Evidence-based reflections on Corruption & Natural Resource Governance

Daniel KaufmannPresident & CEO, NRGI

At the Norad Policy Forum on Natural resource management and corruption – the role of

transparency

Oslo, October 8, 2019

Voice & Accountability 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

Control of Corruption 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

Control of Corruption 2000 & 2018 (WGI):Resource Rich vs. Non-Resource Rich Developing Countries

Good

Poor

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. IMF: Resource Rich.

-1.25

-1.05

-0.85

-0.65

-0.45

-0.25

-0.05

0.15

0.35

0.55

0.75

Resource-rich Non Resource-rich

2000 2018

Base sample has 137 developing countries, of which country groupings include Resource-rich (79), Non Resource-rich (58).

5

The 3-to-1 Development Dividend From Improving Governance & Controlling Corruption

High Corruption Medium Corruption Low Corruption

$300

$3,000

$30,000

Data Source for calculations: KK 2004. Y-axis measures predicted GDP per capita on the basis of Instrumental Variable (IV) results for each of the 3 categories. Estimations based on various authors’ studies, including Kaufmann and Kraay.

The large development dividend of controlling corruption: Resource Rich countries vs. Others

Sources: GDP per capita (atop each column) from World Bank World Development Indicators, 2012.Corruption Control data from Worldwide Governance Indicators (WGI, 2012) Countries grouped into terciles based on WGI Control of Corruption scores. Resource Rich country classification according to IMF (2010).

Poor Corruption Control Average CorruptionControl

Good CorruptionControl

GD

P p

er

ca

pit

a (

PP

P)

Resource-Rich Countries Non Resource Rich

5,000

0

10,000

6,851

3,941

12,712

10,272

45,000

30,820

6

Share of Poor in

Resource Rich

Countries:20%

Share of Poor in

Non-Resource

Rich Countries:

80%Share of Poor in

Resource Rich

Countries: 50%

Share of Poor in Non-

Resource Rich

Countries:50%

Share of the # of Poor living under $2.00 a day in Non-Resource Rich Countries vs. Resource Rich Countries, 1990 & 2030

1990

2030

7

Close link between WEF Global Competitiveness (2018) &

WGI Control of Corruption (2017)

8Source: Worldwide Governance Indicators (http://www.govindicators.org) and World Economic Forum Global Competitiveness Report 2018 (https://www.weforum.org/reports/the-global-competitveness-report-2018)

Australia

China

Hong Kong

Indonesia

Japan

Cambodia

South Korea

Laos

Mongolia

Malaysia

New Zealand

Philippines

Singapore

Thailand

Taiwan

Vietnam

South Africa

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

30 40 50 60 70 80 90

Co

nro

l o

f C

orr

up

tio

n I

nd

icato

r S

co

re

Global Competitiveness Indicator Score

r = 0.83

Sovereign Bond % Yield vs WGI (Composite) Indicator: The ‘1,000 basis points dividend of good governance’

Argentina

Australia

AustriaBelgium

Botswana

Brazil

Bulgaria

Canada

ChileChina

Colombia

CroatiaCzech Republic

Denmark

Egypt, Arab Rep.

FinlandFranceGermany

Greece

Hong Kong SAR, ChinaHungary

Iceland

India

Indonesia

Ireland

IsraelItaly

Japan

Kenya

Korea, Rep.

Lithuania

Malaysia

Mexico

Netherlands

New Zealand

Norway

Pakistan

Philippines

Poland

Portugal

QatarRomania

Russian Federation

Singapore

Slovenia

South Africa

SpainSweden

Switzerland

Taiwan, China

Thailand

Turkey

Uganda

United Kingdom

United States

Vietnam

0

2

4

6

8

10

12

14

16

-1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00

20

18

So

ve

reig

n B

on

d %

Yie

ld

2016 Worldwide Governance Indicator Score

r = -0.73

Sovereign Bond % Yield is obtained from countries’ 10-year bonds as of February 14, 2018.

Source: Worldwide Governance Indicators, available at: www.govindicators.org and 10-Year Government Bond Spreads, available at:

www.investing.com/rates-bonds/government-bond-spreads.

9

10

Costs of State Capture – Private Sector grows and invests less

0

5

10

15

20

25

30

High capture Countries Low capture countries

Ave

rage

rat

e o

f g

row

th '9

7-'

99

Output Investment

AFG

ALB

ARG

ARM

BFA

CAF

CIV

CMR

COG

COL

DEU

DOM

ETH

GBR

GHA

GIN

GTM

GUY

HND

IDN

IRQ

KAZ

KGZLBR

MDGMEX

MLIMMR

MNG

MOZMRTMWI

NGA

NLDNOR

PERPHL

PNG

SEN

SLE

STP

SUR

SYC

TCD

TGO

TJK

TMP

TTOTZA

UKR

ZAR

ZMBALB

ARGBFA

CIV

CMR

COG

COL

DOM

GHA

GIN

GTM

HND

IDN

IRQ

KAZ

LBRMDG

MEX

MLI

MNG

MOZMRTMWI

NGA

NOR

PERPHL

PNG

SEN

SUR

TCD

TGO

TTOTZA

UKR

ZAR

ZMB

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

-2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50

Co

ntr

ol o

f C

orr

up

tio

n In

dic

ato

r Sc

ore

Voice and Accountability Indicator Score

Resource Rich EITI BOTH

r = 0.78

Voice and Accountability & Control of Corruption 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. IMF: Resource Rich. EITI: Countries on EITI.

Squares represent countries that have joined EITI. Dots represent all remaining countries, including those who are resource-rich colored in red.

14

-1.5

-1

-0.5

0

0.5

1

No Freedom/Rights Some Freedom/Rights Satisfactory

Freedom/Rights

Press Freedom / Women's Rights / Transparency

Cont

rol o

f Cor

rupt

ion

Press Freedom Gender Equality Transparency

Good

Freedom of the Press, Gender Rights & Transparency are

Associated with Corruption Control (Emerging Economy sample-- 135 countries)

Source for Control of Corruption: : 'Governance Matters IV: Governance Indicators for 1996-2004’, Kaufmann, D., A. Kraay and M. Mastruzzi,

(http://www.worldbank.org/wbi/governance/govdata/); Source for Press Freedom: Freedom House. Source for Gender Equality: CPIA 2004. Source for Transparency:

Transparenting Transparency”, A. Bellver and D. Kaufmann. Satisfactory Freedom/Rights reflect higher ratings from Press Freedom, women’s rights, gender equality and

transparency ratings.

Older EITI sample covers the 28 emerging EITI countries that were members as of 2011. EITI Newcomers sample covers the 19 emerging EITI countries who joined between 2009 and 2017. A conservative assumption is used for countries missing data in EITI+2 (11 countries) by using the data from the last year with available data. Number of countries with actual data per period are as follows: EITI (47 countries), EITI+1 (47 countries), EITI+2 (43 countries), EITI+3 (42 countries), EITI+4 (41 countries), EITI+5 (36 countries).

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

EITI-5 EITI-4 EITI-3 EITI-2 EITI-1 EITI EITI+1 EITI+2 EITI+3 EITI+4 EITI+5

Go

vern

ance

Ind

icat

or

Sco

re (

EITI

)Older entrants (28) vs. Newcomers (19) – Cutoff: 2011

Older EITI EITI Newcomers

Voice & Accountability pre- & post-EITI candidacy

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. EITI: Countries and joining date on EITI.

Older EITI sample covers the 28 emerging EITI countries that were members as of 2011. EITI Newcomers sample covers the 19 emerging EITI countries who joined between 2009 and 2017. A conservative assumption is used for countries missing data in EITI+2 (11 countries) by using the data from the last year with available data. Number of countries with actual data per period are as follows: EITI (47 countries), EITI+1 (47 countries), EITI+2 (43 countries), EITI+3 (42 countries), EITI+4 (41 countries), EITI+5 (36 countries).

-1

-0.9

-0.8

-0.7

-0.6

-0.5

EITI-5 EITI-4 EITI-3 EITI-2 EITI-1 EITI EITI+1 EITI+2 EITI+3 EITI+4 EITI+5

Go

vern

ance

Ind

icat

or

Sco

re (

EITI

)Older entrants (28) vs Newcomers (19) - Cutoff: 2011

Older EITI EITI Newcomers

Control of Corruption pre- & post-EITI candidacy

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide

Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. EITI: Countries and joining date on EITI.

| WWW.RESOURCEGOVERNANCEINDEX.ORG

2017 Resource Governance Index country scores and rankings

17

| WWW.RESOURCEGOVERNANCEINDEX.ORG

State-owned enterprises assessed in the RGI

18

Source: OECD 2017 Survey of anti-corruption and integrity in SOEs.

Corruption & related irregular practices in SOEs, by sector (Survey by OECD)

EITI & the Anti-Corruption Agenda• Achievements: Dialogue, Data, Civil Society Protections, some

Accountability. Board focus now (with NRGI, Norway support)

• Ahead: For legitimacy of the initiative: Open & Concrete

1. Diagnostics: Incentives for countries to assess and address corruption & capture risks -- at outreach/sign-up, MSG workplans; validation

2. Safeguarding Civil Society Protections -- fundamental

3. Companies stepping up -- including MNC majors & SOEs

4. Service Contracting (following progress on traders)

5. Energy Transition – corruption an obstacle

6. Partnerships: EITI about transparency - hence partners: OECD, IMF, Norway/bilaterals; NRGI, CSOs, researchers -- Political

Thank you