Strengthening World Bank Group Engagement on Governance & Anticorruption

1. Strengthening World Bank Group Engagement on Governance & Anticorruption Sanjay Pradhan Director, Public Sector Governance The World Bank October 18, 2007

2. Central to development effectiveness Global consensus around new GAC strategy – consultations held in 35 developing countries, 12 donor countries and four global events, reaching more than 3,200 people Governance and Anticorruption (GAC) Strategy was unanimously approved by the Board in March 2007 GAC Implementation Plan: Discussed at the Board October 11 – stage set for implementation of concrete actions Context

3. Focus on GAC is based on the Bank’s Mandate to reduce poverty—a capable and accountable state creates opportunities for the poor The Bank’s GAC work must be country driven There is no “one size fits all” – implementation is adapted to individual country circumstances The GAC strategy requires the Bank to remain engaged so that “the poor do not pay twice” The Bank aims to engage in its GAC work with a broad array of stakeholders Work to strengthen, not by-pass, country systems through stronger institutions The Bank will work with governments, donors, and other actors at the country and global levels to ensure a harmonized and coordinated approach The Seven Principles Guiding GAC Implementation

4. Governance & Anticorruption Key Elements of World Bank Strategy Country Level Increased support to countries to strengthen ‘core’ and sectoral governance Global Level Collaborating with development partners, and addressing transnational issues Project Level Combating corruption in WBG operations

5. GAC Strategy Implementation: Country Level • A country-level governance and anticorruption “CGAC” process that assesses GAC impediments to country development goals • A process whereby country teams engage with government and stakeholders and identify “entry points” for Bank support for governance and anticorruption reforms – not a new World Bank report or TA • A country-tailored approach, not a mandatory format • A ‘systematic and disciplined stock-taking of the GAC environment and its impact on country poverty reduction goals and the Bank’s projects • Informs the CAS, and yields a clear “business plan” for how the country program/CAS will address governance and corruption barriers to country development goals

6. Helping countries improve governance • Strengthen cross-cutting public management systems (e.g., financial and budget management, procurement, public administration), and independent oversight intuitions (e.g., SAI, PAC, judiciary) • Mainstream governance reform in sectors by systematically addressing sector-specific GAC impediments to delivering outcomes, and by enhancing sector-level transparency, participation, accountability • Strengthen “demand-side” enabling frameworks and capacity by enhancing transparency/information disclosure (RTI), CSO capacity, use of social audit/accountability tools • Work collaboratively with the private sector and civil society in reform processes (business assoc, chambers, CSOs, media) • Monitor progress via results and governance indicators (including new generation of indicators under development)

7. Mapping Health Sector VulnerabilitiesAddressing Corruption in theDelivery of Essential Drugs … some ways to combat these vulnerable points … Vulnerabilities in … Production of sub-standard drugs Random inspections Manufacturing Monitoring based on transparent & uniform standards (WHO prequal list) Lengthy procedures with weak legal framework Registration Under-inclusion or over-inclusion Media coverage of drug selection committee meetings Selection “Tailor fit” drug specifications Procurement Competition & Transparency Warehouse theft Distribution Tracking systems/third party monitoring Biased prescriptions (info asymmetry between doctor/ pharmacist & patient) Prescription & Disbursement User surveys Source: J. Edgardo Campos and Sanjay Pradhan, The Many Faces of Corruption: Tracking Vulnerabilities at the Sector Level, The World Bank, 2007

8. Enabling environment for Social Accountability Right to information legislation and practice (Orissa implementation of India-wide RTI legislation, Philippines public disclosure of senior officials’ private assets) Independent, competitively owned media (Kenya, Eastern Europe) Independent, executive branch oversight (Supreme audit institutions, Parliamentary accounts committees) Opportunities for citizen and civil society input into development planning, implementation and monitoring (Uganda, PRSCs) Enhancing Demand-side Approaches in Bank Operations Public disclosure of project-level contracting (Bangladesh E-procurement) Participatory budgeting (Brazil) Citizen and community oversight of investment operations (India DPIPs) Community empowerment for improved local governance (Indonesia KDP) Direct Support for Civil Society Capacity Building local civil society capacity for oversight and participation (service delivery score cards, capacity of user groups, parental participation in schools, water users associations, community conservation groups) Strengthening the Demand for Good Governance

9. The two faces of the private sector Competitive, productivity-focused firms thrive on a level-playing field Corrupt, rent-seeking firms thrive in the shadows How to support competitive, responsible private sector? Create sound business environments, benchmarked internationally (Doing Business Indicators) Showcase examples & evidence that ‘avoiding corruption is good for business’ (Celtel’s Mohammed Ibrahim) Support initiatives to promote business ethics and voluntary codes of conduct (ICC Code of Conduct, TI’s Business Principles, WEF PACI, UN Global Compact) – and create external verification mechanisms Build coalitions of businesses and other stakeholders for anticorruption (Indonesia Business Link, Makati Business Club, Global Integrity Alliance) Enforce global/regional laws & regulations (OECD Convention, UNCAC) Making the Private Sector an Advocate of Governance Reform

10. Use aggregate governance indicators to indicate extent & mix of governance problems Use actionable & outcome indicators to monitor progress in implementing priority GAC reforms Monitoring for Results A Typology of Governance Indicators Frontier challenge: Improve menu of actionable & outcome indicators

11. GAC Strategy Implementation: Global Level The Bank is committed to “not acting alone”. Five areas targeted for increased Bank involvement: Donor coordination, including common response principles, especially where GAC pose serious obstacles to development, Build global consensus on how GAC enhances development effectiveness – biannual conference and support for GAC related research Support global legal conventions (e.g., UN Convention Against Corruption, OECD Anti-Bribery Convention, Stolen Asset Recovery Initiative (Star)) Multi-stakeholder engagement and voluntary codes of conduct (e.g., Extractive Industries Transparency Initiative) Harmonize investigative practices with other MDBs

12. One Key Priority:The Stolen Asset Recovery (StAR) Initiative The Problem A Global Effort • Cross-border proceeds from criminal activity, corruption & tax evasion estimated to be $1-1.6 trillion per year— half from developing & transition countries • Bribes received by public officials from developing & transition countries is estimated at $20-40 billion • TI’s estimates of stolen assets include: StAR is a joint initiative with the Bank & UNODC. Partnerships are being developed with the OECD, Norad, IMF, other MDBs, the G8, & developing countries Proposed activities include: • Persuading all jurisdictions to ratify & implement the UNCAC • Helping developing countries build capacity for requesting mutual legal assistance for asset recovery • Advocating with financial centers to lower barriers to recovery • Developing partnerships to share information & experience • On a voluntary basis, offering expertise to monitor the use of recovered assets for development (e.g., Nigeria) Ferdinand Marcos (President of the Philippines 1972-1986) $5-10 billion Mohamed Suharto(President of Indonesia 1967-1998) $14-35 billion Mobuto Sese Seko(President of Zaire 1965-1997) $5 billion Sani Abacha(President of Nigeria 1993-1998) $2-5 billion *Source for estimates of former Presidents above: Transparency International Global Corruption Report 2004. All sums are estimates of alleged embezzlement in US dollars.

13. Advice and suggestions from GovNet members on how best to collaborate and strengthen GAC effectiveness on the ground Potential areas for collective action include: More harmonized assessments Implementation of common response principles (pilots) Implementation & monitoring of OECD and UN conventions Partnership on StAR (raising $15 million in trust funds, to help countries recover stolen assets) Key priority: Multi-donor trust fund on demand for good governance To mainstream and scale up ‘demand-side’ work in World Bank operations To fund civil society development on governance and anti-corruption Challenge: How to make it arms length of government approval? Suggestion Items for Discussion

14. Thank you The World Bank1818 H Street, NWWashington, D.C.20433 USA “Working for a World Free of Poverty”For additional information, see:http://www.worldbank.org