1. Improving Governance & Public Administration: Frontier Areas of Reform
Presented to:
Capacity Enhancement Program on Controlling Corruption & Improving Governance for Thailand
September 6, 2008
Presented by:
Sanjay Pradhan
Director
PREM Public Sector
Governance
The World Bank

2. Governance & Corruption Not the Same Thing!
The manner in which the state acquires
and exercises its authority to provide
public goods & services – depends on
capacity & accountability relationships
among state & non-state actors
Corruption
Use of public office for private gain
Corruption is an outcome – a consequence of weak or bad governance. Weak investment climate & poor service delivery are other outcomes.
Improving governance entails building a more capable, accountable & responsive state

3. Improving Governance A Cross-Cutting Priority for Inclusive Growth
Building a sound investment climate for growth
Institutions for macroeconomic stability (e.g., fiscal responsibility legislation, independent Central Banks)
Streamlined regulatory system: business entry, tax system
Independent, competent, trusted judiciary
Physical and financial infrastructure: power, transport, finance
Delivering better public services to empower the poor
Health, including curbing informal payments, leakages of drugs
Education, including tackling absenteeism, leakages
User participation and oversight in service delivery
Managing public resources better
Transparent & comprehensive budgets
Transparent, competitive public procurement system
Performance-based budgeting and human resource management system with meritocracy and adequate pay

4. Mechanisms to Improve Governance
Capacity, Transparency, Accountability
Citizens/Firms
State Capture
Political Institutions
Political accountability, broad-based political parties
Transparency & regulation of party financing
Formal Oversight Institutions
Independent judiciary
Legislative oversight
Independent oversight (SAI)
Global initiatives: UN, OECD Convention, anti-money laundering
Executive
Transparent budgeting & procurement
Civil service meritocracy & adequate pay
User participation & Accountability in service delivery agencies
Patronage & nepotism
Civil Society & Media
Free press, Right to information
Civil society watchdogs
Citizens/Firms
Citizens/Firms
Private Sector
Contracting out
Extractive Industry Transparency Initiative
Collective business associations
administrative corruption
Outcomes: Services, Investment climate, Corruption
Local Governments & Communities
Decentralization with downward accountability
Community Driven Development (CDD)
Oversight by parent-teacher associations & user groups
Citizens/Firms

5. Helping Countries Improve Governance Different Entry Points Across Countries
Private Sector
Competitive investment climate
Responsible private sector
Public Management
Public financial management & procurement
Administrative & Civil Service Reform
Demand-side Reforms
State oversight institutions (parliament, judiciary, SAI)
Transparency & participation (right to information, user participation)
Civil society & media
CORE SLIDE
Key messages: to clarify that
there are many entry points for governance reform, and the choice depends on country context
while there are many examples of good work in all these areas, the Bank has historically focused within governance primarily on public management
The Bank wants to scale up work in the other four areas, as appropriate and in partnership with other donors: these are the frontiers
building multistakeholder constituencies for reform are a critical aspect of managing the reform process
Structure of Public Sector
Decentralization
Creation of Arms-length agencies
Governance in Sectors
Transparency, participation, accountability in service provision (health, education, transport)
Sector-level corruption issues (EITI, forestry)

6. Deepening basis for the legitimacy of the public service
Evolution of Reforms in High-Income OECDs Significant Foundations of Legitimacy in Place
Deepening basis for the legitimacy of the public service
1990s – Performance
Concern to make promises and deliver on them
Measurement of results and the use of measurements for planning or accountability purposes
1970s - Responsiveness to elected officials and political priorities
Frustration with political neutrality
Concern that the public service is an obstacle to political objectives
1950s - Equal access and equal treatment
Impartiality
Concern that employment in the public sector should be representative of society
19th century - Due process and institutional continuity
Patronage & purchase of public positions
Northcote-Trevelyan Reforms of 1854 in UK, following bureaucratic chaos in the Crimean War
Driven by the law

7. High-Income OECD Countries
Performance-based budgeting: recent trends
Shifting focus from input control to accountability for results
Example: UK Public Service Agreements (PSAs) with the Treasury: three-year agreements with objectives & targets, published & monitored by Treasury
Different degrees of performance information in high-income OECDs:
Presentational: performance information presented with budget for later discussion
Direct or formula-based performance link rare – Example: Korea, where ineffective programs get 10 percent automatic cut, concern about information quality & gaming
Move to accrual accounting and performance & value-for-money audits
Many different approaches towards performance management
Only in a few countries (UK, Denmark): agencies’ performance directly reflected in pay or performance bonus of senior management
In other countries, use of individual performance agreements & appraisal systems to link organizational goals to performance, influencing future career
Majority of OECD countries introduced performance-related pay (PRP) policies, but this has not been successful (created resentment, promotion is better instrument for recruiting or retaining capable staff)
Creation of arms-length agencies
Focused purpose, accountability with autonomy. Examples: UK Next Steps Agencies, Netherlands ZBOs
Coordination challenges with proliferation of agencies
Demand-side reforms -- open government & E-government Examples:
Freedom of Information legislation – with widespread utilization
Publication of service standards (e.g. citizen charters)
Consultative mechanisms (regulatory impact assessments)
Creation of ombudsman offices to hear redress

8. MICs in Latin America
Budget rules for aggregate fiscal discipline: “Fiscal Responsibility” laws
Reforms to improve budget performance
Chile stands out as the country that has made results-based budgeting
Progress in Brazil of withdrawal of autonomy and possible dismissal of Secretary)
But less progress in Bolivia, Peru, Colombia
Integrated Financial Management systems (IFMSs) successful in LAC in 1990s
Human Resource Management
Some success in meritocracy (Chile’s 2004 Reforms, Brazil 1995 Reform)
Failure of meritocracy in clientelistic bureaucracies (Honduras, Bolivia, Peru)
Significant decentralization: Fiscal and administrative, election of mayors
Creation of arms length agencies in enclaves: e.g., Peru’s SUNAT, with some improvement in performance, but questions of sustainability
Major thrust in demand-side reforms
Right to information legislation
E-government – one-stop shops & e-procurement in Brazil & Mexico

9. Latin America: Two Patterns of Public Administration Reforms
Institutionalized and sustained (Chile, Brazil, Costa Rica)
Where public sector operates on reasonably transparent and formal lines, and public servants are hired on merit and reasonably immune from political pressures, then reforms look similar to those in high-income OECD countries
Performance-based human resource management and budget management driving efficiency improvements in service delivery
These reforms are institutionalized and sustained
Opportunistic reforms, but with risks of reversals (Bolivia, Peru, Ecuador)
Where patronage is more entrenched, reforms have flavor of pilots or experiments
More likely to be enclaved or disconnected from the rest of public sector
Flavor of opportunism with risk of reversal
Need rule-based compliance as precondition for reforms

10. ‘Leapfrogging’ & Non-traditional Sequencing: Achievements & Challenges
Spectacular failures because of missing or inadequate “prerequisite” organizational practices
- Kyrgyz, Mongolia, Argentina, Ecuador
Limited number of clear examples – Middle-income countries – sequencing from “prerequisite” to “mature” performance-focused systems
- Chile, Singapore
Many countries chosen to “leapfrog” directly from patronage-based to performance-based management though “islands of success” based on “performance-based” management practices
- Central Banks in many countries
- Tax administration (SUNAT in Peru)

11. 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

12. Frontier Areas of Reform (cont.)
Enhance availability of information
Monitoring and posting of information on activities, outputs and results
Right-to-Information (South Africa, India)
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., Bangalore Report Cards)
Media monitoring of asset declarations (e.g., Philippines)
E-Government
Russia: online tax payment reduced corruption and increased overall tax compliance
Bhoomi project in Karnataka, India computerized 20 million land records for 6.7 million farmers
E-Procurement in Chile, Brazil, Mexico
Multistakeholder coalitions for reform
Needed to combat entrenched networks of corruption
Examples: EITI, FLeG
Global collective action to combat transnational corruption (e.g. StAR)

13. E-Government & Voice for Procurement Reforms Growing Trend in International Experience
Engaging CSOs: Philippines
E-Procurement: Chile
All supplier companies register, indicating areas of business (e.g., IT, construction, furniture)
Public agencies submit tenders through internet
Automatic to all companies in selected area
Online information on name, position of official in-charge
Online information on results: who participated, proposals made, scores received, who won bid, historical record of agency’s purchases & contracts
Legal foundation a mess with over 100 laws and regulations
New omnibus law needed for clarity and predictability in the process
New law in 2003 with determined efforts of reform minded public officials allied with strong and unified advocacy efforts of CSOs to offset entrenched vested interests
For credible enforcement: requirement that all bids and awards committees must have at least one observer from a certified CSO
Extensive training of CSOs now under way

14. Civil Society Monitoring for Improved Service Provision: Bangalore, India
100 94 92 96 90 85 78 77 80 73 73 73 67 70 60
Percent Satisfied 47 50 41 42 40 34 34 32 32 30 25 16 20 14 9 10 5 6 4
n/a 1
n/a
Dramatic improvements across nine city agencies between 1994 and Improvement even in city council, electricity, telephones across three report cards. Other services, hospitals, police, land, buses see huge improvements between 1999 and BATF tell similar story.
Police
City council
Electricity
Water supply
Telephones
Public hospitals
Land authority
Public buses
Transport authority
Agencies
1994
1999
2003
Source: Public Affairs Center, India

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

16. Entrenched Corruption Networks: The Case on Montesinos in Peru
Judiciary
Civil Society
Legislative Branch
International
Alberto Fujimori
State (Bureaucracy)
Political Parties 1
Vladimiro Montesinos
Media
Military
Municipal Government
Private Sector
Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C , based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000

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

18. Extractive Industries Transparency Initiative (EITI)
Multi-stakeholder approach with mutual accountability between government, private sector and civil society
Independent review of payments made to the government by oil, gas and mining companies and of revenues received by government from those companies by a reputable third party (i.e. audit firm)
Publication in accessible form, oversight by civil society
From EITI to EITI++
EITI
Award of
contracts
and
licenses
Regulation and
monitoring
of operations
Collection
of taxes
royalties
Revenue
distribution
management
Sound
Sustainable Projects
Azerbaijan’s State Oil Fund – transparent, consolidated, audited. Focus now upstream on contract transparency & downstream on budget transparency & reporting
Kazakhstan’s investment in downstream public finance management

19. Global Collective Action: Corruption is not just a developing & transition country problem
Percentage of firms that pay public procurement kickbacks by country of origin of foreign direct investment
Source: “Are Foreign Investors and Multinationals Engaging in Corrupt Practices in Transition Economies?” by Kaufmann, Hellman, Jones, in Transition, May-June Note: Survey Question was “How often nowadays do firms like yours need to make extra, unofficial payments to public officials to gain government contracts?” Firms responding “sometimes” or “more frequently” were classified as paying kickbacks. These figures are subject to significant margins of error and thus should be regarded as approximate.

20. The Stolen Asset Recovery (StAR) Initiative
The Problem
A Global Effort
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
TI’s estimates of stolen assets include:
StAR is a joint initiative with the Bank & UNODC, launched in September Partnerships are being developed at the global and country levels to:
Persuade all jurisdictions to ratify & implement the UNCAC
Help developing countries recover the existing stock of stolen assets
Help countries undertake the necessary institutional reforms that would help deter future asset theft
Advocate with financial centers to lower barriers to recovery
On a voluntary basis, offer expertise to monitor the use of recovered assets for development (e.g., Nigeria)
Ferdinand Marcos (President of the Philippines ) $5-10 billion
Mohamed Suharto (President of Indonesia ) $14-35 billion
Global Problem of Money Laundering:
IMF Estimates: between 2% y 5% of Gross World Product, At least USD $600,000,000
Sani Abacha (President of Nigeria ) $2-5 billion
Mobuto Sese Seko (President of Zaire ) $5 billion
*Source for estimates of former Presidents above: Transparency International Global Corruption Report All sums are estimates of alleged embezzlement in US dollars.

21. Conclusion: Frontier Issues for Reform
Strategic reforms to strengthen performance-orientation:
Improving quality & protection of rule-based, meritocratic system
Make strategically important agencies more performance-oriented
Greater performance-orientation (performance budgeting, performance management, M&E, indicators)
Integrating transparency & ‘demand-side’ approaches in public management
More systematic e-government (one-stop shops, e-procurement)
More proactive use of right to information and transparency reforms
Citizen voice in policy making & implementation (consultations, report cards)
Strengthening ethical responsibility in public service
Asset declaration, conflict of interest
Strengthening commitment to public service at individual & collective levels
Coalitions of integrity to rebuild culture of public service
Build multistakeholder coalitions for reform
Collaborative governance arrangements
Global collective action to combat transnational corruption

22. Discussion