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Cancer of Corruption Seminar

Cancer of Corruption Seminar. Presented by: Sanjay Pradhan Director Public Sector Governance The World Bank. Governance Problems: Some Examples. Grand Corruption: State Capture - Leaders plundering state assets (Mobutu, Abacha) - Powerful “oligarchs” buying state officials (CIS)

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Cancer of Corruption Seminar

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  1. Cancer of Corruption Seminar Presented by: Sanjay Pradhan Director Public Sector Governance The World Bank

  2. Governance Problems: Some Examples • Grand Corruption: State Capture - Leaders plundering state assets (Mobutu, Abacha) - Powerful “oligarchs” buying state officials (CIS) - Corrupt leaders colluding with corrupt investors: non-competitive, non-transparent award of contracts (oil & gas) • Nepotism and Patronage in Public Service - Political pressure for award of contracts, appointments - Politicized transfers (South Asia) • Administrative (Petty) Corruption & Inefficiency: - Bribes for licenses, permits, government services - Diversion of funds for public programs - Inefficient and ineffective service delivery

  3. The “Bribe Fee” List Unofficial payments by firms in Ukraine Enterprises Type of License/Service/”Favor” Average fee required admitting need to pay (1996) “unofficially” Enterprise registration $176 66% Each visit by fire/health inspector $42 81% Tax inspector (each regular visit) $87 51% Telephone line installation $894 78% Lease in state space (square ft. per month) $7 66% Export license/registration $123 61% Import license/registration $278 71% Border crossing (lump sum) $211 100% Border crossing (percent of value) 3% 57% Domestic currency loan from bank on 4% 81% preferential terms (percent of value) Hard currency loan on preferential 4% 85% terms (percent of value)

  4. Strengthening Voice and Participation:Report Card of Government Services in Latvia Post Office State Educational Institutions Office of Social Benefits Polyclinic/Health Services Agency of Immigration & Citizenship Prosecutor Customs Service Courts Local Housing Authority Police 0 10 20 30 40 Percent giving favorable rating

  5. Governance can be Measured – Corruption, Countries Good Control Corruption Bad Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for 1996-2002, WP #3106, August 2003. Units in vertical axis are expressed in terms of standard deviations around zero. Country estimates are subject to margins of error (illustrated by thin line atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted.

  6. The Challenge of State Capture Proportion of firms affected by capture of … 30 Parliamentary Votes 25 Presidential Admin. Decrees Civil Court Decrees 20 15 10 5 Hungary Estonia Russia Ukraine

  7. Examples of major programs launched across countries Latvia (anticorruption) Russia (customs/treasury) Ukraine (tax admin) Albania (public admin.) Kyrgyz Republic (governance reform) Jordan (civil society) Cambodia (PE; forestry) Ghana (PE accountability) Philippines (procurement) Guatemala (diagnostic to action program) Indonesia (local governance) Gabon (water/electricity) Bangladesh (civil society) Colombia (diagnostics & civil society) Uganda (PRSC; education) Pakistan (devolution) India – Andra Pradesh (power; e-gov); Karnataka (right to info) Bolivia: (public admin.) Tanzania (PSR) Ethiopia (decentralization)

  8. Good governance and anticorruption has many dimensions & “entry” points • Leadership and Public Management • Ethical leadership: asset declaration, conflict of interest rules • Meritocratic civil service with adequate pay • Transparency & accountability in budget mgnt • Transparent, competitive procurement • Transparency and accountability in sectors: extractive industries, health, education, infrastructure, SOEs • Institutional Checks & Balances • Independent, effective judiciary • Legislative oversight • Independent watchdog agencies • Political Accountability • Political competition, broad-based political parties • Transparency & regulation of party financing • Disclosure of parliamentary votes GOOD GOVERNANCE • Civil Society & Media • Freedom of press • Freedom of information • Civil society watchdogs • Public hearings of draft laws • Report cards, client surveys • Private Sector Interface • Effective, streamlined regulation • Transparent public-private dialogue • Break-up of monopolies • Extractive Industries Transparency Initiative • Curbing corruption from developed countries: UN, OECD Convention • Local Participation & Community Empowerment • Decentralization with accountability • Community Driven Development (CDD) • Oversight by parent-teacher associations & user groups • Beneficiary participation in projects

  9. Extractive Industries Transparency Initiative Key Principles • 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 a readily accessible form of payments made by the companies and of revenues received by government. • Extension of all of the above to companies including state owned enterprises. • Active engagement of all stakeholders in the design, monitoring, and implementation process. • Commitment to a work plan and timelines for implementation.

  10. Corruption is not just a developing country problem Percentage of Firms that Pay Public Procurement Kickbacks by Country of Origin of FDI 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.

  11. Recent initiatives to curb transnational corruption • OECD Convention on Combating Bribery of Foreign Public Officials (1997) • UN Convention Against Corruption Treaty (2003) – 94 countries join • Financial Action Task Force on Money Laundering (FATF) (1989) -- 40 Recommendations (2003) • Recovery of proceeds from corruption (Nigeria 2005) • Publish What You Pay, Extractive Industries Transparency Initiative • World Bank blacklists corrupt firms • Transparency International Principles for countering bribery • Governance Network of OECD DAC (GOVNET) • Norway’s ‘Doers’ Network on Anticorruption (2004)

  12. Improvements in Satisfaction: Public Services in Bangalore Source : PAC

  13. Transparency & Community Monitoring: Primary Education in Uganda US$ per Student 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1990 1991 1993 1994 1995 1999 Intended Grant Amount Received by School (mean)

  14. Transparency and Accountability Network (20+ member groups) Walang Ku-Corrupt Movement (Youth) Drew other civil society groups into the advocacy efforts and coordinated the activities PAGBA & AGAP (w/in Gov’t) CBCP (Church) Philippine Contractors Association (private sector – main stakeholder) Local chambers of Commerce (Private sector) Philippines: Procurement ReformMobilizing Public Support

  15. Radio: The swath & the dagger TV: Raising the ante Reaching Out Print Media: Amplifying the problem Advertising: Creating a ‘brand name’ The Media Campaign:The Communications Strategy

  16. CAR MODEL BENEFICIAL OWNER REGISTERED OWNER Nissan Patrol Edwin Abella Sulpicio S. Bulanon Jr. BIR Reg'l Director, 1817 Jordan Plains Subd., Quezon City Quezon City (listed address of Abella in his SALs) Merrick Abella (son of Abella) Suzuki Grand Vitara Ditto 24 Xavierville, Loyola Heights, Q uezon City Nissan Cefiro Ditto Elizabeth S. Buendia 152 Road 8, Pag - asa, Quezon City BMW Lucien E. Sayuno Limtra Dev. Corp. BIR Reg'l Director, Zone 4, Dasmariñas, Cavite Makati City BMW Ditto Marie Rachel D. Mene ses c/o Metrocor and Holdings, G&F, Makati City Honda Accord Danilo A. Duncano Daniel Anthony P. Duncano BIR Reg'l Director, 2618 JP Rizal, New Capital Estate, Quezon City Quezon City Mitsubishi L200 Corazon P. Pangcog Alberto P. Pangcog (husband) Asst. Reg'l Director, B2 L23 Lagro Subd., Quezon City Valenzuela City Honda CR - V Ditto Alberto P. Pangcog 9 Ricardo St., Carmel 1 Subd., Quezon City Honda CR - V Ditto Ditto BMW Flordeliza P. Villegas Charito P. Sico Revenue District Of’cer 8 Ma. Elena St., Carmel 1 Subd., Cabanatuan City Quezon City Media,Transparency, and Combating Corruption “BIR Officials Amass Unexplained Wealth”By Tess Bacalla , Philippine Center for Investigative Journalism Owner: Regional Director in the Bureau of Internal Revenue; forced to resign; currently facing corruption charges; other officials suspended, also facing charges

  17. Chile’s Internet-based Public Procurement: Transparency and Competition • 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 and contracts

  18. Leadership, Ethics and Good Governance Good Governance Leadership Values & Ethics Decentralization with Accountability Public Financial Accountability Meritocratic Civil Service Independent Judiciary Legislative Oversight Civil Society Voice and Participation Competitive Private Sector “Public ethics and values are a prerequisite to, and underpin, public trust and are a key stone to good governance” – OECD, Policy Brief 6, 2000

  19. Strengthening Public Service Ethics5 Cs to Counter Corruption Connectedness Care & Compassion Creating a sense of Compassion to care for the more needy in society Creating a sense of belonging to society Strengthen Values & Ethics: Counter Corruption Cosmology Courage Overcoming insecurity & incessant quest for material acquisitions Broaden vision by seeing life in the context of the huge universe Commitment to Contribute Creating a commitment to public service – to give v/s take Source: H.H. Sri Sri Ravishankar (Founder, IAHV) @ The International Anticorruption Conference, Korea

  20. Countries have successfully undertaken reforms to improve governance THERE IS HOPE Greater transparency, competition, public participation and oversight in procurement & extractive industries is needed TRANSPARENCY IN EXTRACTIVE INDUSTRIES Reduce day-to-day political interference, greater autonomy with accountability for results STRENGTHEN SOE GOVERNANCE Oversight and participation by civil society and media are crucial for putting external pressures for improving governance STRENGTHEN OVERSIGHT BY CIVIL SOCIETY Reform require ethical leadership and innovative programs to rebuild commitment to public service – to give rather than take REBUILD LEADERSHIP AND ETHOS OF PUBLIC SERVICE International Experience: Five Key Messages

  21. Q&A

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