Questions on Governance and Corruption
PREM week Conference Session # 1 June 25th, 2002
Prepared by D. Kaufmann, in collaboration with Bank colleagues 1
http://www.worldbank.org/wbi/governance
1 See last slide of this presentation for details.
IFI involvement in Anti-Corruption/Governance: Basic Question: Which generic path? (Part I)
0. ‘Zero’ Scenario: No involvement (seventies…)
1. ‘Minor’ Scenario: Economic Competencies (‘till ’96) - Improved Economic/Trade/Regulatory Policy, etc.
2. ‘Traditional +’ Scenario: Economic + PSM + Legal
3. ‘Governance Scenario’: Economic + new Public Sector & Judiciary/Legal Reform + Anti-Corruption + Civil Society/Collective Action
4. ‘Maximalist’ Scenario: Scenario 3 + Politics… (?) We want to review pros and cons of appropriate approach, recognizing
IFI/Bank opportunities as well as limitations. At present there is large variance of approaches across the Bank (ranging from 0 to 3) on which path ought to be taken.
0% 5% 10% 15% 20% 25% 30%
Donors Out
Collaborate withNGOs
Control corruption indonor projects
Awareness/Education
T.A.: Work withcountries
'Pre-Conditionality'
Most Important Role for Donors in Helping Countries Fight Corruption
Percentage of Respondents who Selected Role for Donors as Most Important
Source: Web survey, 1800 respondents. http://www.wbigf.org/hague/hague_survey.php3
Role of IFIs, part II: Onto Specifics
• Working with NGOs: Generally accepted, but what are lessons of experience? Selectivity warranted?
• Emphasizing further other civil society stakeholders?: Parliaments, Private Sector/Business Associations
• The role of Multinationals & Large Domestic Firms • Understanding the Financing of Politics/Parties/Elections• On the dynamics of Elite/State Capture: Corruption is not
always a ‘symptom’ – but quite fundamental…• Role in gathering, analyzing and disseminating
Data/Empirical work on Governance & A-C
‘Traffic Light’ Map: Rule of Law, 2000/01
Source for data: http://www.worldbank.org/wbi/governance/govdata2001.htm ; Map downloaded from : http://info.worldbank.org/governance/kkz/gov2001map.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse; Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
Control of Corruption: one Aggregate Indicator (selected countries from 155 worldwide, for illustration, based on 1998 research data*)
-2
-1
0
1
2Ta
jikis
tan
Iraq
Mya
nmar
Suda
n
Ukra
ine
Indo
nesi
a
Syria
Paki
stan
Mex
ico
Phili
ppin
es
Thai
land
Kore
a, S
outh
Bots
wan
a
Cost
a Ri
ca
Hung
ary
Belg
ium
Chile
Aust
ralia
Sing
apor
e
New
Zea
land
Denm
ark
Source: ‘Governance Matters’, 1999, PRWP 2196 by KKZ. http://www.worldbank.org/wbi/governance/
POORGOOD
Corruption Control Level
Margin of Error
Good Corruption Control
The ‘Dividend’ of Good GovernanceInfant Mortality and Corruption
0
10
20
30
40
50
60
70
80
90
Weak Average Good
Control of Corruption x Development Dividend
0
2,000
4,000
6,000
8,000
10,000
12,000
Weak Average Good
Regulatory Burdenx Development Dividend
Per Capita Income and Regulatory Burden
Literacy and Rule of Law
0
25
50
75
100
Weak Average Good
Rule of Law x Development Dividend
Per Capita Income and Voice and Accountability
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Weak Average Strong
Voice and Accountabilityx DevelopmentDividend
Note: The bars depict the simple correlation between good governance and development outcomes. The line depicts thepredicted value when taking into account the causality effects (“Development Dividend”) from improved governance to betterdevelopment outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.
Investment Climate: Extent of Constraints to Business as Reported by Firms (Selected Countries, I)
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Bangladesh
Source: World Business Environment Survey (WBES) 2000. The data and views presented do not necessarily reflect official views of the entire institution or its Board of Executive Directors. Given inherent error margins associated with any single survey results, it is inappropriate to use the results from this survey for precise country rankings in any particular dimension of the investment climate or governance. For interactive web-tool interface with this data, visit http://info.worldbank.org/governance/wbes/index2.html
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Botswana
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Canada
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Kenya
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Singapore
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Venezuela
Investment Climate: Extent of Constraints to Business as Reported by Firms (Selected Countries, II)
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Egypt
Source: World Business Environment Survey (WBES) 2000. The data and views presented do not necessarily reflect official views of the entire institution or its Board of Executive Directors. Given inherent error margins associated with any single survey results, it is inappropriate to use the results from this survey for precise country rankings in any particular dimension of the investment climate or governance. For interactive web-tool interface with this data, visit http://info.worldbank.org/governance/wbes/index2.html
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Nigeria
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Sweden
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Uruguay
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
US
0
100Bribe Frequency
Corrupt Courts
Inflation
Tax/Regulations
Policy Instab.
Corruption asconstraint
Zimbabwe
State Capture by Elite Firms at very high Economic Cost for the Rest of the Private Sector
0
5
10
15
20
25
Firms' Output Growth (3 yrs)
Low captureeconomies
High captureeconomies
Addressing Capture: Economic Reform, Political Competition & Voice/Civil Liberties Matter
0
0.1
0.2
0.3
0.4
Stat
e Ca
ptur
e In
dex
Partial Civil Libs High Civil Libs
Advanced
Partial
Slow
Pace of Econ Reform
Political/Civil Liberties Reforms
Towards a Solution: Collective Action by FirmsTowards a Solution: Collective Action by Firms
0102030405060708090
Hungary Russia
Business association members
(% of firms)
Active members Nonactive members
Citizen Voice and Access to Public Services by the Citizen Voice and Access to Public Services by the Poor Poor
(Bolivia illustration, each observation is a public agency)(Bolivia illustration, each observation is a public agency)
Based on Public Officials Survey. The sample of institutions includes 44 national, departmental, and municipal agencies which are a prior anticipated to be accessible to the poor
0
20
40
60
80
100
10 20 30 40 50 60 70 80 90
Voice / External Accountability
Acc
essib
ility
to th
e Po
or
ControlledCausalLink
r = 0.54
Which Governance Characteristics Matter for Agency Performance? Results from Bolivia Public Officials’ Survey
Governance Determinant of Performance
Simple Unconditional Relationship
Conditional/Causal Relationship
‘Ethical Values’ 0 0 Agency Autonomy ** 0 Enforcement of Rules ** 0 Quality of Rules * 0 Wage Satisfaction ** 0 Politicization ** ** Internal Transparency ** ** External Voice ** ** Corruption ** **
Note: Middle column reflects simple correlation results, implying that many more variables appear to be significant.
What to Do About Corruption?: Responses from Officials In 62 Countries
20%
30%
40%
50%
60%
70%
80%
90%
Anti-corruptionwatchdoginstitutions
Privatization Voice & CivilLiberties
Reform taxregime
Budgettransparency
Deregulateeconomy
Example set byleadership
% o
f res
pond
ents
giv
e hi
gh ra
ting
Source: ‘Corruption: The Facts’, Foreign Policy, Summer 1997
Concluding…• We are learning, without many successes yet…• Understand forces shaping Governance & Policies• Firms, Multinationals, Influence and Capture • From Traditional PSM to broader Governance: Voice• External Accountability more important than internal rules• Judiciary part of the solution or the problem?: Implications• Coalition-Building & Collective Action: how to help a
‘network’, and empowering millions of auditors• On Data & Knowledge Tools – some interactive resources: http://www.worldbank.org/wbi/governance http://info.worldbank.org/governance/ http://www.worldbank.org/wbi/governance/datasets.htm http://www1.worldbank.org/publicsector/anticorrupt/datatools.htm#1 http://www.worldbank.org/wbi/governance/tools.htm
0% 10% 20% 30% 40% 50% 60%
Oversight committees
Enforcement agencies
Various executive
NGOs
National a-c programs not helpful
Anti-corruption commission
Broad coalition
Best-equipped group to Formulate a National Action Program to Control Corruption
Percentage of Respondents who Selected Group as Best-equipped
Source: Web survey, 1800 respondents. http://www.wbigf.org/hague/hague_survey.php3
Data for Analysis and informing Policy Advise, not for Precise Rankings
Data in this presentation is from empirical research related to aggregate governance indicators, diagnostic surveys, and expert polls, and is subject to a margin of error. Collaboration with Aart Kraay, Joel Hellman, Francesca Recanatini, Randi Ryterman and others, including external partners. Access to collaborative background papers available through the web. The empirical results are not intended for precise rankings of countries, but instead to illustrate performance measures to assist in drawing implications for strategy at the country level – at the country request. The data does not reflect official views (or rankings, which ought to be avoided) by the World Bank or its Board of Directors. Errors are responsibility of the authors. www.worldbank.org/wbi/governance