1. FIGHTING CORRUPTION AND POVERTY: ARE WE GETTING IT RIGHT?
Presentation for Workshop:
From Montesinos to PRSPs
October 21 & 22, 2002
Helen Sutch, PRMPS

2. What is the logic of today’s workshop?
Our focus on corruption springs from the recognition that it is the most serious single obstacle to achieving the Bank’s overall objective of poverty reduction.
But are we tackling corruption in the right way? How should we go about the task of helping countries develop institutions that will be resistant to corruption and effective in reducing poverty?

3. Good governance leads to higher investment & growth
% Investment share in GDP
Income per capita Growth Rate
20%
-1.5% 0% 1% 2%
1.5%
-0.5%
-1.0%
0.5%
15%
10%
High
Medium
Low
High
Medium
Low
Quality of Governance
Quality of Governance in this case was measured by perceptions of 4,000 firms in 67 countries on: (i) protection of property rights; (ii) judicial reliability; (iii) predictability of rules; (iv) control of corruption. Source: World Development Report Survey, 1997

4. Good governance goes hand in hand with better development outcomes
Infant Mortality and Corruption 10 20 30 40 50 60 70 80 90
Weak
Average
Good
Control of Corruption x
Development
Dividend
2,000
4,000
6,000
8,000
10,000
12,000
Weak
Average
Good
Regulatory Quality x
Development
Dividend
Per Capita Income and
Regulatory Burden
Literacy and Rule of Law 25 50 75
100
Weak
Average
Good
Rule of Law x
Development
Dividend
Per Capita Income and
Voice and Accountability
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Weak
Average
Strong x
Development
Dividend
Note: Based on a collaborative research project, 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 Divided”) from improved governance to better development outcomes.

5. Milestones in Anticorruption
1996 JDW’s Annual Meetings speech
1997 WB Anticorruption Strategy
WDRs 1997, 2000, 2001
“Assessing Aid”
1999 onwards: almost every CAS assesses governance and corruption
2000 “Anticorruption in Transition” defines state capture, administrative corruption, and the “anticorruption environment”

6. Good governance and anticorruption have many dimensions
Structure of Government
Executive decision-making structure
Legislative oversight
Independent and effective judiciary
Decentralization and intergovernmental relations
International dimensions: rules for foreign investors, trading partners, donors
Political Accountability
Political competition, credible political parties
Transparency in party financing
Disclosure of parliamentary votes
Asset declaration, conflict-of-interest rules
Competitive Private Sector
Economic incentive framework/policies
Competitive restructuring of monopolies
Regulatory simplification for entry
Transparency in corporate governance
Collective business associations
Civil Society Voice & Participation
Freedom of information
Public hearings
Role of media/NGOs
Governance monitoring
Anticorruption
Public Sector Management
Meritocratic civil service with monetized, adequate pay
Public expenditure management (budget preparation and execution, financial accountability, procurement, audit)
Decentralization with accountability
Service delivery (health, education, infrastructure, courts and other dispute resolution mechanisms)
Tax and customs

7. Understanding the environment, working with the people in it…
Anticorruption surveys of households, businesses and public officials (PREM, WBI), also surveys of courts and investment climate, public expenditure tracking
Institutional and Governance Reviews
Development of governance indicators
Workshops to catalyze the preparation of country strategies
WBI core course for senior officials

9. Governance and anticorruption knowledge sharing has grown…integrating PREM, DEC, WBI, Legal, and OPCS across thematic groups…
Anticorruption
Administrative and civil service reform
Decentralization
E-government
Legal institutions of market economy
Public expenditure management
Tax policy and administration

10. The PRSP process is an important link…
All PRSPs recognize importance of governance (a major advance, comparing pre-PRSP world)
Governance deficits becoming explicit
Civil society participation spurring some demand for good governance
Improved understanding of implementation capacity constraints

11. But what is the common factor?
Stovepiping: or methodological separatism
we deal with institutions as though they were as separate as their names indicate: courts, parliament, civil service, tax administration…
We assume that the private and public sectors are separate and different, and respond to different incentives…

12. Questions for the day
As we move into PRSP and LICUS territory, are we tackling anticorruption and governance in the right way?
Do we need to do more to understand the drivers of corruption before we can shape and implement effective strategies?
Can we do better? And if so..
What, concretely, should we change?