9 plummer janelle-ppt making anti-corruption strategies work

8/4/2019 9 Plummer Janelle-PPT Making Anti-Corruption Strategies Work

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Corruption in the Water Sector

Janelle PlummerPatrik Stlgren

Piers Cross

World Water Week - Stockholm22 August 2006


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The Challenge

Inefficient use of existing water sector finances

Lack of investment

Millions dying from lack of clean water and basicsanitation: Reaching the MDGs is unlikely

Degradation of water resources and ecosystems Unjust distribution of water services and

resources

Lack of democratic influence for stakeholders

Corruption affects who getswhat water when, where andhow. It determines how costsare distributed between differentactors and the environment.


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How big is the corruption problem?

Varies across the sector andnational/sub-national governancesettings

World Bank estimates of project

corruption in highly corrupt countriescould be 30-40% prior to anti-corruptioninitiative

If 30% is correctUS$20 billion could be lost in thenext decade to meet the MDGsfor WSS in Africa*

Much need for diagnostics!

* Based on a 6.7 US$ billion annual estimate for WSS expenditure requirements

WSS in South Asia

False readings: 41% ofcustomers had paid a bribe in last6 months

Illegal connections: 20% ofhouseholds admitted paying abribe to utility staffContractors: 15% excess costbecause of collusionKickbacks: 6-11% of contractsvalue

(Davis,WSP Study, 2003)


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What is corruption?

Definitions

the use of public office for private gain (WB)

the abuse of entrusted power for private gain (TI)


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Corruption comes in many forms

Bribes: payments to public officials to persuade themto do something (quicker, smoother or more favorably).

Collusion: secret agreement between contractors to increase profit margin

Fraud: falsification of records, invoices etc.

Extortion:use of coercion or threats. E.g. a payment to secure / protect ongoingservice (cf. collusive corruption where both sides benefit)

Favoritism/Nepotism in allocation of public office

Grand corruption: high level, political corruption

Petty corruption: corruption in public administration and/or duringimplementation or continuing operation and maintenance


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Examples of corruption in the water sector

Falsified meter readings

Distorted site selection of boreholes or abstractionpoints

Collusion and favouritism in public procurement Bribes to cover up wastewater and pollution discharge

Kickbacks to accept inflated bills in production

Nepotism in allocation of public offices in water

administration Bribes for diversion of water for irrigation

Bribes for preferential treatment (spead, service leveletc)


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Causes of corruption in the water sector

Complementing perspectives

Incentives: Cost/benefit ratio of engaging in

corruption. Economic and non-economic rewards.

Institutions: Dysfunctional institutions - stucture andcapacity creates opportunity and lowers risk ofgetting caught.

Norms: Setting expectations and limitations forlegitimate behaviour.


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Causes of corruption

Corruption = Monopoly + Discretion Accountability

HIGH HIGH LOW


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Is the water sector unique?

It combines high riskcharacteristics:

Monopolistic behavior

Large flow of PUBLICmoney

High cost of sector assets

Assymmetry of power andinformation

Sector/ technicalcomplexity

It is similar to :

Typical civil servicebehavior

The construction industry(most corrupt sector?)


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2. A Framework for Understanding

Corruption in the Water Sector


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An Interaction Framework

Public to public Diversion of resources

Appointments and transfers

Embezzlement and fraud in planning andbudgeting

Public to private Procurement collusion, fraud, bribery

Construction fraud and bribery

Public to citizen / consumer

Illegal connections Falsifying bills and meters

PublicOfficials

Public

Actors

ConsumersPrivate

Corruption occurs

between public officials

and 3 different sets ofactors


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PUBLICPRIVATE

interactions

PUBLICCONSUMERinteractions

PUBLICPUBLIC

interactions

Tendering and Procurement

Construction / Operations/Services

Payment Systems

Policy-making

Management

Planning / budgeting / financing


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PUBLICPRIVATE

interactions


PUBLICPUBLIC

interactions

Tendering and Procurement

Construction / Operations Services

Payment Systems

Policy-making

Management

Planning / budgeting / financing


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PUBLICPRIVATE

interactions


PUBLICPUBLIC

interactions

Illegal connections Speed bribes

Billing/payment bribes

bribery / fraud incommunity procurement

elite capture

Administrative fraud Documentfalsification

Distortions anddiversion of national

budgets

Bribery, fraud,collusion in tenders

Fraud / bribes inconstruction

State Capture ofpolicy and regulatory

frameworks


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PUBLIC to PUBLIC

interactions

Planning and budgeting Corruption in planning

and management

Bribery and kickbacks infiscal transfers

Management andProgram Design

Appointments, transfers Preferred candidates Selection of projects

Policy-making /Regulating

Diversion of funds Distortions in decision-

making, policy-making

Early warningindicators

Monopolies / tariffabnormalities

Lack of clarity ofregulator / provider roles

Embezzlement in

budgeting, planning,fiscal transfers

Speed / complexity ofbudget processes

No.of signatures

% spending on capitalintensive spending

Unqualified senior staff

Low salaries, high perks,cf. HH assets

Increase in price ofinformal water

Anti-corruptionMeasures

Policy and tariff reform

Separation

Transparent minimumstandards

Independent auditing

Citizen oversight andmonitoring

Technical auditing

Participatory planningand budgeting

Performance based staffreforms

Transparent, competitiveappointments


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Same tender listsBidders drop outHigher unit costs

Variation ordersLow workerpayments

Single sourcesupplyChange in qualityand coverage


Simplify tenderdocumentsBiddingtransparencyIndependent tenderevaluation

Integrity pactsCitizen oversightand monitoringTechnical auditingCitizen auditing,public hearingsBenchmarkingSSIP support mechs

PUBLIC toPRIVATE

interactions

Procurement Bribery, fraud, collusion

in tenders

Construction Fraud / bribes in

construction

Operations Fraud / bribes in

construction


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PUBLIC toCONSUMERinteractions

Construction Community based WSS

theft of materials Fraudulent documents

Operations Admin corruption

(access, service, speed)

Payment systems

Illegal connections

access /

speed payments

billing / payment

bribery

meter, billing andcollection fraud and

bribery


Loss of materialsInfrastructurefailure

Low rate of faults

Lack of interest inconnectioncampaignsNight time tanking

Unexplained

variations inrevenues


CorruptionassessmentsCitizenmonitoring andoversight

Report cardsTransparency inreporting

Citizen oversightand monitoring

ComplaintredressalReform tocustomerinterface (e.g.women cashiers)


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Identifying anti-corruption measures

7 sets of anti-corruption measures

Measuring and diagnosing

Transparency and access to information Improving accountability

Institutional and policy reform

Enforcement and regulation

Education and advocacy

Integrity


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Areas to explore

What is the viability of specific sector interventions?

How can decentralization be harnessed as ananti-corruption strategy?

How are these measures different from currentreform efforts?

How do we make anti-corruption work for the poor?


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3. Making Anti-Corruption

Approaches Work for the Poor


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Making anti-corruption work for the poor

Why pro-pooranti-corruption approaches?

Understanding the poors interaction with

corruption Identifying hotspots in the water sector

Developing responses to bring benefit to the poor


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Why pro-poor anti-corruption approaches?

Why pro-poor?

disproportionate impact regressive

differentiated impact the affect on the poor varies

unpredictable impact not much is known

Loss of water assets and services diversion

User pays and cost recovery principles double cost

Risk of fallback tightening and shifting effects?

Growth, efficiency of services, better governanceall thesethings support poverty reduction


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Understanding the poors interaction with corruption

What are the impacts of corruption on the poor?

Short term issues access to water

Differentiated Marginalisation or empowering Coping strategies

Bribery decreases financial assets but increases short termwater assets, health assets

Long term issues efficiency and effectiveness

Marginalisation

Decrease in physical assets

Loss of options


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1. Indirect (does not involve the poor in interaction)

Political corruption, state capture

Diversion and distortion in the allocation of funds Embezzlement from state, sector, local

government budgets

Procurement fraud, fraud in construction

Elite capture


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2. Direct (the poor are involved in the interaction)

Poor users offer bribes or bribes are extorted

to access water (for irrigation, drinking water etc)

for quality, maintenance to get a fair price

Poor officials use their public office for private gain

To provide access, quality and price

To enable elite capture To defraud program / project funds

Act in organizational chain of fraud/ bribery

or as an individual or middleman


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Identifying hotspots

A flow of corruptinteractions

in which the poor are

paying bribes to stayin the system

and receiving bribes(as officials orde-facto officials)

which ones matter

most?


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Identifying hotspots in the water sector

In the poors water context what matters most?

Paying bribes at the point of service delivery

To access assets for WSS/irrigation/drainage control (one-off)

To access ongoing services for repair / operation (recurrent cost) To get the right price for legal or illegal aupply

Taking and extorting bribes and defrauding projects eitherindividually or as a part of a group

Assets captured, controlled by officials

Services and Payment systems controlled by officials

Procurement and execution controlled by officials

Embezzlement of project and community funds


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Identifying hotspots in the water sector

In the poors water context what matters most?

The sub-sector WRM, water supply, sanitation

What characteristics make for more corruption?

The public good finding The system

Where do the poor get their water? The spectrum of waterproviders

The location

Opportunities for corruption at low access points The actors

Relationships between poor and leaders / social elite


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9 plummer janelle-ppt making anti-corruption strategies work

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