Media, Good Governance & the Economy:

Media, Good Governance & the Economy: Transparency & Accountability for Development Impact Daniel Kaufmann and Mark Nelson, The World Bank Institute World Press Freedom Day 2003 Presentation, Kingston, May 2-3, 2002

Media, Transparency, Data and Development There has never been a famine in any country that has been a democracy with a relatively free press... I know of no exception. Amartya Sen, Nobel Laureate It is now generally recognized that better, more timely, information results in better, more efficient resource allocations. Joseph Stiglitz, Nobel Laureate If you cannot measure a problem, you cannot address it. Lord Kelvin

Media Freedom: A Broader Governance and Empirical Perspective Freedom of the Press often approached as a silo issue, instead of component of transparent/good governance and integral part of governments ruling justly Civil Society role is essential in comprehensive strategy for addressing governance Indicators as an incentive for change -- Power of Data: Most powerful data indicators: those that draw public attention to problems and suggest reforms; need to gather more information and data on media, worldwide Laws are important, but External Accountability measures may be even more: Voice & Data

High 0.8 Press Freedom: Variable Picture, Non-Linear, with complex causality Press Freedom 0.5 Low 0.2 Low Income Lower Middle Income Source: WDI 2002 and Freedom House Higher middle income High Income

Rule of Law, Voice and Accountability and Control of Corruption, Regional Averages Good Governance 2.0 Rule of Law 1.0 Control of Corruption Voice and Accountability 0.0-1.0 OECD East Asia NIC Eastern Europe Middle East N. Africa Latin America East Asia emerging Sub-Saharan Africa Former Soviet Union South Asia Poor Governance Source: Governance Research Indicators (KKZ) based from data in D. Kaufmann and A. Kraay, 'Growth without Governance', for 175 countries, details at http://www.worldbank.org/wbi/governance/pubs/growthgov.htm. Units in vertical axis are expressed in terms of standard deviations around zero. Country and regional average estimates are subject to margins of error (illustrated by thin line atop each column), implying caution in interpretation of the estimates and that no precise country rating is warranted. See also regional clarifications in note 6.

Traffic Light World Map Voice and Accountability 2000 Source for data: http://www.worldbank.org/wbi/governance/govdata2001.htm ; Map downloaded from : http://info.worldbank.org/governance/kkz/gov2001map.asp Colors are assigned according to the following criteria: Red, 25% or less rank worse; Orange, between 25% and 50%; Yellow, between 50% and 75%; Light Green between 75% and 90% ; Dark Green above 90%

Voice & Accountability Matters for Development 200 180 160 Infant Mortality 140 120 100 80 60 40 20 0 Finland -2-1 0 1 2 'Voice' (including freedom of the press), Civil Liberties and Accountability Source: KKZ 1999

Control of Corruption and Freedom of the Press Control of Corruption [kkz] High Low 2.5 2 1.5 1 0.5 0-0.5-1 -1.5-2 -2.5 FIN CAN CHE DNK NLDSWENZL SGP CYP ISL GBR DEU AUS LUXNOR IRL AUT HKG USA ISR FRA ESP PRT CHL SVN FJI GRC ITA MYS JPN KWT HUN! BWA EST OMN QAT TWN TTO MLT CRI BHS NAM URY POL CZE CUB ZAF MUS LSO MAR JOR ARE BRN BRA KOR SLE TUN CIV SWZGMB SVK GUY CHN BHR BIH EGY GNB LKA SUR LTU MNG JAM TGO GHA BGD PER MEX PHL MWI INDSEN THA VNMTUR ARG LVA HRV ETHMDA ZWESLV BFA COL LBN BOL PRK HTI MOZ ROM BLR KEN COG BGR UGAMKD MDG PAN SAU TCD ZMB RUS MLI DZA IDNAGO ARM GEO IRN KAZ GIN KGZGTM PAK ECU DOM BEN NGA LBY SYR VEN YEM NIC ALB AZE CMR GAB HND PNG MMR SOM SDN UZB LBR PRY TZA UKR YUG IRG TJK TKM ZAR NER r = 0.68 0 0.2 0.4 0.6 0.8 1 Low High Freedom of the Press (Freedom House)

Transparency within Government Agencies Increases Their Poverty Reduction Impact in Bolivia Poverty Reduction Impact 60 50 40 30 Low Moderately Low Moderately High High Internal Transparency Simple Average Association Controlled Causal Link Based on Bolivia Public Officials Survey. The sample of institutions includes 50 national, departmental, and municipal agencies which are a prior anticipated to have a major impact on poverty reduction.

Citizen Voice Improves Accessibility of Public Services to the Poor in Bolivia Accessibility to the Poor 70 60 50 40 30 Low Moderately Low Moderately High High Voice / External Accountability Simple Average Association Controlled Causal Link Based on Bolivia 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

Transparency and Citizen Oversight US$ per student Tracking Education Dollars in Uganda 3.5 3.0 2.5 Public info campaign 2.0 1.5 1.0 0.5 0.0 1990 1991 1993 1994 1995 1999 Intended grant Actual grant received by primary school (means) Source: Uganda Public Expenditure Tracking Surveys

The Economic Development Dividend of Good Public Governance 90 80 70 60 Infant Mortality and Corruption 12,000 10,000 Per Capita Income and Regulatory Burden 50 8,000 40 30 6,000 20 4,000 x 100 75 10 0 Development Dividend Weak Average Good Control of Corruption Literacy and Rule of Law x 2,000 0 Development Dividend 10000 9000 8000 Weak Average Good Regulatory Burden Per Capita Income and Voice and Accountability 7000 50 6000 5000 25 4000 3000 2000 0 1000 0 Weak Average Good Weak Average Strong x Development Dividend Rule of Law x Development Dividend Voice and Accountability Note: The bars depict the simple correlation between good governance and development outcomes. The line depicts the predicted value when taking into account the causality effects ( Development Dividend ) from improved governance to better development outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.

High 1 State Capture vs. Freedom of the Press r =.59 Absence of State Capture 0.6 Low 0.2 0.2 0.6 1 Low Source: GCS 2002 Press Freedom High

State Capture: A By-Product of Low Civil Liberties and Slow Economic Reforms Very High State Capture 40% Degree of Economic Reforms Extent of State Capture 30% 20% 10% 0% High Civil Liberties Partial Civil Liberties Low reform Partial reform High economic reform Degree of Civil Liberties in Transition Economies http://www.worldbank.org/wbi/governance

Civil Society International Legislative Branch Judiciary Political Parties Media 1 Alberto Fujimori Vladimiro Montesinos Private Sector Municipal Government State (Bureaucracy) Military

Problems of Media in Emerging Economies Lack of legal protections for free speech Repressive misuse of libel & insult laws Weak institutional capacity in the country to respond to media disclosures Weak management and corporate governance within media sector Capture of the Industry by a few (in some cases) Lack of independent finance Insufficient expertise on key subjects Lack of comprehensive data on the industry: management in the dark

The Central European Laboratory An industry transformed in a short period of observable time New legislation enacted State owners replaced by investors, foreign and domestic Some journalism of excellent quality takes hold Emergence from the dark: data on a promising new industry

Case study in Poland: Rzeczpospolita Government sold stake in Party daily (1991) Managers did management training Journalists studied economics Beefed up economics/ business coverage Advertising revenues soared, spurred by strong demand for business page Today newspaper is independent, profitable

Advertising Expenditure 1994=100 900 800 700 600 500 400 300 200 100 0 1994 1995 1996 1997 1998 1999 2000 Czech Republic Hungary Poland Russia Slovenia Source: World Association of Newspapers: World Press Trends 2001

Economic and institutional reform and links to the media Economic growth spurs demand for information Providers of that information compete for new audiences and advertisers Media becomes more independent and plays crucial role of monitoring public and private sector behavior Advocate for institutional change Demand for rigorous information creates culture of truth-telling where facts can be checked and verified

Beijing Youth Daily 18 April 2003 HEADLINE RMB 280,000 Has Been Misappropriated Story about how a local official had confiscated money that was repaid to 500 farmers who successfully sued a seed company for poor quality products. Source: www.sinofile.net

Lessons from Asia Despite well-known hypothesis of a less free Asian model, economic growth in Asian went hand-in-hand with a growing freedoms Asian tigers liberalized business information which led to more freedom in other areas Financial crisis 1997-98 widely understood as failure of information flow and lack of freedom of the press

The next frontier: China? Last five years have seen major relaxation on some aspects of press freedom Southeast China, in particular, is seeing major explosion of competition among media companies SARS exposed weakness of information flow and brought renewed calls for more freedom Political shake-up and potential opening up in China due to the interface of a critical event (SARS), crossborder information flows, and technology More general hypothesis: competent economics journalism leads to stronger independent financial position and political opening for all media (SE Asia, Central Europe, Baltics). A foot in the door for a freer press?

But are lessons of media development successes, as in Central Europe, transferable to other regions? Public sector and governance reforms that focus on transparency, competition Diversifying ownership of the media & de-linking media from public purse Growing public disclosure by media companies of their financial results leads to investor confidence Measures to encourage investment, including from foreigners The media s role: focus on quality content and a strong, independent voice

Entry Points: Media are key Advocates for Good Governance Reforms Governance reforms: inclusion of media issues in training and in implementation of reforms Public sector reforms: stronger emphasis on access to information at all levels, privatization and deregulation of media, foreign investment in media complemented with other public sector reforms Private sector: building knowledge about links between economic performance and good corporate governance/ transparency Knowledge economy: showing links between successful use/creation of knowledge and quality/ freedom of media

The Power of Data Country and international indicators: towards improved internationally comparable indicators on media freedom -- New data is out there but rarely well publicized -- Journalists can play a key role by tracking how countries are doing, holding politicians accountable -- Journalists can offer not only disclosures but provoke debate about solutions Media Industry and Firm-Level indicators: data disclosure (including on real ownership)

Misgovernance rigorously reported EL TIEMPO, BOGOTA, COLOMBIA, FEB. 2002 EDITORIAL El Estado capturado Una encuesta que revela las prácticas de corrupción contra los recursos públicos y aporta elementos para contrarrestarlas. Los desafíos más importantes se concentran en las compras estatales y en los desvíos presupuestales -- la mitad de las adquisiciones del Estado contienen soborno y el promedio de los cobros podría ascender hasta cerca del 19 por ciento del monto de los contratos. Cerca del 11 por ciento de las asignaciones públicas estarían siendo desviadas para fines distintos a su destinación legal datos de la encuesta más grande hecha en Colombia frente al fenómeno de la corrupción. Colombia cuenta hoy con una privilegiada herramienta para adoptar, sin dilaciones, medidas contundentes para controlar este flagelo que se ha devorado recursos públicos y privados de los colombianos en billones de pesos. Queda claro que la lucha por construir integridad en Colombia debe partir de la formación de una amplia coalición de fuerzas La politiquería, el tráfico de influencias, las presiones políticas y la falta de meritocracia se están devorando la institucionalidad colombiana. El 74 por ciento de los usuarios consideran muy frecuente el pago de sobornos en la justicia. Los resultados abren las puertas para una nueva categoría analítica, la captura del Estado, entendida como la capacidad de grupos para influir a través de prácticas corruptas en los procesos de alta decisión estatal, que a su turno se convierte en una forma predominante de corrupción asociada con el favorecimiento de intereses privados en las altas esferas del poder. En otras palabras, es lo que explica el alarido de millones de colombianos que claman para que el bien público vuelva a ser el referente vital del accionar del Estado y para que se puedan librar las instituciones colombianas de las garras de la corrupción.

But by contrast with some best practices, why so many media companies squander their freedom with poor journalism? Where undeveloped advertising markets, media depend on circulation to fund their activities. Often this translates into 3 S s: Scandal, Sex & Sports Low literacy and education levels in many developing countries; tv and radio more important than print media Troubling tendency: sponsorship by politicians or business moguls. Inadequate business acumen among media managers in developing countries Advertising-focused publications compete for the higher end of the market; advertisers prefer serious publications: image enhancement. Insight: newspapers in Central Europe charge a premium for advertising on the business pages.

Role of IFI s and Donor Agencies Set example, providing access to documents, decisions, people, data internet power Emphasize access in public sector reforms Encourage governments (central, regional, local) to end ownership and subsidies to media Involve media early in governance diagnostics, Good Governance & Poverty Reduction programs, and other consultative processes New approaches to learning programs, including management, specialized journalistic fields, with intensive use of rigorous data Make data and research easily accessible (vs. myths..)

A Learning Program Illustration: Regional Media Capacity Building in Russia/CIS Based on needs assessment done 1999-2000 Management training network in five Russian cities (now expanded to Ukraine as well) Training 1200 managers of local and regional newspapers over three years Focus: Financial independence, Budgeting Follow-up: training of journalists in economics and business and investigative journalism General: Also, major learning programs in business/economic journalism and in media development in Latin America, Asia, Africa.

WBI Media Development Program Integral Component of Global Governance Major Training programs through DL/VC and through internet hundreds of journalists in each activity, regions, diverse languages 1000s reached Access to information issues, as well as media selfregulation & codes of conduct are concrete components of these activities Major program of learning/training with partners for thousands of journalists in Latin America Challenges: i) Integrate with other key stakeholders; ii) Analyze frankly and provide tools to address issues of capture & misgovernance within media; iii) challenge of localization, and, iv) Work with media on (under-utilized) Power of Data (Empirical Information) -- incl. indicators

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. www.worldbank.org/wbi/governance