New Frontiers on Governance and Lessons for New Zealand in a Corrupt World Daniel Kaufmann The World...

New Frontiers on Governance and Lessons for New Zealand in a Corrupt World

Daniel KaufmannThe World Bank Institute

http://www.worldbank.org/wbi/governancePresentation at NZIERs Annual General MeetingWednesday, September 19th, 2001Auckland, New ZealandVideo Link with the World Bank, Washington, DCNote: Data presented here subject to margin of error. Views and errors are authors..

On Governance and Corruption: challenging eight conventionsCorporate Governance = National Governance?National (Public) Governance = Control of Corruption?Corporate Responsibility unrelated to Public Governance?Control of Terrorism unrelated to control of corruption?Unavailability/Unreliability of Data in governance field?Administrative/Bureaucratic Bribery is key problem?Corporate Strategies => improved National Governance?NZ exporters/FDI can do little in a corrupt world?

The 8 conventions above will be answered in the Negative.

What is Governance?: A working definition for public governanceGovernance is the process and institutions by which authority in a country is exercised: (1) the process by which governments are selected, held accountable, monitored, and replaced; (2) the capacity of governments to manage resources efficiently, and to formulate, implement, and enforce sound policies and regulations; and, (3) the respect for the institutions that govern economic and social interactions among them

Operationalizing Governance: Unbundling its Definition into Components that can be measured, analyzed, and worked onEach of the 3 main components of Governance Definition is unbundled into 2 subcomponents:Voice and AccountabilityPolitical Stability and lack of ViolenceQuality Regulatory FrameworkGovernment EffectivenessControl of CorruptionRule of Law

Control of Corruption: Aggregate Indicator (selected countries from 155 worldwide, for illustration, based on 1998 research data*)Source: Governance Matters, PRWP 2196 by Kaufmann, Kraay and Zoido. http://www.worldbank.org/wbi/governance/POORGOODCorruption LevelMargin of ErrorGood Corruption Control

Application of Rule of Law Varies by RegionOECDEastAsiaMiddleEastSouthAsiaEasternEuropeLatinAmericaSub-SaharanAfricaFormerSovietUnion(based on aggregation of surveys/polls 1997-99*)High Indexof Rule of LawAppli-cationLowIndexNote: Regional Averages shown for discussion purposes, and hide large intra-regional variation in each case. Thin vertical line 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

The Dividend of Good GovernanceNote: The bars depict the simple correlation between good governance and 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.

Probability of Losing Investment Due to Corruption(For FDI, within a 5-year period. Source SP/DRI, 2000, Selected Countries, Preliminary)

Probability of Losing FDI due to CorruptionCertainUnlikely [%]

Administrative and Judicial Corruption

1

2

3

4

5

6

7

Low corruption

Very high corruption

Administrative Corruption

Corruption in the Judiciary

Corruption in the Banking Sector, abridged(Source: EIU, 2001)Systemic corruptionHonest Banking

Not FreePartly FreeFreeCorruption [and Absence of Rule of Law]High LowCivil LibertiesCorruption/Absence of Rule of Law & Civil Liberties Based on averages of data from 160 countries.

Control of Graft and Freedom of the PressHighLowLowHighr = .68 Freedom of the Press (Freedom House)Control of Graft [kkz]

Corruption

Public Oversight and Civil Society:Ombudsman in Albania and Bolivia Private Sector Coalition in Bolivia Diagnostic Surveys and NGO monitoring in Ecuador and others

Governance Improvement in Practice:Differentiated Strategies in Five Countries

Financial Controls: Procurement Reform in Bolivia, Ecuador and Georgia

Institutional and Civil ServiceReform: Transparent Privatization in Ecuador Salary Reform in Bolivia Disclosure of Assets in Bolivia and Georgia

Legal-Judicial: Revamp of Supreme Court in Bolivia Competency test and firing of judges in Georgia, Albania and Latvia Mediation in Albania

Economic Policy: Deregulation and Delicensing in Bolivia Revamping Customs in Ecuador and Latvia Tax Administration in Latvia and Ecuador Tax/Customs Code Reform in Albania

Open Law Making / Public Meetings on Procurement

Public Procurement Unit Cost Comparison Initiative

Anti-Corruption Compact: Firms, Leaders, NGOs

D. Modesty: The Infancy of Serious Anti-Corruption

Diagnostic Surveys as Input to Action Program Design and Strategy: Illustrations1. In-depth Country Diagnostic surveys of Firms, Users and Public Officials: identify misgovernance, corruption and institutional vulnerabilities in each agency2. How costly is corruption in afflicted agencies?3. How to Prioritize and design politically feasible reforms? Support Strategies?4. Capacity Building and Institutional Development

AlbaniaGeorgiaLatvia020406080Customs inspectorsTax inspectorsJudgesOrdinary policeInvestigators/ prosecutorsMinisters Which Public Sector Jobs Are Sold? Percent of public officials reporting purchase of positions48604152412539321625104023533321419Source: Diagnostics 1998

Citizen Voice and Access to Public Services by the Poor (Bolivia illustration, each observation is a public agency)Based on 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

Transparency within Government Agencies Prevents Purchase of Public PositionsBased on 90 national, departmental, and municipal agencies covered in the Public Officials Survey.

Chart9

13.2814.511.81.8Low

12.5111.55Moderately Low

9.59.5Moderately High

8.96.941.81.8High

Simple Average Association

Control Causal Link

Margin of Error

Internal Transparency

Job Purchase

all3

all3

45.4946.21-11.288

32.9132.80

23.1620.6811.288

Simple Average Association Between Transparency and Corruption

Controlled Causal Link of Transparency on Corruption


Frequency of Bribery

construct3

6.3324.95

35.3633.88

Simple Average Association Between Autonomy and Corruption

Controlled Causal Link of Autonomy on Corruption


all4

38.4736.399

35.533.8357

27.7230.6239

Simple Average Association Between Wages and Corruption

Controlled Causal Link of Wages on Corruption

Wage Satisfaction


construct4

22.3437.1118

43.733.9769

36.3730.4671

Simple Average Association Between Voice and Corruption

Controlled Causal Link of Voice on Corruption

Voice


effect

51.8255.0519

59.6560.1275

70.5365.279

Simple Average Association Between Resources and Service Delivery

Controlled Causal Link of Resources on Service Delivery

Resources

Service Delivery Performance

Sheet2

29.6126.97

36.4931.09

34.9536.33

Simple Average Association Between Politicization and Corruption

Controlled Causal Link of Policitization on Corruption

Politicization


Sheet1

45.4946.21-11.288

32.9132.80

23.1620.6811.288





Sheet6

6.3324.952.4402

35.3633.88-12.9646




38.4736.399-4.2432422

35.533.83570

27.7230.62394.2717278



Wage Satisfaction


5454.572.3904

59.1959.860.1730737705

6865.8-2.3572

Simple Average Association Between Voice and Service Delivery

Controlled Causal Link of Voice on Service Delivery

Voice

Quality of Services

51.8255.05192.18705

59.6560.12750

70.5365.279-2.2975064



Resources


29.6126.973.0212

36.4931.090

34.9536.33-2.2908



Politicization


TransparencyTransparencyControlled Causal Link of Transparency on CorruptionupperlowerSimple Average Association Between Transparency and CorruptiondifferenceMeritocracyControlled Causal Link of Meritocracy on CorruptionupperlowerSimple Average Association Between Meritocracy and Corruptiondifference

Low52.7346.2142.860223487552.617376512545.49-11.2886.8Low53.4138.646636.458637914740.834562085345.49-4.3759241706

Medium64.6432.833.731060142333.400739857732.9102.26Medium63.934.345734.196079146934.495320853132.91-0.2992417062

High75.420.6825.48338612116.03961387923.1611.2886.8High76.7129.093631.433126066426.754073933621.344.6790521327

64.2534.0364.6734.03

-1.190.4234875445-0.410.1943127962

AutonomyAutonomyControlled Causal Link of Autonomy on CorruptionupperlowerSimple Average Association Between Autonomy and Corruptiondifference

Autonomous Agencies124.95216.332.44021.47

Non-autonomous Agencies033.883635.36-12.9646-7.81

62.4633.74

-4.243.1879699248

WageControlled Causal Link of Wages on CorruptionSimple Average Association Between Wages and Corruption

Low21.0136.39939.133748837234.423051162838.47-4.24324222.55617

Medium36.2733.835734.257646511633.805553488435.50

High54.7730.623928.346251162833.056948837227.724.27172782.57333

37.8933.74

-0.18-0.1395348837

VoiceControlled Causal Link of Voice on CorruptionSimple Average Association Between Voice and CorruptionVoiceControlled Causal Link of Voice on Service DeliverySimple Average Association Between Voice and Service Delivery

Low38.5137.111835.599782062838.623817937222.34-3.0240358744Low38.5154.5756.011080327953.5477196721542.39041.44

Medium52.1433.976933.870666816134.083133183943.7-0.2124663677Medium52.1459.8660.454236885260.281163114859.190.1730737705

High67.430.467131.934768161428.999431838636.372.9353363229High67.465.865.428746721367.819853278768-2.3572-1.42

33.7460.79

53.1753.17

-0.23-0.10313901350.410.0840163934

ValuesControlled Causal Link of Values on CorruptionSimple Average Association Between Values and Corruption

Low33.8435.968236.1922228740.1795771336.37-3.9873542601

Medium50.8133.762134.039391928334.526208071734.52-0.4868161435

High67.7331.562531.892904035928.889495964130.283.0034080717

33.74

50.98ResourcesControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

-0.13-0.1048387097Low38.3355.051955.952403278753.458796721351.822.187051.3175

Medium51.0660.127560.102174590259.747625409859.650

High63.9965.27964.31714262366.13525737770.53-2.2975064-1.38404

60.79

51.27

0.40.0785854617

PoliticizationControlled Causal Link of Policitization on CorruptionSimple Average Association Between Politicization and Corruption

Low21.9826.9737.696794170444.130605829629.613.02121.82

Medium41.5731.0935.211587443937.604412556136.4900

High57.9236.3333.137410313932.157589686134.95-2.2908-1.38

33.74

40.7

0.340.1176470588

RulesControlled Causal Link of Ill-Specified Rules on CorruptionSimple Average Association Between Ill-Specified Rules and Corruption

Bad53.9840.902533.637242600933.470157399145.330.1670852018

Medium63.233.987532.467584304930.398615695132.942.0689686099

Good73.0726.58531.215466367727.110533632322.594.1049327354

33.74

63.53

-0.75-0.1536885246

00

00

00





00

00




00

00

00



Wage Satisfaction


00

00

00

Simple Average Association Between Voice and Corruption

Controlled Causal Link of Voice on Corruption

Voice


00

00

00

Simple Average Association Between Values and Corruption

Controlled Causal Link of Values on Corruption

Voice

Service Delivery

00

00

00



Politicization


00

00

00

Simple Average Association Between Ill-Specified Rules and Corruption

Controlled Causal Link of Ill-Specified Rules on Corruption

Rules


00

00

00



Voice


00

00

00



Resources


00

00

00

Simple Average Association Between Meritocracy and Corruption

Controlled Causal Link of Meritocracy on Corruption

Meritocracy


41.5436.7-4.482

36.434.57

31.832.91

23.530.14.6646



Wage Satisfaction


50.6851.292.72242.7224

56.3258.04

60.9962.7

73.669.85-2.6726-2.6726



Voice

Quality of Services

29.0327.484.4824.482

3332.46

3635.44

3538.72-3.486-3.486



Politicization


6.3324.952.4402

35.3633.88-12.9646




29.0327.4830.95

3332.4632.94

3635.4434.26

3538.7235.78



Politicization


6.3324.9521

35.3633.8836




TransparencyControlled Causal Link of Transparency on CorruptionSimple Average Association Between Transparency and Corruptiondifference

Low49.8348.81-12.05167.26

Moderately Low37.2935.743.13

Moderately High28.9132.672.92

High16.6417.9312.25087.38

WageControlled Causal Link of Wages on CorruptionSimple Average Association Between Wages and CorruptionHigh36.739.54-4.4822.7

Low36.741.54-4.4822.7Moderate_High34.5736.41.6

Moderately Low34.5736.41.6Moderate_Low32.9135.81.54

Moderately High32.9131.81.54Low30.123.54.66462.81

High30.123.54.66462.81

VoiceControlled Causal Link of Voice on Service DeliverySimple Average Association Between Voice and Service Delivery

Low51.2950.682.72241.64



High69.8573.6-2.67261.61

PoliticizationControlled Causal Link of Policitization on CorruptionSimple Average Association Between Politicization and Corruption

Low27.4829.034.4822.730.95



High38.7235-3.4862.135.78

ResourcesControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low5452.433.35322.02



High67.5974.04-3.4032.05

RulesControlled Causal Link of Ill-Specified Rules on CorruptionSimple Average Association Between Ill-Specified Rules and Corruption

Bad045.330

Medium032.940

Good022.590

33.74

0

DIRECT

QualityBribeTransparencyMeritocracyService QualityCorruption

Corruption-0.110.00-0.13-0.11

Meritocracy0.00-0.42-0.010.00-0.41

Transparency0.00-1.140.000.12-1.19

Resources0.400.000.000.000.400.00

Voice0.380.010.140.170.41-0.23

Politicization0.000.12-0.13-0.17-0.040.34

Autonomy0.00-11.33-4.46-4.780.47-4.24

Wage0.00-0.180.000.000.02-0.18

Enforcement0.00-0.010.000.000.00-0.01

Values0.00-0.130.000.000.01-0.13

Rules0.000.00-0.660.00-0.080.75

PerRules0.000.000.000.380.02-0.16

PerRuleControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryVoiceControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryVoiceControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryAutonomyAutonomyControlled Causal Link of Autonomy on CorruptionupperlowerSimple Average Association Between Autonomy and CorruptiondifferenceBudget DiversionControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low59.8956.572.87181.7359.86Low37.3138.895.0132-3.02Low43.0442.684.482-2.7Autonomous Agencies15.32216.9111.52046.94Low57.556.79-4.8142.9

Moderate_Low62.4359.721.3562.42Moderate_Low47.7249.211.35Moderate_Low50.853.771.35Non-autonomous Agencies011.13611.186.32463.81Moderate_Low54.855.211.48

Moderate_High65.0366.441.4865.03Moderate_High54.7453.561.48Moderate_High57.1258.791.4862.4633.74Moderate_High50.951.181.35

High68.7875.39-3.03781.8368.8High63.962.86-4.8142.9High64.53262.66-4.4822.7High45.2144.825.0132-3.02

Budget DiversionControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low6162.015.0132-3.02

Rule4Controlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryTransparencyControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryModerate_Low5656.141.35

Low8.8812.39-1.992-1.2Low45.7340.633.5856-2.16Rule4Controlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryModerate_High5251.11.48

Moderate_Low8.2710.981.35Moderate_Low49.547.291.35Low43.4546.29-54.32High4450-4.8142.9

Moderate_High7.846.251.48Moderate_High52.97581.48Moderate_Low36.8439.021.35Simple Average AssociationControlled Causal Link

High7.344.652.2411.35High57.557.7-3.35322.02Moderate_High31.1628.581.48Low13.2814.511.8

High24.8221.464.91Moderately Low12.5111.55

Moderately High9.59.5

High8.96.941.87129.5250.6599526913

7108.51

484144.535

5974

26282742

24182130

111814.56

71410.517

242926.521

7129.54

101311.56Party finance (% of firms)Corruption

1278222013.8251821.527258.44

10714568.414020.535120.13

PoliticiControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery414839444042.435152513357.14

Low57583.43622.073.7167.97711.6229525058.844323.542425.97

Moderate_Low59591.357.1664.9165282628281925.8421327.5104230.52

Moderate_High62621.489.4462.963182430292926302226273036.35

High6564-3.2038-1.9312.0760.57591.3821811129911.863520.524670.78

1478889172018.5201777.27

292432182024.621814.5112124.68

1278557.44442429477.92

131019141414655.54614.29

181659263029.8272724.03

40498212628.8353549.35

1579111411.2131363.64

433040333436424240.26

13106121811.8101072.73

222026141719.8272737.66

353247242733242427.27

201237292524.6202062.99

854665.8111183.77

443737212633292912.34

548596.2449.09

PerRuleControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryPerRuleControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryPerRuleControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low59.8956.572.87181.7359.86Low59.8956.572.87181.7359.86Low59.8956.572.87181.7359.86

Moderate_Low62.4359.721.3562.42Moderate_Low62.4359.721.3562.42Moderate_Low62.4359.721.3562.42

Moderate_High65.0366.441.4865.03Moderate_High65.0366.441.4865.03Moderate_High65.0366.441.4865.03

High68.7875.39-3.03781.8368.8High68.7875.39-3.03781.8368.8High68.7875.39-3.03781.8368.8

ValueControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low36.4741.43-4.4156-2.6659.86

Moderate_Low34.38391.3562.42

Moderate_High33.234311.4865.03

High31.1219.624.2164-2.5468.8

00-1.992

00

00

002.241



Quality of Rules

Budget Diversion

003.58563.5856

00

00

00-3.3532-3.3532


Politicization

Quality of Services

005.01325.0132

00

00

00-4.814-4.814



Voice

Accessibility to the Poor

00

00

00

00



Voice

Poverty Reduction Impact

00

00

00

00





000

000

000

000



Rules in Personnel Management

Meritocracy

002.87182.8718

00

00

00-3.0378-3.0378

&A

Page &P




Meritocracy

002.87182.8718

00

00

00-3.0378-3.0378




Meritocracy

00-5-5

00

00

0066



Voice


002.4402

00-12.9646



Job Purchases

002.87182.8718

00

00

00-3.0378-3.0378




Bribery

00-4.4156

00

00

004.2164



Voice

Bribery

001.6221.622

00

00

001.3821.382


Politicization

Meritocracy

00-5

00

00

006



Quality of Rules


00

00

00

00



Voice


00

00

00

00



Budget Diversion


00

00

00

00



Budget Diversion


001.81.8

00

00

001.81.8


Controlled Causal Link

Transparency

Job Purchase

Simple Average AssociationControlled Causal LinkdifferenceBudget DiversionControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Simple Average AssociationControlled Causal LinkdifferenceLow40.6345.73-5Low57.556.79-4.814Simple Average AssociationControlled Causal Link

Low48.8149.83-12.0516Moderately Low47.2949.5Moderate_Low54.855.21Low13.2814.511.8

Moderately Low35.7437.29Moderately High5652.97Moderate_High50.951.18Moderately Low12.5111.55

Moderately High32.6728.91High57.757.55High45.2144.825.0132Moderately High9.59.5

High17.9316.6412.2508High8.96.941.8

Rule4Controlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryVoiceControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Low43.4546.29-5VoiceControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service DeliveryLow43.0442.684.482Budget DiversionControlled Causal Link of Resources on Service DeliverySimple Average Association Between Resources and Service Delivery

Moderate_Low36.8439.02Low37.3138.895.0132Moderate_Low50.853.77Low6162.015.0132-3.02

Moderate_High31.1628.58Moderate_Low47.7249.21Moderate_High57.1258.79Moderate_Low5656.141.35

High24.8221.46Moderate_High54.7453.56High64.53262.66-4.482Moderate_High5251.11.48

High63.962.86-4.814High4450-4.8142.9

00-12.0516-12.05160

000

000

0012.250812.25080


Control Causal Link

Margin of Error


Bribery

00-5-50

000

000

00550


Control Causal Link

Margin of Error



00-5-50

000

000

00660


Control Causal Link

Margin of Error

Voice / External Acountability

Bribery

005.01325.01320

000

000

00-4.814-4.8140


Control Causal Link

Margin of Error



004.4824.4820

000

000

00-4.482-4.4820


Control Causal Link

Margin of Error



00-4.814-4.8140

000

000

005.01325.01320


Control Causal Link

Margin of Error

Budget Diversion


005.01325.01320

000

000

00-4.814-4.8140


Control Causal Link

Margin of Error

Budget Diversion


001.81.80

000

000

001.81.80


Control Causal Link

Margin of Error


Job Purchase

DIRECTThru CorruptionThru TransparencyThru Meritocracy

QualityBribeTransparencyMeritocracyQualityBribeTransparencyMeritocracyQualityBribeTransparencyMeritocracyQualityBribeTransparencyMeritocracy

Corruption-0.110.00-0.14-0.110.000.000.000.000.000.000.000.000.000.000.000.00

Meritocracy0.000.40-0.010.00-0.040.00-0.060.000.000.010.00-0.000.000.000.000.00

Transparency0.00-1.170.000.110.130.000.000.130.000.000.000.000.000.000.000.00

Resources0.400.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00

Voice0.380.040.150.18-0.000.00-0.01-0.000.00-0.180.000.000.000.00-0.000.00

Politicization0.000.09-0.14-0.18-0.010.00-0.01-0.010.000.160.000.000.000.000.000.00

Autonomy0.00-12.47-4.80-5.161.370.001.751.370.005.620.000.000.000.000.050.00

Wage0.00-0.170.000.000.020.000.020.020.000.000.000.000.000.000.000.00

Enforcement0.00-0.100.000.000.010.000.010.010.000.000.000.000.000.000.000.00

Values0.00-0.130.000.000.010.000.020.010.000.000.000.000.000.000.000.00

Rules0.000.00-0.650.000.000.000.000.000.000.760.000.000.000.000.000.00

PerRules0.000.000.000.380.000.000.000.000.000.000.000.000.000.00-0.000.00

DIRECTINDIRECTNET

QualityBribeTransparencyMeritocracyQualityBribeTransparencyMeritocracyQualityBribeTransparencyMeritocracy

Corruption-0.110.00-0.14-0.11Corruption0.000.000.000.00Corruption-0.110.00-0.14-0.11

Meritocracy0.000.40-0.010.00Meritocracy-0.040.01-0.06-0.00Meritocracy-0.040.41-0.07-0.00

Transparency0.00-1.170.000.11Transparency0.130.000.000.13Transparency0.13-1.170.000.24

Resources0.400.000.000.00Resources0.000.000.000.00Resources0.400.000.000.00

Voice0.380.040.150.18Voice-0.00-0.18-0.01-0.00Voice0.38-0.140.140.18

Politicization0.000.09-0.14-0.18Politicization-0.010.16-0.01-0.01Politicization-0.010.25-0.15-0.19

Autonomy0.00-12.47-4.80-5.16Autonomy1.375.621.801.37Autonomy1.37-6.85-3.00-3.79

Wage0.00-0.170.000.00Wage0.020.000.020.02Wage0.02-0.170.020.02

Enforcement0.00-0.100.000.00Enforcement0.010.000.010.01Enforcement0.01-0.100.010.01

Values0.00-0.130.000.00Values0.010.000.020.01Values0.01-0.130.020.01

Rules0.000.00-0.650.00Rules0.000.760.000.00Rules0.000.76-0.650.00

PerRules0.000.000.000.38PerRules0.000.00-0.000.00PerRules0.000.00-0.000.38

Corruption0%-1%0%

Meritocracy100%3%85%100%

Transparency100%0%54%

Resources0%

Voice-1%130%-5%-3%

Politicization100%65%7%5%

Autonomy100%-82%-60%-36%

Wage100%0%100%100%

Enforcement100%0%100%100%

Values100%0%100%100%

Rules100%0%

PerRules100%0%

0

Politicization of Public Agencies in Indonesia Lowers Transparency in Public Sector (Indonesian Public Official Survey Very Preliminary Draft)Based on 36 public agencies covered in the Indonesia Public Officials Survey.

Chart12

76760.80.8

76.776.7

77.5781.121.12


Controlled Link

Politicization

Transparency

Sheet1

Politicization vs CorruptionSimple Average AssociationControlled LinkerrorEnforcement vs CorruptionSimple Average AssociationControlled LinkerrorValues vs CorruptionSimple Average AssociationControlled LinkerrorVoice vs BriberySimple Average AssociationControlled LinkerrorWage vs BriberySimple Average AssociationControlled LinkerrorPoliticization vs TransparencySimple Average AssociationControlled Linkerror

Low67.264.781.665Low69.667.5Low69.0768.1-2.08Low71.9671.43.84Low64.364.43.024Low76760.8

Medium6866.61.12Medium69.466.9Medium67.4567.55Medium67.866.9Medium73.866.1Medium76.776.7

High7168.82.4High6666.3High67.7766.951.92High64.664.22.4High67.469.3-3.584High77.5781.12

68.733333333366.726666666768.333333333366.968.096666666767.533333333368.1267.568.566.676.733333333376.9

Voice vs CorruptionSimple Average AssociationControlled LinkerrorResource Envelope vs CorruptionSimple Average AssociationControlled LinkEducation vs CorruptionSimple Average AssociationControlled LinkerrorResource vs BriberySimple Average AssociationControlled LinkerrorExtraJob vs BriberySimple Average AssociationControlled LinkerrorEducation vs TransparencySimple Average AssociationControlled Linkerror

Low70.469.4Low67.165.2Low67.367.9-2.08Low58.857.75.024Low69.565.5Low75.275.6

Medium67.966.7Medium69.469High68.5366.91.408Medium71.5569.4Medium65.167.8Medium76.176.5

High66.865.4High67.666.667.91567.4High67.468.994.384High74.169High77.977.9

68.366666666767.166666666768.033333333366.933333333365.916666666765.363333333369.566666666767.433333333376.476.6666666667

Sheet1

67.264.781.6651.665

6866.61.121.12

7168.82.42.4


Controlled Link

Degree of Politicization

Corruption

Sheet2

3734.8-2.49

3333.5

3231.8

30312.656



Personal Values

Bribery

Sheet3

69.667.5

69.466.9

6666.3


Controlled Link

Rule Enforcement

Corruption

Sheet4

00-2.08

00

001.92


Controlled Link

Personal Values

Corruption

Sheet5

00

00

00


Controlled Link

Citizen Voice

Corruption

Sheet6

67.165.2

69.469

67.666.6


Controlled Link

Resource Envelope

Corruption

00-2.08

001.408


Controlled Link

Education

Corruption

003.843.84

00

002.42.4


Controlled Link

Citizen Voice

Bribery

005.0245.024

00

004.3844.384


Controlled Link

Resource Envelope

Bribery

000.80.8

00

001.121.12


Controlled Link

Politicization

Transparency

00

00

00


Controlled Link

Education

Transparency

00

00

00


Controlled Link

Citizen Voice

Bribery

00

00

00


Controlled Link

Resource Envelope

Bribery

003.024

00

00-3.584


Controlled Link

Average Wage

Bribery

00

00

00


Controlled Link

Wage Shortfall

Bribery

500

502

503

504

505

506

800

810

850

851

852

853

854

890

904

905

906

1000

1001

1100

1101

1102

1109

1110

1200500502503504505506800810850851852853854890904905906100010011100110111021109111012001201120312041205150120012060220025012503260038013802410042014202420342044205430043104320432143224323

1201

1203

1204

1205

1501

2001

2060

2200

2501

2503

2600

3801

3802

4100

4201

4202

4203

4204

4205

4300

4310

4320

4321

4322

4323

Public Sector Corruption in Indonesia Is Not Caused by Low Government Pay (Indonesian Public Official Survey Very Preliminary Draft) Based on 36 public agencies covered in the Indonesia Public Officials Survey.

Chart9

64.364.4

73.866.1

67.469.3


Controlled Link

Average Wage

Bribery

Sheet1

Politicization vs CorruptionSimple Average AssociationControlled LinkerrorEnforcement vs CorruptionSimple Average AssociationControlled LinkerrorValues vs CorruptionSimple Average AssociationControlled LinkerrorVoice vs BriberySimple Average AssociationControlled LinkerrorWage vs BriberySimple Average AssociationControlled LinkerrorPoliticization vs TransparencySimple Average AssociationControlled Linkerror

Low67.264.781.665Low69.667.5Low69.0768.1-2.08Low71.9671.43.84Low64.364.43.024Low75.775.9

Medium6866.61.12Medium69.466.9Medium67.4567.55Medium67.866.9Medium73.866.1Medium76.776.7

High7168.82.4High6666.3High67.7766.951.92High64.664.22.4High67.469.3-3.584High77.577.9

68.733333333366.726666666768.333333333366.968.096666666767.533333333368.1267.568.566.676.633333333376.8333333333

Voice vs CorruptionSimple Average AssociationControlled LinkerrorResource Envelope vs CorruptionSimple Average AssociationControlled LinkEducation vs CorruptionSimple Average AssociationControlled LinkerrorResource vs BriberySimple Average AssociationControlled LinkerrorExtraJob vs BriberySimple Average AssociationControlled LinkerrorEducation vs TransparencySimple Average AssociationControlled Linkerror

Low70.469.4Low67.165.2Low67.367.9-2.08Low58.857.75.024Low69.565.5Low75.275.6

Medium67.966.7Medium69.469High68.5366.91.408Medium71.5569.4Medium65.167.8Medium76.176.5

High66.865.4High67.666.667.91567.4High67.468.994.384High74.169High77.977.9

68.366666666767.166666666768.033333333366.933333333365.916666666765.363333333369.566666666767.433333333376.476.6666666667

Sheet1

67.264.781.6651.665

6866.61.121.12

7168.82.42.4


Controlled Link

Degree of Politicization

Corruption

Sheet2

3734.8-2.49

3333.5

3231.8

30312.656



Personal Values

Bribery

Sheet3

69.667.5

69.466.9

6666.3


Controlled Link

Rule Enforcement

Corruption

Sheet4

00-2.08

00

001.92


Controlled Link

Personal Values

Corruption

Sheet5

00

00

00


Controlled Link

Citizen Voice

Corruption

Sheet6

67.165.2

69.469

67.666.6


Controlled Link

Resource Envelope

Corruption

00-2.08

001.408


Controlled Link

Education

Corruption

003.843.84

00

002.42.4


Controlled Link

Citizen Voice

Bribery

005.0245.024

00

004.3844.384


Controlled Link

Resource Envelope

Bribery

00

00

00


Controlled Link

Politicization

Transparency

00

00

00


Controlled Link

Education

Transparency

00

00

00


Controlled Link

Citizen Voice

Bribery

00

00

00


Controlled Link

Resource Envelope

Bribery

003.024

00

00-3.584


Controlled Link

Average Wage

Bribery

00

00

00


Controlled Link

Wage Shortfall

Bribery

500

502

503

504

505

506

800

810

850

851

852

853

854

890

904

905

906

1000

1001

1100

1101

1102

1109

1110

1200500502503504505506800810850851852853854890904905906100010011100110111021109111012001201120312041205150120012060220025012503260038013802410042014202420342044205430043104320432143224323

1201

1203

1204

1205

1501

2001

2060

2200

2501

2503

2600

3801

3802

4100

4201

4202

4203

4204

4205

4300

4310

4320

4321

4322

4323

Very Corrupt

Not Corrupt

The ratio at the top of each column is the corruption ranking of Parliament among all surveyed institutions. Thus, for instance, in Cambodia, relative to other surveyed public institutions, Parliament rated best among 10, while in Ecuador it rated worst among 35. Research sources: Governance Anti-Corruption Index Country Diagnostic Surveys, Bolivia, Cambodia, Ecuador, Georgia, Latvia, Paraguay, Romania, Slovakia, WBI /WB http://www.worldbank.org/wbi/governance/

Parliaments: Misgoverned or Honest Institutions?Enormous Variation on Corruption Relative Standing

Relative to All other institutions surveyed

Lower Income Households Pay DisproportionallyBribe/Total Income ratio % ( A Latin American Country )

BEEPS: Unbundling and Comparing Governance Constraints Across all countries in Transition (and beyond)

Recognizing the Problem of State CaptureVladimir Putins statement to Russias business leaders (last year): I only want to draw your attention straightaway to the fact that you have yourselves formed this very state, to a large extent through political and quasi-political structures under your control, so perhaps what one should do least of all is blame the mirror.

Defining State CaptureFirms that shape the rules of the game to their advantage through illicit, non-transparent provision of private gains to public officials, including:

private purchase of legislative votesprivate purchase of executive decreesprivate purchase of court decisionsillicit political party financing

Measuring State Capture

The Myth that Administrative Bribery Pays

Captor Firms Get Big Gains But only in High Capture States

At A Cost Of Greater Insecurity for All OthersShare of Firms with Secure Property Rights

Capture comes at a very high Socio-Economic Cost

2%4%6%8%10%12%% firms 'purchase' legislativeDomesticInvestorWithFDI% of firms that 'Purchase' Legislation and Decrees in Transition Economies Transnational Corporate Responsibility Matters as Well:Note: For transition economies, average of 20 countries. Source: Hellman, Jones and Kaufmann, 2000 (www.worldbank.org/wbi/governance)

Prevalence of Kickbacks for Public Procurement by FDI (by country of FDI origin, bribing in transition)Source: Hellman, Jones and Kaufmann 2000 (BEEPS in Transition). Estimates subject to margin of error.

Towards a Solution:More Political CompetitionPace of Econ ReformPolitical Reforms

Towards a Solution:Collective Action by Firms

Concrete Implications: What can New Zealand FDI and exporters realistically do? (part I)Work with NZ government to ensure thorough and transparent evaluation of OECD convention implementation by other membersTowards Pan-Asian anti-bribery conventionPower of Information: Survey, Expose, Shame and Disseminate media, host governments, e*Business Associations activism abroadEmbassies of cleaner gang of FDI countries

Concrete Implications, part II: What can New Zealand FDI and exporters realistically do?6. In systemically corrupt countries, stay away7. In relatively corrupt countries, say No to bribery8. Logic of collective action: credibly saying No to kickbacks and state capture the high roadPressure to have international public listings of corrupt firms debarred, such as the one at World Bank http://www.worldbank.org/html/opr/procure/debarr.htmlNZ Foreign Aid: Support of good governance and Anticorruption programs in developing countries

Collective Responsibility: AC = K.I + LE + CA

Overall Corruption Over Time(Selected Countries; ICRG index, rescaled 0-10)02468High corruptionLow corruption1992199319941995199619971998IndonesiaIndonesiaFinlandEl Salvador10El SalvadorFinlandRussiaRussiaPolandPoland1988-927

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

c

33Firms Senior Management Time Spent with OfficialsDo the bribes paid by firms make life easier for them? Not necessarily; as it turns out, firms that pay more bribes end up spending more (not less) time with bureaucrats. In Russia, various estimates suggest that senior managers/owners of SMEs end up spending between 20-30 percent of their time negotiating with officials. Excessive control by officials over enterprise translates into excessive regulations, inordinate amounts of time spent by the enterprises owner with bureaucrats, and bribery. Our evidence suggests a very close association throughout the world between the extent of bribery and (higher) senior management time wasted with officials on licenses, as well as a close association between bribery and higher cost of investing and cost of capital for firms. Thus, we find no empirical support for the traditional grease argument, which suggested that petty bribery can help oil the squeaky wheels of commerce in developing countries. To the contrary, the business community ends up losing by bribing.

New Frontiers on Governance and Lessons for New Zealand in a Corrupt World Daniel Kaufmann The World...

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