1. 1 Global Parliamentary Integrity and Institutional Strengthening: Empirics and Implications for Broader Institutional Reforms Daniel Kaufmann and Colleagues The World Bank Background Handout for Discussion for Session at Global Parliamentary Conference London, January 28th-29th, 2001 The data and views presented in this handout are for discussion, reflecting recent research work carried out at the World Bank Institute (WBI) in collaboration with other Bank units and with institutions in emerging economies. They are preliminary and do not necessarily represent official views of the Bank or its Executive Directors. At WBI I am particularly indebted to R. Stapenhurst on Parliamentary Learning events.

2. 2 Broad and Empirical Approach to Governance Rule of Law Control of Corruption (or Graft) Lack of Regulatory Burden Government Effectiveness Voice and Accountability Political Stability and lack of Violence

3. 3 Quality of Rule of Law by Region Good Poor

4. 4 The ‘Dividend’ of Good Governance Infant Mortality and Corruption 0 10 20 30 40 50 60 70 80 90 WeakAverageGood Control of Corruption x Development Dividend 0 2,000 4,000 6,000 8,000 10,000 12,000 WeakAverageGood Regulatory Burden x Development Dividend Per Capita Income and Regulatory Burden Literacy and Rule of Law 0 25 50 75 100 WeakAverageGood Rule of Law x Development Dividend Per Capita Income and Voice and Accountability 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 WeakAverageStrong Voice and Accountability x Development Dividend Note: The bars depict the simple correlation between good governance and development outcomes. The line depicts the predicted value when taking into account the causality effects (“Development Dividend”) from improved governance to better development outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.

5. 5 …Small firms and New Entrants face more administrative (petty) corruption in transition

6. 6...Yet the focus ought to shift to ‘Grand Corruption’: firms shaping the legal, policy and regulatory environment by illegally ‘purchasing’ the laws, policies and regulations of the state (“State Capture” by corporates) State Capture Index and its Components (% of firms affected by corporate purchase of:...) Source: Hellman, Jones and Kaufmann “Seize the State, Seize the Day”, http://www.worldbank.org/wbi/governance/

7. 7 Very Corrupt Not Corrupt The ratio at the top of each column is the corruption ranking of Parliament among all surveyed institutions. Thus, for instance, in Cambodia, relative to other surveyed public institutions, Parliament rated best among 10, while in Ecuador it rated worst among 35. Research sources: Governance Anti-Corruption Index Country Diagnostic Surveys, Bolivia, Cambodia, Ecuador, Georgia, Latvia, Paraguay, Romania, Slovakia, WBI/WB. http://www.worldbank.org/wbi/governance/

8. 8 Clearly, Parliaments are not all alike: Questions from Empirics and Implications for global partnerships and institution-building Enormous Variation in Legitimacy and Performance of Parliaments Worldwide Performance of Public Sector and Parliaments in a country appear to be closely correlated Where executive is well governed, parliament has high probity But if executive is corrupt, parliament not exempt… Internet News Review 2000: China, Japan, Nigeria, Thailand, Russia, Colombia, Egypt, Israel, others? Approach needs to look at all key institutions within the country, and not as Parliament as island Setting Example from Within: Role of Parliament as part of the solution (and not perpetuating it as part of the problem) For details on the empirical research on state capture, on diagnostic surveys which is background to this presentation, visit: http://worldbank.org/wbi/governrnance

9. 9 SloveniaHungaryBulgariaRussiaUkraine Source: J. Hellman, G. Jones and D. Kaufmann, Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition (World Bank Policy Research Working Paper 2444) September 2000. http://www.worldbank.org/wbi/governance/

10. 10 Source: J. Hellman, G. Jones and D. Kaufmann, Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition (World Bank Policy Research Working Paper 2444) September 2000. http://www.worldbank.org/wbi/governance/

11. 11 Eacb dot denotes one country in Transition, rated by firms in terms of performance of the Executive and Legislative. Source: J. Hellman, G. Jones and D. Kaufmann, Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition (World Bank Policy Research Working Paper 2444) September 2000. http://www.worldbank.org/wbi/governance/ Excellent Performance Rating

12. 12 Source: J. Hellman, G. Jones and D. Kaufmann, Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition (World Bank Policy Research Working Paper 2444) September 2000. http://www.worldbank.org/wbi/governance/

13. 13 Enormous Socio-Economic Costs of State Capture by Oligarchs and Vested Elite Interests: Business sector grows much slower, lacks investments and insecure property rights

14. 14 The result: weak property rights 0 10 20 30 40 50 60 70 80 Est Uzb Pol Sln Azer Hun Cro Slk Geo Bul Arm Rom Bel Cze Kaz Lit Kyr Rus Ukr Mol Firms reporting insecure property and contract rights % of All Firms %

15. 15

16. 16 State Capture exists where partial Civil Liberties and slow Economic Reforms Degree of Civil Liberties in Transition Economies Economic Reforms

17. 17 Corruption High Low Civil Liberties Civil Liberties Help Control Corruption (Worldwide Evidence, 150 countries)

18. 18 Control of Corruption and Freedom of the Press High Low High r =.68 Freedom of the Press (Freedom House) Control of Graft [kkz]

19. 19

20. 20 Civil Society Oversight: Freedom of information Public hearings of draft laws Monitoring by media/NGO’s Good and Clean Government Competition & Entry : Competitive restructuring of monopolies Regulatory simplification Public Administration and Public Finance: Meritocratic civil service Transparent, monetized, adequate remuneration Accountability in expenditures (Treasury, Audit, Procurement) Strategy for Good Government and Anticorruption Accountability of Political Leadership: Disclosure of parliamentary votes Transparency in party financing Asset Declaration, Conflict of Interest Rules Checks and Balances: Independent and effective judiciary Decentralization with accountability

21. 21 Implications -- Some Issues for Discussion and Debate For Legislative Body Setting an Example, Parliamentary strengthening is needed first in many settings Strengthening/reforming of Parliaments: cannot be done in isolation of reforms in public institutions? Towards Full Transparency in Legislative Votes Mitigating ‘Capture’ by the Executive & by Vested Interests Towards Transparency in Electoral/Political Finance Role of Multinational Firms and International Responsibility Integrated approach, focused on country priorities and action towards Institutional Reform --- therefore... Role of Parliamentary Training and Networks key: but with better integration with other institutions and civil society? How can we best support process with learning programs? Info on programs: http//www.worldbank.org/wbi/governance/

22. 22 For further information and data: http://www.worldbank.org/wbi/governance