Public Sector Governance & Corruption

1. Public Sector Governance & Corruption A Quick Introduction

2. Contains materials from Public Sector Governance and Anti-corruption Core Course, Public Sector Group, the World Bank

3. Why governance and corruption? • Ch 11 deals with the poor, the sick, the disenfranchised. They live in countries with economies unable to provide a better life, and where contrasts are apparent. • Ch 12 suggests that foreign direct investments can limit conflict. FDI depends on economic and political stability. • Governments or states have a role in how economies are managed, determines political climate. • Governance deals with how states acquires and exercises its authority.

4. Governance • Myths about governance and corruption in http://www.imf.org/pubs/ft/fandd/2005/09/basics.htm • Governance and corruption are one and the same. • Governance and corruption can not be measured • The importance of governance and corruption is over-rated. • Governance is a luxury only rich countries can afford. • It takes generations for governance to improve.

5. Governance • Myths about governance and corruption (continued) • Donors can “ringfence”projects in highly corrupt countries and sectors. • Fight corruption by fighting corruption. • The culprit is the public sector in developing countries. • There is little countries can do to improve governance. • There is not much the IFIs can do.

6. Governance Corruption Institutions Concepts/Definitions The manner in which theState acquires and exercises its authority to provide public goods and services Usingpublicoffice for privategain The“rules of the game”that govern the behavior of people within a given environment

7. Definitions & discussion • State = government, which includes national and local units • Provides goods and services not otherwise provided by private sector • Acquisition of authority • Election • Exercise of authority

8. Administrative Corruption: Private payments and other benefits to public officials in connection with the implementation of government policy and regulations State Capture: Influence of powerful private interests in the formation of laws, regulations, through illegal provision of private gains for public officials Concepts/Definitions Corruption

9. Example of administrative corruption • I will use my classification scheme • Petty – bribery to facilitate a process or avoid minor penalties, e.g. traffic violations • Extortion through use of authority to extract bribe • Major – briberies and use of influence to win major contracts or control of assets • Manage a port or power plant • State capture – in addition to major contracts, write laws that favor specific interests

10. Delegation of Implementation Delegation and Voice Political Accountability Internal Accountability Public Goods and Services Client Power/Social Accountability The Governance Triad Politicians/ Policymakers Citizens Bureaucrats

11. The Governance Triad Politicians/ Policymakers Compact Delegation of Implementation Delegation and Voice Political Accountability Internal Accountability Public Goods and Services Citizens Bureaucrats Client Power/Social Accountability

12. Comment on relationships • Because of the complexity of relationships between entities, what is delegated and who are accountable have to be decided on a case by case basis • Relationship is implicit – citizens vote, politicians act on their behalf – and explicit, e.g. bureaucrats can have job descriptions. However link to citizenry is usually weak.

13. State Capture The Governance Triad Politicians/ Policymakers Delegation of Implementation Delegation and Voice Political Accountability Internal Accountability Public Goods and Services Citizens Bureaucrats Client Power/Social Accountability

14. Examples of state capture • In case of Saudi Arabia, based on reading, is there state capture? • Other examples – readings?

15. Administrative Corruption The Governance Triad Politicians/ Policymakers Compact Delegation of Implementation Delegation and Voice Political Accountability Internal Accountability Public Goods and Services Citizens Bureaucrats Client Power/Social Accountability

16. Example of administrative corruption • Enforce laws, for example seizure or traffic laws. • Citizens may actually pay the same or less to obtain the service or avoid penalties. Either way, government suffers financially and in terms of credibility. • Other examples

17. Some basic principles of good governance • In providing goods and services, states do have to deal with various sectors. • Who should be involved in decision making? • Are goods and services being delivered? • Are public officials accountable? Is there transparency? • Fairness – equal opportunity, laws enforced impartially • Direction – strategic vision on good governance and human development

18. Where corruption thrives • Human discretion • Low risk of capture • Large sums of money • Penalties for capture much less than sums of money to be gained • Suggests: • Rules are unclear and subject to interpretation • Weak rule of law • Low paid civil servants • Social acceptance that corruption is inevitable

19. In-class writing • List issues or topics we have covered so far that you find: • Personally interesting • Believe a global manager must be knowledgeable of • Note whether the topic meets both criteria

20. Some suggested topics • Challenge to global companies of “flat world”: e-waste, mass produce but cater to individual markets, competition from non-traditional locations, etc. • Investigate movement of an industry in the last couple of decades to understand how and why these became global; provide perspective on “triple convergence” • What were the roles of indigenous entrepreneurs in establishing manufacturing facilities in places like southern China, northern Mexico (maquiladoras), or software companies in India? Roles of global firms? • Various means used by different countries to encourage foreign direct investments

21. Some suggested topics • Use governance and corruption framework in understanding political situation in a particular country? For example, are China and India really “model” states? • Causes and organization behind terrorist activities in a given country • Islam and its relationship with specific countries (where one may have a major operation.)