor governance and corruption undermine the World Bank’s mission of poverty reduction Governance & Anticorruption for Poverty Reduction: Poor governance and corruption undermine the World Bank’s mission of poverty reduction Country Leadership & Ownership: The World Bank is committed to supporting a country’s own governance & anticorruption priorities Country Leadership & Ownership: The World Bank is committed to supporting a country’s own governance & anticorruption priorities Staying Engaged: The World Bank will seek creative ways to provide support, even in poorly- governed countries— “don’t make the poor pay twice” Staying Engaged: The World Bank will seek creative ways to provide support, even in poorly- governed countries— “don’t make the poor pay twice” Multi-Stakeholder Engagement: The World Bank will scale up good practice in engaging with civil society, media, parliaments, judiciary, private sector in its operational work Multi-Stakeholder Engagement: The World Bank will scale up good practice in engaging with civil society, media, parliaments, judiciary, private sector in its operational work Strengthening Country Systems: Better national institutions are the long term solution to mitigating fiduciary risk for all public money Strengthening Country Systems: Better national institutions are the long term solution to mitigating fiduciary risk for all public money Working Together: The World Bank will work with donors & other actors at the country & global levels to ensure a harmonized approach—“the World Bank should not act in isolation” Working Together: The World Bank will work with donors & other actors at the country & global levels to ensure a harmonized approach—“the World Bank should not act in isolation” 7 Guiding Principles

6. The World Bank Page 6 Sanjay Pradhan Public Sector Governance Course Project Level Combating corruption in World Bank Group operations Country Level Deepening support to countries to strengthen governance Global Level Working with development partners, sharing experience & addressing transnational issues Key Elements of World Bank’s Strategy

7. The World Bank Page 7 Sanjay Pradhan Public Sector Governance Course Public Management Public financial management & procurement, monitored by PEFA Administrative & civil service reform Governance in Sectors Transparency & participation Competition in service provision Sector-level corruption issues (EITI, forestry) Civil Society, Media & Oversight Institutions State oversight institutions (parliament, judiciary, SAI) Transparency & participation (FOI, asset declaration, user participation & oversight) Civil society & media Local Governance Community-driven development Local government transparency Downward accountability Private Sector Competitive investment climate Responsible private sector Coalition building across stakeholders Helping Countries to Improve Governance Through Various ‘Entry-Points’

8. The World Bank Page 8 Sanjay Pradhan Public Sector Governance Course The new international aid architecture emphasizes the principle of mutual accountability Scaling up of donor assistance requires sound PFM systems and reduced corruption in partner countries Strengthening PFM Systems a key priority Increasing recognition that "ringfencing" projects will not work – need to strengthen country systems

9. The World Bank Page 9 Sanjay Pradhan Public Sector Governance Course Comprehensive Fiscal oversight: Are the aggregate fiscal position and risks are monitored and managed? Comprehensive Fiscal oversight: Are the aggregate fiscal position and risks are monitored and managed? Information: Is adequate fiscal, revenue and expenditure information produced and disseminated to meet decision-making and management purposes? Information: Is adequate fiscal, revenue and expenditure information produced and disseminated to meet decision-making and management purposes? Comprehensive, Policy-based, budget: Does the budget capture all relevant fiscal transactions, and is the process, giving regard to government policy? Comprehensive, Policy-based, budget: Does the budget capture all relevant fiscal transactions, and is the process, giving regard to government policy? Budget Realism: Is the budget realistic, and implemented as intended in a predictable manner? Budget Realism: Is the budget realistic, and implemented as intended in a predictable manner? Control: Is effective control and stewardship exercised in the use of public funds? Control: Is effective control and stewardship exercised in the use of public funds? Accountability and Transparency: Are effective external financial accountability and transparency arrangements in place? Accountability and Transparency: Are effective external financial accountability and transparency arrangements in place? PEFA’s Performance Measurement Framework Six PFM System Aspects

10. The World Bank Page 10 Sanjay Pradhan Public Sector Governance Course Strengthening Demand for Public Financial Accountability Participatory Budgeting, Puerto Alegra (Brazil) Civil Society Oversight; transparent, competitive procurement (Slovakia) Strengthening Supreme Audit Institutions (Hungary) Public Expenditure Tracking & Information Campaigns (Ghana, Madagascar, Mozambique, Peru, Senegal, Tanzania, Zambia) Procurement oversight by CSOs (Philippines) Strengthening Public Accounts Committees of Parliament (India) Transparent, competitive e- procurement (Latin America) Strengthening Public Accounts Committees of Parliament (Kenya, Ghana, Zambia -- AFR) Accountability, Transparency & Integrity Project (Tanzania) Key Issue: Instrument to Support Demand-side Interventions

11. The World Bank Page 11 Sanjay Pradhan Public Sector Governance Course Tackling Corruption in Key Sectors Manufacturing Registration Selection Procurement Distribution Prescription & Disbursement Random inspections Monitoring based on transparent & uniform standards Tracking systems User surveys Media coverage of drug selection committee meetings Transparency Reference: Jillian Clare Cohen, Assistant Professor, Faculty of Pharmacy and Director, Comparative Program on Health & Society, University of Toronto Tracing Vulnerabilities in Value-Chain: Pharmaceuticals

12. The World Bank Page 12 Sanjay Pradhan Public Sector Governance Course Participatory prioritization of policies & public spending Investment Operations Brazil Rural Poverty Reduction Project Rio Grande do Norte; Malawi Third Social Action Fund Development Policy Lending Armenia SAC IV; Laos PRSC1; Timor-Leste Consolidation Support Program Policy Grant, Vietnam PRSC (I to IV) Innovative Examples of Multistakeholder Engagement in WB Operations Strengthening transparency & oversight over the use of budgetary resources Investment Operations Bangladesh Public Procurement Reform Project Development Policy Lending Haiti Economic Governance Reform Operation I and II User participation & oversight in service provision Investment Operations Andhra Pradesh, India District Poverty Initiatives Project; Morocco Initiative for Human Development Support Project Development Policy Lending Brazil PHDSRL I; Georgia PRSC; Peru PSRL III Ethiopia, Protection of Basic Services Strengthening participatory local governance Investment Operations Albania Community Works 2 Project; Bangladesh Local Governance Support Project; Ethiopia Capacity Building for Decentralized Service Delivery; Indonesia KDP Development Policy Lending Sierre Leone ERRC III Strengthening other formal oversight institutions Investment Operations Guatemala Judicial Reform Project; Kenya Institutional Reform and Capacity Building Project; Legal & Judicial Other WBI Parliamentary Strengthening Program Other actions Development Policy Lending Bangladesh DSC III Other WBI Media Program Community Radio Initiatives Partnership for Transparency Fund

13. The World Bank Page 13 Sanjay Pradhan Public Sector Governance Course Decentralization The Challenge  Decentralization is more likely to work when there is adequate capacity and two sets of accountabilities are in place  Downward accountability between local governments and citizens  Allocation of responsibilities between central and local governments Assignment of service provision responsibilities Assignment of fiscal resources (including local tax base) Central fiduciary and performance oversight over local In practice, the impulse for decentralization is political; high risk of being stuck in institutional ‘limbo’ (Albania; East Asia review – Cambodia, China, Indonesia, Philippines, Thailand and Vietnam)

14. The World Bank Page 14 Sanjay Pradhan Public Sector Governance Course Making the Private Sector an Advocate of Governance Reform The two faces of the private sector  Competitive, productivity-focused firms thrive on a level-playing field  Corrupt, rent-seeking firms thrive in the shadows How to support competitive, responsible private sector?  Create sound business environments, benchmarked internationally (Doing Business Indicators)  Showcase examples & evidence that ‘avoiding corruption is good for business’ (Celtel’s Mohammed Ibrahim)  Support initiatives to promote business ethics and voluntary codes of conduct (ICC Code of Conduct, TI’s Business Principles, WEF PACI, UN Global Compact) – and create external verification mechanisms  Build coalitions of businesses and other stakeholders for anticorruption (Indonesia Business Link, Makati Business Club, Global Integrity Alliance)  Enforce global/regional laws & regulations (OECD Convention, UNCAC)

15. The World Bank Page 15 Sanjay Pradhan Public Sector Governance Course Monitoring for Results  Use aggregate governance indicators (e.g., CPIA, KKZ, TI CPI) to indicate of extent and mix of governance problems  Use actionable & outcome indicators (e.g., PEFA, Global Integrity Index) to monitor progress in implementing priority governance and anticorruption reforms  Support participatory mechanisms for monitoring and mutual accountability (private sector, civil society) Frontier challenge: Improve menu of actionable and outcome indicators

16. The World Bank Page 16 Sanjay Pradhan Public Sector Governance Course Combating Corruption in World Bank Operations Prevention Strengthen country systems Identify high-risk operations, mitigate risk upstream Prepare project anticorruption action plans Increase disclosure and transparency; greater oversight and participation from civil society organizations Create anticorruption teams composed of field staff to review project design & rate risk Focus on corruption in portfolio review IFC-MIGA to strengthen ethical corporate practices across their operations

17. The World Bank Page 17 Sanjay Pradhan Public Sector Governance Course Combating Corruption in Bank Operations (cont.) Enforcement Independent review of INT in order to strengthen investigation of corruption in projects Continue to publicly sanction corrupt firms Implement the Voluntary Disclosure Program (VDP) Sanctions reform: on separate track, Board approved

18. The World Bank Page 18 Sanjay Pradhan Public Sector Governance Course Coalitions with civil society, private sector, parliamentarians, and others (e.g., GOPAC, PACI, Global Integrity Alliance) to combat entrenched corruption networks Donor Collaboration MDB harmonization in high-risk settings to avoid ‘mixed- signals’; coordinated donor action to support demand-side initiatives Global Collective Action Against Corruption Global & Regional Conventions (UNCAC, OECD, AU, OAS, Asia-Pacific Action Plan) need to be enforced to curb transnational corruption & facilitate asset recovery

19. The World Bank Page 19 Sanjay Pradhan Public Sector Governance Course One Key Priority: The Stolen Asset Recovery (StAR) Initiative Ferdinand Marcos (President of the Philippines 1972-1986) $5-10 billion Sani Abacha (President of Nigeria 1993- 1998) $2-5 billion Mobuto Sese Seko (President of Zaire 1965-1997) $5 billion Mohamed Suharto (President of Indonesia 1967-1998) $14-35 billion *Source for estimates of former Presidents above: Transparency International Global Corruption Report 2004. All sums are estimates of alleged embezzlement in US dollars. Proposed activities include: Persuading all jurisdictions to ratify & implement the UN Convention Against Corruption (UNCAC) Persuading all jurisdictions to ratify & implement the UN Convention Against Corruption (UNCAC) Helping developing countries build capacity for requesting mutual legal assistance for asset recovery Helping developing countries build capacity for requesting mutual legal assistance for asset recovery Developing partnerships to share information & experience Developing partnerships to share information & experience On a voluntary basis, offering expertise to monitor the use of recovered assets in order to ensure transparency & development impact (e.g., Nigeria) On a voluntary basis, offering expertise to monitor the use of recovered assets in order to ensure transparency & development impact (e.g., Nigeria) Cross-border proceeds from criminal activity, corruption & tax evasion estimated to be $1-1.6 trillion per year— half from developing & transition countries Cross-border proceeds from criminal activity, corruption & tax evasion estimated to be $1-1.6 trillion per year— half from developing & transition countries Bribes received by public officials from developing & transition countries is estimated at $20-40 billion Bribes received by public officials from developing & transition countries is estimated at $20-40 billion TI’s estimates of stolen assets include: TI’s estimates of stolen assets include: The Problem StAR is a joint initiative with the Bank & UNODC. Partnerships are being developed with the OECD, Norad, IMF, other MDBs, the G8, & developing countries A Global Effort

20. The World Bank Page 20 Sanjay Pradhan Public Sector Governance Course Coalitions with civil society, private sector, parliamentarians, and others (e.g., GOPAC, PACI, Global Integrity Alliance) to combat entrenched corruption networks Donor Collaboration MDB harmonization in high-risk settings to avoid ‘mixed- signals’; coordinated donor action to support demand-side initiatives Global Collective Action Against Corruption Global & Regional Conventions (UNCAC, OECD, AU, OAS, Asia-Pacific Action Plan) need to be enforced to curb transnational corruption & facilitate asset recovery

21. The World Bank Page 21 Sanjay Pradhan Public Sector Governance Course Media Private Sector Municipal Government Military State (Bureaucracy) Political Parties Civil Society International Legislative Branch Judiciary 1 Entrenched Corruption Networks: The Case on Montesinos in Peru Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000 Vladimiro Montesinos Alberto Fujimori

22. The World Bank Page 22 Sanjay Pradhan Public Sector Governance Course Philippines: Procurement Reform Transparency and Accountability Network (20+ member groups) Walang Ku-Corrupt Movement (Youth) (Youth) PAGBA & AGAP (w/in Gov’t) CBCP (Church) Philippine Contractors Association (private sector – main stakeholder) Local chambers of Commerce (Private sector) Procurement Watch: Drew other civil society groups into the advocacy efforts and coordinated the activities Forging Coalitions for Reform

23. The World Bank Page 23 Sanjay Pradhan Public Sector Governance Course Scale up governance work where it matters most for development – alleviate governance constraints to poverty reduction Moving Forward: What Will the World Bank do Differently? Systematically scale up engagement with private sector & industrialized countries – to tackle the supply side of corruption Scale up multistakeholder engagement – with civil society, media, parliaments, local communities in policy making & service delivery Work with donors & other int’l actors to ensure a harmonized approach & collective action – based on respective mandates & comparative advantage Systematically integrate governance in sectoral projects & programs – in extractive industries, infrastructure, forestry, health, education Strengthen country systems while enhancing anticorruption measures in WB operations – a/c action plans; enhanced disclosure, participation & monitoring

24. The World Bank Page 24 Sanjay Pradhan Public Sector Governance Course Emerging Elements of GAC Implementation Plan - Country Governance & Anticorruption implementation plans (CGAC) - Competitive fund for topping up country Bank budgets - Performance reward & innovation fund for teams 1 Country- driven Process & Incentives 2 Leadership Capacity & Organizational Arrangements 3 Country-level: Sectoral Governance & Engagement 4 Diagnostics, indicators & knowledge 5 Project-level: Risk Management 6 Global Collective Action – Bankwide leadership team to coordinate GAC work – Regional clusters (2 pilots) – Multisectoral organizational arrangements – Field advisors in high-risk settings – Donor coordination in high- risk settings (OECD-DAC GovNet & MDG Task Force) – StAR Initiative-asset recovery – Multi-statkeholder alliances in sectors (EITI, FLEG, PROFISH, MeTI, CoST, GIA) – Guidance & good practice in integrating GAC in sectors – New instruments for private sector work to curb ‘supply- side’ of corruption – Guidance on engaging with non-governmental stakeholders (media, etc.) – Integrated fiduciary assessments in project preparation – Risk reviews – AC action plans & teams – Enhanced disclosure & 3 rd party monitoring – More regional supervision – Diagnostics for CASs & key sectors – Guidance & good practice notes for staff – Accelerate development & use of actionable & outcome indicators – M&E to evaluate impact

25. The World Bank Page 25 Sanjay Pradhan Public Sector Governance Course Q&A

26. The World Bank Page 26 Sanjay Pradhan Public Sector Governance Course Civil Society Monitoring Service Provision: Bangalore Source: Public Affairs Center, India 5 6 4 9 25 1 14 41 47 42 67 34 16 32 73 94 73 92 73 78 85 96 77 n/a 0 10 20 30 40 50 60 70 80 90 100 City council Electricity Water supply Telephones Public hospitals Police Land authority Public buses Transport authority Agencies Percent Satisfied 199419992003

27. The World Bank Page 27 Sanjay Pradhan Public Sector Governance Course “BIR [Tax Collector] Officials Amass Unexplained Wealth” By Tess Bacalla, Philippine Center for Investigative Journalism CAR MODEL BENEFICIAL OWNER REGISTERED OWNER Nissan Patrol Edwin Abella BIR Reg'l Director, Quezon City Sulpicio S. Bulanon Jr. 1817 Jordan Plains Subd., Quezon City (listed address of Abella in his SALs) Suzuki Grand Vitara Ditto Merrick Abella (son of Abella) 24 Xavierville, Loyola Heights, Quezon City Nissan Cefiro Ditto Elizabeth S. Buendia 152 Road 8,Quezon City BMW Lucien E. Sayuno BIR Reg'l Director, Makati City Limtra Dev. Corp. Zone 4, Dasmari ñ as, Cavite BMW Ditto Marie Rachel D. Mene ses c/o Metrocor and Holdings, G&F, Makati City Honda Accord Danilo A. Duncano BIR Reg'l Director, Quezon City Daniel Anthony P. Duncano 2618 JP Rizal, New Capital Estate, Quezon City Mitsubishi L200 Corazon P. Pangcog Asst. Reg'l Director, Valenzuela City Alberto P. Pangcog (husband) B2 L23 Lagro Subd., Quezon City Honda CR-V Ditto Alberto P. Pangcog 9 Ricardo St., Carmel 1 Subd., Quezon City Owner: Regional Director in the Bureau of Internal Revenue forced to resign; currently facing corruption charges; other officials suspended, also facing charges Media, Transparency & Combating Corruption

28. The World Bank Page 28 Sanjay Pradhan Public Sector Governance Course Improving PFM – A Platform Approach Platform 1 A credible budget delivering a reliable and predictable resource to budget managers Platform 2 Improved internal control and public access to key fiscal information to hold managers accountable Platform 3 Improved linkage of priorities and service targets to budget planning and implementation Platform 4 Integration of accountability and review processes for both finance and performance management Integration of budget (recurrent & capital budgets)  Strengthen macro and revenue  Forecasting  Streamline spending processes Broad Activities  Re-design  Budgeting  Classification system  Initial design of FMIS for core business processes  Strengthen external audit and define internal audit function  Re-design budget cycle (e.g. MTEF)  Pilot program based budgeting & budget analysis  Further fiscal  Decentralization  Full design of FMIS  Develop IT  Management  Strategy  Initial design of asset register Enables a basis for accountability Enables focus on what is done with money Enables more accountability for performance management Cambodia – Sequence of Platforms Broad Activities Broad Activities Broad Activities Source: See “Study of measures used to address weaknesses in Public Financial Management systems in the context of policy-based support,” by Peter Brooke, at www.pefa.orgwww.pefa.org

29. The World Bank Page 29 Sanjay Pradhan Public Sector Governance Course Do community-based approaches support – or subvert – decentralization?  Early experience with social funds was problematic Politicization of FONCODES in Peru (targeted swing localities)  But subsequent learning... Harness bottom-up synergies to strengthen local governance Kecamatan Development Program in Indonesia Afghanistan, Albania, Kyrgyz, Tanzania, etc. Even Peru...  Since 2003, performance-based transition to fiscal transfer to district governments …  By end 2005, 384 of 1,578 districts accredited

30. The World Bank Page 30 Sanjay Pradhan Public Sector Governance Course 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 19901991199319941995 Equiv. US$ per student Intended grant Actual grant received by primary school (means) 1999 Source: Uganda Public Expenditure Tracking Surveys Tracking Education Dollars in Uganda Empowering Local Communities with Information Can Reduce “Leakages” Public info campaign

31. The World Bank Page 31 Sanjay Pradhan Public Sector Governance Course Strengthening Oversight: Judicial Reform Three emerging lessons 1. Work simultaneously on independence and accountability  ECA: independent courts, w/o accountability, result: court corruption 2. Without explicit change management process, efforts to overhaul justice system will fail  Latin American failure of efforts to modernize criminal justices 3. Informal, local justice systems govern as much as 95% of the population in some countries  If goal is to improve justice for average citizen, look at both formal and informal systems …but we still don’t know much about what types of justice reforms are most effective in different country circumstances …

32. The World Bank Page 32 Sanjay Pradhan Public Sector Governance Course Governance System Actors, Capacities and Accountability 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

33. The World Bank Page 33 Sanjay Pradhan Public Sector Governance Course Transparency: A Cross-Cutting Imperative Political Governance Political Parties Competition, transparency Executive-Central Govt Service Delivery & Regulatory Agencies Subnational Govt & Communities Formal Oversight Institutions Parliament Judiciary Oversight institutions Cross-cutting Control Agencies (Finance, HR) Citizens/Firms Private Sector Interface Civil Society & Media Transparency: Parliamentary votes Income & Assets Campaign contributions Transparency: Free press Freedom of information Citizen Report Cards Transparency: Fiscal transparency Public Expenditure Tracking Surveys (PETS) Transparency: ‘Blacklisting’ firms bribing in public procurement E*procurement Extractive Industries Transparency Initiative (EITI)

34. The World Bank Page 34 Sanjay Pradhan Public Sector Governance Course Countries differ in their trajectories & entry points  Trajectories are driven by political forces  Key issue: How to sequence reforms? Quality of bureaucracy Quality of checks and balance institutions Ι ΙΙ ΙΙΙ Source: Global Monitoring Report, 2006 A Country Approach In some countries, this will mean moving from reforms of bureaucracy to support checks and balances

35. The World Bank Page 35 Sanjay Pradhan Public Sector Governance Course Context  In 1996, corruption was a taboo “c-word” – since then, the World Bank’s governance and anticorruption work has evolved rapidly  In recent years, stakeholders in recipient & donor countries are demanding better governance & corruption control – scaling up of aid also requires strengthening governance  On March 20, the World Bank’s governance & anticorruption (GAC) strategy was unanimously endorsed by the Board, and approved by the Spring Meetings in April  The strategy represents an unprecedented global consensus – a product of in-depth consultations