GUIDING QUESTIONS. Introduction

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1 SWEDISH INTERNATIONAL DEVELOPMENT COOPERATION AGENCY (SIDA) WRITTEN SUBMISSION ON CONSULTATIONS ON STRENGTHENING WORLD BANK ENGAGEMENT ON GOVERNANCE AND ANTICORRUPTION Introduction Sweden supports the WB intention to address governance and anti-corruption in a strategic way. We are an interested party in this process, both as a member of the Bank and as a Development Cooperation Donor who faces the same challenges regarding Governance and Anti-corruption as the Bank. We understand the specificities of the WB, restrictions that its mandate may imply, however the mandate to promote growth and reduce poverty will be impossible to perform if Governance as a condition for success is not recognized and addressed in an analytical and transparent manner. Recently IEGs Annual review of Development Effectiveness 2006, was presented in Sweden. It s Chapter 4 on Strengthening Public Sector Accountability-provides several pointers for the way ahead, based on an analysis of the WBs experience and results. From the discussions preceding and following Singapore it is quite clear that we are discussing issues that are controversial, both inside and outside the Bank; deciding not to address them however, is not an option. GUIDING QUESTIONS 1. Engagement Strategy: What should the Bank do in countries with weak governance and severe corruption, where government leadership is not consistent in tackling these problems? In such circumstances, how should the Bank remain engaged to help reduce poverty? Are there circumstances under which the Bank should restrict or stop lending? How can the Bank ensure consistent treatment across countries? Use UNCAC Increase country presence Harmonize locally and in DAC and other fora Focus on Champions of reform Be country specific and equal in treatment Be transparent and predictable We would like to stress that we as a bilateral donor face similar challenges. In a post Parisdeclaration context and also before, donor coordination joint assistance strategies etc. make these challenges shared challenges. Obviously the WB has its specific role and mandate but this is not performed in a different reality than the rest of development co-operation or investments. We generally work in partnership with countries with weak governance and high corruption risk and need to recognize this as an aspect of a multidimensional poverty concept. Analysis that gives us knowledge about these complex and sometimes volatile contexts is vital. Among development co-operation agencies (WB included) at this moment much focus 1

2 is given to methods for assessing governance and corruption. This is positive but harmonizing and division of labour in these efforts is important. Otherwise partner countries will suffer from mission after mission asking the same questions and writing up reports. The UN-Convention Against Corruption (UNCAC) ratified by a large number of developing countries paves the way for fact finding and self assessment in the area of corruption/anti corruption. Building shared understanding with partner countries at the outset of WB CAS:es and/or joint assistance strategies seems fundamental. Based on this shared understanding, agreement on possible action in deteriorating governance/corruption situations may be more feasible to attain. The Paris declaration speaks about mutual accountability and predictability which becomes increasingly important working with different forms of budget support. To our understanding predictability also needs to take into account worst case scenarios and in dialogue with partner countries reach clear understanding of what situations will trigger the Bank to reconsider its engagement. Continuous assessment of governance and corruption shared by donors and partner countries seems to be basic to predictable and sound actions. This would benefit from the Bank increasing it s in country presence, continuity in staffing and favouring professional skills in the governance area when staffing field offices. We find it encouraging that the Bank is considering its own incentives structures when looking to avoid arbitrary actions at country level. We all act in imperfect situations and the Bank will need to maintain it s financing while at the same time support efforts regarding improvement in governance, such as civil service reform, PFM, national control systems etc. The notion that the WB supports strictly technical solutions that have no political effect is an illusion The IEG evaluation recognizes the tendency of overoptimistic programming, a problem we recognize all too well. However an effort towards increased realism in programming, playing with different risk scenarios at the outset of interventions and country strategies may prevent stop and go situations. Partner countries PRS:s supposedly prioritize areas/sectors of intervention believed to be most important in poverty reduction. We believe alliances with champions of reform should be sought there. There are also examples of the Bank successfully moving from financing at national level, towards sub-national or municipal level. However creating parallel administrative and power structures with the intention to safeguard Bank funds, though looking as a sound idea in the short run, tends to weaken already weak governance in the long run. It is commendable that the Bank is looking to apply equal treatment of partner countries- at the same time country specificities need to be taken into account. Grouping and ranking countries is a risky business - however cross-country comparative studies and sharing of experience seem important in order to avoid arbitrary decisions. Once again shared baseline analysis in partnership with partner countries and making it known to a wider range of stake-holders i.e. the Board seems to be a sound basis for Bank accountability. The Bank s predictability and transparency is of utmost importance. It is a challenge to apply the same set of rules without creating a rigid blue print a difficult but necessary balance. This is a concern much stressed by our Embassies. From the field we ve received the following questions and advice that could be used when corruption is increasing: 2

3 - What is the cause of corruption - lacking political will and/or technical systems? Impunity may be one of the hardest problems to tackle because it indicates a lack of political will in the crucial institutions, and sends the wrong message to society. - Which parts of society are affected? "The government" cannot be treated as one entity; apart from consisting of Executive, Legislative and Judicial powers - and sometimes other entities are considered separately such as electoral and Audit bodies - there are different levels and different institution within the same area, e.g. one ministry or a group of municipalities may be relatively clean. - And what are the main types of corruption: petty and/or grand, political (appointment of dependent judges) and/or economic (bribes, tax exemptions) and/or personal (nepotism, party recruitment)? All different types of corruption must be considered and appropriate solutions tailored to context including considerations of what can realistically be achieved in the medium and long term respectively. - The importance of capacity building (mainly in partner country but also among donor institutions) cannot be over-emphasized, see under 3 below. - Lending is a temptation in that it provides resources to show results now (political gains) while costs are deferred to future generations. Debt reduction has increased this temptation through hopes that no deferred costs will ever actually have to be paid. This increases corruption risks per se, and must be counteracted through stricter inter-generational costbenefit analyses. 2. A Multi-stakeholder Approach: While government is the key counterpart of the Bank, how can the World Bank Group better engage non-governmental stakeholders, including civil society, media, and the private sector? How should the Bank support champions of reform inside and outside the executive branch of government? Show the way by acting transparently and openly Harmonize with donor groups locally Looking through the issues brought up in the debate around the Strategy the criticism that states that the Bank should only relate to the executive power is worrying. To our understanding no WB loans take place without parliamentarian approval which in itself opens up for dialogue with the political actors. We welcome the Bank s intention to engage with actors outside of central government - which is actually the case already. This is sensitive in highly centralized societies with little citizen oversight of public performance and little participation. Traditionally some of us bilateral donors who more easily relate to various sectors of society have played a complementary role in this respect, supporting civil society, private sector efforts to promote reform. The Bank is part of a donor group and does not need to do it all, but be aware of the shared network of societal relations, and experiences and have the confidence that issues can be taken care of by others and still benefit the quality of WB work. In many countries, fora where government and organized civil society meet are becoming increasingly common and often provide space for a multiactor dialogue also with the Bank and other development agencies. Increased transparency can be encouraged by the Bank setting the example of openness around its own activities. 3. Mitigating Fiduciary Risk: How can the Bank ensure that its grant and loan proceeds 3

4 are used for their intended purposes, while helping countries build their own systems and capacity? o o Increase field presence Increase stakeholder participation Accountability mechanisms must be built, not only towards lenders/donors ("ensuring highest fiduciary standards" para 8) but most of all towards voters/tax payers/citizens/population in the country. Accountability mechanisms involving participatory methods must not decrease accountability/responsibility of democratic structures and institutions (compare parties in parliament vs. NGOs and CBOs). Fiduciary systems must be balanced against economy, efficiency and effectiveness; mostly Ministries of Finance are in charge of financial systems and are foremost concerned with control rather than with service delivery. Improved technical systems must be coupled with capacity building, but not just for the immediate managers of the system (this could result in worse corruption because of asymmetries in knowledge) but also for those who should be held accountable - officials and politicians - and those they should be accountable to - citizens/public. Capacity includes more than technical skills, but building new attitudes takes time and often requires working with completely different areas or target groups than the ones directly affected (e.g. public financial or staff managers). Once again, the Bank will have to work with risk - improving national systems, is to our thinking best done while making use of them. There is great temptation in moving from sector- or general budget support to project type interventions with parallel administration, however the possibility to safeguard these from corruption is not guaranteed. Project funds are also fungible in the framework of all resources, on and off budget. Presence in the field, continuous frank dialogue and stakeholder oversight are key to risk mitigation. We believe high stakeholder participation and power in interventions helps lower fiduciary risk. 4. Global Collective Action: How can bilateral donors, the World Bank, and other multilateral organizations complement each other in supporting governance reform? How can mixed signals by donors be avoided? How can the role of multinationals from industrialized countries in corruption be addressed? Instruments for joint action are in place through for example Joint Assistance Strategies; WB PRSCs are often shared instruments for joint budget support where governance reform often plays a role. As said before different actors have different mandates and experiences in a given country and sector. Through information sharing, conscious division of labour and joint dialogue with government and civil society comparative advantages can be used and mutual capacity development attained. The collective of States Parties to the UNCAC, DAC/Task Team on anti corruption are platforms where shared codes of conduct may be developed. TI-indexes, Corporate Social Responsibility efforts such as the Global Compact and others provide data for joint understanding and action. Mixed signals can be reduced by taking governance and anticorruption issues as an integrated part in joint endeavours and sector group work. Donors should encourage local business to behave in a socially responsible way and assist them in developing their competence in the field. Businesses could be encouraged to joining the UN Global Compact or adhering to other corporate social responsibility instruments such as the OECD Guidelines for multinational enterprises or the World Economic Forum Partnering against Corruption. Multinational companies could be engaged in sharing their 4

5 experience with internal integrity instruments. We regard the Danish web portal as a good platform for work in this field. In our case the OECD convention against bribery is the instrument for regulating how our multinational companies should act. There is a challenge in coherence regarding setting the same strict rules for the demand and supply sides of corruption, which requires good teamwork between responsible people in different policy areas, such as trade, foreign investment and development co-operation. 5. Tracking Change: How should indicators be used to monitor progress at the country level? As the Paris declaration states the starting point should be national systems. This means looking for the base line in national statistics and make use of the indicators developed in the framework of a country s PRS (where such exists). We believe information should be sought from a mix of sources, both involved and independent (including perception of corruption) and this should be done both together with partner country institutions and independently. In this way the country's capacity and interest in collecting this kind of information is strengthened, and the data can be quality assured. In the area of corruption the self assessments provided for in UNCAC may eventually supply country owned indicators, comparable across countries. In general we believe the Bank could cooperate more with the UN-system in this field. Turning to the IEG evaluation the experience is that the existence of proper legislation and responsible institutions are not indicators enough. Enforcement capacity is vital and we would like to add enforcement room and enforcement will. 5