how corruption affects the water sector

Transparency International Executive Education Series 2008:

An introduction to the Water Integrity Network

John ButterworthIRC International Water and Sanitation Centre

Contents

1. Key definitions and the importance of this topic: what do statistics tell us?

2. Frameworks for understanding corruption

3. Case studies

4. Designing pro-poor strategies to prevent corruption

5. Links and further information

1.1 Some key definitions

Transparency = sharing information and acting in an open manner

Honesty/ Integrity = working and acting in ways that reflect known best practices, and following ethical principles

Accountability = objectively holding people and agencies responsible for their performance

Corruption = the abuse of entrusted power for private gain

1.2 Governance, poverty and WASH indicators in 10 selected countries

Transparency International CPI

Index (Rank of 163 countries: 1=best,

163=worst)

Population below national poverty

line, total, percentage

(Most recent year with data 1997-

2004)

Water supply coverage %(most recent

year e.g. 2004)

Sanitation coverage % (most recent

year e.g. 2004)

Children under five mortality rate

(per 1,000 live births, 2005)

Ghana 70 39.5 75 18 112

Burkina Faso 79 19.2 61 13 191

Uganda 105 37.7 60 43 136

Ethiopia 130 44.2 22 13 164

South Africa 51 Nd 88 65 68

Mozambique 99 69.4 43 32 145

India 70 24.7 86 33 74

Philippines 121 21.5 85 72 33

Honduras 121 29.5 87 69 40

Colombia 59 55.0 93 86 21

Sources: www.transparency.org; http://mdgs.un.org/; http://www.wssinfo.org/

Source: Stalgren, 2006

1.3 Correlation or cause?

1.4 Key questionsAre there causal linkages, as well as correlations, between corruption, WASH sector performance and poverty?

Will increased WASH sector investment (to meet MDGS) have the desired impact without better governance?

What are the most important forms of corruption and levels at which it occurs?

Why might the WASH sector be prone to corruption?

How much leakage should we expect to find?

What could be achieved with existing investments if we tackled leakage?

Should corruption ever be tolerated?

2.1 Interaction frameworkPublic to public

Diversion of resourcesAppointments and transfers Embezzlement and fraud in planning and budgeting

Public to privateProcurement collusion, fraud, briberyConstruction fraud and bribery

Public to Citizen / consumerIllegal connectionsFalsifying bills and meters

Source: Janelle Plummer

Public Officials

Public Actors

Consumers Private

Corruption occurs between

public officials

and 3 different sets of actors

2.2 Interaction framework

PUBLIC PRIVATE

interactions

PUBLICCONSUMER interactions

PUBLIC PUBLIC

interactions

Tendering and Procurement

Construction/Operations

Payment Systems

Policy-making and regulating

Planning/budgeting / transfers

Management

PUBLIC PRIVATE

interactions

PUBLIC CONSUMERinteractions

PUBLIC PUBLIC

interactions

• Distortions and diversion of national budgets

• Administrative fraud

• Document falsification

• State Capture of policy and regulatory frameworks

• Bribery, fraud, collusion in tenders

• Fraud/bribes in construction

• Bribery/fraud in community procurement

• Elite capture

• Illegal connections

• Speed bribes• Billing/payment

bribes

PUBLIC to PUBLIC

interactions

Planning and budgeting

• Corruption in planning and management

• Bribery and kickbacks in fiscal transfers

Management and Program Design• Appointments, transfers• Preferred candidates• Selection of projects

Policy-making/Regulating•Diversion of funds•Distortions in decision-making, policy-making

Early warning indicators

• Monopolies/tariff abnormalities

• Lack of clarity of regulator/provider roles

• Embezzlement in budgeting, planning, fiscal transfers

• Speed/complexity of budget processes

• No. of signatures• % spending on capital

intensive spending

• Unqualified senior staff

• Low salaries, high perks, cf. HH assets

• Increase in price of informal water

Anti-corruption Measures

• Policy and tariff reform• Separation• Transparent minimum

standards • Independent auditing

• Citizen oversight and monitoring

• Technical auditing• Participatory planning

and budgeting

• Performance based staff reforms

• Transparent, competitive appointments


• Same tender lists• Bidders drop out• Higher unit costs

• Variation orders• Low worker

payments

• Single source supply

• Change in quality and coverage


• Simplify tender documents

• Bidding transparency

• Independent tender evaluation

• Integrity pacts• Citizen oversight

and monitoring• Technical auditing• Citizen auditing,

public hearings• Benchmarking• SSIP support

mechanisms

PUBLIC toPRIVATE

interactions

Procurement

• Bribery, fraud, collusion in tenders

Construction


Operations


PUBLIC to CONSUMER

interactions

Construction

• Community based WSS – theft of materials

• Fraudulent documents

Operations

• Admin corruption(access, service, speed)

Payment systems

• meter, billing and

collection – fraud and bribery


• Loss of materials

• Infrastructure

• failure

• Low rate of faults

• Lack of interest in connection campaigns

• Night time tanking

• Unexplained variations in revenues


• Corruption assessments

• Citizen monitoring and oversight

• Report cards

• Transparency in reporting

• Citizen oversight and monitoring

• Complaints redressed

• Reform to customer interface (e.g.

women cashiers)

2.3 Chain of impacts

2.4 Local governance

Specific governance challenges at local level require different approaches

Decentralisation brings new challenges and opportunities

Corruption has more immediate and corrosive impact

Improvements may also be more rapid and wide reaching

In WASH, community management as a key paradigm

Tackling poverty is a key issue

3.1 Decentralization versus centralization in India

Davies (2004) identified high levels of corruption

Petty corruption (falsify meter reading, speed repairs etc)

Kickbacks from contractors

Transfers within administration

Decentralisation linked to higher levels of corruption. Why?

Opportunity to plan activities linked to decentralisation programmes

3.2 Report cards in India

Public Affairs Centre (PAC) in Bangalore developed report cards for citizens to rank performance of public service agencies (including water)

Monitored public satisfaction with staff behaviour, quality of service, information, and corruption (speed money)

Initially showed lows levels of public satisfaction, agencies not citizen friendly, lacked customer orientation, corruption a serious problem

Second survey 5 years later revealed limited improvements

Third survey 4 years later showed noticeable progress by all agencies

3.2 Report cards in India

Report cards influenced key officials in understanding perceptions of ordinary citizens

Public agencies launched reforms to improve the infrastructure and services

Government agencies showed greater transparency and more responsiveness

CRCs acted as a catalyst in the transformation of services in Bangalore

3.3 Using freedom of information lawsIndia adopted a Right to Information Act in 2001

The citizens group Parivartan in Delhi has been active in supporting its use

There have been examples where an application under the act has brought immediate results on a water issueSource: Earle & Turton

3.4 Lesotho Highlands Water ProjectLargest international water transfer was from Lesotho-South Africa

Construction contracts awarded fraudulently

Foreign companies paid bribes

Successful prosecutions set precedentsSource: Earle & Turton

3.4 Lesotho Highlands Water ProjectPrecedents from prosecution

Bribes are still illegal even if not acted on after corrupt agreement

Jurisdiction can be takenwhere the impact is felt

Crucially, courts can gain access to Swiss bank accountsSource: Earle & Turton

3.5 Pipe manufacturers in ColombiaProcurement is vulnerable to price fixing and collusion

Private sector pipe manufacturers in Colombia introduced self-regulation

Adopted an integrity pact not to pay or accept bribes

Support given by professional association, Transparency International and government

Half of 167 manufacturers have signed up

Prices have reduced by 30%

3.6 Phnom Penh, Cambodia

Transformation of a public utility under difficult post- conflict (civil war) conditions

High levels of illegal connections and unaccounted for water, including bribery of utility officials

Indicators 1993 2006

Staff per 1,000/connections 22 4

Production Capacity 65,000 m3/day 235,000 m3/day

Non Revenue Water 72% 8%

Coverage area 25% 90%

Total connections 26,881 147,000

Metered coverage 13% 100%

Supply Duration 10 hours/day 24 hours/day

Collection Ratio 48% 99.9%

Total revenue 0.7 billion riels

(US$180,000)1

34 billion riels

(US$8.7 million)

Financial situation Heavy subsidy Full cost recovery


Corruption was tackled effectively, due to

• Leadership

• Culture of change

• External support

Led to reform and new investment


Human resources management improved

Revenue collection improved

Rehabilitation of services achieved harnessing local resources

Illegal connections were tackled, reducing unaccounted for water

Tariffs were increased

3.7 Sanitation in Kerala

The NGO SEUF targeted diversion of funds to reduce costs (by ½ to ⅔) in latrine construction

Mix of strategies to tackle corruption:

• more information

• extra checks & spot checks

• public postings

• double signatures

• action on complaints at lowest level

• referral of problems

3.8 Money diverted from education in Uganda Public expenditure tracking (PET) survey in Uganda

Tracked central funds allocated for school construction

Only 13% of funds arrived at schools

Transparency campaign published, information about the grants

Led to capture being reduced from 87% to 18%

Schools near newspaper and communication points did better in receiving their funds Source: Reinikka, R. and Smith, N. Undated

3.9 Kecamatan Development Project (KDP) Tackling grassroots corruption in a large rural development project KDP – a central government project focused on poor villages and highly dispersed Very high risk environment Weak institutions for control Mapping is a key step in tackling thisSource: Guggenheim (2007)

3.9 Kecamatan Development Project (KDP)

Mapping identified sources of corruption• Bribing officials to get

projects• Cuts taken at high levels• Illicit fees• Under-delivery of

materials/ work• Embezzlement by staff

3.9 Kecamatan Development Project (KDP)

Solutions identified• Reducing discretion• Reducing transactions• Promoting competition• Lowering costs of

acquiring information• Promoting social controls• Strengthening formal

oversight• Applying sanctions

Effect of Audits on Percent Missing

Wages

Wages

Materials

Materials

0%

5%

10%

15%

20%

25%

30%

35%

Control Audits

Per

cen

t M

issi

ng

4.1 Pro-poor anti-corruption strategiesAre all information, transparency and accountability initiatives likely to benefit the poor?

Could they even be harmful?

Evidence shows that anti-corruption actions can harden and shift its forms

Source: Janelle Plummer (2007)

4.2 Diagnose A key starting point is to understand what types and level of corruption exist

Frameworks can be used to map different types of corruption and help to identify appropriate solutions

Severe lack of diagnosis of corruption and its impacts on the poor in the WASH sector

Poorly informed anti-corruption activities risk merely hardening or shifting it to other forms

Look before you leap

Diagnose

Monitor Target

MitigateConnectsolutions

4.3 Target Focus on water and sanitation services that reach the poor May include small-scale providers and community managed systems Local government a key level in WASH - an opportunity to prevent corruption before it takes root Decentralisation to service providers and agencies that are closer to communities can encourage more accountability Weak local agencies may be more susceptible to being corrupted than stronger State agencies

Diagnose

Target

ConnectsolutionsMitigate

Monitor

4.4 Example: Indonesia

15% get water directly from utility networks

20% get water indirectly or illegally

65% rely on community-managed systems, self-supply and small-scale providers

4.5 Connect solutions

Effective anti-corruption programmes combine a mix of strategies.

Supply side measures include high level institutional reforms to tackle corruption

Demand side measures strengthen the ability of poor people to seek improvements

Diagnose

Target


Monitor

4.6 Mitigate

In some places petty corruption may be a necessary evil to get access to services

Anti-corruption measures take away this coping strategy

Programmes should do no harm

put back what is lost

identify alternatives so that the poor do not need to engage in petty corruption

Diagnose

Target


Monitor

4.7 Monitor

WASH sector has little experience in reducing levels of corruption

Vital to observe which strategies are effective and which aren’t

Implementation programmes should be flexible and build on what works best

Diagnose

Target


Monitor

4.8 Key messages

Be informed and anticipate

Be inspired by examples and success stories

Use multiple strategies to improve access to information, transparency and accountability…and prevent corruption

Act in partnerships

Learn what works

5.1 Links and further information www.waterintegritynetwork.net is the website of the Water Integrity Network based at Transparency International in Berlin

www.irc.nl/transparency includes materials from the IRC International Water and Sanitation Centre and links to other useful sources

www.transparency.org is the website of Transparency International, a global civil society organisation in anti-corruption

5.2 Links and further informationAstana, A.N. (2004). ´Corruption and decentralization: evidence from India’s water sector´. In proceedings of the 30th WEDC International Conference, held at Laos, 2004.Loughborough, London, WEDC.Balcazar, A.R. 2006. The establishment of an anti-corruption agreement with pipe manufacturing companies: a Colombian experience [online] Available at www.waterintegritynetwork.net/page/238 (A 5 minute video about the Colombian integrity pact between pipe manufactures can be viewed at www.waterintegritynetwork.net/page/254)Davis, J. (2004). ´Corruption in Public Service Delivery: Experience from South Asia’s Water and Sanitation Sector´. In: World Development, vol. 32, no. 1, pp. 53–71, UK, Elsevier Ltd. www.elsevier.com/locate/worlddevGonzález de Asís, M., O’Leary, D., Butterworth, J. & Ljung, P. (forthcoming) Training modules for the Programa para mejorar la transparencia, la rendición de cuentas y el acceso a la información en el sector del agua en Honduras y Nicaragua. World Bank Institute. Available in English and Spanish (forthcoming)Gonzalez de Asis, M. (forthcoming) Reducing Corruption at the Local Level. World Bank.Plummer, J., & Cross, P., 2006 A framework for tackling corruption in the water and sanitation sector in Africa. In proceedings of the 32nd WEDC International Conference held in Sri Lanka, 2006. Loughborough, London, WEDC.Plummer, J. 2007. Making Anti-Corruption Approaches Work for the Poor: Issues for consideration in the development of pro-poor anti-corruption strategies in water services and irrigation. Swedish Water House, SIWI and WIN. [online] Available at www.swedishwaterhouse.se Satyanand, P.M. and Malick, B. 2007. Engaging with citizens to improve services: overview and key findings. Water and Sanitation Program-South Asia, New Delhi, India [online] Available at www.wsp.org Shordt, K., Stravato, L., & Dietvorst, C. 2007. About Corruption and Transparency in the Water and Sanitation Sector. Thematic Overview Paper 16. IRC International Water and Sanitation Centre, the Netherlands [online] Available at www.irc.nlSijbesma, C., Mathew, S., and Balachandra Kurup, K. (forthcoming) Preventing corruption in sanitation: A case from Kerala, India. World Bank Institute, Washington.Sohail, M & Cavill, S. 2007. Accountability arrangements to combat corruption – case study synthesis report and case study survey reports. Partnering to combat corruption series. [online] Available at www.lboro.ac.uk/wedc/publications/ Stålgren, P. 2006. Corruption in the Water Sector: Causes, Consequences and Potential Reform. Swedish Water House Policy Brief No. 4, SIWI, Stockholm, Sweden [online] Available at www.swedishwaterhouse.se TI & UN-Habitat. 2004. Tools to support transparency in local governance. Urban governance toolkit series [online] Available at www.transparency.org/tools/e_toolkit/ TI. The 2008 Global Corruption Report is focused on the water sector. Forthcoming at www.transparency.org Woodhouse, A. 2002. Village corruption in Indonesia: Fighting corruption in the World Bank’s Kecamatan Development Program. World Bank, Washington.

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