Presented to: GAC Health Workshop Nairobi, Kenya March, 2011 Presented by: Denyse Morin The World Bank Group Mitigating Corruption Risks: “A Value Chain Approach”

Improving Development Outcomes The Cost of Corruption “in the Real” 25% of drugs consumed in poor countries are counterfeit or substandard (WHO). Illegal logging accounts for more than 75% of annual logging turnover in Indonesia. Poor governance costs the roads sector up to 40% of sector expenditures annually. TI estimates that at least $400B is lost to corruption in public procurement each year.

Improving Development Outcomes The manner in which the State acquires and exercises its authority to provide public goods and services public Using public office for private private gain Governance Corruption Governance and Corruption: Not the Same Thing!

Improving Development Outcomes Poor Governance Lack of Transparency Weak Voice & Accountability Monopoly Power Wide Discretion Inefficiency Corruption

Improving Development Outcomes Risk Mapping ROAD MAP Cross Cutting Functions: Process Flow Sector: Value Chain

Improving Development Outcomes Risk Mapping ROAD MAP Cross Cutting Functions: Process Flow Sector: Value Chain Focus on output of sector Focus on output of sector Identify vulnerable points and inter-linkages Identify vulnerable points and inter-linkages Formulate practical remedial measures Formulate practical remedial measures Develop measurable and actionable indicators Develop measurable and actionable indicators

Improving Development Outcomes Health Sector Delivery of Essential Drugs Manufacturing Registration Procurement Distribution Selection Prescription/Disbursement “tailor fit” drug specifications under-inclusion or over-inclusion production of sub-standard drugs biased prescriptions (info asymmetry b/w doctor/pharmacist and patient) lengthy procedures with weak legal framework warehouse theft

Improving Development Outcomes Health Sector Health Sector Delivery of Essential Drugs Manufacturing Registration Selection Procurement Distribution Prescription & Disbursement Random inspections Monitoring based on transparent & uniform standards (WHO prequal list) Tracking systems User surveys Media coverage of drug selection committee meetings Competition & Transparency Tackling decision points vulnerable to corruption

Improving Development Outcomes Forestry Sector The Life of a Log $2.20 Local logger: $2.20 $20.00 Local broker: $20.00 $ Foreign middle man: $ $ Foreign lumber processor: $ Exporter of sawn timber: $ $1, US trader: $1, From illegal to legal

Improving Development Outcomes Forestry Sector The Life of a Log satellite monitoring local communities/ third party Tracking system: timber cut for export vs. exported lumber (value) IKEA Model: log certification International code of conduct Increase supply thru fast growing trees

Improving Development Outcomes The Transport/Roads Sector From micro to macro National Sector Agency Project

Improving Development Outcomes The Transport/Roads Sector From micro to macro National Weak electoral laws Sector Policy capture Weak link: budgeting & planning Agency Weak procurement system Politicized appointments Project Contract manipulation Document fraud