of transparency

1

‘Transparenting Transparency’

Initial Empirics and Policy Applications

Daniel Kaufmann and Ana BellverWorld Bank Institute

http://worldbank.org/wbi/governance

Presentation at the Pre-Conference on Institutional Change for Growth and Poverty Reduction in Low-Income Countries

at the International Monetary Fund, Washington, DC, July 6-7, 2005

2

Main Messages of Transparenting Transparency

• Major contributions exist on right to know/access to informationand transparency, but little progress on: -- measurement and ‘unbundling’ of transparency -- empirical analysis-- policy analysis and strategic/policy focus

• Propose a Transparency Index (as in UCM/Governance work):Economic/Institutional vs. Political Transparency

• Finding of large variance worldwide in terms of transparency: i)cross-country: incl. within same region & transparency present in some emerging economies; and ii) within country: economic vs. political transparency

• Transparency associated with better socio-economic indicators, less corruption, & improved competitiveness

• Results are supported at the ‘micro’ level: in-country diagnostic complement: Bolivia and Chile illustrations

• Policy implications: transparency core in 2nd-generation institutional reforms, role of IFIs, & concrete strategies

3

Towards an Aggregate Index of Transparency: Basic Unbundling into Two Dimensions

• Ec/Institutional transparency: content, accessibility and usefulness of economic and institutional information provided by public institutions – Economic and Financial Information– Implementation of Freedom of Information laws– Transparency in the budget and its process– Transparency of economic policy-making– Transparency of the public administration

• Political transparency: response to citizenry’s demand for open debate and for accountability in political institutions: – Transparency in political funding – Openness and competitiveness of political participation– Independence of the media– Disclosure of Politician’s Assets, Voting records, etc

4

Sources of Transparency Indicators

• Cross-Country Surveys of Firms: Global Competitiveness Survey, World Competitiveness Yearbook

• Expert Assessments from NGOs, Think Tanks: Reporters Without Borders, Freedom House, Amnesty International, Fundar & other Latin American NGOs, Brown University’s Center for Public Policy, Transparency International, Polity IV Project, International Budget Project, Center for Public Integrity, Freedominfo

• Expert Assessments from Multilateral Agencies: Islam Economic Transparency Index, United Nations, World Bank CPIA, African Development Bank CPIA, UNECA

5

Sources for Transparency Indicators, 2004

pollPolitical Regime Characteristics and Transitions, 1800-2002

Polity IV Project

objective assessment

Budget Practices and Procedures surveyOECD/WB

surveyWorld Competitiveness YearbookInstitute for Management Development


Opening Budgets to Understanding and Debate, 2004

International Budget Project

pollLatin American Index of Budget Transparency

Fundar/International Budget Project


Global Survey 2004 Freedominfo/Banisar

pollNations in TransitFreedom HousepollFreedom in the WorldFreedom House

PollPublic Integrity IndexCenter for Public Integrity


Global E-Government 2004Brown University’s Centre for Public Policy

pollCountry Policy & Institutional AssessmentAfrican Development Bank

6

Sources for Transparency Indicators, 2004 Cont’d

surveyGlobal Competitiveness Report World Economic Forum

pollCountry Policy & Institutional Assessment

World Bank

objectiveassessment

Islam Transparency Index 2004World Bank

objectiveassessmentWorld Public Sector Report 2003United Nations

pollAfrican Governance Indicators, 2005UN Economic Commission for Africa

objectiveassessment

Global Corruption Report 2004Transparency International

pollCIRI Human Rights datasetState Department/ Amnesty International

pollReporters Without BordersReporters Without Borders

7

‘Perceptions’-based data and Objective-data

1.Examples of ‘Perceptions’-based data• Firms are usually informed clearly and transparently by the

Government on changes in policies affecting their industry? (IT)

• Is freedom of the media guaranteed? (PT)• In practice, is the right of access to information effective?

(IT)2.Examples of Objective data

• Is the deposit interest rate published quarterly? (IT)• Is the budget documentation placed on the internet? (IT)• Is there a Freedom of information Law? (IT)• Is disclosure of contributions to political parties mandatory?

(PT)

8

Why Aggregate Indicators?Basic Premise: individual data sources provide a noisy

“signal” of broader concept of governance, e.g.:– Publication of economic variables → EC/INST

TRANSPARENCY– Disclosure of political funding → POLITICAL

TRANSPARENCY– Transparency of policy → EC/INST TRANSPARENCY– Freedom of the press→ POLITICAL TRANSPARENCY

Benefits of Aggregation -- through the U.C. Method• aggregate indicators are more informative about broad

concepts of transparency• broader country coverage than individual indicator• generate explicit margins of error for country scores

9

Building Aggregate Transparency Indicators

• Use Unobserved Components Model (UCM) to construct composite transparency indicators, and margins of error for each country

• Estimate of transparency: 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

10

Unobserved Components Model

• Observed indicator k of governance in country j, y(j,k), is noisy indicator of true governance in country j, g(j):

• Variance in measurement errors is same across countries for each source, but different across sources:

• Identifying assumption: Measurement errors are uncorrelated across sources ⇒ highly correlated sources measure governance with more precision

( )y j k g j j k( , ) (k) (k) ( ) ( , )= + ⋅ +α β ε

[ ] )k()k,j(E 22εσ=ε

11

Estimates of Governance from UCM

• UCM allows us to infer the distribution of governance in a country conditional on the observed data for that country

• Best estimate of governance is the mean of this conditional distribution:

• So estimate of governance is weighted average of re-scaled scores, with weights proportional to precision of each source:

∑= β

α−⋅=

)j(K

1k )k()k()k,j(y)k(w))]j(K,j(y),...,1,j(y|)j(g[E

∑=

−ε

−ε

σ+

σ= )j(K

1k

2

2

)k(1

)k()k(w

12

Precision of Estimates from UCM

• Reliability or precision of estimate of transparency for each country is the standard deviation of this conditional distribution:

• These standard errors are smaller for countries that (a) appear in more sources, and/or (b) appear in more reliable sources

21

)j(K

1k

2)k(1))]j(K,j(y),...,1,j(y|)j(g[SD−

=

−ε ⎟⎟

⎠

⎞⎜⎜⎝

⎛σ+= ∑

13

Estimating Unobserved Components Model

• Distinguish between representative and non-representative sources

• For representative sources, estimate parameters α(k), β(k), and σε(k) using maximum likelihood

• Construct initial estimate of governance using representative sources only

• For non-representative sources, estimate parameters by regressing each source on initial estimate of governance

• Construct final estimate of transparency using all sources

14

Levels of Transparency Worldwide, 2004

• Estimates of transparency for 194 countries• Assess the precision of these estimates, using standard

errors generated by UCM– Simple rule of thumb: cross-country differences in

governance significant if 90% confidence regions don’t overlap

• Precision of governance indicators has improved over time with more, and better, data sources– e.g. MCA eligibility requires countries above median on

Control of Corruption– 2004 KK data: 33% of countries significantly above (at

90% confidence level)--much improved– Single source: less than 10% of countries are

significantly above median (at 90% confidence)

15

Institutional Transparency, Bottom Quartile (Initial, 2004)*

-2.5

0

2.5

LIBE

RIA

KO

REA

, NO

RTH

AFG

HAN

ISTA

N

SOM

ALI

A

TURK

MEN

ISTA

N

LAO

S

LIB

YA

MIC

RONE

SIA

SYR

IA

ER

ITRE

A

KIR

IBA

TI

CO

NGO

DJIB

OU

TI

IRA

Q

IVO

RY C

OAS

T

NIG

ER

UZBE

KIS

TAN

AZE

RBA

IJA

N

SIE

RRA

LE

ON

E

CAM

ERO

ON

MA

LAW

I

GAB

ON

AN

GO

LA

Low Transparency

TransparencyLevel Margin

of Error

High Transparency

Source: Transparenting Transparency by BK (2005). N. of countries: 194.

* Preliminary data- Not for quotation or to establish rankings.

16

Institutional Transparency, Middle-Low Quartile (Initial, 2004)*

-2.5

0

2.5

GA

MB

IA

ZIM

BA

BWE

MY

ANM

AR

BUR

UND

I

ETH

IOPI

A

MA

URI

TAN

IA

BE

NIN

MAL

I

KE

NYA

NIG

ERI

A

ZAM

BIA

MO

ZAM

BIQ

UE

MA

DAG

AS

CAR

EG

YP

T

TAN

ZANI

A

HO

NDU

RAS

VIE

TNAM

IRA

N

BUR

KIN

A F

AS

O

NAM

IBIA

GEO

RGIA

LEB

ANO

N

UG

AND

A

FIJI

Low Transparency


of Error

High Transparency



17

Institutional Transparency, Middle-High Quartile (Initial, 2004)*

-2.5

0

2.5G

HAN

A

GU

ATE

MAL

A

TUN

ISIA

MO

RO

CCO

BO

TSW

ANA

BEL

ARU

S

MA

CED

ONI

A

ALB

ANIA

PA

RAG

UA

Y

NE

PAL

RU

SSIA

URU

GU

AY

ARM

ENI

A

CHI

NA

INDO

NE

SIA

CO

STA

RIC

A

SO

UTH

AFR

ICA

JOR

DAN

RO

MAN

IA

BO

LIV

IA

MAL

AY

SIA

CRO

ATI

A

CO

LOM

BIA

PAN

AMA

SLO

VAK

REP

UBL

IC

Low Transparency

TransparencyLevel

Margin of Error

High Transparency



18

Institutional Transparency, Top Quartile (Initial, 2004) *

-1.7

0.8

3.3BU

LGA

RIA

IND

IA

THAI

LAN

D

PE

RU

UKR

AIN

E

ARG

ENT

INA

HUN

GA

RY

ICE

LAND

AUS

TRIA

BRA

ZIL

SPA

IN

PO

LAN

D

SLO

VE

NIA

ITAL

Y

NO

RW

AY

GE

RM

AN

Y

JAP

AN

MEX

ICO

FINL

AN

D

NE

THE

RLA

ND

S

FRA

NCE

DE

NMA

RK

SW

ED

EN

AUS

TRA

LIA

UNI

TED

KIN

GD

OM

CHIL

E

CA

NAD

A

UNIT

ED

STA

TES

Low Transparency

TransparencyLevel

Margin of Error

High Transparency



19

Institutional Transparency, Selected Countries (Initial, 2004)*

-2.5

0.5

3.5

LIB

ERIA

KO

RE

A, N

OR

TH

SYR

IA

MA

LAW

I

MYA

NM

AR

BU

RUN

DI

ZAM

BIA

SEN

EGA

L

VE

NEZU

ELA

BAN

GLA

DES

H

GE

OR

GIA

FIJI

GU

ATE

MA

LA

BO

TSW

ANA

PAR

AG

UAY

RUS

SIA

CHIN

A

INDI

A

UKR

AIN

E

BR

AZIL

SLO

VEN

IA

JAP

AN

FRA

NCE

SW

EDE

N

CHIL

E

UN

ITE

D S

TATE

S

Low Transparency

TransparencyLevel

Margin of Error

High Transparency

Source for data: Transparenting Transparency by BK (2005).Colors are assigned according to the following criteria: Dark Red, bottom10th percentilerank; Light Red between 10th and 25th Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ;Dark Green above 90th.

20

Political Transparency, Bottom Quartile (Initial, 2004)*

-2.5

0

2.5K

OR

EA, N

ORT

H

CUBA

LIB

YA

TURK

ME

NIST

AN

ZIM

BABW

E

CHIN

A

SUD

AN

SAU

DI A

RAB

IA

BELA

RUS

SYR

IA

SO

MAL

IA

RW

ANDA

EG

YPT

BHUT

AN

KYRG

YZ R

EPUB

LIC

LIB

ERIA

YEM

EN

AZER

BAI

JAN

CHAD

CAM

ERO

ON

UKR

AINE

MA

LAYS

IA

RUSS

IA

Low Transparency


of Error

High Transparency



21

Political Transparency, Middle-Low Quartile (Initial, 2004)*

-2.5

0

2.5AN

GO

LA

BAN

GLA

DES

H

MAL

DIVE

S

ETHI

OPI

A

ALG

ERIA

JORD

AN

PAK

ISTA

N

VENE

ZUEL

A

CAM

BODI

A

ZAM

BIA

COLO

MBI

A

NIG

ERIA

CO

NG

O

GU

ATEM

ALA

KENY

A

TURK

EY

INDO

NESI

A

UGAN

DA

HON

DURA

S

PAR

AGUA

Y

MO

ZAM

BIQ

UE

MA

DAG

ASCA

R

Low Transparency


of Error

High Transparency



22

Political Transparency, Middle-High Quartile (Initial, 2004)*

-2.5

0

2.5CR

OAT

IA

INDI

A

MEX

ICO

BULG

ARIA

BOLI

VIA

NAM

IBIA

ARG

ENTI

NA

BRA

ZIL

BO

TSW

ANA

KORE

A, S

OU

TH

ITA

LY

ISRA

EL

HO

NG

KO

NG

GR

EECE

GHA

NA

CHIL

E

SO

UTH

AFR

ICA

HUN

GAR

Y

URU

GUA

Y

SLO

VAK

REP

UBLI

C

AUST

RIA

CYPR

US

BEL

IZE

Low Transparency

TransparencyLevel

Margin of Error

High Transparency



23

Political Transparency, Top Quartile (Initial, 2004)*

-2.5

0

2.5P

OLA

ND

COST

A RI

CA

SPA

IN

FRA

NCE

JAPA

N

LATV

IA

UNIT

ED K

ING

DOM

ESTO

NIA

GE

RMAN

Y

CAN

ADA

PORT

UGAL

UNIT

ED S

TATE

S

MA

RSHA

LL IS

LAND

S

LUX

EMBO

URG

NEW

ZEA

LAN

D

SWIT

ZERL

AND

FINL

AND

NO

RW

AY

ICEL

AND

SW

EDE

N

DENM

ARK

Low Transparency

TransparencyLevel

Margin of ErrorHigh

Transparency



24

Political Transparency, Selected Countries (Initial, 2004)*

-2.5

0

2.5

KOR

EA, N

ORT

H

CUB

A

VIE

TNAM

CHIN

A

LIB

ERIA

AZER

BAIJ

AN

UKR

AINE

RUSS

IA

BAN

GLA

DES

H

JORD

AN

MAL

AWI

HO

NDU

RAS

GEO

RGIA

PAN

AMA

ROM

ANIA

NAM

IBIA

ARG

ENTI

NA

PHIL

IPP

INES

BOTS

WAN

A

ITAL

Y

GHA

NA

CHIL

E

SPA

IN

PORT

UGAL

BELG

IUM

DENM

ARK

Low Transparency

TransparencyLevel

Margin of Error

High Transparency

Source for data: Transparenting Transparency by BK (2005).Colors are assigned according to the following criteria: Dark Red, bottom10th percentile rank; Light Red between 10th and 25th Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.


25

Overall Transparency, Selected Countries (Initial, 2004)*

-2.5

0

2.5K

OR

EA, N

ORT

H

CUBA

SO

MA

LIA

SUD

AN

YEM

EN

IVO

RY

COAS

T

GAM

BIA

CHIN

A

ZAM

BIA

VENE

ZUEL

A

NIG

ERI

A

GEO

RGIA

JORD

AN

MAD

AG

ASC

AR

SEN

EGA

L

PARA

GU

AY

UKRA

INE

TURK

EY

PANA

MA

BOLI

VIA

EL S

ALV

ADO

R

GRE

ECE

BRA

ZIL

SLO

VAK

REP

UBLI

C

MEX

ICO

ITAL

Y

CHIL

E

DEN

MA

RK

CANA

DA

UNI

TED

STAT

ES

Low Transparency

TransparencyLevel

Margin of Error

High Transparency

Source for data: Transparenting Transparency by BK (2005).Colors are assigned according to the following criteria: Dark Red, bottom10th percentilerank; Light Red between 10th and 25th Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th. * Preliminary data- Not for quotation or to establish rankings.

26

Control of Corruption vs. Institutional Transparency (Initial, 2004)

ZWE

ZMBYEM

WBGVNM

VEN

VUT

UZB

URY

GBR

ARE

UKR

UGATUV

TKM

TUR

TUN

TTO

TON

TGO

TMP THA

TZA

TJK

TWN

SYR

CHE SWE

SWZ

SUR

SDN

VCT LCAKNA

LKA

ESP

ZAF

SOM

SLB

SVN

SVK

SGP

SLE

SYC

YUGSEN

SAU

STP

SMR SAM

RWA

RUS

ROM

QAT

PRT

POL

PHL

PER

PRYPNG

PANPCI

PAK

OMN

NOR

NGA

NER

NIC

NZL

NLD

NPL

NRUNAM

MMR

MOZ

MAR

MNG

MCO

MDA

FSM MEX

MUS

MRT

MHL

MLT

MLI

MDVMYS

MWI

MDG

MKD

LUX

LTU

LIE

LBYLBR

LSO

LBN

LVA

LAO

KGZ

KWT

KOR

PRK

KIR

KEN

KAZ

JOR

JPN

JAM

CIV

ITAISR

IRL

IRQ

IRN

IDN

IND

ISL

HUN

HKG

HND

HTI

GUY

GNBGIN

GTM

GRD GRC

GHA

DEU

GEO

GMBGAB

FRA

FIN

FJI

ETH

EST

ERI

GNQ

SLV

EGY

ECU

DOM

DMA

DJI

DNK

CZE

CYP

CUB

HRV

CRI

ZAR

COGCOM

COL

CHN

CHL

CAF

CPV

CAN

CMR

KHM

BDI

BFA

BGR

BRN

BRA

BWA

BIH

BOL

BTN

BEN

BLZ

BEL

BLR

BRB

BGD

BHR

BHS

AZE

AUTAUS

ARMARG

ATG

AGO

DZA

ALB

AFG

-2

-1

0

1

2

3

-1.5 0.5 2.5Institutional Transparency

Con

trol o

f Cor

rupt

ion

Low

Low High

High

r = 0.71

Sources: Governance Matters IV by KKM (2005) and Transparenting transparency by BK (2005). N.countries: 190

27

Control of Corruption vs. Political Transparency (Initial, 2004)

ZWE

ZMBYEM

WBGVNM

VEN

VUT

UZB

URY

USA

GBR

ARE

UKR

UGATUV

TKM

TUR

TUN

TTO

TON

TGO

TMPTHA

TZA

TJK

TWN

SYR

CHESWE

SWZ

SUR

SDN

VCT LCAKNA

LKA

ESP

ZAF

SOM

SLB

SVN

SVK

SGP

SLE

SYC

YUGSEN

SAU

STP

SMRSAM

RWA

RUS

ROM

QAT

PRT

POL

PHL

PER

PRYPNG

PAN PCI

PAK

OMN

NOR

NGA

NER

NIC

NZL

NLD

NPL

NRU

NAM

MOZ

MAR

MNG

MCO

MDA

FSMMEX

MUS

MRT

MHL

MLT

MLI

MDVMYS

MWI

MDG

MKD

LUX

LTU

LIE

LBY LBR

LSO

LBN

LVA

LAO

KGZ

KWT

KOR

KIR

KEN

KAZ

JOR

JPN

JAM

CIV

ITAISR

IRL

IRQ

IRN

IDN

IND

ISL

HUN

HKG

HND

HTI

GUY

GNBGIN GTM

GRDGRC

GHA

DEU

GEO

GMBGAB

FRA

FIN

FJI

ETH

EST

ERI

GNQ

SLV

EGY

ECU

DOM

DMA

DJI

DNK

CZE

CYP

HRV

CRI

ZAR

COGCOM

COL

CHN

CHL

CAF

CPV

CAN

CMR

KHM

BDI

BFA

BGR

BRN

BRA

BWA

BIH

BOL

BTN

BEN

BLZ

BEL

BLR

BRB

BGD

BHR

BHS

AZE

AUTAUS

ARMARG

ATG

AGO

DZA

ALB

AFG

-2

-1

0

1

2

3

-2.0 0.0 2.0Political Transparency

Con

trol o

f Cor

rupt

ion

Low

Low High

High

r = 0.76

Sources: Governance Matters IV by KKM (2005) and Transparenting transparency by BK (2005). N.countries: 190

28

Global Competitiveness vs. Institutional Transparency (Initial, 2004)

ZWE

ZMBVNM

VEN

URY

GBR

ARE

UKRUGA

TUR

TUN

TTO

THA

TZA

TWN

CHE

SWE

LKA

ESP

ZAF

SVN

SVK

SGP

YUG

RUS

ROM

PRT

POL

PHL

PER

PRY

PAN

PAK

NOR

NGA

NIC

NZLNLD

NAM

MOZ

MARMEX

MUS

MLT

MLI

MYS

MWIMDG

MKD

LUX

LTU

LVA

KOR

KEN

JOR

JPN

JAM

ITA

ISR

IRL

IDN

IND

ISL

HUN

HKG

HND

GTM

GRC

GHA

GEO

GMB

FRA

FIN

ETH

EST

SLV

EGY

ECU

DOM

DNK

CZECYP

HRV

CRI

COL

CHN

CHL

TCD

CAN

BGRBRA

BWA

BIH

BOL

BEL

BGD

BHR

AUT

ARG

AGO

DZA

2

4

6

-1.5 0.5 2.5Institutional Transparency

Glo

bal C

ompe

titiv

enes

s In

dex

Low

Low High

High

r = 0.79

Sources: EOS 2004 and Transparenting transparency by BK (2005). N. of countries: 104.

29

Regression Results: Institutional Transparency

1 2 3 4 5

UCM InstitutionalTransparency 0.61 0.25 0.37 0.34 0.66

8.59*** 3.93*** 1.14 4.75*** 2.02**

Political Rights 0.14 0.11 0.16 -0.01 0.045.14*** 5.43*** 3.79*** 0.37 0.85

Political Rights * Institutional Transparency 0.04 0.01

0.85 0.25

GDP per capita (PPP) 1.05 1.12

10.36*** 7.61***

Observations 188 188 188 103 103

Adjusted R-squared 0.58 0.73 0.59 0.77 0.61

Dep Variable: Control of Corruption Dep Variable: Global Competitiveness Index

T-ratios in italics. A constant term was used in all regressions but not shown here

30

Global Competitiveness vs. Political Transparency (Initial, 2004)

ZMBVEN

URY

USA

GBR

ARE

UKRUGA

TUR

TUN

TTO

THA

TZA

TWN

CHE

SWE

LKA

ESP

ZAF

SVN

SVK

SGP

YUG

RUS

ROM

PRT

POL

PHL

PER

PRY

PAN

PAK

NOR

NGA

NIC

NZLNLD

NAM

MOZ

MARMEX

MUS

MLT

MLI

MYS

MWIMDG

MKD

LUX

LTU

LVA

KOR

KEN

JOR

JPN

JAM

ITA

ISR

IRL

IDN

IND

ISL

HUN

HKG

HND

GTM

GRC

GHA

GEO

GMB

FRA

FIN

ETH

EST

SLV

EGY

ECU

DOM

DNK

CZECYP

HRV

CRI

COL

CHL

TCD

CAN

BGRBRA

BWA

BIH

BOL

BEL

BGD

BHR

AUT

ARG

AGO

DZA

2

4

6

-1.5 0.5 2.5Political Transparency

Glo

bal C

ompe

titiv

enes

s In

dex

Low

Low High

High

r = 0.60

Sources: EOS 2004 and Transparenting transparency by BK (2005). N. of countries: 104.

31

Regression Results: Political Transparency

1 2 3 4

UCM Political Transparency 0.61 0.44 -0.37 0.05

3.80*** 3.63*** 2.01** 0.34

Political Rights 0.03 -0.04 0.12 0.010.41 0.68 2.22** 0.20

Political Rights * Political Transparency 0.20 0.08

6.58*** 3.10***

GDP per capita (PPP) 1.26 1.1512.88*** 9.96***

Observations 188 188 188 188

Adjusted R-squared 0.42 0.72 0.52 0.74

Dep Variable: Control of Corruption


32

Regression Results: Political Transparency

1 2 3 4 5 6

UCM Political Transparency 0.61 0.44 -0.37 0.05 -1.28 -0.24

3.80*** 3.63*** 2.01** 0.34 2.87*** 0.69

Political Rights 0.03 -0.04 0.12 0.01 0.19 -0.040.41 0.68 2.22** 0.20 2.43** 0.59

Political Rights *Political Transparency 0.20 0.08 0.31 0.11

6.58*** 3.10*** 5.16*** 2.14**

GDP per capita (PPP) 1.26 1.15 1.23

12.88*** 9.96*** 7.24***

Observations 188 188 188 188 103 103

Adjusted R-squared 0.42 0.72 0.52 0.74 0.56 0.77

Dep Variable: Global Competitiveness IndexDep Variable: Control of Corruption


33

Transparency related to more competitiveness..

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

Overall Transparency Index

Glo

bal C

ompe

titiv

enes

s In

Overall Transparency Index (Initial, 2004) and Global Competitiveness Index (GCI)

Source: GCI: World Economic Forum (2004), Overall Transparency Index, 2005

R2=0.59

34

Ec/Institutional Transparency (Initial, 2004)and Cost to register a business

0

20

40

60

80

100

120

Low transparency Mediumtransparency

High transparencyCos

t to

regi

ster

a b

usin

ess

(%of

GN

I per

cap

ita)

Source: Cost of business: World Development Indicators, 2002; Ec/Institutional Transparency Index 2005.

R2= -0.47

35

Spread of Freedom of Information laws

• Has the potential of changing the way citizens relate to their governments

• Twenty years ago only ten OECD nations had laws which specifically guaranteed the rights of citizens to access information from public institutions.

• Today, over fifty countries have adopted comprehensive FOI laws and over thirty have pending efforts all over the world

36Source: www.freedominfo.org

37

Transparency associated with better human development indicators even after controlling per

income…

0.240.360.43R2

16376164# obs(0.06)(0.10)(0.06)

0.100.21-0.02Constant(0.14)(0.16)(0.10)

0.27***0.41***0.38***Transparency(0.09)(0.18)(0.08)

0.31***0.62***0.42***GNI per capImmunizationFem. LiteracyLife Expectancy

** indicates significance at .05 level and *** at .01 level. Source: Life expectancy, Female Literacy and Immunization: World Development

Indicators, 2003

38

The media can play a key role in increasing the demand for transparency…

-0.6-0.4-0.2

00.20.40.60.8

0-200 201-500 501-3300

Radios per 1000 hab

Gen

eral

Tr

ansp

aren

cyRadios per 1000 hab. vs. Overall Transparency Index (Initial, 2004)

Sources: Radios per 1000 people: World Development Indicators 2002, Overall Transparency Index 2005, # countries 49

39

FOI laws- necessary but not sufficient…

1

4

7

Gov

ernm

ent

Tran

spar

ency

No FOI ProcessingFOI

FOI adopted

Freedom of Information Law

Freedom of Information (FOI) Law vs. Extent of Information Actually Provided by Government to Enterprise Sector, 2004

Sources: Government transparency: Executive Opinion Survey (EOS), 2004 & FOI: Global Survey, 2004. # of countries per x-axis category: No FOI (26), Processing FOI (26), FOI Adopted (51).

40

Angola, Bosnia-HerzegovinaBulgaria,Croatia, Czech Republic, Dominican Republic, Ecuador, Georgia, Hungary, Italy, Latvia, Pakistan, Panama, Peru, Poland, Romania, Serbia, Turkey, Ukraine

Argentina, BangladeshBolivia, EthiopiaGuatemala, HondurasNicaragua, ParaguayRussia, TanzaniaUruguay

Chad, EgyptVenezuelaZimbabwe

Poor Information from

Government (EOS)

Austria, Belgium Colombia, EstoniaFrance, Greece, Israel, JamaicaSouth Korea, Lithuania, Mexico, Philippines, Portugal, Slovak RepublicSlovenia, Spain, Thailand, Trinidad And Tobago

Botswana, BrazilEl Salvador, IndonesiaKenya, MalawiMozambique, NigeriaSri Lanka, Uganda

Algeria, Costa RicaCyprus, JordanMacedonia, MadagascarMalta, Vietnam

Medium Information from

Government (EOS)

Australia, Canada, Denmark, FinlandIceland, India, Ireland, JapanNetherlands, New Zealand, Norway, Sweden, South AfricaUnited Kingdom, United States

Chile, Germany, Ghana, NamibiaZambia

Bahrain, China, Gambia, Hong Kong, LuxembourgMalaysia, Mali, MauritiusMorocco, SingaporeSwitzerland, TaiwanTunisia,United Arab Emirates

Good Information from

Government (EOS)

FOI AdoptedProcessing FOINO FOI

Freedom of Information Laws and Government Transparency, 2004

Source: Freedominfo (2004) and EOS (2004).

41

Freedom of Information Law (FOIL) vs Fiscal Transparency (IMF)

COLOMBIAGEORGIAKOREA, SOUTHPAKISTANPERUTURKEY

BANGLADESHGHANA,HONDURASMALAWI,MOZAMBIQUENICARAGUA,SRI LANKATANZANIA, UGANDA, URUGUAY

AZERBAIJAN,BENIN, BURKINA FASO,CAMEROONIRAN,KAZAKHSTAN; KYRGYZ REPUBLIC, MALI,MAURITANIA,MONGOLIA, RWANDA, TUNISIA

Low Transparency

(IMF rating =<.5)

ALBANIA,ARMENIA,BULGARIA,CANADA, CZECH REPUBLIC, ESTONIA,FRANCE, GREECE, HUNGARY, INDIA, ISRAEL, ITALY, JAPAN,LATVIA, ITHUANIA,MEXICO, POLAND PHILIPPINES, PORTUGAL, ROMANIA,SLOVAK REPUBLICSLOVENIA, SWEDENUKRAINE, UNITED STATES

BRAZILCHILEGERMANYPAPUA NEW GUINEA

High Transparency

(IMF rating >.5)

FOIL AdoptedProcessing FOILNO FOIL

ANGOLA, AUSTRALIA, AUSTRIA, BELGIUM, BELIZE, BOSNIA-HERZEGOVINA, CROATIA, DENMARK, DOMINICAN REPUBLICECUADOR, FINLAND,ICELAND,IRAQIRELAND,JAMAICA,LIECHTENSTEINMOLDOVA,NETHERLANDSNEW ZEALAND, NORWAY,PANAMASERBIA,SOUTH AFRICASPAIN,TAJIKISTANTHAILANDTRINIDAD AND TOBAGOUNITED KINGDOMUZBEKISTAN

ARGENTINA, BELARUSBOLIVIA, BOTSWANAEL SALVADORETHIOPIA, GUATEMALA, HAITIINDONESIA, KENYALESOTHO, NAMIBIANEPAL, NIGERIAPARAGUAY, RUSSIAZAMBIA

AFGHANISTAN, ALGERIA, ANDORRA, ANTIGUA AND BARBUDA,BAHAMAS, BAHRAIN, BARBADOS, BHUTAN, BRUNEI, BURUNDI, CAMBODIA, CAPE VERDE, CENTRAL AFRICAN REPUBLIC, CHAD, CHINA, COMOROS, CONGO, Congo, Dem. Rep. (Zaire), COSTA RICA, CUBA, CYPRUS, DJIBOUTI, DOMINICA, EGYPT, EQUATORIAL GUINEA, ERITREA, FIJI, GABON, GAMBIA, GRENADA, GUINEA, GUINEA-BISSAU, GUYANA, HONG KONG, IVORY COAST, JORDAN, KIRIBATI, KOREA, NORTH, KUWAITLAOS, LEBANON, LIBERIA, LIBYA, LUXEMBOURG, MACEDONIA, MADAGASCAR, MALAYSIA, MALDIVES, MALTA, MARSHALL ISLANDS, MAURITIUS, MICRONESIA, MONACO , MOROCCO, MYANMAR, NAURU, NIGER, OMAN, PALAU, QATAR, SAMOA, SAN MARINO, SAO TOME AND PRINCIPE, SAUDI ARABIA, SENEGAL, SEYCHELLES, SIERRA LEONE, SINGAPORE, SOLOMON ISLANDS, SOMALIA, ST. KITTS AND NEVIS, ST. LUCIA, ST. VINCENT AND THE GRENADINES, SUDAN, SURINAME, SWAZILAND, SWITZERLAND, SYRIA, TAIWAN, TIMOR, EAST, TOGO, TONGA, TURKMENISTAN, TUVALU, UNITED ARAB EMIRATES, VANUATU, VENEZUELA, VIETNAM, WEST BANK GAZA, YEMEN, ZIMBABWE

Declined

42

FOI Laws & Fiscal Transparency (IMF) in Latin America

BELIZEDOMINICAN REPUBLICJAMAICAPANAMATRINIDAD AND TOBAGO

ARGENTINABOLIVIAEL SALVADORGUATEMALAHAITIPARAGUAY

ANTIGUA AND BARBUDABAHAMASBARBADOSCOSTA RICACUBADOMINICAGRENADAST. KITTS AND NEVISST. LUCIAST. VINCENT AND THE GRENADINES

Declined

FOI AdoptedProcessing FOINO FOI

COLOMBIAPERU

HONDURASNICARAGUAURUGUAY

Low Transparency

(IMF rating =<.5)

MEXICOBRAZILCHILE

High Transparency

(IMF rating >.5)

43

Case study – Bolivia diagnostic• Aggregate Cross-Country empirical analysis is insufficient:

i) rough tool for policy applications at a country level; ii) challenges of causality direction

• Thus, complementing with micro-data within one country• One such survey: In-depth survey of 1250 officials in 90

public institutions in Bolivia, accounts for endogeneity• Transparency = % of cases where the actions of public

officials & decision-making process are transparent• Main findings service delivery performance depends

negatively on the level of corruption and positively on external voice of users and transparency

• Transparency-related determinants seem to be more relevant in explaining performance of public agencies that other variables such as wage satisfaction or internal organizational rules

44

TaxSantaCruz

PoliceSantaCruz

Ombudsman

NatPoliceNatCustoms

NatComptroller

JudicialCouncil

HighCourt-SantaCruz

HighCourt-LaPaz

CustomsSantaCruz

CustomsCochabamba

ConstitutionalTribune

CentralBank

20

40

60

80

100

30 40 50 60 70 80 90

Transparency

Serv

ice

Del

iver

y Pe

rfor

man

ceHigh

High

Low

Low

6a: Public Service Delivery and Transparency in Bolivia's Public Institutions

r = .58

Source: Kaufmann, Mastruzzi and Zavaleta (2003), based on 90 national, departmental and municipal agencies covered in the Public Officials Survey

45

Transparency of Public Institutions and Purchase of public positions, Bolivia.

Source: Kaufmann, Mastruzzi and Zavaleta (2003), based on 90 national, departmental and municipal agencies covered in the Public Officials Survey

46

Economic/Institutional & Political Transparency Index (Initial, 2004)

-2.5

0

2.5OECD

East A

sia N

ICs

East A

sia dev

.Sou

th Asia

Sub-sa

hara

n Afri

caM

. East

/N. A

fr

Former

Soviet

Union

Eastern

Eur

ope

Latin A

merica

Caribb

ean

CHILE

Tran

spar

ency

Indi

ces

Index ranges from -2,5 (worst) to 2.5 (best).

High

Low

Ec/Institutional Transparency Index

Political Transparency Index

47

The case of Chile: unbundling transparency

• Since 1996, Chile has made considerable advances in governance indicators compare to the Latin American average, and today it is highly rated in governance

• In terms of economic and institutional transparency, Chile is in 8th position (eg Central Bank of Chile among the best rated in effectiveness and transparency in the world)

• Yet Chile faces challenges on political transparency -- the ‘gap’: Ec/Institutional Transparency = 2.38 vs. Political Transparency = 0.82

• Weak areas requiring specific progress: – Implementation of Freedom of Information law with

effective mechanism to access the information– Financial disclosure for public officials, legislators,

judges, etc. – Further transparency in (‘sole sourced’) procurement – Disclosure of political funding/expenditures (& lobby law)

48

Policy applications- Transparency reforms as second generation institutional change

• Despite potential benefits, transparency reforms rarely integrated into institutional reform programs

• Transparency reforms can be substitutes to (over)-regulation, to creation of additional public institutions (eg. A-C agencies) and incessant legal drafting -- which have higher costs and less benefits

• Transparency reforms often require political capital: but if present there are significant technocratic areas where the IFIs can have a much larger and key role

• Transparency reforms have low financial cost, and high benefits: net savers of resources (eg. E*procurement)

• Transparency reforms well-suited to be “entry points”catalyzing further institutional change, since: i) effective inchanging incentives of political leaders to serve broad social groups, and ii) politically more feasible than industry wide-regulation

49

Basic Scorecard: 10 Transparency Reform Components1. Public Disclosure of Assets and Incomes (and outside

earnings) of Candidates, Public Officials, Politicians, Legislators - & dependents

2. Public Disclosure of Political Campaign contributions by individuals and firms, and of campaign expenditures

3. Public Disclosure of Parliamentary Votes, w/out exceptions4. Effective Implementation of Conflict of Interest Laws,

separating business, politics, legislation, & government5. Publicly blacklisting firms bribing in public procurement6. Effective Implementation of Freedom of Information Law,

with easy access to all to government information7. Fiscal/Financial transparency: central/local budgets; EITI8. E*procurement: transparency (web) and competition9. Adoption and implementation of ‘Lobby Law’10. Judiciary transparency and disclosure on funding, assets

of judges, and on full disclosure of judicial decisions

50

Should IFIs Scale up work on Transparency?

• IFI Adopting and Mainstreaming Transparency Strategies, based on Diagnostics that unbundle and are comprehensive (not just narrow economic transparency)

• Integrating to our analysis Transparency as Regulatory-relieving and Institutionally-relieving: with an exception– supporting more IFAIs?

• IFI transparency reforms internally within our own institutions

• ‘Back to basics’: Transparency as ‘the’ topic of December conference?

51

Data for Analysis and Informing Policy Advice, Not for Precise Rankings

Any data on Governance, Institutions, and Investment Climate is subject to a margin of error. It is not

intended for precise country rankings, but to highlight relative strengths and weaknesses and draw analytical

and policy lessons. The data presented here and in the Report do not necessarily reflect official views on rankings by the World Bank or its Board of Directors.

Errors are responsibility of the authors.

http://worldbank.org/wbi/governance

of transparency

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