Modernization and Transparency

1. Modernization and Transparency Robert Klitgaard Ministry of State for Administrative Development January 23, 2008

2. This Evening’s Discussion • Institutions and competitiveness • Corruption and how to reduce it • What has worked elsewhere… • To move from strategy to implementation • From punishment to prevention • To avoid the J-curve of reform • To decentralize effectively • To improve the guardians of good government • First, an example

3. About Claremont Graduate University • The graduate university of the Claremont Colleges • “Oxford in the orange groves” • Intimate, interdisciplinary, engaged • 2200 graduate students in 23 fields, most pursuing the Ph.D. • www.cgu.edu

4. Colombia in 1998 • The Transparency International index: 50 out of 52 countries • “Heading down a good or bad road?” • Ernesto Samper’s scandals • Plus: economic crises and long-standing guerrilla conflict linked with drugs • Welcome to the Presidency

5. Andrés Pastrana • Son of a former President • Successful mayor • Lost to Samper in 1994 • Interested in good governance • El Principio del Pez Gordo • Wins in 1998 with good governance as a major promise

6. Colombia • Population of just over 40 million • Twice the size of France; mostly difficult terrain; transport over land is expensive and slow • Strong democratic tradition; long history of violent conflict • Number one producer of cocaine • The world’s highest murder rate

7. POLITICAL Country is ready for change Samper Scandal: The authority of the state is very weak The guerillas and paramilitary groups are strong ECONOMIC Budget deficit is increasing and public debt has built up since 1995 – need for fiscal adjustment Economy is heading into recession Situation in 1998

8. Examples of Corruption • CAPRECOM: public health • Invías: roads • Organized crime and corruption • Plata o plomo • Justice system • Police clean • Permits and licenses corrupt

9. Institutions and Laws • Laws and institutions against corruption abound. • A tendency towards “legalism” (i.e. creating new laws without enforcing existing ones) • Coordination among institutions is insufficient • Government processes are not transparent

10. Popular Participation • Veedurías exist, but are neither well-known nor widely used • Complaints and denunciations are lost in the maze of institutions; citizens feel powerless • Pastrana has anti-corruption mandate from a nascent civil society • Transparency International chapter in Colombia in 1998

11. What Should Andrés Pastrana Do? • What alternatives should be considered in the Presidential Program in the Fight against Corruption? • What would you recommend as priorities?

12. What He Did: Plan Colombia • Achieving good governance • Building social capital • Obtaining peace and development • Reactivating macroeconomic growth and employment →Improving institutions, including fighting corruption, is a cornerstone of Plan Colombia.

13. Presidential Program in Fighting Corruption (PPLC) • Directed by a Colombian business leader • PPLC mission is the coordination and implementation of policy • A phased strategy: • Diagnosis • Design • Planning • Pilot projects • Implementation

14. Diagnosis • Existing laws and institutions don’t fit together strategically • Inefficient regulation • Certain conditions favor corruption: • Inefficiency • Lack of transparency • The weakness of ethical values • Lack of popular participation • The lack of coordination among the institutions

15. Design PREVENTION CONTROL & PUNISHMENT Improve the Efficiency and Transparency in public institutions. Strengthen the Popular Participation in the oversight of government Strengthen the Ethics and Values of public servants Investigation and Punishmentof corruption

16. Key Principles • Full prosecution, no matter who • Comprehensive participation • Good coordination • Reengineer and reform government systems with the help of public sector employees • Harness technology

17. Implementation Two big splashes: • Create an elite anti-corruption group—the Procurador, the director of the PPLC, and the Interior Minister—and “fry big fish” • Prosecute Congressmen for illegal contracts—including Pastrana allies

18. Efficiency and Transparency • Establishment of www.gobiernoenlinea.gov.co an internet portal for the government; electronic publication of information required of all agencies • Systematic reengineering and reform of agency-specific processes; 2000 employees trained • Binding standards for public contracting, budgeting, and other recurring processes

19. Ethics and Values • 4200 employees and 360 facilitators in various agencies trained in the improvement of the service culture • Inclusion of ethics and values as topics in the existing nation-wide training • Design of a management course for public sector employees

20. Civil Society Participation • “Colombiemos” empowers citizens to monitor government and report problems • PPLC takes charge of denunciations and follows them through the institutions • Handbook for veedores and for the oversight of “Campo en Acción” • Building of National Alliance Against Corruption across Civil Society • Integrity Pacts

21. Coordination and Investigation • Formation of the first inter-institutional group for investigation, adding a technical body to the high-profile group of ministers • Commission for the network of health sector veedores, as a pilot project for better coordination in oversight

22. Some Results • Estimated savings of 242 billion pesos (!), due to more efficient processes • Receipt of 4135 denunciations (a 40% increase), the value of which exceed 430 billion pesos • All government agencies are online and publish contracting information, among other items • More than 10,000 Colombians signed up for the “Colombiemos” campaign

23. Results (cont.) • International image of Colombia, according to the CPI: Of 84 countries, Colombia moved from the 79th place (score of 2.2) in 1998 up to 52nd place (score of 3.6) in 2002 • Large-scale survey on corruption shows improvements

24. Two Notable Successes • Prevention through better systems • The institutionalization of anti-corruption measures • Using information technology • Internet presence enables cheap, fast dissemination of information and the use of computing makes government processes more efficient

25. This Evening’s Discussion • Institutions and competitiveness • Corruption and how to reduce it • What has worked elsewhere… • To move from strategy to implementation • From punishment to prevention • To avoid the J-curve of reform • To decentralize effectively • To improve the guardians of good government

26. Per Capita Income and Infant Mortality and Corruption Regulatory Burden 12,000 90 80 10,000 70 8,000 60 50 6,000 40 4,000 30 20 2,000 10 0 0 Weak Average Good Weak Average Good Literacy and Rule of Law Development Regulatory Burden Control of Corruption Development x x Dividend Dividend 100 Per Capita Income and 75 Voice and Accountability 10000 50 9000 8000 7000 25 6000 5000 4000 0 3000 2000 Weak Average Good 1000 0 Development Rule of Law x Weak Average Strong Dividend Development x Voice and Accountability Dividend Source: Dani Kaufman, “Rethinking Governance: Questioning from Empirical Perspective,” The World Bank (WBI), December 2002.

27. Investment and Growth • Countries differ • Countries with poor governance have • Less investment, other things equal • Less benefit from each dollar of investment. • Who loses the most? The poor.

28. This Evening’s Discussion • Institutions and competitiveness • Corruption and how to reduce it • What has worked elsewhere… • To move from strategy to implementation • From punishment to prevention • To avoid the J-curve of reform • To decentralize effectively • To improve the guardians of good government

29. Corruption • Definition: The misuse of office for personal gain. • External • For a service that is legal (extortion, speed money) • For an illegal service (bribery, kickbacks) • Internal • Theft, embezzlement, nepotism

30. Types of Corrupt Regimes • Types of corrupt regimes • Zaire • Philippines • Republic of Korea • How extensive, how much does it distort, and where does the money go

31. Why Does Corruption Occur? • A crime of calculation, not passion • Corruption follows a formula: Corruption = Monopoly + Discretion - Accountability

32. Successful Reforms C = M + D - A • Reduce monopoly by enhancing competition • Limit discretion through simpler, clearer rules of the game • Increase accountability in many ways

33. This Evening’s Discussion • Institutions and competitiveness • Corruption and how to reduce it • What has worked elsewhere… • To move from strategy to implementation • From punishment to prevention • To avoid the J-curve of reform • To decentralize effectively • To improve the guardians of good government

34. Moving from Strategy to Implementation • The importance of implementation and how to overcome cynicism • The principle of the big fish • Create a coordinating mechanism • Begin with key agencies and low-hanging fruit

35. Create Political Support • Example of Mozambique • Rephrase the purpose • High-level workshops to diagnose • National, regional, ministerial • Information from the people • Diagnosing corrupt systems

36. From Punishment to Prevention • C = M + D – A • Vulnerability assessments and “maps of risks” • An economic crime of calculation • Improve information and incentives

37. Preventing the J-Curve • What is the J-curve? • When things get worse in the short run • Changing the rules leads to uncertainty • Punishments lead to fear • Solutions • Training in new rules • Incentives for performance, not just rules

38. Decentralization • “The next great wave of corruption”? • Institutional preparation • Strong popular participation • Information about results • Creative ideas (e.g., Panama) • Celebrate successes and learn from them • A contest

39. The Guardians • Who are they? • Justice system (police, prosecutors, courts) • Auditing system • Press • More • How to strengthen • Diagnose institutional weaknesses with help of their clients

40. Final Remarks • Attitude and optimism: We can do it • Think of systems, not just individuals C = M + D - A • Why bother?