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1 Corruption within a Governance Framework: Practical Lessons from Empirical Evidence Daniel Kaufmann, World Bank Institute Presentation at the Seminar on Tackling Corruption Worldwide: From 0 to Hero, St Hugh s College, Oxford, March 21 st
2 The initial ascent getting to base camp WDR on Institutions 1982 TI CPI (5/95) The Prohibition Era JDW Cancer of Corruption Speech (10/96) State in a Changing World (97) Strategic Compact (97) Anticorruption Strategy (97) Governance Pillar - CDF (98) Gov/A-C Diagnostics start (98) O.P. Mainstreaming AC in CAS (99) Broadening & Mainstreaming Governance Strategy (00) Public Expenditure, Financial Mgt. & Procurement Reforms Diagnostic/Data/ Monitoring Tools Administrative & Civil Service Reform Civil Society Voice, Accountability, Media & Transparency Mechanisms State Capture/Corporate Governance Legal/Judicial Reform Internal AC unit created in WB (98) 1st set of firms Debarred from WB (99) Formalization of INT (01)
3 Explosion of activities: Examples of major programs launched across countries Albania (public admin.) Latvia (anticorruption) Ukraine (tax admin) Russia (customs/treasury) Kyrgyz Republic (governance reform) Jordan (civil society) Cambodia (PE; forestry) Guatemala (diagnostic to action program) Colombia (diagnostics & civil society) Bolivia: (public admin.) Ghana (PE accountability) Gabon (water/electricity) Uganda (PRSC; education) Tanzania (PSR) Pakistan (devolution) Ethiopia (decentralization) Bangladesh (civil society) Philippines (transport) Indonesia (local governance) India Andra Pradesh (power; e-gov); Karnataka (right to info) 3
4 4
5 A Live Test: Culture,, Information and Incentives: You are approaching your car in the empty and unattended garage late at night You see an envelope on the floor, and you pick it up It contains 20 bills of US $100 each. If no possibility that anyone would know: No cameras, no monitoring, no reporting What would you do with such envelope full of cash? 5
6 A. If no possibility that anyone would know: You are alone, there is no monitoring, cameras, or possibility of resporting 33% Report and Return Funds 50% Undecided 17% Keep Option Finder Results: Various Audiences 6
7 B. If 30% probability that information is shared (e.g. 30% that camera recording info which may be reviewed) 22% Undecided 4% Keep 74% Report and Return Funds 7
8 Most effective Anticorruption Measures? Responses from Officials and Leaders in 62 countries 90% % de entrevistados que dan un alto grado 80% 70% 60% 50% 40% 30% 20% Comisiones Anti-corrupcion Privatizacion Voz y libertades civiles Reformas Publicas Transparencia presupuestaria Fuente: D. Kaufmann, Corruption: The Facts, Foreign Policy, Verano, 1997 Economia desregulada Liderazgo ejemplar 8
9 Governance Redux: Outlining Key Themes 1. Governance can be measured, monitored, analyzed 2. Aggregate and Disaggregated Governance Indicators: How constructed, interpreted -- & margins of error 3. Governance Performance Variations across regions, countries & dimensions of governance 4. Progress on Governance and Anti-Corruption? 5. Limits to Generalized Worldwide & Regional Analyses? 6. Key Research Findings and Addressing Myths 7. Main Lessons, 1: Over-estimated traditional Legal and Public Sector Management strategies? 8. Main Lessons, 2: Underestimated role of: i) Politics (and its financing); ii) Private Sector; iii) Transparency and Citizen Voice Mechanisms 9
10 Empirical Approach to Governance 1. Macro : Worldwide Aggregate Governance Indicators: 200 countries, 6 components, periodic. 2. Mezzo : Cross-Country Surveys of Enterprises 3. Micro : Specialized, in-depth, in-country Governance and Institutional Capacity Diagnostics: Includes surveys of: i) user of public services (citizens); ii) firms, and iii) public officials On Aggregate/Macro Level first 10
11 Governance: A working definition Governance is the process and institutions by which authority in a country is exercised: (1) the process by which governments are selected, held accountable, monitored, and replaced; (2) the capacity of gov t to manage resources and provide services efficiently, and to formulate and implement sound policies and regulations; and, (3) the respect for the institutions that govern economic and social interactions among them 11
12 Operationalizing Governance: Unbundling its Definition into Components that can be measured, analyzed, and worked on Each of the 3 main components of Governance Definition is unbundled into 2 subcomponents: Democratic Voice and (External) Accountability Political Instability, Violence/Crime & Terror Regulatory Burden Government Effectiveness Corruption Rule of Law We measure these six governance components 12
13 Sources of Governance Data Data on governance from 25 different sources constructed by 18 different organizations Data sources include cross-country surveys of firms, commercial risk-rating agencies, think-tanks, government agencies, international organizations, etc.) Over 200 proxies for various dimensions of governance Organize these measures into six clusters corresponding to definition of governance, for four periods: 1996, 1998, 2000, and 2002, covering up to 199 countries 13
14 Sources of Governance Data Cross-Country Surveys of Firms: Global Competitiveness Survey, World Business Environment Survey, World Competitiveness Yearbook, BEEPS Cross-Country Surveys of Individuals: Gallup International, Latinobarometro, Afrobarometer Expert Assessments from Commercial Risk Rating Agencies: DRI, PRS, EIU, World Markets Online, Expert Assessments from NGOs, Think Tanks: Reporters Without Borders, Heritage Foundation, Freedom House, Amnesty International Expert Assessments from Governments, Multilaterals: World Bank CPIA, EBRD, State Dept. Human Rights Report 14
15 Inputs for Governance Indicators 2002 Publisher Publication Source Country Coverage Wefa s 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 15 Binghamton Univ. Human Rights Violations Research Survey 140 developed and developing
16 Ingredients for Rule of Law Indicator Surveys of Firms BEEPS Global Competitiveness Survey World Competitiveness Yearbook Type of Questions Courts Honest? Crime? Property rights protected? Crime, money laundering, judicial independence, protection of financial assets Justice fairly administered, personal security and private property protected Surveys of Individuals Gallup Risk Rating Agencies BERI DRI EIU PRS World Markets Observer Think Tanks Freedom House Heritage Foundation Governments State Dept Human Rights Report Trust in legal system Contract enforcement Costs of crime, enforceability of contracts Costs of crime, enforceability of contracts, property rights protection Law and order Judicial independence, crime Rule of law Property rights, black market activity Judicial independence 16
17 Building Aggregate Governance Indicators Use 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 17
18 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): ( ) y( j, k) = α(k) + β(k) g( j) + ε( j, k) Variance in measurement errors is same across countries for each source, but different across sources: E [ ] 2 2 ε( j,k) = (k) σ ε Identifying assumption: Measurement errors are uncorrelated across sources? highly correlated sources measure governance with more precision 18
19 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: E[g(j) y(j,1),..., y(j,k(j))] = So estimate of governance is weighted average of re-scaled scores, with weights proportional to precision of each source: w (k ) = K( j) w(k) y(j,k) α(k) k = 1 β(k) 1 + σ ε K ( j) k = 1 (k ) σ ε 2 (k ) 2 19
20 Precision of Estimates from UCM Reliability or precision of estimate of governance for each country is the standard deviation of this conditional distribution: K( j) SD[g(j) y(j,1),..., y(j,k(j))] = 1+ σ k= 1 These standard errors are smaller for countries that (a) appear in more sources, and/or (b) appear in more reliable sources ε (k)
21 Precision and Number of Sources: Rule of Law, KK 2002 Standard Error of Governance Estimate Number of Sources 21
22 Assigning Countries to Governance Categories: Margins of Error Matter Probability Country is in Top Half of Sample CAN DNK NZL NLD AFG BDI SGP ISL SWE FIN Probability (0-1) ZAR SDN PNG MMR SOM IRQ AGO TKM CMR KEN NER ZWE TJK NGA AZE YUG RUS IDN ECU PRY ERI MRT BFA MDG UGA TZA LBY UKR PRK ZMB KGZ HTI KAZ SYR MDA ARM NIC PAK VNM BOL CIV YEM GTM GEO UZB BGD IRN HND LBN DZA ALB Margin of Error Governance Score VEN LBR GAB ROM MKD PHL COG BIH TGO TUR THA GUY SLE PAN MLI ETH SEN IND COL ARG SAU SLV LAO NPL CHN MEX GHA DOM MNG BRN BGR EGY CUB BLR JAM PER LVA BRA LKA HRV BHR JOR MWI MOZ GNB MYS ARE GMB SUR MLT GIN LTU SVK CZE KHM ZAF RWA KOR POL MAR OMN BLZ TTO MUS TWN QAT KWT ITA HUN WTB URY GRC EST BHS TUN CRI BWA FJI BEL SVN ISR FRA IRL HKG PRI JPN PRT CYP NAM AUT DEU CHL ESP USA AUS NOR LUX GBR CHE Median CC Score 0 Control of Corruption Rating 0 Note: Confidence Interval: 90% Control of Corruption Percentile Rank
23 Large Margins of Error for Objective Governance Indicators Standard error Objective Indicator Scenario A Standard error of Subjective indicator: KK Standard error Telephone Wait line Phone faults Trade Tax revenue Budgetary Volatility Revenue Source Volatility Contract Intensive Money Contract Enforcement Regulation of Entry Aggregate Indicator Option A: estimate of standard deviation of measurement error in subjective indicator is correct. Option C: standard deviation of measurement error in subjective indicator is twice as large as that in the objective indicator. The standard error of subjective indicator refers to the Governance component closely related to the associated objective indicator 23
24 Measurement Error for Objective Indicators Standard Error for "Objective" Indicator Days to Start Business Contract Intensive Money Actual S.E. for RQ = 0.4 Actual S.E. for RL = 0.3 Known: Correlation of objective & subjective; standard error of subjective indicator Unknown: standard error of objective indicator Corrltn: ( 2 ) ( σ 1 + σ ) Correlation of "Subjective" and "Objective" Indicator 24 ρ 2 = 1 1 2
25 Control of Corruption -- Selected Countries, KK 2002 Good Bad -2.5 Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for , WP #3106, August Units in vertical axis are expressed in terms of standard deviations around zero. Country estimates are subject to margins of error (illustrated by thin line 25atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted.
26 Control of Corruption: Selected Countries, 2002 Source for data: ; Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
27 Governance World Map : Control of Corruption, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90% 27
28 Governance World Map : Control of Corruption, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90% 28
29 Governance World Map : Control of Corruption, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90% 29
30 Governance World Map : Political Stability/ Lack of Violence, 2002 Source for data: ; Map downloaded from : 30 Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%
31 Governance World Map : Voice and Accountability, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Red, 25% or less rank worse ( bottom 10% in darker red); Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90% 31
32 Governance World Map : Africa and Middle East, Government Effectiveness, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
33 Governance World Map : Africa and Middle East, Regulatory Quality, 2002 Source for data: ; Map downloaded from : Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
34 Good 100 Governance Indicators By Regions Percentile Ranks, 2002 Voice And Accountability Percentile Rank 50 Control of Corruption Poor 0 OECD East Asia (NIC) East Asia dev. Former Soviet Union Eastern Europe Middle East North Africa Subsaharan Africa Latin America Source for data: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for , WP #3106, August
35 Governance Indicators: Chile 1998 vs Source for data: ; Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
36 Governance Indicators: Bolivia 1996, 2000 & 2002 Source for data: ; Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
37 Governance Indicators: Croatia, 1998 & 2002 Source for data: ; Colors are assigned according to the following criteria: Dark Red, bottom th percentile rank; Light Red between 10 th and 25 th ; Orange, between 25 th and 50 th ; Yellow, between 50 th and 75 th ; Light Green between 75 th and 90 th ; Dark Green above 90 th.
38 Governance Indicators: Indonesia Note: the thin lines depict 90% confidence intervals. Colors are assigned according to the following criteria: Red, 25 th percentile; Orange, between 25 th and 50 th percentile; Yellow, between 50 th and 75 th percentile; Light Green between 75 th and 90 th 38 percentile; Dark Green above 90 th percentile.chart downloaded from :
39 The Mezzo Level of Measurement -- Listening to Firms -- Large Cross-country Survey of Enterprises -- Significant More Unbundling is possible -- Stay mindful of Margins of Error 39
40 Unbundling Corruption [Regional Averages] Preliminary results 2003, View of the Firm, 102 countries 70 Extent of Bribery for: Access Public Utilities Procurement Capture of Laws & Regulations 35 0 East Asia Industrialized OECD East Asia Developing Eastern Europe Latin America South Asia Sub-saharan Africa % of firms rating type of corruption as high/very high Former Soviet Union Source: EOS Each region has the following number of countries: OECD: 23; East Asia (Developing): 6, East Asia 40(NIC): 4; Eastern Europe: 14; Former Soviet Union: 2 (Russia and Ukraine); South Asia: 4; Sub-Saharan Africa: 21; Middle East North Africa: 7; Latin America and Caribbean: 21.
41 Political Influence by Powerful Firms, EOS 2003 % firms Reporting Poor Rating 100 Influencing political financing Bribery to shape laws 50 0 Argentina Botswana Brazil Cameroon Colombia Costa Rica Croatia Finland 41 Source: EOS, Y axis: % of firms who reported a poor rating (1,2,3) for each of the underlying governance variables. Nigeria Russian Federation USA Zimbabwe
42 Control of Cronyism: Differences across industrialized countries (OECD) 100 No Cronyism Percentile Rank 50 Cronyism 0 Denmark Austria Finland Sweden Singapore Botswana Crony Bias constructed based on data from EOS, 2003, in 102 countries, calculated as the difference between 42 influence by firms with political ties and influence by the firm s own business association. Netherlands Australia Germany United Kingdom France United States Greece Italy
43 The Governance Gap : Overall Evidence is Sobering 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 developmental 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 crosscountry, even within a region. Some successes. And it is early days. 43
44 3 High Inflation Significant Decline in Inflation Rates Worldwide TRANSITION 1.5 EMERGING (avg. in logs) Low 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 44
45 Quality of Infrastructure 6.5 High East Asia Industrialized OECD 4 Transition Low Emerging Source: EOS (Quasi-balanced panel). Question 6.01: General infrastructure in your country is among the best in the world? 45
46 Extent of Independence of the Judiciary 7 Independent OECD 4.5 East Asia Industrialized Transition Non- Independent Emerging Source: EOS (Quasi-balanced panel). Question 5.01: The judiciary in your country is independent from political influences of members of government, citizens or firms? 46
47 Rule of Law and Corruption have not improved recently 1.00 Good 0.75 Control of Corruption Rule of Law Poor Why should we be concerned?
48 In emerging economies, while on average little progress, there are excellent examples, and possible to learn from variation In Africa, Mauritius, Botswana as stars, Ghana has made some inroads, as well as Mali and to an extent Madagascar; Sierra Leone and a few others making some progress in some dimensions? In other continents, the cases of Slovenia, Hungary, the 3 Baltic countries, Costa Rica, S. Korea, Chile 48
49 On the Micro Level In-depth, in-country Diagnostics: Surveys of citizens/users of public services, enterprises and public officials (complementing Worldwide Aggregate Governance Indicators, and Mezzo cross-country enterprise surveys) 49
50 Diagnostic evidence from Sierra Leone Perceived level of honesty in public institutions (as reported by managers, public officials and households) Customs Department Traffic police Surveys and Lands Department Income Tax Department Law Officers Department Ministry of Gender Social Welfare & Children s Affairs University of Sierra Leone Sierra Leone Water Company (SALWACO) Sierra Leone Broadcasting Service (SLBS) Bank of Sierra Leone 0% 10% 20% 30% 40% % of respondents reporting the institution to be honest households public officials business 50
51 Corruption is a Regressive Tax (Colombia) Bajo Ingreso Mediano Ingreso Alto Ingreso Bajo Ingreso Mediano Ingreso Alto Ingreso 51
52 New Diagnostic Tools permit measuring important dimensions of capacity illustration #1 from Bolivia diagnostics: How Politicized Agencies exhibit Budgetary Leakages Low Moderately Low Moderately High High -5 Politicization Yellow columns depict the unconditional average for each category. Blue line depicts the controlled causal effect 52 from X to Y variables. Dotted red lines depict the confidence ranges around the causal effect depicted by the blue line.
53 Illustration of empirical analysis based on diagnostic: Users Feedback to Public Agencies Helps Control Bribery Bribery Low Moderate_Low Moderate_High High Voice / External Accountability Simple Average Association Control Causal Link Margin of Error Based on 90 national, departmental, and municipal agencies covered in the Bolivia Public Officials Survey. 53
54 Citizen Voice Improves Accessibility of Public Services to the Poor Accessibility to the Poor r = 0.54 Controlled Causal Link Voice / External Accountability Based on Public Officials Survey. The sample of institutions includes 44 national, departmental, and municipal agencies which are a prior anticipated to be accessible to the poor 54
55 Transparency within Government Agencies Prevents Purchase of Public Positions Job Purchase Low Moderately Low Moderately High High Internal Transparency Simple Average Association Control Causal Link Margin of Error Based on 90 national, departmental, and municipal agencies covered in the Public Officials Survey. 55
56 Peru: Sources of Undue Private Influence on the State % reporting agent is highly influential Drug Economic Conglomerates Groups Responses by: Firms Public officials FDI/ Transnational Corporations Organized Crime Professnl Labor Unions Associations Based on governance diagnostic surveys 56 of public officials and enterprises
57 Some Key Lessons from Empirical Research Consequences and Costs of Misgovernance: Lower Incomes, Investment; Poverty & Inequality But no automatic virtuous circle (from incomes) Determinants of Misgovernance and Corruption: Capture and Undue Influence by Vested Interests No Voice, Press Freedoms, Devolution, Transparency Low Professionalism of Public Service No Example from the Top / Lack of Leadership Easy and Gradualist Panaceas But Endogeneity a challenge: Need to search for more fundamental determinants: political, historical variables 57
58 Does Good Governance Really Matter? Worldwide Evidence: Improved Governance, Public and Private, makes an enormous difference in Per Capita Incomes of Nations Good Governance Pays : The 400% Dividend The reverse causality does not hold: -- No Evidence that Higher Incomes/Richer countries automatically results in improved governance 58
59 Governance Indicators and Income per Capita, Worldwide High US$20,000 Low Level of Governance Medium Level of Governance High Level of Governance Income per capita US$3,000 Low US$400 Voice and Accountability Government Effectiveness Control of Corruption Sources: Kaufmann D., Kraay A., Mastruzzi M., Governance Matters III: Governance Indicators for (KK 2002); 59 Income per capita (in Purchasing Power Parity terms) obtained from Heston-Summers (2000) and CIA World Factbook (2001).
60 Child Mortality vs. anti-corruption: One-directional causality Child Mortality per 1,000 births (log) Low SLE AFG SOM AGO RWA NERLBR ZMBCIV IRQ BDI TCD ETH CAF GIN ZAR COG UGA PAK NGA MRT MMR CMR YEM HTI ZWE SDN BGD ZAF PRK GHA EGY GTM DOM PER TKM DZA PHL BRA CHN IRN TUN LBY VEN JAM RUS ATG URY CRI EST KOR HRV ITA SVN CHL USA GBR CANNLD FRA DNK NOR FIN ISL Control of Corruption 60 Source: KK 2002, WDI 2002 r = High
61 Women Rights and Corruption Control Corruption Index (ICRG, 1990s) IRQ GAB SLE BGD HTI SDN MMR PRY GNB SAU TGO NGA PAN HND PAK ARE MLI GTM IDN BOL KWT IND NER PHL KEN CMR COL ECU ZMB AGO EGY COG VEN SEN MAR TUN THA DZA DOM BFA YUG MEX GHA ARG CHL URY RUS YEM SYR LKA IRN CIV ZWE ITA BWA LBY JOR BHR TZA CHN GIN MYS 2 1 R 2 = Source of Women s Right Variable: Stohl, Michael (Convenor) Global Studies Program, Global Governance of Human Rights ESP KOR CZE ISR BEL IRL PRT HUN USA GBR AUT CRI GRC JPN AUS POL FRA DEU SWE NOR NZL CHE NLD CAN DNK Women Social and Economic Rights, 1990s 61 FIN
62 Good Controlling Corruption and Voice and Accountability 80 Control of Corruption 40 Poor 0 Low Average High Voice and Accountability 62
63 Good Freedom of the Press to improve Rule of Law and Controlling Corruption 80 Rule of Law Control of Corruption Percentile Rank 40 Poor 0 Not Free Average Free Sources: Freedom House, 2002 and KK
64 Transparency and Citizen Oversight US$ per student Tracking Education Dollars in Uganda Public info campaign Intended grant Source: Uganda Public Expenditure Tracking Surveys Actual grant received by primary school (means) 64
65 No Evidence to support some popular notions 1. Constant drafting of new A-C laws/regulations 2. Creating many new Commissions & Agencies 3. Blaming Globalization or Privatization 4. Cultural Relativism (or Regional Characteristics) 5. Historical Determinism by contrast, what may be particularly important 65
66 What may work a list of 10 for debate 1. Localize Know-how, and Unbundle notions 2. Transparency Mechanisms (e*governance, data) 3. Voice and Democratic Accountability (& media) 4. Judicial Independence, Property Rights (RoL) 5. Prevention, Incentives (e.g. Meritocracy, Budget) 6. Political Reform, incl. Political Finance 7. Private Sector & MNCs: Corporate Responsibility 8. Compete -- to join world s Economic Clubs 9. IFI, G-8, OECD Responsibility (Global Compact) 10. With modesty: learning, interdisciplinary approach 66
67 On the growing gap between EU-accession countries and the rest of transition --Rule of Law Over Time, Selected Regions, High 2 OECD 1 East Asia (NIC) Rule of Law 0 Transition EU Accession Countries Sub-Saharan Africa Low Other Transition Countries Source for data: Each region has the following number of countries: OECD: 28; East Asia (Developing): 35, East Asia (NIC): 4; Eastern Europe: 16; Former Soviet Union: 12; South Asia: 8; Sub-Saharan Africa: 47; Middle East North Africa: 21; Latin America and Caribbean:
68 Illustration of Concrete Projects and Measures promoting Transparency and Accountability Transparency & reform in political/party finance: e.g. new methods for disclosure (expenses), etc. E*disclosure (web) of votes of parliamentarians Public Disclosure of Assets/Incomes by public officials and legislators and their dependents E*procurement; e*data.governance; diagnostics In-depth Institutional Country Diagnostics for Agency and Budgetary transparency Delisting Firms Publicly 68
69 Working with Competitive Business Associations does Matter Business association members (% of firms) Hungary Russia Azerbaijan Active members Nonactive members Source: J. Hellman, G. Jones, D. Kaufmann Seize the State, Seize the Day: State Capture, Corruption and Influence in Transition World Bank Policy Research Working Paper
70 New Empirical Frontiers Political Finance, Capture & Corruption Subnational Level: Governance and the City The Human Rights Nexus 70
71 Data for Analysis and informing Policy Advise, not for Precise Rankings Data in this presentation is from aggregate governance indicators, surveys, and expert polls and is subject to a margin of error. It is not intended for precise comparative rankings across countries, but to illustrate performance measures to assist in drawing implications for strategy. It does not reflect official views on rankings by the World Bank or its Board of Directors. Errors are responsibility of the author(s), who benefited in this work from collaboration with many Bank staff and outside experts. 71
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