Addressing Corruption Challenges Using Governance Diagnostic Surveys: Some Illustrations

1. Addressing Corruption Challenges Using Governance Diagnostic Surveys: Some Illustrations Presented by: Francesca Recanatini Senior Economist PREM Public Sector Governance World Bank Presented to: PREM Learning Week - AGI Course Thursday April 29, 2010 MC4-800

2. Outline • Governance and corruption: A Definition • Motivation • Methodology/ies • Survey data • Agency-level Indicators • Going forward

3. Governance and Corruption The process, institutions and customs through which the function of governing is carried out. Governance Corruption Usingpublicoffice for privategain • Corruptionis an outcome– a consequence of weak or bad governance • Poor delivery of services and weak investment climate are other outcomes of bad governance

4. Corruption and Development: some initial evidence… Inequality - Corruption is a regressive tax: Poor & small firms pay more in bribes Exclusion - Corruption restricts access of poor households to public services WBI diagnostics. % of gross monthly revenue paid in bribes, as reported by managers 2001. WBI diagnostics. Discouraged Poor Users Due to Bribes, 2001. Service delivery - Bribery is associated with bad quality of service Growth - Negative impact on competitiveness WBI diagnostics. Citizens’ Responses, Ecuador 2000.

5. Good governance has many dimensions … Citizens/Firms • Political Governance • Political competition, broad-based political parties • Transparency & regulation of party financing • Public Sector Management • Public finance management & procurement • Civil service meritocracy & adequate pay • Service delivery and regulatory agencies in sectors • Formal Oversight Institutions • Independent judiciary • Legislative oversight • Independent oversight (SAI) • Global initiatives: UN, OECD Convention, anti-money laundering • Civil Society & Media • Free press, FOI • Civil society watchdogs Citizens/Firms Citizens/Firms • Private Sector Interface • Streamlined regulation • Extractive Industry Transparency Initiative • Collective business associations • Decentralization and Local Participation • Decentralization with downward accountability • Community Driven Development (CDD) • Oversight by parent-teacher associations & user groups Outcomes: Services, Regulations, Corruption Citizens/Firms

6. 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 institutionimplements

7. Participatory process to policy design to address political economy issues Challenge: poor governance and corruption 7. Monitoring and Evaluation of NAS Country Implemented 6. Implementation by Government End WB T.A. 5. Revision of the NAS 4. Public dissemination + discussion WB Technical Assistance • CAPACITY • BUILDING • Local firm collects data • Local enumerators trained • Local supervision by • technical cmte. Collects EXPERIENCE & PERCEPTIONS data from service USERS & PROVIDERS (3 sources) 3. Draft of the NAS 2. Diagnostic surveys + analysis 1. Establishment of Steering Committee Key Partnership: Government + Civil Society

8. Country Diagnostic Results Extent of corruption, (Selected Countries ‘03-’05)

9. Country Diagnostic Results Corruption increases inequality

10. Country Diagnostic Results Public funds are mismanaged by agency(as reported by Public Officials, Sierra Leone, 2003) % of Public Officials that said irregularities/(misappropriations) are frequent

11. Mechanisms to participate to the policy process % of households reporting to use the following channel to participate in the policy process (Sierra Leone, 2003)

12. 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?

13. Methodological Approach Tools & Info Process Needs Iterative process: 8-12 months Desk Study: history, sector structure, current context Outcomes: 1. Governance Baseline 2. Agency Specific Indicators 3. Public Dissemination & Participatory Policy Process Transparent Process Sector Level Governance Assessment Local Partnership Gov’t + Civil Society In-Depth Interviews Donor Partnership w/Active Donors Cross-Sector Team (PREM, WBI, SDV,PDS, Procurement) Country Ownership Political Economy Assessment 3 Surveys (Experience Based) Partnership w/ Bank Country Team Audit & Project Data Broad Peer Review Team Capacity Needs

14. 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

15. 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

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

17. 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)

18. 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)

19. 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

20. 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

21. 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

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

23. Confidential Extent of corruption (Several Countries 2000-2005)

24. Confidential Peru and Colombia: extent of "State Capture" by elites (as reported by public officials, 2001) Capture by Vested Interests of: % public officials report bribes to agency influence business climate

25. Confidential Peru: Sources of Undue Private Influence on the State Responses by: Based on governance diagnostic surveys of public officials and enterprises

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

27. Confidential Public funds mismanaged by agency (as reported by Public Officials, Sierra Leone ‘03) % of Public Officials that said irregularities/(misappropriations) are frequent