the world bank page 1 sanjay pradhan presented by: sanjay pradhan director prem public sector...

The World Bank

Sanjay Pradhan

Presented by:Sanjay Pradhan

DirectorPREM Public Sector

GovernanceThe World Bank

Presented to:Capacity Enhancement Program on Controlling Corruption & Improving Governance for ThailandSeptember 6, 2008

Improving Governance & Public Administration:

Frontier Areas of Reform

The World Bank

Sanjay Pradhan

Governance & CorruptionNot the Same Thing!

The manner in which the The manner in which the statestate acquires acquires and exercises its authority to provide and exercises its authority to provide public goods & services – depends on public goods & services – depends on capacity & accountability relationships capacity & accountability relationships among state & non-state actorsamong state & non-state actors

Use of Use of publicpublic office for office for privateprivate gain gain

GovernanceGovernance

CorruptionCorruption

•Corruption is an outcome – a consequence of weak or bad governance. Weak investment climate & poor service delivery are other outcomes.

• Improving governance entails building a more capable, accountable & responsive state

The World Bank

Sanjay Pradhan

Improving GovernanceA Cross-Cutting Priority for Inclusive Growth

• Building a sound investment climate for growth– Institutions for macroeconomic stability (e.g., fiscal responsibility legislation,

independent Central Banks)– Streamlined regulatory system: business entry, tax system– Independent, competent, trusted judiciary– Physical and financial infrastructure: power, transport, finance

• Delivering better public services to empower the poor– Health, including curbing informal payments, leakages of drugs– Education, including tackling absenteeism, leakages– User participation and oversight in service delivery

• Managing public resources better– Transparent & comprehensive budgets– Transparent, competitive public procurement system– Performance-based budgeting and human resource management system with

meritocracy and adequate pay

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Sanjay Pradhan

Political Institutions• Political accountability, broad-based political

parties• Transparency & regulation of party financing

Citizen

s/Firm

s

Citizens/Firms

Cit

izen

s/F

irm

s

Citizens/Firms

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

Civil Society & Media• Free press, Right to

information• Civil society watchdogs

Private Sector• Contracting out • Extractive Industry

Transparency Initiative• Collective business

associations

Executive

• Transparent budgeting & procurement

• Civil service meritocracy & adequate pay

• User participation & Accountability in service delivery agencies

Mechanisms to Improve GovernanceMechanisms to Improve GovernanceCapacity, Transparency, AccountabilityCapacity, Transparency, Accountability

Outcomes: Services,

Investment climate,

Corruption

Formal Oversight Institutions

• Independent judiciary• Legislative oversight • Independent

oversight (SAI)• Global initiatives: UN,

OECD Convention, anti-money laundering

State Capture

Patronage &

nepotism

administrative

corruption

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Sanjay Pradhan

Public Management

Public financial management & procurement

Administrative & Civil Service Reform

Governance in SectorsTransparency, participation, accountability in

service provision (health, education, transport)

Sector-level corruption issues (EITI, forestry)

Demand-side Reforms

State oversight institutions (parliament, judiciary, SAI)

Transparency & participation (right to information, user

participation)

Civil society & media

Structure of Public Sector

Decentralization

Creation of Arms-length agencies

Private Sector

Competitive investment climate

Responsible private sector

Helping Countries Improve Governance Different Entry Points Across Countries

The World Bank

Sanjay Pradhan

Evolution of Reforms in High-Income OECDsSignificant Foundations of Legitimacy in Place

1990s – Performance

Concern to make promises and deliver on themMeasurement of results and the use of measurements for planning or accountability purposes

1970s - Responsiveness to elected officials and political prioritiesFrustration with political neutralityConcern that the public service is an obstacle to political objectives

1950s - Equal access and equal treatment

ImpartialityConcern that employment in the public sector should be representative of society

19th century - Due process and institutional continuity Patronage & purchase of public positions Northcote-Trevelyan Reforms of 1854 in UK, following bureaucratic chaos in the Crimean War Driven by the law

Deepening basis for the legitimacy of the public service

The World Bank

Sanjay Pradhan

High-Income OECD Countries• Performance-based budgeting: recent trends

– Shifting focus from input control to accountability for results • Example: UK Public Service Agreements (PSAs) with the Treasury: three-year agreements with objectives

& targets, published & monitored by Treasury

– Different degrees of performance information in high-income OECDs:• Presentational: performance information presented with budget for later discussion• Direct or formula-based performance link rare – Example: Korea, where ineffective programs get 10

percent automatic cut, concern about information quality & gaming

– Move to accrual accounting and performance & value-for-money audits

• Many different approaches towards performance management– Only in a few countries (UK, Denmark): agencies’ performance directly reflected in pay or performance bonus of

senior management– In other countries, use of individual performance agreements & appraisal systems to link organizational goals to

performance, influencing future career– Majority of OECD countries introduced performance-related pay (PRP) policies, but this has not been successful

(created resentment, promotion is better instrument for recruiting or retaining capable staff)

• Creation of arms-length agencies– Focused purpose, accountability with autonomy. Examples: UK Next Steps Agencies, Netherlands ZBOs– Coordination challenges with proliferation of agencies

• Demand-side reforms -- open government & E-government Examples:

– Freedom of Information legislation – with widespread utilization – Publication of service standards (e.g. citizen charters)– Consultative mechanisms (regulatory impact assessments)– Creation of ombudsman offices to hear redress

The World Bank

Sanjay Pradhan

MICs in Latin America• Budget rules for aggregate fiscal discipline: “Fiscal

Responsibility” laws

• Reforms to improve budget performance– Chile stands out as the country that has made results-based budgeting

– Progress in Brazil of withdrawal of autonomy and possible dismissal of Secretary)

– But less progress in Bolivia, Peru, Colombia

– Integrated Financial Management systems (IFMSs) successful in LAC in 1990s

• Human Resource Management– Some success in meritocracy (Chile’s 2004 Reforms, Brazil 1995 Reform)

– Failure of meritocracy in clientelistic bureaucracies (Honduras, Bolivia, Peru)

• Significant decentralization: Fiscal and administrative, election of mayors

• Creation of arms length agencies in enclaves: e.g., Peru’s SUNAT, with some improvement in performance, but questions of sustainability

• Major thrust in demand-side reforms– Right to information legislation

– E-government – one-stop shops & e-procurement in Brazil & Mexico

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Sanjay Pradhan

Latin America: Two Patterns of Public Administration Reforms

• Institutionalized and sustained (Chile, Brazil, Costa Rica)– Where public sector operates on reasonably transparent and

formal lines, and public servants are hired on merit and reasonably immune from political pressures, then reforms look similar to those in high-income OECD countries

– Performance-based human resource management and budget management driving efficiency improvements in service delivery

– These reforms are institutionalized and sustained • Opportunistic reforms, but with risks of reversals

(Bolivia, Peru, Ecuador)– Where patronage is more entrenched, reforms have flavor of

pilots or experiments– More likely to be enclaved or disconnected from the rest of public

sector– Flavor of opportunism with risk of reversal – Need rule-based compliance as precondition for reforms

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Sanjay Pradhan

‘Leapfrogging’ & Non-traditional Sequencing:Achievements & Challenges

• Spectacular failures because of missing or inadequate “prerequisite” organizational practices- Kyrgyz, Mongolia, Argentina, Ecuador

• Limited number of clear examples – Middle-income countries – sequencing from “prerequisite” to “mature” performance-focused systems- Chile, Singapore

• Many countries chosen to “leapfrog” directly from patronage-based to performance-based management though “islands of success” based on “performance-based” management practices

- Central Banks in many countries - Tax administration (SUNAT in Peru)

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Sanjay Pradhan

Frontier Areas for Reform

• Ensure rule-based public administration practices are in place:

– Internal audit & control– Monitoring of merit-based recruitment, promotion, transfers – Indicators for rule-based compliance: Public Expenditure

and Financial Accountability or PEFA indicators; Human resource management (HRM) Actionable Governance Indicators (AGIs)

• Strengthen ethical responsibility:– Asset declaration requirements– Codes of ethics for public officials– Strengthen commitment to values and ethics in public service:

transformational leadership at individual & collective levels– Coalitions of integrity to combat entrenched networks and

attitudes towards corruption

The World Bank

Sanjay Pradhan

Frontier Areas of Reform (cont.)• Enhance availability of information

– Monitoring and posting of information on activities, outputs and results – Right-to-Information (South Africa, India)

• Enhance participation & monitoring by civil society & media– Stakeholder consultations in policy development process– Bring state closer to people: Decentralization– Posting of information on organizational budgets, standards and performance – CSO monitoring of public sector performance (e.g., Bangalore Report Cards)– Media monitoring of asset declarations (e.g., Philippines)

• E-Government– Russia: online tax payment reduced corruption and increased overall tax

compliance – Bhoomi project in Karnataka, India computerized 20 million land records for

6.7 million farmers– E-Procurement in Chile, Brazil, Mexico

• Multistakeholder coalitions for reform– Needed to combat entrenched networks of corruption– Examples: EITI, FLeG– Global collective action to combat transnational corruption (e.g. StAR)

The World Bank

Sanjay Pradhan

E-Government & Voice for Procurement Reforms Growing Trend in International Experience

E-Procurement: ChileE-Procurement: Chile

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

Public agencies submit tenders through internet

Automatic e-mail to all companies in selected area

Online information on name, position of official in-charge

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

Engaging CSOs: PhilippinesEngaging CSOs: Philippines Legal foundation a mess with

over 100 laws and regulations New omnibus law needed for

clarity and predictability in the process

New law in 2003 with determined efforts of reform minded public officials allied with strong and unified advocacy efforts of CSOs to offset entrenched vested interests

For credible enforcement: requirement that all bids and awards committees must have at least one observer from a certified CSO

Extensive training of CSOs now under way

Legal foundation a mess with over 100 laws and regulations

New omnibus law needed for clarity and predictability in the process

New law in 2003 with determined efforts of reform minded public officials allied with strong and unified advocacy efforts of CSOs to offset entrenched vested interests

For credible enforcement: requirement that all bids and awards committees must have at least one observer from a certified CSO

Extensive training of CSOs now under way

The World Bank

Sanjay Pradhan

Civil Society Monitoring for Improved Service Provision: Bangalore, India

Source: Public Affairs Center, India

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

ouncil

Elect

ricity

Wat

er s

upply

Telep

hones

Public h

ospita

ls

Police

Land a

uthorit

y

Public b

uses

Transp

ort au

thorit

y

Agencies

Per

cen

t S

atis

fied

1994 1999 2003

The World Bank

Sanjay Pradhan

Media Monitoring: “BIR [Tax Collector] 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, 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

Owner: Regional Director in the Bureau of Internal Revenue forced to resign; currently facing corruption charges; other officials suspended, also facing charges

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Sanjay Pradhan

Media

Private Sector

Municipal Government

Military

State (Bureaucracy)Political Parties

Civil Society

International Legislative Branch

Judiciary

1

Entrenched Corruption Networks: The Case on Montesinos in Peru

Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000

Vladimiro Montesinos

Alberto Fujimori

The World Bank

Sanjay Pradhan

Philippines: Procurement ReformTransparency 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)

Procurement Watch:Procurement Watch: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

Multistakeholder Coalitions for Reform

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Sanjay Pradhan

Extractive Industries Transparency Initiative (EITI)• Multi-stakeholder approach with mutual accountability

between government, private sector and civil society

• 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 accessible form, oversight by civil society

• From EITI to EITI++ EITI

Award of contracts

andlicenses

Regulation and monitoring of operations

Collection of taxes and royalties

Revenue distribution

and management

Sound Sustainable

Projects

• Azerbaijan’s State Oil Fund – transparent, consolidated, audited. Focus now upstream on contract transparency & downstream on budget transparency & reporting

• Kazakhstan’s investment in downstream public finance management

The World Bank

Sanjay Pradhan

Global Collective Action: Corruption is not just a developing & transition

country problem

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.

Percentage of firms that pay public procurement kickbacks by country of origin of foreign direct

investment

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Sanjay Pradhan

The Stolen Asset Recovery (StAR) Initiative

Ferdinand Marcos (President of the Philippines

1972-1986) $5-10 billion

Sani Abacha(President of Nigeria 1993-

1998) $2-5 billion

Mobuto Sese Seko(President of Zaire 1965-1997)

$5 billion

Mohamed Suharto(President of Indonesia 1967-

1998) $14-35 billion

*Source for estimates of former Presidents above: Transparency International Global Corruption Report 2004. All sums are estimates of alleged embezzlement in US dollars.

Persuade all jurisdictions to ratify & Persuade all jurisdictions to ratify & implement the UNCACimplement the UNCAC

Help developing countries recover Help developing countries recover the existing stock of stolen assetsthe existing stock of stolen assets

Help countries undertake the Help countries undertake the necessary institutional reforms that necessary institutional reforms that would help deter future asset theftwould help deter future asset theft

Advocate with financial centers to Advocate with financial centers to lower barriers to recoverylower barriers to recovery

On a voluntary basis, offer expertise On a voluntary basis, offer expertise to monitor the use of recovered to monitor the use of recovered assets for development (e.g., Nigeria)assets for development (e.g., Nigeria)

Cross-border proceeds from criminal activity, Cross-border proceeds from criminal activity, corruption & tax evasion estimated to be $1-corruption & tax evasion estimated to be $1-1.6 trillion per year— half from developing & 1.6 trillion per year— half from developing & transition countriestransition countries

Bribes received by public officials from Bribes received by public officials from developing & transition countries is estimated developing & transition countries is estimated at $20-40 billionat $20-40 billion

TI’s estimates of stolen assets include:TI’s estimates of stolen assets include:

The ProblemStAR is a joint initiative with the

Bank & UNODC, launched in September 2007. Partnerships are being developed at the global and

country levels to:

A Global Effort

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Sanjay Pradhan

Conclusion: Frontier Issues for Reform

• Strategic reforms to strengthen performance-orientation:o Improving quality & protection of rule-based, meritocratic systemo Make strategically important agencies more performance-oriented o Greater performance-orientation (performance budgeting, performance

management, M&E, indicators)• Integrating transparency & ‘demand-side’ approaches in

public managemento More systematic e-government (one-stop shops, e-procurement)o More proactive use of right to information and transparency reformso Citizen voice in policy making & implementation (consultations, report

cards)• Strengthening ethical responsibility in public service

o Asset declaration, conflict of interesto Strengthening commitment to public service at individual & collective

levelso Coalitions of integrity to rebuild culture of public service

• Build multistakeholder coalitions for reformo Collaborative governance arrangementso Global collective action to combat transnational corruption

The World Bank

Sanjay Pradhan

Discussion

the world bank page 1 sanjay pradhan presented by: sanjay pradhan director prem public sector...

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