Public Sector Governance & CorruptionA Quick Introduction

Contains materials from Public Sector Governance and Anti-corruption Core Course,

Public Sector Group, the World Bank

Why governance and corruption?

• Ch 11 deals with the poor, the sick, the disenfranchised. They live in countries with economies unable to provide a better life, and where contrasts are apparent.

• Ch 12 suggests that foreign direct investments can limit conflict. FDI depends on economic and political stability.

• Governments or states have a role in how economies are managed, determines political climate.

• Governance deals with how states acquires and exercises its authority.

Governance

• Myths about governance and corruption in http://www.imf.org/pubs/ft/fandd/2005/09/basics.htm– Governance and corruption are one and the same.– Governance and corruption can not be measured– The importance of governance and corruption is over-

rated.– Governance is a luxury only rich countries can afford.– It takes generations for governance to improve.

Governance

• Myths about governance and corruption (continued)– Donors can “ringfence”projects in highly

corrupt countries and sectors.– Fight corruption by fighting corruption.– The culprit is the public sector in developing

countries.– There is little countries can do to improve

governance.– There is not much the IFIs can do.

Concepts/DefinitionsThe manner in which the StateStateacquires and exercises itsauthority to provide public goods and services

Using publicpublic office for privateprivate gain

GovernanceGovernance

CorruptionCorruption

InstitutionsInstitutions

The “rules of the game”“rules of the game” that govern the behavior of people within a given environment

Definitions & discussion

• State = government, which includes national and local units

• Provides goods and services not otherwise provided by private sector

• Acquisition of authority– Election

• Exercise of authority

Concepts/Definitions

CorruptionCorruption

Administrative CorruptionAdministrative Corruption::Private payments and other benefits to public officials in connection with the implementation of government policy and regulations

State CaptureState Capture::Influence of powerful private interests in the formation of laws, regulations, through illegal provision of private gains for public officials

Example of administrative corruption

• I will use my classification scheme• Petty – bribery to facilitate a process or avoid

minor penalties, e.g. traffic violations– Extortion through use of authority to extract bribe

• Major – briberies and use of influence to win major contracts or control of assets– Manage a port or power plant

• State capture – in addition to major contracts, write laws that favor specific interests

The Governance Triad

Politicians/Policymakers

Citizens Bureaucrats

Delega

tion

and

Voice

Delega

tion

and

Voice

Polit

ical A

ccou

ntab

ility

Polit

ical A

ccou

ntab

ility

Delegation of

Delegation of

Implementation

Implementation

Internal Accountability

Internal Accountability

Public Goods and ServicesPublic Goods and Services

Client Power/Social AccountabilityClient Power/Social Accountability

The Governance Triad

Politicians/Policymakers

Citizens Bureaucrats

Delega

tion

and

Voice

Delega

tion

and

Voice

Polit

ical A

ccou

ntab

ility

Polit

ical A

ccou

ntab

ility

Public Goods and ServicesPublic Goods and Services

Client Power/Social AccountabilityClient Power/Social Accountability

Delegation of

Delegation of

Implementation

Implementation

Internal Accountability

Internal AccountabilityCompactCompact

Comment on relationships

• Because of the complexity of relationships between entities, what is delegated and who are accountable have to be decided on a case by case basis

• Relationship is implicit – citizens vote, politicians act on their behalf – and explicit, e.g. bureaucrats can have job descriptions. However link to citizenry is usually weak.

The Governance Triad

Politicians/Policymakers

Citizens Bureaucrats

Delega

tion

and

Voice

Delega

tion

and

Voice

Polit

ical A

ccou

ntab

ility

Polit

ical A

ccou

ntab

ility

Delegation of

Delegation of

Implementation

Implementation

Internal Accountability

Internal Accountability

Public Goods and ServicesPublic Goods and Services

Client Power/Social AccountabilityClient Power/Social Accountability

State Capture

Examples of state capture

• In case of Saudi Arabia, based on reading, is there state capture?

• Other examples – readings?

The Governance Triad

Politicians/Policymakers

Citizens Bureaucrats

Delega

tion

and

Voice

Delega

tion

and

Voice

Polit

ical A

ccou

ntab

ility

Polit

ical A

ccou

ntab

ility

Delegation of

Delegation of

Implementation

Implementation

Internal Accountability

Internal Accountability

Public Goods and ServicesPublic Goods and Services

Client Power/Social AccountabilityClient Power/Social Accountability

CompactCompact

AdministrativeCorruption

Example of administrative corruption

• Enforce laws, for example seizure or traffic laws.– Citizens may actually pay the same or less to

obtain the service or avoid penalties. Either way, government suffers financially and in terms of credibility.

• Other examples

Some basic principles of good governance

• In providing goods and services, states do have to deal with various sectors.– Who should be involved in decision making?

• Are goods and services being delivered?• Are public officials accountable? Is there

transparency?• Fairness – equal opportunity, laws enforced

impartially• Direction – strategic vision on good governance

and human development

Where corruption thrives• Human discretion• Low risk of capture• Large sums of money• Penalties for capture much less than sums of

money to be gained• Suggests:

– Rules are unclear and subject to interpretation– Weak rule of law– Low paid civil servants– Social acceptance that corruption is inevitable

In-class writing

• List issues or topics we have covered so far that you find:– Personally interesting– Believe a global manager must be

knowledgeable of• Note whether the topic meets both criteria

Some suggested topics• Challenge to global companies of “flat world”: e-waste,

mass produce but cater to individual markets, competition from non-traditional locations, etc.

• Investigate movement of an industry in the last couple of decades to understand how and why these became global; provide perspective on “triple convergence”

• What were the roles of indigenous entrepreneurs in establishing manufacturing facilities in places like southern China, northern Mexico (maquiladoras), or software companies in India? Roles of global firms?

• Various means used by different countries to encourage foreign direct investments

Some suggested topics

• Use governance and corruption framework in understanding political situation in a particular country? For example, are China and India really “model” states?

• Causes and organization behind terrorist activities in a given country

• Islam and its relationship with specific countries (where one may have a major operation.)