Kauffman Corruption & Governance Kauffman

8/7/2019 Kauffman Corruption & Governance Kauffman

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http://www.worldbank.org/wbi/governancehttp://www.worldbank.org/wbi/governance


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New Frontiers in Governance and Anti-CorruptionThe Power of Data and Collective Action

OSCE Economic Forum 2001

Brussels, January 30-31st

Daniel Kaufmann, The World Bank Institute

http://www.worldbank.org/wbi/governance

Governance: 9 Key Issues + 1 Challenge

Focus on Corruption equating poor governance

Government drives Anti-Corruption (A-C) program

Paramount: A-C Agencies / Commissions / Ethics Off.

Judiciary/Legal Enforcement Institutions arethe key

Strict Enforcement of Rules: civil service/bureaucracy

High Pay in public service for combating corruption

Focus: Bureaucratic bribery in developing countries

Focus on problem within Governments

Data on Governance/Corruption not that useful

ChallengeChallenge:: The 9 Key Issues above contain mythsThe 9 Key Issues above contain myths


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2

3%

4%

4%

4%

7%

8%

18%

4%

48%

0% 10% 20% 30% 40% 50%

Not Worth It

NGOs AloneInt'l Experts

Legislative

Enforcement Agencies

Executive Alone

Civil Society Alone

A-C Agency

Broad Coalition

Percentage of Respondents

Who Should take the lead in a NationalGovernance/Anticorruption Program?

(response of public officials in conference surveys)

A-C: Anti-Corruption

Broad Perspective -- and Unbundling:

Assessing OverallGovernance with Data[based on over 300 variables; 160 countries][based on over 300 variables; 160 countries]

Control of Corruption (or Graft)

Application of the Rule of Law

Quality of Regulatory Framework

Government Effectiveness

Voice, Civil Liberties and Accountability

Political Stability & lack of Violence/CrimeFull definition on governance, and access and details on data: http://www.worldbank.org/wbi/governance
http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/


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3

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

Zaire

Turkmenistan

Cameroon

Azerbaijan

Uzbekistan

Paraguay

Nigeria

Ukraine

Indonesia

Venezuela

Mauritius

CzechRepublic

CostaRica

Hungary

Malaysia

Belgium

Slovenia

Chile

France

UnitedStates

UnitedKingdom

Singapore

Canada

New

Zealand

Finland

Denmark

Control of Corruption: Aggregate Indicator(From 155 worldwide, transition/selected countries)*

Source: Governance Matters, PRWP 2196 by Kaufmann, Kraay and Zoido; based on data from 1998.

For details and data, visit http://www.worldbank.org/wbi/governance There is a margin of error (thin line); extreme care in interpretation is needed.

POORGOOD

Application of Rule of Law Varies by Region

OECD East

Asia

Middle

East

South

Asia

Eastern

Europe

Latin

America

Sub-

Saharan

Africa

Former

Soviet

Union

(based on aggregation of surveys/polls 1997-99*)

HighIndex

of Rule

of Law

Appli-

cation

LowIndex

Note: Regional Averages shown for discussion purposes, and hide large intra-regional variation in each case. Thin verticalline reflects estimated margin of error. Source: Kaufmann, Kraay and Zoido-Lobaton(1999). "Aggregating Governance Indicators" and"Governance Matters" PWRP 2195 and 2196. http://www.worldbank.org/wbi/governance
http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/


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The Dividend of Good Governance

Infant Mortality and Corruption

0

10

20

30

40

50

60

70

80

90

Weak Average Good

Control of Corruptionx DevelopmentDividend

0

2,000

4,000

6,000

8,000

10,000

12,000

Weak Average Good

Regulatory Burdenx DevelopmentDividend

Per Capita Income and

Regulatory Burden

Literacy and Rule of Law

0

25

50

75

100

Weak Average Good

Rule of LawxDevelopment

Dividend

Per Capita Income and

Voice and Accountability

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Weak Average Strong

Voice and AccountabilityxDevelopment

Dividend

Note: The bars depict the simple correlation between good governanceand development outcomes. The line depicts thepredicted value when taking into account the causality effects (Development Dividend) from improved governance to betterdevelopment outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.

Finland0

20

40

60

80

100

120

140

160

180

200

-2 -1 0 1 2

Voice, Civil Liberties and Accountability

InfantMortality

Voice, Accountability and Civil Liberties Matter for Development

Source: KKZ 1999


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5

Not Free Partly Free Free

Corrup

tion

Corrup

tion

High

Low

Civil Liberties

Corruption is associated with absence of Civil Liberties

Based on averages of

data from 160 countries.

AGOALB

ARE

ARG

ARM

AUSAUT

AZE

!

BEN

BFABGD

BGR

BHR

BHS

BIH

BLRBOL

BRABRN

BWA

CANCHE

CHL

CHNCIV

CMR

COGCOL

CRI

CUB

CYP

CZE

DEU

DNK

DOMDZA ECU

EGY

ESP

EST

ETH

FIN

FJI

FRA

GAB

GBR

GEO

GHA

GIN

GMBGNB

GRC

GTM

GUY

HKG

HND

HRVHTI

HUN

IDN

IND

IRL

IRN

IRG

ISL

ISR

ITA

JAM

JOR

JPN

KAZKEN

KGZ

KOR

KWT

LBN

LBRLBY

LKA

LSOLTU

LUX

LVA

MAR

MDA MDGMEX

MKD MLI

MLT

MMR

MNG

MOZ

MUS

MWI

MYS

NAM

NER

NGANIC

NLD

NOR

NZL

OMN

PAK

PAN

PER PHL

PNG

POL

PRK

PRT

PRY

QAT

ROMRUSSAU

SDN

SEN

SGP

SLE

SLV

SOM

SURSVK

SVN

SWE

SWZ

SYRTCD

TGO THA

TJK TKM

TTO

TUN

TUR

TWN

TZA

UGA

UKR

URY

USA

UZBVEN

VNM

YEMYUG

ZAF

ZAR

ZMB

ZWE

r = 0.68

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

0 0.2 0.4 0.6 0.8 1

Control of Graft and Freedom of the Press

High

Low

Low High

r = .68

Freedom of the Press (Freedom House)

ControlofGraft[kkz]


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Salient Features of New Governance Diagnostic Tools

Multi-pronged surveys of: households, firms and public

officials [triangulation]

Experiencial questions (vs. opinions/generic)

Speciallydesignedand testedclosedquestions

Conceptual framework: Incentive Structure behindGovernance; focus on development

Rigorous technicalrequirements in implementation

Local Institution Implements, with WB Collaboration Recognizing Multidimensionality of Governance

Focus on Service Delivery: Input for Action and Change

4.2

2.1

1.4

0

1

2

3

4

Low

Income

Middle

Income

High

Income

Lower Income Households Pay Disproportionally

Bribe/Total Income ratio % ( A Latin American Country )


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Albania

Georgia

Latvia

0 20 40 60 80

Customs inspectors

Tax inspectors

Judges

Ordinary police

Investigators/prosecutors

Ministers

Which Public Sector Jobs Are Sold?

Percent of public officials reporting purchase of positions

48

60

41

5241

25

39

3216

25

10

4023

5

3332

14

19

Source: Diagnostics 1998

Public Prosecutor

Electricicy company

Cent. BankM of Fin - Income

National Fin. Corp.

MunicipalityPresidency

M of Fin - Treasury

Attorney General

Congress

Undersec. Of Gov't

Electoral Supreme TribunalCourts

Universities and schools

M of Energy and Mines

M of Fin - BudgetUndersec. Of Social Welfare

Telephone company

National Council of TransitProv. Council

Comptroller

Real Estate Bank

y = -0.05x + 6.05

R2

= 0.50

r=-0.71

1

2

3

4

5

40 50 60 70 80 90 100

Meritocracy in Hiring and Promotion

Public Officials Survey: Meritocracy in the Public Service

Can Help Reduce CorruptionHigh

Low


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Citizen Voice Improves Accessibility of Public

Services to the Poor in Bolivia

Based on Bolivia Public Officials Survey. The sample of institutions includes 44 national,

departmental, and municipal agencies which are a prior anticipated to be accessible to the poor

30

40

50

60

70

Low Moderately Low Moderately High High

Voice / External Accountability

AccessibilitytothePoor

Simple Average Association Controlled Causal Link

Transparency within Government Agencies Increases

Their Poverty Reduction Impact in Bolivia

Based on Bolivia Public Officials Survey. The sample of institutions includes 50 national, departmental,

and municipal agencies which are a prior anticipated to have a major impact on poverty reduction.

30

40

50

60

Low Moderately Low Moderately High High

Internal Transparency

PovertyReductionImpact

Simple Average Association Controlled Causal Link


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Extent of State Capture in TransitionExtent of State Capture in Transition

Country

Parliamentarylegislation(% of firms)

Presidentialdecrees(% of firms)

CentralBank(%of firms)

CriminalCourts(%of firms)

Party finance(% of firms)

Capture index(%of firms)

CaptureClassification

Albania 12 7 8 22 25 16 LowArmenia 10 7 14 5 1 7 LowAzerbaijan 41 48 39 44 35 41 HighBelarus 9 5 25 0 4 8 LowBulgaria 28 26 28 28 42 28 HighCroatia 18 24 30 29 30 27 HighCzech Rep 18 11 12 9 6 11 LowEstonia 14 7 8 8 17 10 LowGeorgia 29 24 32 18 21 24 HighHungary 12 7 8 5 4 7 LowKazakhstan 13 10 19 14 6 12 LowKyrgyzstan 18 16 59 26 27 29 HighLatvia 40 49 8 21 35 30 HighLithuania 15 7 9 11 13 11 LowMoldova 43 30 40 33 42 37 HighPoland 13 10 6 12 10 12 LowRomania 22 20 26 14 27 21 HighRussia 35 32 47 24 24 32 HighSlovakia 20 12 37 29 20 24 HighSlovenia 8 5 4 6 11 7 LowUkraine 44 37 37 21 29 32 HighUzbekistan 5 4 8 5 4 6 Low

Overall 24 21 25 18 20 22

0

5

10

15

20

25

30

35

40

45

50

Hungary Estonia Russia Azerbaijan

Parliamentary

legislation

Decrees Central Bank

Influence

State Capture Prevails in some countries

The Capture Economy vs. the Market Economy

%ofFirmsaffectedbystatecapture

%

%

%

%

%

%

%

%

%

%

Adverse Impact of Purchases of:

Source: Hellman, Jones and Kaufmann 2000 (BEEPS in Transition)


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2%

4%

6%

8%

10%

12%

%f

irms'purchase'legislative

DomesticInvestor

WithFDI

% of firms that 'Purchase' Legislation and Decreesin Transition Economies

Transnational Corporate Responsibility Matters as Well:

Note: For transition economies, average of 20 countries.Source: Hellman, Jones andKaufmann, 2000 (www.worldbank.org/wbi/governance)

% Firms that pay public procurement kickbacks% Firms that pay public procurement kickbacks(of those that trade with the state)(of those that trade with the state)

0

5

10

15

20

25

30

35

40

%o

ffirms

Domestic

FDI(D

omesticH

Q)

FDI(O

verse

asHQ

)


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Enormous Social/Enormous Social/EconomiEconomi costs of state capture:costs of state capture:Much lower growth in sales and investment in economyMuch lower growth in sales and investment in economy

(and also weaker property rights protection)(and also weaker property rights protection)

0

5

10

15

20

25

Averagerateofgrowth'97-'99

High capture Countries Low capture countries

Sales

Investment

State Capture exists where partial Civil Liberties

and slow Economic Reforms

0%

10%

20%

30%

40%

ExtentofState

Capture

High Civil Liberties Partial Civil

Liberties

High Economic Reform

Partial Econ. Reform

Low Ec. Reform

Degree of Civil Liberties in Transition Economies

Economic

Reforms


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Corruption

Public Oversight and Civil Society:Public Oversight and Civil Society:

OmbudsmanOmbudsman in Albania and Boliviain Albania and Bolivia Private Sector CoalitionPrivate Sector Coalition in Boliviain Bolivia DiagnosticDiagnostic Surveys andSurveys and NGONGO

monitoring in Ecuador and othersmonitoring in Ecuador and others

Governance Improvement in Practice:Differentiated Strategies in Five Countries

Financial Controls:Financial Controls:ProcurementProcurement Reform in Bolivia,Reform in Bolivia,

Ecuador and GeorgiaEcuador and Georgia

Institutional and Civil ServiceInstitutional and Civil ServiceReform:Reform:TransparentTransparent PrivatizationPrivatization

in Ecuadorin Ecuador SalarySalary Reform in BoliviaReform in Bolivia Disclosure of AssetsDisclosure of Assets inin

Bolivia and GeorgiaBolivia and Georgia

Legal-Judicial:Legal-Judicial:

Revamp ofRevamp ofSupreme CourtSupreme Court in Boliviain Bolivia Competency test and firingCompetency test and firing of judgesof judgesin Georgia, Albania and Latviain Georgia, Albania and Latvia MediationMediation in Albaniain Albania

Economic Policy:Economic Policy:Deregulation andDeregulation and DelicensingDelicensing in Boliviain Bolivia RevampingRevamping CustomsCustoms in Ecuador and Latviain Ecuador and Latvia Tax AdministrationTax Administration in Latvia and Ecuadorin Latvia and Ecuador Tax/CustomsTax/Customs Code Reform in AlbaniaCode Reform in Albania

Summing Up

Broadening Framework: Governance for Growth

Addressing State Capture and Grand Corruption

Political vs. Economic Independence of key agencies

Voice & Civil Society: Participation/Collective Action

Role of Competitive Private Sector/Business Assciations

Addressing Fundamentals/Systemic Factors [vs. Symptoms]:

imperative of Institutional Reform

New empirical diagnostic tools & dissemination:

The Power of Info.data

http://www.worldbank.org/wbi/governance


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Broader Framework in Quality of Growth: Summing Up

Growth is paramount for poverty alleviation andwelfare improvement...

...But not if short term, K-int. and volatile growth

And there are also other important welfarecomponents: Civil Liberties, Human K, etc.

Governance and Voice components are alsoimportant inputs for quality growth

Rich countries can help quality growth process inemerging economies: governance and aid

We are still learning: power of data

Visit: http://www.worldbank.org/wbi/governance

National Governance: Challenges in Integrating Anti-

Corruption Into Institutional Change

A simple Formula synthesizing Governance/Anticorruption:

IG and AC = KI + LE + CA

Improving Governance andAnti-Corruption =

= Knowledge/Info.Data +

...+ Leadership (incl. Political) + ...

... + CollectiveAction (change)


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http://www.worldbank.org/wbi/governance/

Data Presented for Analysis and informing

Policy Advise, not for Precise Rankings

The data contained in this presentation originates from

various enterprise surveys (as well as outside expert rating

agencies) and are subject to a margin of error. The

purpose is therefore not to present precise comparative

rankings across countries, but instead to illustrate

characteristics of governmental and corporate

performance in order to assist in drawing implications for

action. No ranking of countries is intended in presentingresults from these external sources by either the presenter

of this work, the World Bank or its Board of Directors.

Further details and data, visit: http://www.worldbank.org/wbi/governance
http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/http://www.worldbank.org/wbi/governance/

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