Integrating Corruption and Governance Related Concerns in the design of CASs

Integrating Corruption and Governance Related Concerns in the design of CASs

By: Vinay BhargavaDirector, Operations and International Affairs, EXT

Presentation at the PREM-WBIGP Core Course on Public Sector Governance and Anticorruption– February 15th, 2005

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PREM Public Sector Governance 2

Introduction and Presentation Outline

Corruption+ weak governance = risks development outcomes + to Bank

CAS Guidelines: All CASs to discuss governance issues in key parts of CAS body ( Diagnosis; Country Vision; Assistance Program; Risks)

Anatomy of Two Governance Focused CASs: Ghana and Indonesia

Four Step (Iterative) Approach to prepare a governance focused CAS:– Step 1: Assess country governance environment– Step 2: Formulate a country assistance program– Step 3: Identify partnerships and coalitions – Step 4: Identify risks and propose mitigation measures

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Bank Guidelines for addressing governance issues in CASs

Upstream Review– Significance of corruption/governance issues in the country– Risks to country development and the Bank operations– Proposed Bank assistance and risk mitigation approaches

Downstream CAS preparation and Review– Diagnosis of corruption and governance issues – Country’s strategy and programs for improving governance– Bank’s proposed assistance program and results– Analysis of risks to country and Bank and mitigation measures

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Institutional Checks & BalancesParliament

Other accountability institutions

Institutional Checks & BalancesParliament

Other accountability institutions

Public Sector ManagementFinancial management reformsCivil Service reformsDecentralization of service delivery provisionLocal government and public expenditureImprove M & E capacity

Public Sector ManagementFinancial management reformsCivil Service reformsDecentralization of service delivery provisionLocal government and public expenditureImprove M & E capacity

Anatomy of Governance Elements in Ghana 2004-6 CAS Anatomy of Governance Elements in Ghana 2004-6 CAS Diagnosis: CPIA-3.0. Major structural issue. Risks: to country- high; to Bank -no mention. Country Vision: Strong Good governance and accountability program-- 1 of 5 PRSP Pillars.

Triggers:Triggers: To Stay in the Base Case: Progress on financial management , in particular on the 15 point s of HIPC Accountability Action Plan .To Move to the High Case: Progress on public sector including civil service reforms.

Civil Society Voice & Participation

• Improve capacity of civil society groups

ENTRY ENTRY POINTSPOINTS

Lending Instruments: PRSCs; M&E components; Community Empowerment loansAAA Instruments: WBI ; Development Dialogue sessions; Outreach/media programs; CPAR;

CFAA; Community Empowerment study; PER; M&E assessmentResults and Performance Indicators: See Hand Out

CAS Objective:CAS Objective: Support to Improve Governance and Empowerment -3rd Pillar of CAS

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Institutional Checks & BalancesJudiciary and legal reformsAnti-corruption institutions

Disclosure by public officialsCorruption perception survey

Institutional Checks & BalancesJudiciary and legal reformsAnti-corruption institutions

Disclosure by public officialsCorruption perception survey

Public Sector ManagementFinance and procurement reformsTax, customs. Public expenditures reformsEffective Implementation of Decentralization Local government governance improvement

Public Sector ManagementFinance and procurement reformsTax, customs. Public expenditures reformsEffective Implementation of Decentralization Local government governance improvement

IndonesiaIndonesiaDiagnosis: Chapter on the Special problem of corruption. Money politics. Risks: very high both to the Bank and country. Political will risk. High risk to the Bank’s credibility/reputation. Country Vision: part of government’s package of policy actions. Weak program .

Triggers:Triggers: To Stay in the Base Case: Improvements in government fiduciary management and anti-corruption institutions. To Move to the High Case: Improvements in fiscal accountability, governance in the justice sector, and fiduciary management.

Civil Society Voice & ParticipationPublic participation and monitoring

Full collaboration to promote governance

ENTRY ENTRY POINTSPOINTS

Assistance Approach: Four principles applied to promote good governance thru all activities.Lending Instruments: CDD programs; tax, customs, financial; media/CSOs components; loans to districtsAAA Instruments: Investment climate surveys; WBI; expenditure tracking; governance surveys; TA grants for judiciary; parliament . Results and Performance Indicators: Many -See Hand Out.Partnerships: Joint AAA and funding; CDF; Partnership for Governance Reform

CAS Objective: Address the key issue of governance improvement thru all CAS activities- set standard for the Bank to address corruption and governance issues.

Competitive Private Sector*Corporate governance *Anti money laundering

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A four steps iterative approach is proposed to integrate governance focus in a CAS

Step 1: Assess key country governance environment*Corruption and governance indicators and knowledge base*Government’s ACG strategy and program ( including political will),*Risks to the country development outcomes ;

Step 2: Formulate Bank’s assistance program:

Step 3: Identify partnerships and coalitions for coordinated action

Step 4: Analyze the risks * to the success of Bank activities and to the Bank’s reputation

* and formulate measures to mitigate/address the risks.

Depth of coverage and audiences vary by Upstream and Downstream

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Step 1.1 :Assemble basic country knowledge (Essential for designing a program suitable for local conditions)

Governance indicators: CPIA, WBI, Investment climate, TI, client survey. Political economy of corruption and degrees of freedom for the Bank’s action Summary findings of ESW diagnostics and OED/QAG reviews. Government anti-corruption/governance strategy--Current and historical Key anticorruption institutions ( executive and non-executive branches). Key anti-corruption champions among civil society and donors-activities. Legacy issues: past Bank assistance; media; INT; Bank remedies. On-going and recent Bank anti-corruption activities (Last CAS/PR) Relatively high risk ministries/public enterprises.

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Step1.2 : Categorizing Countries by Transparency, Accountability, and Corruption

in the Public Sector

CPIA Rating (Question # 20)

Control of Corruption

Incidence of Corruption

1.0-2.0 Lowest High

2.5-3.0 Middle-Low Substantial

3.5-4.0 Middle-High Modest

4.5-6.0 Highest Low

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Step 2.1: Formulating the Bank’s Assistance Program

A typical program includes the following elements:

Objectives and approach to assistance

Proposed entry points

Proposed mix of Lending and Non-Lending instruments

Expected results (Country and CAS performance indicators)

Proposed triggers ( if any) associated with CAS scenarios

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Step 2.2: Key Trade-Offs depending upon country situation

Supporting country’s program vs. risks to the Bank.

Balancing help to executive branch with help to non-government institutions of accountability ( e.g. parliament), CSOs and media.

Selectivity of entry points for results and credibility vs. comprehensive

Balancing lending vs. non-lending mix and sequence of assistance.

Prerequisites and Selectivity in When, Where, How and How Much to lend in high risk countries/situations.

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Institutional Checks & Balances• Independent, effective judiciary

• Legislative oversight

• Decentralization with accountability• Global initiatives: OECD Convention, anti-

money laundering, WCO

Institutional Checks & Balances• Independent, effective judiciary

• Legislative oversight

• Decentralization with accountability• Global initiatives: OECD Convention, anti-

money laundering, WCO


• Freedom of information• Public hearings on draft laws• Media/NGOs• Community empowerment• Report cards, client surveys


• Freedom of information• Public hearings on draft laws• Media/NGOs• Community empowerment• Report cards, client surveys

Political Accountability• Political competition, credible political parties• Transparency in party financing• Disclosure of parliamentary votes• Asset declaration, conflict-of-interest rules

Political Accountability• Political competition, credible political parties• Transparency in party financing• Disclosure of parliamentary votes• Asset declaration, conflict-of-interest rules

Competitive Private Sector• Economic policies• Restructuring of monopolies• Effective, streamlined regulation• Robust financial systems • Corporate governance• Collective business associations

Competitive Private Sector• Economic policies• Restructuring of monopolies• Effective, streamlined regulation• Robust financial systems • Corporate governance• Collective business associations

Step2.3: Possible entry points for CAS Interventions (Source: PRMPS)

Public Sector Management• Meritocratic civil service with adequate pay• Public expenditure, financial management, procurement• Tax and customs• Frontline service delivery (health, education, infrastructure)

Public Sector Management• Meritocratic civil service with adequate pay• Public expenditure, financial management, procurement• Tax and customs• Frontline service delivery (health, education, infrastructure)

GOODGOVERNANCE

GOODGOVERNANCE

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Step 2.4: Assess potential impact

Whether and how effectively the CAS interventions in the selected entry points likely to :

Reduce opportunities for corruption

Increase risk of exposure and punishment

Increase severity of punishment

Reduce incentives for corruption

Increase public demand/pressure for reducing corruption

Strengthen accountability of public sector programs

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Step 3 : Building partnerships and coalitions

Expectation for cooperation among donors in a country led strategy

Coalitions are more effective for improving governance

Instruments: joint or parallel( coordinated) activities with domestic and /or external partners for :

**Studies **Funding **Statements ** TA projects

**Coordination group **Coalitions **Public dialogue events

** Mass communications **Dialogues with government

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Step 4: Risk Analysis and Mitigation Categorize country by risks to the Bank operation and reputation.

– CPIA ,governance indicators, and country knowledge assessment

– Country team self assessment validated by selected external interviews

CAS Review shows use of one or more of the following mitigation measures to reduce risks to the Bank:

– Fiduciary controls (procurement and financial) and INT review – Integrating social accounting mechanisms– Integrating strong results monitoring framework– Screening of new projects for corruption risks; preventive measures– Increasing transparency ( disclosure, hotline)– Strategic communications and partnerships– Proactive sanctions enforcement

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That is all – Thank You Very That is all – Thank You Very much for your attention.much for your attention.

Integrating Corruption and Governance Related Concerns in the design of CASs

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