1The World Bank

Cancer of Corruption Cancer of Corruption SeminarSeminar

Presented by:Presented by:

Sanjay PradhanDirectorPublic Sector GovernanceThe World Bank

2The World Bank

Governance Problems: Some Governance Problems: Some ExamplesExamples

• Grand Corruption: State CaptureGrand Corruption: State Capture - Leaders plundering state assets (Mobutu, Abacha) - Leaders plundering state assets (Mobutu, Abacha) - Powerful “oligarchs” buying state officials (CIS)- Powerful “oligarchs” buying state officials (CIS)- Corrupt leaders colluding with corrupt investors: non-- Corrupt leaders colluding with corrupt investors: non-competitive, non-transparent award of contracts (oil & competitive, non-transparent award of contracts (oil & gas)gas)

• Nepotism and Patronage in Public ServiceNepotism and Patronage in Public Service- Political pressure for award of contracts, - Political pressure for award of contracts, appointmentsappointments- Politicized transfers (South Asia)- Politicized transfers (South Asia)

• Administrative (Petty) Corruption & Inefficiency:Administrative (Petty) Corruption & Inefficiency:- Bribes for licenses, permits, government services- Bribes for licenses, permits, government services- Diversion of funds for public programs- Diversion of funds for public programs- Inefficient and ineffective service delivery- Inefficient and ineffective service delivery

3The World Bank

The “Bribe Fee” ListThe “Bribe Fee” ListUnofficial payments by firms in UkraineUnofficial payments by firms in Ukraine

EnterprisesEnterprisesType of License/Service/”Favor” Type of License/Service/”Favor” Average fee required Average fee required admittingadmitting need to pay need to pay

(1996)(1996) “unofficially”“unofficially”

Enterprise registration $176 66%Each visit by fire/health inspector $42 81%Tax inspector (each regular visit) $87 51%Telephone line installation $894 78%Lease in state space (square ft. per month) $7 66%Export license/registration $123 61%Import license/registration $278 71%Border crossing (lump sum) $211 100%Border crossing (percent of value) 3% 57%Domestic currency loan from bank on 4% 81% preferential terms (percent of value)Hard currency loan on preferential 4% 85% terms (percent of value)

4The World Bank

Strengthening Voice and Participation:Strengthening Voice and Participation:Report Card of Government Services in Report Card of Government Services in

LatviaLatvia

0 10 20 30 40

Percent giving favorable rating

Post Office

State Educational Institutions

Office of Social Benefits

Polyclinic/Health Services

Agency of Immigration & Citizenship

Prosecutor

Customs Service

Courts

Local Housing Authority

Police

5The World Bank

Governance can be Measured – Corruption, Governance can be Measured – Corruption, CountriesCountries

Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for 1996-2002, WP #3106, August 2003. Units in vertical axis are expressed in terms of standard deviations around zero. Country estimates are subject to margins of error (illustrated by thin line atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted.

Good Control Corruption

Bad-2.5

0

2.5

6The World Bank

5

10

15

20

25

30

Proportion of firms affected by capture of …

HungaryHungary EstoniaEstonia RussiaRussia UkraineUkraine

Parliamentary VotesParliamentary Votes

Presidential Admin. DecreesPresidential Admin. Decrees

Civil Court DecreesCivil Court Decrees

The Challenge of State Capture The Challenge of State Capture

7The World Bank

Latvia (anticorruption)

Russia (customs/treasury)

India – Andra Pradesh (power; e-gov); Karnataka (right to info)

Colombia (diagnostics& civil society)

Indonesia(local governance)

Uganda (PRSC; education)

Jordan (civil society)

Examples of major programs Examples of major programs launched across countrieslaunched across countries

Pakistan (devolution)

Philippines (procurement)

Ghana (PE accountability)

Bolivia: (public admin.)

Albania(public admin.)

Guatemala (diagnostic to action program)

Tanzania (PSR)

Ethiopia (decentralization)

Cambodia (PE; forestry)

Ukraine (tax admin)

Bangladesh(civil society)

Gabon(water/electricity)

Kyrgyz Republic (governance reform)

8The World Bank

Political Accountability• Political competition,

broad-based political parties

• Transparency & regulation of party financing

• Disclosure of parliamentary votes

Political Accountability• Political competition,

broad-based political parties

• Transparency & regulation of party financing

• Disclosure of parliamentary votes

Institutional Checks & Balances

• Independent, effective judiciary

• Legislative oversight• Independent watchdog

agencies

Institutional Checks & Balances

• Independent, effective judiciary

• Legislative oversight• Independent watchdog

agencies

Civil Society & Media• Freedom of press• Freedom of information• Civil society watchdogs• Public hearings of draft

laws• Report cards, client

surveys

Civil Society & Media• Freedom of press• Freedom of information• Civil society watchdogs• Public hearings of draft

laws• Report cards, client

surveys

Private Sector Interface

• Effective, streamlined regulation

• Transparent public-private dialogue

• Break-up of monopolies • Extractive Industries

Transparency Initiative• Curbing corruption from

developed countries: UN, OECD Convention

Private Sector Interface

• Effective, streamlined regulation

• Transparent public-private dialogue

• Break-up of monopolies • Extractive Industries

Transparency Initiative• Curbing corruption from

developed countries: UN, OECD Convention

Good governance and anticorruption has Good governance and anticorruption has many dimensions & “entry” pointsmany dimensions & “entry” points

Leadership and Public Management• Ethical leadership: asset declaration, conflict of

interest rules• Meritocratic civil service with adequate pay• Transparency & accountability in budget mgnt • Transparent, competitive procurement• Transparency and accountability in sectors:

extractive industries, health, education, infrastructure, SOEs

Leadership and Public Management• Ethical leadership: asset declaration, conflict of

interest rules• Meritocratic civil service with adequate pay• Transparency & accountability in budget mgnt • Transparent, competitive procurement• Transparency and accountability in sectors:

extractive industries, health, education, infrastructure, SOEs

GOODGOODGOVERNANCEGOVERNANCE

GOODGOODGOVERNANCEGOVERNANCE

Local Participation & Community Empowerment

• Decentralization with accountability• Community Driven Development (CDD)• Oversight by parent-teacher associations &

user groups• Beneficiary participation in projects

Local Participation & Community Empowerment

• Decentralization with accountability• Community Driven Development (CDD)• Oversight by parent-teacher associations &

user groups• Beneficiary participation in projects

9The World Bank

Extractive Industries Transparency Extractive Industries Transparency Initiative Key PrinciplesInitiative Key Principles

• 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 a readily accessible form of payments made by the companies and of revenues received by government.

• Extension of all of the above to companies including state owned enterprises.

• Active engagement of all stakeholders in the design, monitoring, and implementation process.

• Commitment to a work plan and timelines for implementation.

10The World Bank

Corruption is not just a developing Corruption is not just a developing country problemcountry problem

Percentage of Firms that Pay Public Procurement Kickbacks by Country of

Origin of FDI

Source: “Are Foreign Investors and Multinationals Engaging in Corrupt Practices in Transition Economies?” by Kaufmann, Hellman, Jones, in Transition, May-June 2000. 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.

11The World Bank

Recent initiatives to curb Recent initiatives to curb transnational corruptiontransnational corruption

OECD Convention on Combating Bribery of OECD Convention on Combating Bribery of Foreign Public Officials (1997)Foreign Public Officials (1997)

UN Convention Against Corruption Treaty (2003) – UN Convention Against Corruption Treaty (2003) – 94 countries join94 countries join

Financial Action Task Force on Money Laundering Financial Action Task Force on Money Laundering (FATF) (1989) -- 40 Recommendations (2003) (FATF) (1989) -- 40 Recommendations (2003)

Recovery of proceeds from corruption (Nigeria Recovery of proceeds from corruption (Nigeria 2005)2005)

Publish What You Pay, Extractive Industries Publish What You Pay, Extractive Industries Transparency InitiativeTransparency Initiative

World Bank blacklists corrupt firmsWorld Bank blacklists corrupt firmsTransparency International Principles for Transparency International Principles for

countering briberycountering briberyGovernance Network of OECD DAC (GOVNET)Governance Network of OECD DAC (GOVNET)Norway’s ‘Doers’ Network on Anticorruption Norway’s ‘Doers’ Network on Anticorruption

(2004)(2004)

OECD Convention on Combating Bribery of OECD Convention on Combating Bribery of Foreign Public Officials (1997)Foreign Public Officials (1997)

UN Convention Against Corruption Treaty (2003) – UN Convention Against Corruption Treaty (2003) – 94 countries join94 countries join

Financial Action Task Force on Money Laundering Financial Action Task Force on Money Laundering (FATF) (1989) -- 40 Recommendations (2003) (FATF) (1989) -- 40 Recommendations (2003)

Recovery of proceeds from corruption (Nigeria Recovery of proceeds from corruption (Nigeria 2005)2005)

Publish What You Pay, Extractive Industries Publish What You Pay, Extractive Industries Transparency InitiativeTransparency Initiative

World Bank blacklists corrupt firmsWorld Bank blacklists corrupt firmsTransparency International Principles for Transparency International Principles for

countering briberycountering briberyGovernance Network of OECD DAC (GOVNET)Governance Network of OECD DAC (GOVNET)Norway’s ‘Doers’ Network on Anticorruption Norway’s ‘Doers’ Network on Anticorruption

(2004)(2004)

12The World Bank

Improvements in Satisfaction: Improvements in Satisfaction: Public Services in BangalorePublic Services in Bangalore

 

5 6 49

25

1

14

4147

42

67

34 34

16

32 32

73

94

73

92

7378

85

96

77

n/a n/a0

10

20

30

40

50

60

70

80

90

100

City c

ounci

l

Elect

ricity

Wat

er s

upply

Tele

phon

es

Public

hos

pita

ls

Polic

e

Land

aut

horit

y

Public

bus

es

Tran

spor

t aut

hority

Agencies

% s

atis

fied

1994 1999 2003

Source : PAC

13The World Bank

Transparency & Community Monitoring:Transparency & Community Monitoring: Primary Education in UgandaPrimary Education in Uganda

0.00.0

0.50.5

1.01.0

1.51.5

2.02.0

2.52.5

3.03.0

3.53.5

1990 1991 1993 1994 1995

US$ per US$ per

StudentStudent

Intended Grant AmountIntended Grant Amount Received by School (mean)Received by School (mean)

1999

14The World Bank

Philippines: Procurement ReformPhilippines: Procurement ReformMobilizing Public SupportMobilizing Public Support

Transparency and Accountability Transparency and Accountability Network (20+ member groups)Network (20+ member groups)

Walang Ku-Corrupt Movement Walang Ku-Corrupt Movement (Youth)(Youth)

PAGBA PAGBA &&AGAPAGAP(w/in (w/in Gov’t)Gov’t)

CBCP(Church)

Philippine Contractors Association(private sector – main stakeholder)

Local chambers of Commerce (Private sector)

Drew other civil society groups Drew other civil society groups into the advocacy efforts and into the advocacy efforts and

coordinated the activitiescoordinated the activities

15The World Bank

Reaching Out Reaching Out

Radio: The Radio: The swath & the swath & the

daggerdagger

The Media Campaign:The Media Campaign:The Communications StrategyThe Communications Strategy

Print Media: Print Media: Amplifying the Amplifying the

problemproblem

TV: Raising the TV: Raising the anteante

Advertising: Creating a Advertising: Creating a ‘brand name’‘brand name’

16The World Bank

“BIR 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, Q uezon City

Nissan Cefiro Ditto Elizabeth S. Buendia 152 Road 8, Pag-asa, Quezon City

BMW Lucien E. Sayuno BIR Reg'l Director, Makati City

Limtra Dev. Corp. Zone 4, Dasmariñas, Cavite

BMW Ditto Marie Rachel D. Meneses 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

Honda CR-V Ditto Ditto

BMW Flordeliza P. Villegas Revenue District Of’cer Cabanatuan City

Charito P. Sico 8 Ma. Elena 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, and Combating Media,Transparency, and Combating CorruptionCorruption

17The World Bank

All supplier companies register, indicating All supplier companies register, indicating areas areas of business (e.g., IT, construction, furniture)of business (e.g., IT, construction, furniture)

Public agencies submit tenders through internetPublic agencies submit tenders through internet

Automatic e-mail to all companies in selected areaAutomatic e-mail to all companies in selected area

Online information on name, position of official in-Online information on name, position of official in-charge charge

Online information on results: who participated, Online information on results: who participated, proposals made, scores received, who won bid, proposals made, scores received, who won bid, historical record of agency’s purchases and contractshistorical record of agency’s purchases and contracts

Chile’s Internet-based Public Chile’s Internet-based Public Procurement:Procurement:

Transparency and Competition Transparency and Competition

18The World Bank

Independent Judiciary

Legislative Oversight

Civil Society Voice and Participation

Decentralization withAccountability

Public FinancialAccountability

Competitive PrivateSector

MeritocraticCivil Service

Leadership Values & Ethics

Leadership, Ethics and Good Leadership, Ethics and Good GovernanceGovernance

“Public ethics and values are a prerequisite to, and underpin, public trust and are a key stone to good governance”

– OECD, Policy Brief 6, 2000

Good Governance

19The World Bank

Strengthening Public Service Strengthening Public Service EthicsEthics

5 Cs to Counter Corruption5 Cs to Counter Corruption

Strengthen Values & Ethics:

Counter Corruption

Strengthen Values & Ethics:

Counter Corruption

Commitment to Contribute

Commitment to Contribute

ConnectednessConnectedness

CourageCourage CosmologyCosmology

Care & CompassionCare & Compassion

Overcoming insecurity & incessant quest for material acquisitions

Creating a sense of belonging to society

Creating a sense of Compassion to care for the

more needy in society

Creating a commitment to public service – to give v/s take

Broaden vision by seeing life in the context of

the huge universe

Source: H.H. Sri Sri Ravishankar (Founder, IAHV) @ The International Anticorruption Conference, Korea

20The World Bank

THERE IS HOPE Countries have successfully undertaken reforms to improve governance

Countries have successfully undertaken reforms to improve governance

TRANSPARENCY IN EXTRACTIVE INDUSTRIES

Greater transparency, competition, public participation and oversight in procurement & extractive industries is needed

Greater transparency, competition, public participation and oversight in procurement & extractive industries is needed

STRENGTHEN SOE GOVERNANCE

Reduce day-to-day political interference, greater autonomy with accountability for results

Reduce day-to-day political interference, greater autonomy with accountability for results

STRENGTHEN OVERSIGHTBY CIVIL SOCIETY

Oversight and participation by civil society and media are crucial for putting external pressures for improving governance

Oversight and participation by civil society and media are crucial for putting external pressures for improving governance

REBUILD LEADERSHIP ANDETHOS OF PUBLIC SERVICE

Reform require ethical leadership and innovative programs to rebuild commitment to public service – to give rather than take

Reform require ethical leadership and innovative programs to rebuild commitment to public service – to give rather than take

International Experience: International Experience: Five Key Five Key MessagesMessages

21The World Bank

Q&AQ&A