Mainstreaming Governance and Anti Corruption in the CAS

Mainstreaming Governance and Anti. Corruption in the CAS and Operations: A Guide for Country Teams with Country Applications By: Vinay Bhargava Director, Operations and International Affairs, EXT Presentation at the Core Course on Public Sector Governance and Anti-corruption February 14 -16, 2006 The World Bank 2/16/2006 Vinay Bhargava 1

What do you think is the most important problem facing the world? In a Voice of the People Survey by Gallup International the responses were: TI: Global Corruption Barometer 2005 Level of corruption in next three years expected to: CORRUPTION Decrease a little Stay the same Decrease a lot Increase a little Source: Gallup International – Voice of the People 2005 2/16/2006 Vinay Bhargava 2

Outline Five Phases in Mainstreaming ¡ Diagnose governance environment and causes/drivers of corruption ¡ Choosing entry points and designing anticorruption program suited to operating governance environment ¡ Assessment of risks to the Bank and design of mitigation measures ¡ Building coalition of external/internal supporters ¡ Monitor progress, evaluate results and adjust 2/16/2006 Vinay Bhargava 3

A quick review of the Bank’s Guidelines for addressing governance issues in CASs ¡ Upstream Review l Significance of corruption/governance issues in the country l Risks to country development and the Bank operations l Proposed Bank assistance and risk mitigation approaches ¡ Downstream CAS preparation and Review l Diagnosis of corruption and governance issues l Country’s strategy and programs for improving governance l Bank’s proposed assistance program and results l Analysis of fiduciary, developmental, and reputational risks to country and Bank and mitigation measures 2/16/2006 Vinay Bhargava 4

Anatomy of Governance Elements in Ghana 2004 -6 CAS Diagnosis: CPIA-3. 0. Major structural issues. Risks: to country - high; to Bank - no mention. Country Vision: Strong good governance and accountability program – 1 of 5 PRSP Pillars. CAS Objective: Support to Improve Governance and Empowerment -3 rd Pillar of CAS Public Sector Management Institutional Checks & Balances Financial management reforms Civil Service reforms Decentralization of service delivery provision Local government and public expenditure Improve M & E capacity Parliament Other accountability institutions Civil Society Voice & Participation Improve capacity of civil society groups Lending Instruments: PRSCs; M&E components; Community Empowerment loans AAA Instruments: WBI; Development Dialogue sessions; Outreach/media programs; CPAR; CFAA; Community Empowerment study; PER; M&E assessment Results and Performance Indicators: Well specified Triggers: To Stay in the Base Case: Progress on financial management, in particular on the 16 benchmarks (now 28 PEFA indicators) of HIPC Accountability Action Plan. To Move to the High Case: Progress on public sector including civil service reforms. 2/16/2006 Vinay Bhargava 5

A Review of 107 CASs produced in FY 99 -05 shows: Very good coverage… However quality issues: ¡ Weak diagnostics ¡ ¡ Selection criteria not clear ¡ Risk-response not balanced ¡ Risks to the Bank not fully assessed/mitigated ¡ 2/16/2006 Generic prescriptions Success stories scarce Vinay Bhargava 6

Phase 1–Diagnosis: Assembling knowledge (Practical Tips) ¡ Governance indicators (e. g. , KKZ, CPIA, TI, etc. ) ¡ Political landscape and degrees of freedom for action ¡ Summary findings of diagnostics and evaluations (AAA) ¡ Government strategy—current and historical ¡ Key anticorruption institutions (executive/non-executive branches) ¡ Key anti-corruption champions (in and out of government) ¡ Legacy issues: past donor assistance; media ¡ On-going and recent Bank anti-corruption activities (last CAS) ¡ Relatively high risk ministries/public enterprises 2/16/2006 Vinay Bhargava 7

Causes: Opportunity to abuse power 2/16/2006 Vinay Source: Transparency International Global Corruption Barometer 2005, http: //www. transparency. org/policy_and_research/surveys_indices/gcb/2005 Bhargava 8

Causes: Ambiguous Laws and Regulations; Weak Rule of Law; and Crime 2/16/2006 Vinay Source: Transparency International Global Corruption Barometer 2005, http: //www. transparency. org/policy_and_research/surveys_indices/gcb/2005 Bhargava 9

Causes: Low Income; Historical; Quality of Public Administration; Political Corruption 2/16/2006 Vinay Source: Transparency International Global Corruption Barometer 2005, http: //www. transparency. org/policy_and_research/surveys_indices/gcb/2005 Bhargava 10

Phase 2: Designing an anti-corruption program suited to local conditions 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/CSP performance indicators) ¡ Proposed triggers (if any) associated with CAS/CSP scenarios 2/16/2006 Vinay Bhargava 11

Phase 2 -Objectives and Assistance Approach: Key Trade-Offs depending upon situation ¡ Supporting development imperatives vs. risks to the Bank ¡ Balancing help to executive branch with help to nongovernment institutions of accountability ¡ Selectivity of entry points for results and credibility vs. comprehensive approaches ¡ 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 situations 2/16/2006 Vinay Bhargava 12

Phase 2: Choosing Entry Points ¡ The range of entry points is very broad Governance systems of actors, capacities, and accountability (supply-side and demand-side relationships) l Many dimensions of good governance (a menu of entry points) l ¡ Criteria to use in selecting entry points 2/16/2006 Vinay Bhargava 13

Governance Systems: Actors, Capacities and Accountability Citizens/Firms Political Actors & Institutions • Political Parties • Competition, transparency Check & Balance Institutions • Parliament • Judiciary • Oversight institutions Cross-cutting Control Agencies (Finance, HR) Civil Society & Private Sector • Civil Society Watchdogs • Media • Business Associations Citizens/Firms Executive-Central Govt Service Delivery & Regulatory Agencies Source: Sanjay Pradhan Subnational Govt & Communities Citizens/Firms 2/16/2006 Vinay Bhargava Outcomes: Services, Regulations, Corruption 14

Good Governance has many dimensions Citizens/Firms Political Accountability • Political competition, broad-based political parties • Transparency & regulation of party financing • Disclosure of parliamentary votes effective judiciary • Legislative oversight (PACs, PECs) • Independent oversight institutions (SAI) • Global initiatives: UN, OECD Convention, anti-money laundering Effective Public Sector Management • Ethical leadership: asset declaration, conflict of interest rules • Cross-cutting public management systems: meritocracy, public finance, procurement • Service delivery and regulatory agencies in sectors Civil Society & Media • Freedom of press, FOI • Civil society watchdogs • Report cards, client surveys Private Sector Interface • Streamlined regulation • Public-private dialogue • Extractive Industry Transparency • Corporate governance • Collective business associations Citizens/Firms Checks & Balances • Independent, Decentralization and Local Participation Source: Sanjay Pradhan • • Decentralization with accountability Community Driven Development (CDD) Oversight by parent-teacher associations & user groups Beneficiary participation in projects Citizens/Firms 2/16/2006 Vinay Bhargava 15

Phase 2: Practical tips for choosing entry points Whether and how effectively the proposed entry point is 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 ¡ Be feasible under the political landscape, institutional setting, and administrative capacity 2/16/2006 Vinay Bhargava 16

Phase 2: Choosing the mix of assistance instruments for an entry point Undertaking and disseminating ESW ¡ Grants for institutional capacity building ¡ WBI capacity building programs ¡ Sponsoring in-country dialogue events ¡ Fitting lending operations with anticorruption plans ¡ Free standing lending/TA operations in support of governance improvement ¡ 2/16/2006 Vinay Bhargava 17

Phase 2: Analysis of entry points and instruments chosen in 21 FY 05 CASs Note the dominance of public sector management interventions and none in political accountability 2/16/2006 Vinay Bhargava 18

Phase 3: Building partnerships ¡ Expectation for cooperation among donors ¡ Coalitions are more effective for improving governance ¡ Instruments: joint or parallel (coordinated) activities with domestic and/or external partners for: **Studies **Joint statements **Coordination group **Mass communications 2/16/2006 Vinay Bhargava **Funding **TA projects **Public dialogue events **Dialogues with gov’t. 19

Phase 3: Build Coalition to shift balance of power between vested interests and reformers ¡ Cultivate political support ¡ Get the public behind reform l l l NGOs Media Business Associations Donors Students and Academics ¡ ¡ 2/16/2006 Cultivate internal supporters Build on scandals and crisis Vinay Bhargava 20

Phase 3: Involve institutions to limit corruption ¡ ¡ Judiciary Legislature Decentralization with accountability Constitutionally independent accountability institutions l l l ¡ Anti-corruption agency Election Commission Ombudsman Supreme audit institutions Media Disclosure laws, policies and regulations 2/16/2006 Vinay Bhargava 21

Sectors and Institutions Most Affected By Corruption Source: 2/16/2006 Transparency International Global Corruption Barometer 2005, Vinay http: //www. transparency. org/policy_and_research/surveys_indices/gcb/2005 Bhargava 22

Phase 4: Assessing Risks to the Bank l Country team members to rate the extent (on a scale of 1 to 5, with 5 being highest risk situation) to which the state of corruption and governance can: l l Reduce the ability to mobilize resources for development l Raise concern in public that Bank assistance increases opportunities for corrupt officials l Result in corruption seeping into Bank financed projects and l 2/16/2006 Undermine results/effectiveness of Bank assistance Pose personal security risks to Bank staff and counterparts Vinay Bhargava 23

Phase 4 : Risk Analysis and Mitigation ¡ Upstream-Categorize country by risks to the Bank l CPIA , governance indicators, and country knowledge assessment l Country team self assessment validated by selected external interviews ¡ Commonly used mitigation measures to reduce risks to the World Bank: l Fiduciary controls (procurement and financial) and INT review l Integrating social accounting mechanisms l Integrating strong results monitoring framework l Screening of new projects for corruption risks; preventive measures l Increasing transparency (disclosure, hotline) l Strategic communications and partnerships l Proactive sanctions enforcement 2/16/2006 Vinay Bhargava 24

Phase 5: Monitor progress, evaluate results and adjust ¡ Set clear and monitorable results ¡ Push beyond Disclosure Policy to supply information to public that make activities transparent ¡ Set reporting and independent auditing systems ¡ Put in place social accountability mechanisms ¡ Encourage beneficiary participation in planning/evaluation 2/16/2006 Vinay Bhargava 25

Phase 5: Social Accountability Mechanism Source: Social Development Paper No. 76. World Bank, 2004. 2/16/2006 Vinay Bhargava 26

Thank you. 2/16/2006 Vinay Bhargava 27