Strengthening World Bank Group Engagement on Governance & Anticorruption Presented to: World Bank Staff Core Course on Public Sector Governance PREM Knowledge & Learning Week Washington, DC April 23, 2007 The World Bank Presented by: Sanjay Pradhan Director Public Sector Governance Poverty Reduction & Economic Management (PREM) Outline A. Context B. The World Bank’s Governance & Anticorruption Strategy 1. Country Level 2. Project Level 3. Global Level C. Implementation The World Bank Sanjay Pradhan Public Sector Governance Course Page 2 An Unprecedented Global Consensus Consultations held in 35 developing countries, 12 donor countries, & four global events, reaching more than 3,200 people Europe MNA ECA Egypt, Jordan (planned), Morocco, Brussels, the Hague, Tunisia (planned), Yemen London, Madrid, OECD, Paris, Rome, Stockholm Albania, Bulgaria, Georgia, Moldova, Russia EAP North America Ottawa, Washington DC (IMF, MDBs, US Government, CSOs, private sector, unions) LAC SAR Bangladesh, Argentina, Bolivia, India, Nepal Dominican Republic, El Salvador, Guatemala, AFR Mexico, IACC Burkina Faso, Botswana, Cameroon, Kenya, Mauritania, Mozambique, Republic of Congo, Rwanda, Senegal, Tanzania, Uganda Australia, Cambodia, China, Japan, Indonesia, Lao PDR, Mongolia, New Zealand, Philippines, Thailand, Vietnam Proactive engagement & unanimous endorsement by the Board Sanjay Pradhan The World Bank Public Sector Governance Course Page 3 Governance is the door to anticorruption Governance The manner in which the state acquires and exercises its authority to provide public goods & services Corruption Use of public office for private gain • Corruption is an outcome – a consequence of weak or bad governance • Governance reform – strengthening capacity & accountability – helps combat corruption by addressing its underlying causes The World Bank Sanjay Pradhan Public Sector Governance Course Page 4 Seven Guiding Principles Governance & Anticorruption for Poverty Reduction: Poor governance and corruption undermine the World Bank’s mission of poverty reduction Working Together: 7 Guiding Principles Country Leadership & Ownership: Strengthening Country Systems: The World Bank is committed to supporting a country’s own governance & anticorruption priorities Consistent Approach: While there is no ‘one-sizefits-all’, the World Bank will apply a consistent approach across countries & continue to allocate more aid to better governed environments (PBA) The World Bank 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” Better national institutions are the long term solution to mitigating fiduciary risk for all public money Staying Engaged: The World Bank will seek creative ways to provide support, even in poorlygoverned 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 Sanjay Pradhan Public Sector Governance Course Page 5 Key Elements of World Bank’s Strategy Country Level Global Level Deepening support to countries to strengthen governance Working with development partners, sharing experience & addressing transnational issues The World Bank Project Level Combating corruption in World Bank Group operations Sanjay Pradhan Public Sector Governance Course Page 6 Helping Countries to Improve Governance Through Various ‘Entry-Points’ Private Sector Public Management Civil Society, Media & Oversight Institutions Competitive investment climate Responsible private sector Public financial management & procurement, monitored by PEFA Administrative & civil service reform State oversight institutions (parliament, judiciary, SAI) Transparency & participation (FOI, asset declaration, user participation & oversight) Civil society & media Local Governance Governance in Sectors Community-driven development Local government transparency Downward accountability Transparency & participation Competition in service provision Sector-level corruption issues (EITI, forestry) Coalition building across stakeholders Sanjay Pradhan The World Bank Public Sector Governance Course Page 7 Strengthening PFM Systems a key priority The new international aid architecture emphasizes the principle of mutual accountability Increasing recognition that "ringfencing" projects will not work – need to strengthen country systems Scaling up of donor assistance requires sound PFM systems and reduced corruption in partner countries The World Bank Sanjay Pradhan Public Sector Governance Course Page 8 PEFA’s Performance Measurement Framework Budget Realism: Is the budget realistic, and implemented as intended in a predictable manner? Comprehensive, Policy-based, budget: Does the budget capture all relevant fiscal transactions, and is the process, giving regard to government policy? Comprehensive Fiscal oversight: Are the aggregate fiscal position and risks are monitored and managed? The World Bank Six PFM System Aspects Accountability and Transparency: Are effective external financial accountability and transparency arrangements in place? Control: Is effective control and stewardship exercised in the use of public funds? Information: Is adequate fiscal, revenue and expenditure information produced and disseminated to meet decision-making and management purposes? Sanjay Pradhan Public Sector Governance Course Page 9 Strengthening Demand for Public Financial Accountability Transparent, competitive eprocurement (Latin America) Civil Society Oversight; transparent, competitive procurement Strengthening Public Accounts Committees of Parliament (Slovakia) Strengthening Supreme Audit Institutions (Hungary) (Kenya, Ghana, Zambia -AFR) Accountability, Transparency & Integrity Project Procurement oversight by CSOs (Philippines) (Tanzania) Participatory Budgeting, Puerto Alegra (Brazil) Strengthening Public Accounts Committees of Parliament (India) Public Expenditure Tracking & Information Campaigns (Ghana, Madagascar, Mozambique, Peru, Senegal, Tanzania, Zambia) Key Issue: Instrument to Support Demand-side Interventions Sanjay Pradhan The World Bank Public Sector Governance Course Page 10 Tackling Corruption in Key Sectors Tracing Vulnerabilities in Value-Chain: Pharmaceuticals Manufacturing Transparency Registration Random inspections Monitoring based on transparent & uniform standards Tracking systems Selection Procurement Media coverage of drug selection committee meetings Distribution Prescription & Disbursement Reference: Jillian Clare Cohen, Assistant Professor, Faculty of Pharmacy and Director, Comparative Program on Health & Society, University of Toronto The World Bank User surveys Sanjay Pradhan Public Sector Governance Course Page 11 Innovative Examples of Multistakeholder Engagement in WB Operations 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) 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 The World Bank 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 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 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 Other actions Development Policy Lending Bangladesh DSC III Other WBI Media Program Community Radio Initiatives Partnership for Transparency Fund Sanjay Pradhan Public Sector Governance Course Page 12 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) The World Bank Sanjay Pradhan Public Sector Governance Course Page 13 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) The World Bank Sanjay Pradhan Public Sector Governance Course Page 14 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 The World Bank Sanjay Pradhan Public Sector Governance Course Page 15 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 The World Bank Sanjay Pradhan Public Sector Governance Course Page 16 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 The World Bank Sanjay Pradhan Public Sector Governance Course Page 17 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 Coalitions Donor Collaboration with civil society, private sector, MDB harmonization in high-risk settings to avoid ‘mixed- others (e.g., GOPAC, PACI, Global Integrity signals’; Alliance) to combat coordinated donor action to support parliamentarians, and entrenched corruption networks demand-side initiatives The World Bank Sanjay Pradhan Public Sector Governance Course Page 18 One Key Priority: The Stolen Asset Recovery (StAR) Initiative The Problem 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: Mohamed Suharto (President of Indonesia 1967-1998) $14-35 billion Sani Abacha (President of Nigeria 19931998) $2-5 billion Ferdinand Marcos (President of the Philippines 1972-1986) $5-10 billion Mobuto Sese Seko (President of Zaire 1965-1997) $5 billion A Global Effort StAR is a joint initiative with the Bank & UNODC. Partnerships are being developed with the OECD, Norad, IMF, other MDBs, the G8, & developing countries Proposed activities include: 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 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) Sanjay Pradhan The World Bank *Source for estimates of former Presidents above: Transparency International Global Corruption Report 2004. All sums are estimates of alleged embezzlement in US dollars. Public Sector Governance Course Page 19 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 Coalitions Donor Collaboration with civil society, private sector, MDB harmonization in high-risk settings to avoid ‘mixed- others (e.g., GOPAC, PACI, Global Integrity signals’; Alliance) to combat coordinated donor action to support parliamentarians, and entrenched corruption networks demand-side initiatives The World Bank Sanjay Pradhan Public Sector Governance Course Page 20 Entrenched Corruption Networks: The Case on Montesinos in Peru Judiciary Civil Society International Political Parties Legislative Branch Alberto Fujimori 1 State (Bureaucracy) Vladimiro Montesinos Media Private Sector Municipal Government Military Sanjay Pradhan Public Sector Governance Course The World Bank Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000 Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Page 21 Forging Coalitions for Reform Philippines: Procurement Reform Transparency and Accountability Network (20+ member groups) PAGBA & AGAP (w/in Gov’t) Procurement Watch: Drew other civil society groups into the advocacy efforts and coordinated the activities Local chambers of Commerce (Private sector) The World Bank Walang Ku-Corrupt Movement (Youth) CBCP (Church) Philippine Contractors Association (private sector – main stakeholder) Sanjay Pradhan Public Sector Governance Course Page 22 Moving Forward: What Will the World Bank do Differently? Scale up governance work where it matters most for development – alleviate governance constraints to poverty reduction Systematically integrate governance in sectoral projects & programs – in extractive industries, infrastructure, forestry, health, education The World Bank Scale up multistakeholder engagement – with civil society, media, parliaments, local communities in policy making & service delivery Systematically scale up engagement with private sector & industrialized countries – to tackle the supply side of corruption Strengthen country systems while enhancing anticorruption measures in WB operations – a/c action plans; enhanced disclosure, participation & monitoring Work with donors & other int’l actors to ensure a harmonized approach & collective action – based on respective mandates & comparative advantage Sanjay Pradhan Public Sector Governance Course Page 23 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 Countrydriven Process & Incentives – – – – Bankwide leadership team to coordinate GAC work Regional clusters (2 pilots) Multisectoral organizational arrangements Field advisors in high-risk settings 2 Leadership Capacity & Organizational Arrangements Guidance & good practice in integrating GAC in sectors New instruments for private sector work to curb ‘supplyside’ of corruption Guidance on engaging with non-governmental stakeholders (media, etc.) 3 Country-level: Sectoral Governance & Engagement The World Bank 4 Diagnostics, indicators & knowledge 5 Project-level: Risk Management – – – – – 6 Global Collective Action – – Diagnostics for CASs & key sectors Guidance & good practice notes for staff Accelerate development & use of actionable & outcome indicators M&E to evaluate impact Integrated fiduciary assessments in project preparation Risk reviews AC action plans & teams Enhanced disclosure & 3rd party monitoring More regional supervision Donor coordination in highrisk settings (OECD-DAC GovNet & MDG Task Force) StAR Initiative-asset recovery Multi-statkeholder alliances in sectors (EITI, FLEG, PROFISH, MeTI, CoST, GIA) Sanjay Pradhan Public Sector Governance Course Page 24 Q&A The World Bank Sanjay Pradhan Public Sector Governance Course Page 25 Civil Society Monitoring Service Provision: Bangalore 100 94 96 92 85 Percent Satisfied 90 80 73 73 78 73 77 67 70 60 47 50 42 41 34 40 32 32 25 30 16 20 10 34 5 6 4 14 9 1 n/a n/a 0 Agencies 1994 The World Bank 1999 Source: Public Affairs Center, India 2003 Sanjay Pradhan Public Sector Governance Course Page 26 Media, Transparency & Combating Corruption “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 Edwin Abella BIR Reg'l Director, Quezon City Suzuki Grand Vitara Nissan Cefiro Ditto BMW Lucien E. Sayuno BIR Reg'l Director, Makati City Ditto Nissan Patrol BMW Honda Accord Mitsubishi L200 Honda-VCR The World Bank Ditto Danilo A. Duncano BIR Reg'l Director, Quezon City Corazon P. Pangcog Asst.Reg'l Director, Valenzuela City Ditto REGISTERED OWNER Sulpicio S. Bulanon Jr. 1817 Jordan Plains Subd., Quezon City (listed address of Abella in his SALs) Merrick Abella (son of Abella) 24 Xavierville, Loyola Heights, Q uezon City Elizabeth S. Buendia 152 Road 8, Quezon City Limtra Dev. Corp. Zone 4, Dasmariñas, Cavite Marie Rachel D. Mene ses c/o Metrocor and Holdings, G&F, Makati City Daniel Anthony P. Duncano 2618 JP Rizal, New Capital Estate, Quezon City Alberto P. Pangcog (husband) B2 L23 Lagro Subd., Quezon City Alberto P. Pangcog 9 Ricardo St., Carmel 1 Subd., Quezon City Sanjay Pradhan Public Sector Governance Course Page 27 Improving PFM – A Platform Approach Cambodia – Sequence of Platforms Enables focus on what is done with money Enables a basis for accountability Platform 1 Platform 2 Improved internal control and public access to key fiscal information to hold managers accountable A credible budget delivering a reliable and predictable resource to budget managers Re-design • Integration of budget (recurrent & capital budgets) Strengthen macro and revenue Forecasting Streamline spending processes The World Bank Platform 4 Integration of accountability and review processes for both finance and performance management Platform 3 Improved linkage of priorities and service targets to budget planning and implementation Broad Activities Full design of FMIS Broad Activities Develop IT Management Broad Activities Broad Activities Enables more accountability for performance management Budgeting Classification system Initial design of FMIS for core business processes Re-design budget cycle (e.g. MTEF) Pilot program based budgeting & budget analysis Strategy Initial design of asset register Further fiscal Decentralization Strengthen external audit and define internal audit function Sanjay Pradhan Source: See “Study of measures used to address weaknesses in Public Financial Management systems in the context of policy-based support,” by Peter Brooke, Public at www.pefa.org Sector Governance Course Page 28 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 The World Bank Sanjay Pradhan Public Sector Governance Course Page 29 Empowering Local Communities with Information Can Reduce “Leakages” Tracking Education Dollars in Uganda Equiv. US$ per student 3.5 3.0 Public info campaign 2.5 2.0 1.5 1.0 0.5 0.0 1990 1991 Intended grant The World Bank 1993 1994 1995 1999 Actual grant received by primary school (means) Sanjay Pradhan Source: Uganda Public Expenditure Tracking Surveys Public Sector Governance Course Page 30 Strengthening Oversight: Judicial Reform Three emerging lessons 1. Work simultaneously on independence and accountability ECA: independent courts, w/o accountability, result: corruption court 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 … The World Bank Sanjay Pradhan Public Sector Governance Course Page 31 Governance System Actors, Capacities and Accountability Citizens/Firms Political Governance • Political Parties • Competition, transparency Formal Oversight Institutions • Parliament • Judiciary • Oversight institutions Cross-cutting Control Agencies (Finance, HR) Civil Society & Private Sector • Civil Society Watchdogs • Media • Business Associations Citizens/Firms Citizens/Firms Executive-Central Govt Service Delivery & Regulatory Agencies Subnational Govt & Communities Outcomes: Services, Regulations, Corruption Citizens/Firms The World Bank Sanjay Pradhan Public Sector Governance Course Page 32 Transparency: A Cross-Cutting Imperative Citizens/Firms Transparency: Formal Oversight Institutions • Parliament • Judiciary • Oversight institutions Transparency: • Fiscal transparency • Public Expenditure Tracking Surveys (PETS) Political Governance • Political Parties • Competition, transparency Transparency: • Free press • Freedom of information • Citizen Report Cards Executive-Central Govt Civil Society & Media Cross-cutting Control Agencies (Finance, HR) Service Delivery & Regulatory Agencies Subnational Govt & Communities Private Sector Interface Citizens/Firms Citizens/Firms • Parliamentary votes • Income & Assets • Campaign contributions Transparency: • ‘Blacklisting’ firms bribing in public procurement • E*procurement • Extractive Industries Transparency Initiative (EITI) Citizens/Firms The World Bank Sanjay Pradhan Public Sector Governance Course Page 33 A Country Approach Countries differ in their trajectories & entry points Trajectories are driven by political forces Key issue: How to sequence reforms? Quality of bureaucracy Ι ΙΙ ΙΙΙ Quality of checks and balance institutions Source: Global Monitoring Report, 2006 In some countries, this will mean moving from reforms of bureaucracy to support checks and balances The World Bank Sanjay Pradhan Public Sector Governance Course Page 34 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 The World Bank Sanjay Pradhan Public Sector Governance Course Page 35