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  • Corruption, Transparency and Governance Workshop on Deliberative Democracy

    Dani Kaufmann and Francesca RecanatiniWBI Global Governance TeamMay 14, 2003www.worldbank.org/wbi/governance

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

  • Objective

    To discuss cross-country and in-country methodologies developed by the World Bank Institute to assess governance and transparencyTo introduce the private-public governance nexus (capture) and present some preliminary evidence

  • Main ResultsGovernance is linked to developmentParticipatory collective action and voiceare key for sustainable policy changesTransparency, incentives and prevention play a role in improving governanceThe role of politics especially influence/capture has been under-estimated?

  • OutlineDefinition of governanceGovernance, development and democracyWorld Bank methodologies developed to measure and improve governance

    Cross-countryIn-country

    Mechanisms of influence and capture

  • What What isis Governance?:Governance?:A working definition for public governanceA working definition for public governance

    Governance is the process, institutions and customs through which the function of governing is carried out

  • GovernanceGovernance..

    (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

  • Each of the 3 main components of governance can be unbundled into 2 subcomponentsVoice and AccountabilityPolitical Stability and lack of ViolenceQuality Regulatory FrameworkGovernment EffectivenessControl of CorruptionRule of Law

  • Building Aggregate Governance IndicatorsUse Unobserved Components Model (UCM) to construct composite governance indicators, and margins of error for each country

    Estimate of governance: weighted average of observed scores for each country, re-scaled to common units

    Weights are proportional to precision of underlying data sources

    Precision depends on how strongly individual sources are correlated with each other

    Margins of error reflect (a) number of sources in which a country appears, and (b) the precision of those sources

  • Inputs for Governance Indicators 2002Publisher Publication Source Country Coverage

    Wefas DRI/McGraw-Hill Country Risk Review Poll 117 developed and developing

    Business Env. Risk Intelligence BERI Survey 50/115 developed and developing

    Columbia University Columbia U. State Failure Poll 84 developed and developing

    World Bank Country Policy & Institution Assmnt Poll 136 developing

    Gallup International Voice of the People Survey 47 developed and developing

    Business Env. Risk Intelligence BERI Survey 50/115 developed and developing

    EBRD Transition Report Poll 27 transition economies

    Economist Intelligence Unit Country Indicators Poll 115 developed and developing

    Freedom House Freedom in the World Poll 192 developed and developing

    Freedom House Nations in Transit Poll 27 transition economies

    World Economic Forum/CID Global Competitiveness Survey 80 developed and developing

    Heritage Foundation Economic Freedom Index Poll 156 developed and developing

    Latino-barometro LBO Survey 17 developing

    Political Risk Services International Country Risk Guide Poll 140 developed and developing

    Reporters Without Borders Reporters sans frontieres (RSF) Survey 138 developed and developing

    World Bank/EBRD BEEPS Survey 27 transition economies

    IMD, Lausanne World Competitiveness Yearbook Survey 49 developed and developing

    Binghamton Univ. Human Rights Violations Research Survey 140 developed and developing

  • Control of Corruption: one Aggregate Indicator (selected countries, for illustration, based on 2000/01 research data)

    -2.5

    0

    2.5

    Cong

    o, D

    em. R

    ep. (

    Zaire

    )

    KENY

    A

    ZIM

    BABW

    E

    INDO

    NESI

    A

    TANZ

    ANIA

    KORE

    A, N

    ORT

    H

    HAIT

    I

    MO

    LDO

    VA

    ARM

    ENIA

    VIET

    NAM

    IVO

    RY C

    OAS

    T

    BANG

    LADE

    SH

    ALBA

    NIA

    INDI

    A

    CHIN

    A

    MEX

    ICO

    BULG

    ARIA

    CRO

    ATIA

    MO

    ZAM

    BIQ

    UE

    MAL

    AYSI

    A

    URUG

    UAY

    TUNI

    SIA

    COST

    A RI

    CA

    BOTS

    WAN

    A

    CYPR

    US

    NAM

    IBIA

    CHIL

    E

    NEW

    ZEA

    LAND

    Source: KKZ 2000/01

    POOR GOOD

    CorruptionLevel

    Margin of Error

    Good Corruption Control

  • Rule of Law, 1998 vs. 2000 Latin America

    Source for data: http://www.worldbank.org/wbi/governance/govdata2001.htm ; Chart downloaded from : http://info.worldbank.org/governance/kkz/Note: the thin lines depict 90% confidence intervals. Colors are assigned according to the following criteria: Red, 25% or less rank worse; Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%

    http://www.worldbank.org/wbi/governance/govdata2001.htmhttp://info.worldbank.org/governance/kkz/

  • Traffic Light World MapVoice and Accountability 2000

    Source for data: http://www.worldbank.org/wbi/governance/govdata2001.htm ; Map downloaded from : http://info.worldbank.org/governance/kkz/gov2001map.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse; Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between75% and 90% ; Dark Green above 90%

    http://www.worldbank.org/wbi/governance/govdata2001.htmhttp://info.worldbank.org/governance/kkz/governance_indicator.asp

  • Governance and Poverty Nexus, IGovernance and Poverty Nexus, I

    Lower Investment and Growth

    Unsound economic/institutional policies due to vested interests

    Distorted allocation of public expenditures/investments

    Low human capital accumulation

    Elite corporate interests capture laws and distort policymaking

    Absence of rule of law and property rights

    Governance obstacles to private sector development

    Lack of Health and Education

    Low human capital accumulation Lower quality of education and health care

    Cont

  • Governance and Poverty, cont.Governance and Poverty, cont.

    Poor have Smaller share in Growth

    State capture by elite of government policies and resource allocationRegressiveness of bribery tax on small firms and the poorRegressiveness in public expenditures and investmentsUnequal income distribution

    Bribery imposes regressive tax and impairs access and quality of basic services for health, education, and justicePolitical capture by elites of access to particular services

    Impaired Access to Public Services

  • The Dividend of Good GovernanceInfant Mortality and Corruption

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    Weak Average Good

    Control of Corruption x Development Dividend

    0

    2,000

    4,000

    6,000

    8,000

    10,000

    12,000

    Weak Average Good

    Regulatory Burdenx Development Dividend

    Per Capita Income and Regulatory Burden

    Literacy and Rule of Law

    0

    25

    50

    75

    100

    Weak Average Good

    Rule of Law x Development Dividend

    Per Capita Income andVoice and Accountability

    0

    1000

    2000

    3000

    4000

    5000

    6000

    7000

    8000

    9000

    10000

    Weak Average Strong

    Voice and Accountabilityx DevelopmentDividend

    Note: 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.

  • Figure 1: Rule of Law, Voice and Accountability and Control of Corruption, Regional Averages, KKZ 2000

    Good Governance

    -1.0

    0.0

    1.0

    2.0

    O ECD East Asia NIC Eastern Europe Middle East N.Africa

    Latin America East Asiaemerging

    Sub-SaharanAfrica

    Former SovietUnion

    South Asia

    Rule of Law

    Control of Corruption

    Voice and Accountability

    Poor Governance

    Source: Governance Research Indicators (KKZ) based from data in D. Kaufmann and A. Kraay, 'Growth without Governance', for 175 countries, details at http://www.worldbank.org/wbi/governance/pubs/growthgov.htm. Units in vertical axis are expressed in terms of standard deviations around zero. Country and regional average estimates are subject to margins of error (illustrated by thin line atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted. See also regional clarifications in note 6.

    http://

  • Figure 5: Transparency and GDP Growth

    1

    3

    5

    Low Middle High

    Extent of Transparency

    Transparent Information by GovernmentEffective Parliamentary OversightCorporate Ethics

    Annual GDP Growth (%)

    Source: Annual GDP growth over 1999-2001 is taken from WDI 2002; GDP is computed in PPP terms. The various transparency / governance variables drawn from Executive Opinion Survey, 2002.

  • Cor

    rupt

    ion

    Cor

    rupt

    ion

    High

    Low

    Corruption is associated with absence of Civil Liberties

    Not Free Partly Free Free

    Based on averages of data from 160 countries. Civil Liberties

  • Control of Graft and Freedom of the Press

    AGOALB

    AREARG

    ARM

    AUSAUT

    AZE

    !

    BEN

    BFABGDBGR

    BHR

    BHS

    BIHBLR

    BOL

    BRABRN

    BWA

    CANCHE

    CHL

    CHNCIV

    CMR

    COGCOL

    CRICUB

    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

    JAMJOR

    JPN

    KAZKENKGZ

    KOR

    KWT

    LBN

    LBRLBY

    LKALSO

    LTU

    LUX

    LVA

    MAR

    MDA MDGMEX

    MKD MLI

    MLT

    MMR

    MNG

    MOZ

    MUS

    MWI

    MYSNAM

    NER

    NGA NIC

    NLDNOR

    NZL

    OMN

    PAKPAN

    PER PHL

    PNG

    POL

    PRK

    PRT

    PRY

    QAT

    ROMRUSSAU

    SDN

    SEN

    SGP

    SLESLV

    SOM

    SURSVK

    SVN

    SWE

    SWZ

    SYRTCD

    TGO THA

    TJK TKM

    TTO

    TUN

    TUR

    TWN

    TZA

    UGA

    UKR

    URY

    USA

    UZBVEN

    VNM

    YEMYUG

    ZAF

    ZAR

    ZMBZWE

    r = 0.68-2.5

    -2-1.5

    -1-0.5

    00.5

    11.5

    22.5

    0 0.2 0.4 0.6 0.8 1

    High

    Low

    Low High

    r = .68

    Freedom of the Press (Freedom House)

    Con

    trol o

    f Gra

    ft [k

    kz]

  • Overall Evidence is Sobering, however:Progress on Governance is modest at best, so far

    Evidence points to slow, if any, average progress worldwide on key dimensions of governance

    This contrasts with some other development dimensions (e.g. quality of infrastructure; quality of math/science education; effective absorption of new technologies), where progress is apparent

    At the same time, substantial variation cross-country, even within a region. Some successes.

  • 0

    1.5

    3

    1984-1988 1989-1993 1994-1998 1999-2001

    TRANSITION

    EMERGING

    OECD+NIC

    Source: Rethinking Governance, based on calculations from WDI. Y-axis measures the log value of the average inflation for each region across each period

    Significant Decline in Inflation Rates WorldwideHighInflation

    Low

    (avg. inlogs)

  • 1.5

    4

    6.5

    1997 1998 1999 2000 2001 2002

    OECD

    East AsiaIndustrialized

    Middle East

    EasternEurope

    East AsiaDeveloping

    Latin America

    Former SovietUnion

    South Asia

    Quality of Infrastructure(Regional Averages of High/Low Quality every year, GCR 1997-2002)

    Low

    High

  • 1

    2

    3

    4

    5

    6

    1984-1988 1989-1993 1994-1998 1999 2000 2001

    Emerging & Transition Economies

    Source: ICRG/PRS, 1984-2001, data subject to margins of error

    Control of Corruption Over Time for Emerging/Transition Economies PRS/ICRG

    Poor

    Good

  • 2

    4.25

    6.5

    1998 1999 2000 2001 2002

    OECD

    East AsiaIndustrialized

    Middle East

    East AsiaDeveloping

    Eastern Europe

    Latin America

    Former SovietUnion

    Extent of Independence of the Judiciary (Regional Averages of Extent/Lack of Independence every year)

    Non-Independent

    Independent

  • From From researchresearch to policy: into policy: in--country focuscountry focusA demand-driven process to improve governance, build local capacity and consensus among key stakeholdersKey elements: participation, transparency and analytical rigor (diagnostic surveys)Outcomes: greater local capacity, new policy actors, baseline governance data, and action plan for policy reform

  • InIn--country focus to policy makingcountry focus to policy making

    Commitment of the governmentCreation of national steering committeeImplementation of diagnostic surveysPublic discussion and dissemination of resultsParticipatory development of country strategyFollow-up monitoring activities

  • Who Should take the lead in a National Governance/Anticorruption Program?

    3%

    4%

    4%

    4%

    7%

    8%

    18%

    4%

    48%

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

    Not Worth It

    NGOs Alone

    Int'l Experts

    Legislative

    Enforcement Agencies

    Executive Alone

    Civil Society Alone

    A-C Agency

    Broad Coalition

    Percentage of Respondents

  • The processChallenge: poor governance and corruption

    1. Establishment of Steering Committee

    2. Diagnostic surveys + analysis

    3. Draft of the NAS

    4. Public dissemination + discussion

    5. Revision of the NAS

    6. Implementation by Government

    7. Monitoring and Evaluation of NAS

    WB

    I Tec

    hnic

    al A

    ssis

    tanc

    e

    Key Partnership: Government + Civil Society

    Country Implemented

    Experientialdata from 3sources on quality of

    governance

  • Key Features of Governance Diagnostic ToolsMulti-pronged surveys of: households, firms and public officials [triangulation]

    Experiencial questions (vs. opinions/generic) Specially designed and tested closed questionsConceptual framework: Incentive Structure

    behind Governance; focus on development Rigorous technical requirements in

    implementationLocal Institution Implements, with WB

    CollaborationRecognizing Multidimensionality of Governance

    Focus on Service Delivery: Input for Action and Change

  • Challenge: poor governance and corruption

    1. Establishment of Steering Committee

    2. Diagnostic surveys + analysis

    3. Draft of the NAS

    4. Public dissemination + discussion

    5. Revision of the NAS

    6. Implementation by Government

    7. Monitoring and Evaluation of NAS

    WB

    I Tec

    hnic

    al A

    ssis

    tanc

    e

    Key Partnership: Government + Civil Society

    Country Implemented

    A few Illustrations

    GuatemalaHighly fragmented civil societyJoint effort (CMU, SDV, WBI) to build consensus

    Sierra LeoneStrong commitment (civil society, state, donors) => surveys and report within a year. Results will be used for Institutional Reform Project

    HondurasCNA: report and strategy to newly elected gov (January 2001); integration of strategy in the 2002-2006 government plan

  • Additional success storiesGhana: report and strategy (2000), integration of results into Bank projects, dissemination at national and regional levelColombia: report (2001). Strategy in progress, collaboration between government and steering committeeBolivia: report (2001); country reform policy for Judiciary and procurement

  • Stages for Development of the National Anti-Corruption Strategy

    1. Establishment of Steering Committee

    2. Diagnostic surveys + analysis

    3. Draft of the NAS

    4. Public dissemination + discussion

    5. Revision of the NAS

    6. Implementation by Government

    7. Monitoring and Evaluation of NAS

    WB

    I Tec

    hnic

    al A

    ssis

    tanc

    e

    Key Partnership: Government + Civil Society

    Country Implemented

    Alternative pathsPeru

    Lack of political will => strategy never implementedSubsequent entry point: capacity building for monitoring with CMU and SDV

    IndonesiaWeak demand for reform and damaged reputation => work with local partners + donors; support A-C diagnostics by local NGO; involvement of locals in design and implementation of projects

    San PauloDifferent unit of observation: city. Partnership with TI to adapt tools and compile report

    EcuadorLack of political will (2000) => report never releasedNew government (2003) => A-C and governance key issues in the new CAS

  • The power of diagnostic data and key...

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