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Addressing Corruption Challenges Using Governance Diagnostic Surveys: Some Illustrations

Presented to:PREM Learning Week - AGI CourseThursday April 29, 2010MC4-800

Presented by:Francesca RecanatiniSenior EconomistPREM Public Sector GovernanceWorld Bank

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Outline

Governance and corruption: A Definition

Motivation Methodology/ies Survey data Agency-level Indicators Going forward

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Governance and Corruption

The process, institutions and customs through which the function of governing is carried out.

Using public office for private gain

Governance

Corruption

• Corruption is an outcome – a consequence of weak or bad governance

• Poor delivery of services and weak investment climate are other outcomes of bad governance

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0%

10%

20%

Low Medium High

Income

% d

isco

urag

ed u

sers

Peru

Inequality - Corruption is a regressive tax: Poor & small firms pay more in bribes

WBI diagnostics. % of gross monthly revenue paid in bribes, as reported by managers 2001.

0123456789

Ecuador Peru Honduras

Small Medium Large

Exclusion - Corruption restricts access of poor households to public services

WBI diagnostics. Discouraged Poor Users Due to Bribes, 2001.

Corruption and Development: some initial evidence…

Service delivery - Bribery is associated with bad quality of service

Social securityTransit authority police

Customs office

National policePublic registry

Trash collection

Post officePublic education

Power company

Tax collection

Phone companyLicense department

Public hospitals

Construction permitsWater

y = -0.02x + 4.29R2 = 0.38r = -0.62

3.0

3.5

4.0

4.5

5.0

0 10 20 30 40 50 60

Percent of respondents reported paying any bribes

Qua

lity

of p

ublic

ser

vice

s:1=

very

poo

r 7=v

ery

good

WBI diagnostics. Citizens’ Responses, Ecuador 2000.

Growth - Negative impact on competitiveness

32

Controlling Corruption is Associated with Higher Country’s Competitiveness

ZWE

VNMVEN

URY

USA

GBRARE

UKRUGA

TUR

TUN

TTO

THA

TZA

TJ K

TWNCHESWE

LKA

ESP

ZAF

SVN

SVK

SGP

YUGRUS

ROM

QAT PRT

POL

PHLPER

PRY

PAN

PAK

NOR

NGANIC

NZLNLD

NAM

MOZ

MAR

MNGMDA

MEX MUS

MLT

MLI

MYS

MWI MDG

MKD

LUX

LTULVA

KGZ

KWT

KOR

KEN

KAZ

J OR

J PN

J AM

ITA

ISR IRL

IDN

IND

ISL

HUN

HKG

HND

GUY

GTM

GRC

GHA

DEU

GEO GMB

FRA

FIN

ETH

SLVEGY

ECUTMP

DOM

DNK

CZECYP

HRV CRICOL

CHN

CHL

TCD

CAN

CMRKHM

BGRBRA

BWA

BIHBOL

BEN

BEL

BGD

BHR

AZE

AUT

AUS

ARGDZA

ALB

2

4

6

-2 -1 0 1 2 3Control of Corruption

Glo

bal C

ompe

titiv

enes

s In

dex

Low

Low High

High

r = 0.90

Sources: GCI is from GCR2005/6 by WEF, Control of Corruption from Kaufmann, Kraay and Mastruzzi, ‘Governance Matters IV: Governance Indicators for 1996-2004’.

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Political Governance• Political competition, 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

Citizens/Firm

s

Citizens/Firms

Citi

zens

/Fir

ms

Citizens/Firms

Decentralization and Local Participation• Decentralization with downward accountability• Community Driven Development (CDD)• Oversight by parent-teacher associations & user groups

Civil Society & Media• Free press, FOI• Civil society watchdogs

Private Sector Interface• Streamlined regulation• Extractive Industry

Transparency Initiative• Collective business

associations

Public Sector Management

• Public finance management & procurement

• Civil service meritocracy & adequate pay

• Service delivery and regulatory agencies in sectors

Good governance has many dimensions …

Outcomes: Services,

Regulations, Corruption

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Governance diagnostic surveys - Approach A participatory process to identify

governance challenges and build local capacity

Key features: Three surveys: households, firms and public

officials Questions focused on experience, adapted to

local realities and tested in the field Survey instruments and results validated through

focus groups Rigorous technical implementation Local institution implements

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1. Establishment of Steering Committee

2. Diagnostic surveys + analysis

3. Draft of the NAS

4. Public dissemination + discussion

5. Revision of the NAS

6. Implementation by Government

7. Monitoring and Evaluation of NAS

Challenge: poor governance and corruption

WB

Tec

hnic

al A

ssis

tanc

e

Key Partnership: Government + Civil Society

Country Implemented

Participatory process to policy design to address political economy issues

CAPACITY BUILDING

• Local firm collects data• Local enumerators trained• Local supervision by

technical cmte.

Collects EXPERIENCE& PERCEPTIONS data from serviceUSERS & PROVIDERS(3 sources)

End WB T.A.

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0% 15% 30% 45% 60% 75% 90%

% of public officialsreport frequent public

funds mis-management

% of public officialsreport frequent

purchase of positionsin their institutions

% public officialsreport frequent casesof corruption in public

administration

Sierra Leone(2003) Guinea(2004) Guatemala(2004) Zambia(2003)Paraguay(2005) Mozambique(2004) Madagascar(2005)

Country Diagnostic ResultsExtent of corruption, (Selected Countries ‘03-’05)

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Percentage of household income spent on bribes to obtain services, by income status (as reported by households), Sierra Leone, 2003

0% 5% 10% 15% 20%

Public health services

Public education services

Income Tax Department

Judges/Courts officials

Municipal/Dist. Councils

Surveys and Lands

percentage of household income spent on bribeshigh incomemiddle incomelow income

Corruption increases inequality

Country Diagnostic Results

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Public funds are mismanaged by agency (as reported by Public Officials, Sierra Leone, 2003)

0 10 20 30 40 50 60 70 80 90

Min. of DefenceMin. of Development

Min. of InformationNat. Commissions

OthersPara-statals

Min. of FinanceMin. of Local Govt.

Min. of Social WelfareMin. of Education

Min. of JusticeS.L Police

Min. of AgricultureMin. of Health

% of Public Officials that said irregularities/(misappropriations) are frequent

Country Diagnostic Results

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Mechanisms to participate to the policy process

0

10

20

30

40

50

60

Association/NGO Direct tie topublic officials

None

Southern Northern Eastern Western

% of households reporting to use the following channel to participatein the policy process (Sierra Leone, 2003)

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Sector Level Diagnostic Surveys: Key questions (e.g. transport)

Institutional structure of the sectors under study How does transport work in Mauritania? What needs to happen at the

implementation level? Possible vulnerabilities

Internal to the sector: transporters, officials and regulations. External to the sector: linked to banking sector? International issues?

Mechanisms of poor governance Is it difficult to get a trucking license? Are bribes required to cross

borders with freight? Do civil servants have necessary capacity? Are rules clear?

Costs of poor governance What price do transporters and customers pay to ‘facilitate’ antiquated or

inadequate processes? What is the mark up on contracts due to fraud? How many roads are narrower than they should be because of corruption?

Who are the major players and what are their policy needs? Potential entry points for reform? Who plays a role in the reform

process? Who can be a potential deal breaker? How can we understand the political landscape to ensure policy outcomes are politically viable?

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Methodological Approach

Sector LevelGovernance Assessment

Tools & Info

Desk Study: history,

sector structure, current context

In-Depth Interviews

3 Surveys(Experience Based)

Audit & Project Data Cross-Sector Team

(PREM, WBI, SDV,PDS, Procurement)Country Ownership

Political Economy Assessment

Team Capacity Needs

Transparent Process

Local PartnershipGov’t + Civil Society

Donor Partnership w/Active Donors

Partnershipw/ Bank Country Team

Broad PeerReview

Process Needs

Outcomes:

1. Governance Baseline

2. Agency Specific Indicators3. Public Dissemination &

Participatory Policy Process

Iterative process: 8-12 months

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Innovative features Sector-specific focus:

Apply methodology and solutions to country and sector realities Mixed methods:

Focus groups & In-depth Interviews Surveys (households, businesses & civil servants) Desk study Project cost data

Active participation of civil society and government to contribute to policy making process.

Close collaboration with donors’ colleagues. Active links to on-going sector projects

WB transport and port projects EU transport ministry aid project

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Agency-level Indicators Using responses from public officials Public officials are employees of each

agency Public official’s responses are re-scale

(from 0 to 100) and then aggregated by agency using factor analysis technique

0 always meaning the lowest level of quality of governance, corruption, access or service performance

Governance Indicators, by agency(Public officials from 20 agencies, Guinea 2004)

Audit Mechanisms

Enforcement of Rules

Quality of Rules Politicization Resources Transparency Citizen

VoiceWage

Satisfaction Service State Capture

Overall Corruption

Ministère de la justice 63 51 55 44 37 47 72 19 67 44 39Ministère de la Sécurité 62 50 57 44 38 47 74 18 69 38 35Ministère de l’Administration et de la Décentralisation 61 53 54 42 39 49 75 29 70 45 45Ministère des Finances 76 72 60 40 43 58 80 28 67 51 30Ministère de l’Enseignement Supérieurs et Recherche Scientifique

62 50 56 44 35 46 74 20 69 47 42

Ministère de l’Urbanisme et Habitat 76 42 33 64 75 38 5Ministère de la Santé Publique 70 63 57 43 35 60 70 30 58 40 44Service Communal 62 51 34 40 52 64 13 49 49Service Sous Préfectoral 58 43 55 45 32 43 72 13 64 52 37Ministère de la Communication 52 61 44 38 46 75 42 65 69Ministère de la Jeunesse et Sports 60 52 56 42 42 53 73 11 71 52 42Ligue Islamique Nationale 62 60 59 41 41 49 75 28 64 43 33Ministère de l’Agriculture 61 58 57 42 38 45 77 30 65 36 36Ministère de l’enseignement Pré Universitaire 67 69 57 41 50 50 72 42 76 45 31Ministère de la Fonction Publique 44 60 45 44 44 71 25 56 10Organisation Non Gouvernementale (ONG) 59 53 41 48 44 82 8 70 54Entreprise Micro – Finance 32 73 8 80 13Ministère de l’Energie, Mines et Environnement 70 49 55 52 25 74Whole Country 62 50 57 45 34 46 75 20 68 42 37

The indicators above take values between 0-100. To interpret them please keep in mind that:-The higher the value of the governance indicator the better the quality of that dimension . -The higher the value of the corruption index, the more severe the problem.

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Lessons learnt Do we actually know anymore what we are

measuring?Multi tools do not translate into less precision or confusion. Rather, “competition” allows us to improve our methodologies and to create interesting partnerships (Madagascar, Paraguay, Peru)

How can we help various stakeholders make appropriate use of all the tools out there?Local focus, local capacity building, participation, and learning by doing (Paraguay, Peru, Sierra Leone)

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Lessons learnt, cont. How do we balance global (ranking)

measurement tools with national assessments?Two sides of the same coins, but with different objectives. Important that the two approaches complement each other

Who should be involved in measuring?It depends on the country reality. Our experience: the country as a whole. But donors, INGOs can play a very important role (Sierra Leone, Mozambique, Haiti). NSOs should also be involved to promote sustainability (Peru, Paraguay)

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Lessons learnt, cont. What are the advantages and disadvantages of

the approach used?Pros: Greater local capacity, consensus and ownership that can ensure sustainability of reform process; south-south knowledge dissemination (Costa Rica, Zambia, Mozambique, Haiti)Cons: Time consuming and costly; challenging to coordinate many different actors, especially international ones; unforeseen political changes

To what extent have measurement tools helped shape public sector reforms?Honduras, Burundi, Mozambique, Madagascar

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Lessons learnt, cont. Additional challenges

2nd generation diagnostics focus on sector governance => more challenging to apply this model at the sector level (Mauritania, Senegal, Yemen and Morocco)

Government commitment Transparency of process Participation of different stakeholders

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WB Governance Resources on the Web Governance and Anti-corruption:

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20040922~menuPK:34480~pagePK:34370~theSitePK:4607,00.html

Public Sector Group: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPUBLICSECTORANDGOVERNANCE/0,,menuPK:286310~pagePK:149018~piPK:149093~theSitePK:286305,00.html

Governance and Anti-corruption (WBI): http://web.worldbank.org/WBSITE/EXTERNAL/WBI/EXTWBIGOVANTCOR/0,,menuPK:1740542~pagePK:64168427~piPK:64168435~theSitePK:1740530,00.html

Governance Diagnostic Surveys Country Sites: http://www.worldbank.org/wbi/governance/capacitybuild/d-surveys.html

Courses and Surveys: Governance Diagnostic Capacity Building: http://www.worldbank.org/wbi/governance/capacitybuild/courses.html

Actionable Governance Indicators Website: www.agidata.info (internal) www.agidata.org (external)

Additional material available upon request: AskGov@worldbank.org

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Prevalence of Bribery in Public Procurement Reports from Firms, Selected Countries – 2006

0 20 40 60 80 100

Denmark

New Zealand

Chile

Uruguay

South Africa

United Kingdom

El Salvador

Costa Rica

Colombia

Botswana

Guatemala

Mexico

Brazil

Italy

Greece

Venezuela

Pakistan

Russia

China

Chad

Cambodia

Bangladesh

% Firms that pay public procurement kickbacks

Confidential

Preliminary. Selected countries, and margins of error apply, therefore no ranking is implied. Source: EOS 2006 of the WEF, analysis by WBI. Question: When firms like yours do business with the government, how much (% fee) of the contract value are they expected to pay in additional payments for the bid to succeed? Calculations of shares based on firms that reported answers other than zero.

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Extent of corruption (Several Countries 2000-2005)

Confidential

0% 15% 30% 45% 60% 75% 90%

% public officials reporting frequent casesof corruption in public administration

% firms reporting bribes used frequently inpublic services

% firms reporting bribes used frequently inpublic contracts

Peru(2001) Colombia(2001) Honduras(2001) Ecuador(2000)Sierra Leone(2003) Guinea(2004) Guatemala(2004) Zambia(2003)Paraguay(2005) Mozambique(2004) Madagascar(2005)

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Peru and Colombia: extent of "State Capture" by elites (as reported by public officials, 2001)

30 50 70 90

Central Bank decisions

Regulatory Agencies

High Officials (influencing presidentialdecrees/decisions)

Judiciary (influencing major courtdecisions)

Parliamentarians (to influence laws)

ColombiaPeru Confidential

% public officials report bribes to agency influence business climate

Capture by Vested Interests of:

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Peru: Sources of Undue Private Influence on the State

10

40

70

100

DrugConglomerates

EconomicGroups

FDI/TransnationalCorporations

OrganizedCrime

ProfessnlAssociations

Labor Unions

% re

porti

ng a

gent

is h

ighl

y in

fluen

tial

Firms Public officials

Confidential

Based on governance diagnostic surveys of public officials and enterprises

Responses by:

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Bribes to win contracts with Government, (as reported by public officials, 1999-2005)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Bolivia(1999)

Colombia(2001)

Guatemala(2004)

Guinea(2004)

Honduras(2001)

Paraguay(2005)

Peru(2001)

Sierra Leone(2003)

Zambia(2003)

Mozambique(2004)

Madagascar(2005)

% of public officials reporting that the practice is frequent

Executive Local Governments

Confidential

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Public funds mismanaged by agency (as reported by Public Officials, Sierra Leone ‘03)

0 10 20 30 40 50 60 70 80 90

Min. of DefenceMin. of Development

Min. of InformationNat. Commissions

OthersPara-statals

Min. of FinanceMin. of Local Govt.

Min. of Social WelfareMin. of Education

Min. of JusticeS.L Police

Min. of AgricultureMin. of Health

Confidential% of Public Officials that said irregularities/(misappropriations) are frequent