1. Mainstreaming Governance and Anti-Corruption in the CAS and Operations: A Guide for Country Teams with Country Applications
By: Vinay Bhargava
Senior Advisor, PRMPS and EXT
Presentation at the Core Course
on Public Sector Governance and Anti-corruption
April 23-27, 2007
The World Bank
2/16/2006
Vinay Bhargava

2. Outline of presentation
GAC practices in CASs: A retrospective (FY99-06)
What will be done differently in CASs: Expectations under the new strategy
How To Mainstream GAC in CASs: A Suggested Five Step Approach
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Vinay Bhargava

3. FY99-06: Main Findings and Conclusions
Explicit discussion of GAC issues in CASs , as required under the guidelines, has become mainstream.
Increasingly the discussion of GAC issues in CASs is grounded in the Bank’s AAA.
Helping countries with governance and anticorruption has become a regular feature of the Bank’s assistance. About 90% CASs (FY99-06)
GAC related triggers used in about 80 % of the CASs.
Increasingly CASs are discussing risks from corruption to the Bank financed projects.
Coordination with other donors in GAC has become a regular feature of CASs.
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4. FY06 CASs: Current Practices and Areas for Improvement
FY06 CASs were better than earlier years.
Several potential areas for lifting the game.
DIAGNOSIS: In FY06 CASs CFAA,CPAR and PER main sources. Rare to see
See Governance assessment/survey as the source
See Relationship between GAC and growth discussed
Find non-government checks and balances institutions discussed
See an explicit connection between diagnosis and prescription
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5. FY06 CASs: Current Practices and Areas for Improvement ( Continued)
Entry Points:
Building capable and accountable states dominates
Half the CASs supported demand side of governance (transparency, CSOs , private sector)
Assessment and Mitigations of Risks:
Only half of the CASs assessed risks to Bank operations and only 30% discussed reputational risks.
Majority did not assess risk of deterioration but 75% specified GAC related triggers
Main mitigation strategy: Fiduciary controls and social accountability mechanisms
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6. Moving Forward: What Will the World Bank do Differently?
Scale up multistakeholder engagement – with civil society, media, parliaments, local communities in policy making & service delivery
Scale up governance work where it matters most for development
– alleviate governance constraints to poverty reduction
Strengthen country systems while enhancing anticorruption measures in WB operations –
a/c action plans; enhanced disclosure, participation & monitoring
Systematically integrate governance in sectoral projects & programs –
in extractive industries, infrastructure, forestry, health, education
Systematically scale up engagement with private sector & industrialized countries – to tackle the supply side of corruption
Work with donors & other int’l actors to ensure a harmonized approach & collective action –
based on respective mandates & comparative advantage
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7. What will be done differently in CASs
What will be done differently in CASs ? Expectations under the new GAC strategy.
Explicit consideration of (based on improved diagnostics):
GAC challenges and adequacy of government’s program
Risks posed by GAC challenges to the development and the Bank
Ways to involve private sector and accountability mechanisms
Stay engaged but tailor each CAS to Country Circumstances:
Weak governance but strong government GAC program
Weak governance but uneven government commitment
Most poorly governed settings
Course corrections during the CAS implementation with the Board’s involvement.
Source: guiding principles 3-6 and pages of the GAC Strategy.
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8. How To Mainstream GAC in CASs? A Suggested Five Step Approach
Take stock of GAC landscape and legacy including the constraints GAC poses to growth and poverty reduction.
Formulate C-GAC strategy and entry points suitable for the country GAC challenges and government commitment.
Assess and mitigate risks (fiduciary and reputational) to the Bank’s proposed engagement.
Formulate partnership (including coalitions), consultations and communication plan.
Develop results framework including the M and E arrangements and GAC related triggers (as applicable).
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9. Step 1: Stock taking: Objectives
Determine adequacy of diagnostics (commission more?)
DPR, ICA, IGR, GAC diagnostic surveys, Doing business
PEFA, PER, CPAR, CFAA, ROSC, Country GAC Assessment
DFID Driver of Change, TI- National Integrity Surveys, TI- Global Corruption Barometer, Global Integrity country report, OECD-DAC-MDB Joint survey, External intelligence sources
Determine GAC as constraint to growth and poverty reduction
Assess country circumstances faced.
Weak governance but strong government GAC program
Weak governance but uneven government commitment
Most poorly governed country setting.
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10. Step 1–Stock Taking : A check list
Aggregate and disaggregate governance indicators (e.g., KKZ, CPIA, TI, Global Integrity, Doing Business, ICA, Country client survey)
Political economy of GAC reforms and degrees of freedom for action
GAC as constraint to growth and poverty reduction: Summary findings of diagnostics and evaluations (AAA),
Government strategy and commitment—current and historical
Inventory and efficacy of key check and balances institutions in the government (executive/non-executive branches) and NGOs.
Key anti-corruption champions/partners (in and out of government)
Legacy issues: donor assistance; media monitoring; corruption scandals
On-going and recent Bank anti-corruption activities (last CAS)
Relatively high risk ministries/public enterprises
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11. GAC As Constraint on Economic Growth and Poverty Reduction
Indicator
Ratings (%)
Inadequate
Adequate
Not at all
Low/ Some
Middle/ adequate
High
How well does the CAS
1. Discuss the relationship between weak governance and corruption, and poverty reduction and economic growth. 25 38 31 6
2. Assess weaknesses concentrated in certain sectors or institutions. 50
3. Assess the government’s commitment to strengthening governance and tackling corruption. 56 13
4. Discuss the government’s track record of progress with strengthening governance.
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12. Diagnostic Sources/Instruments
Main Sources of Governance Diagnostics in 16 FY06 CASs*
Diagnostic Sources/Instruments
Frequency
Country Financial Accountability Assessment (CFAA) 9
Public Expenditure Review (PER) 7
Country Policy and Institutional Assessment (CPIA)
Doing Business Report 6
Country Procurement Assessment Report (CPAR)
Investment Climate Assessment (ICA) 5
Implementation Review (by INT) 4
Report on Standards and Codes (ROSC)
Country Economic Memorandum (CEM)
Public Expenditure Financial Accountability (PEFA) 2
Governance and Anticorruption Diagnostic Survey 1
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* Table 2 shows the number of CASs supporting their governance and corruption diagnostics by referring to AAAs. AAAs used in other contexts than governance and corruption diagnostics will not be included in the table.
Vinay Bhargava

13. Step 2: Formulate Country specific GAC strategy, entry points and assistance instruments
A typical C-GAC program should include the following elements:
Objectives and approach to assistance
Proposed entry points
Proposed mix of lending and non-lending instruments
Risk assessment and mitigation
Results framework and triggers
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14. Step 2-Objectives and Assistance Approach: Key Trade-Offs depending upon situation
Supporting development vs. managing risks to the Bank
Balancing help to executive branch with help to non-government institutions of accountability
Selectivity in entry points for results and credibility vs. comprehensive ( cover the water front) approaches
Balancing lending vs. non-lending mix and sequence of assistance.
Prerequisites and Selectivity in When, Where, How and How Much to lend in high risk situations
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15. Step 2: Practical tips for choosing entry points
Whether and how effectively the proposed entry point is likely to:
Reduce opportunities for corruption
Increase risk of exposure and punishment
Increase severity of punishment
Reduce incentives for corruption
Increase public demand/pressure for reducing corruption
Strengthen accountability of public sector programs
Be feasible under the political landscape, institutional setting, and administrative capacity
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16. Step 2: Helping Countries- Various ‘Entry-Points’
Private Sector
Competitive investment climate
Responsible private sector
Public Management
Public financial management & procurement, monitored by PEFA
Administrative & civil service reform
Civil Society, Media & Oversight Institutions
State oversight institutions (parliament, judiciary, SAI)
Transparency & participation (FOI, asset declaration, user participation & oversight)
Civil society & media
Local Governance
Community-driven development
Local government transparency
Downward accountability
Governance in Sectors
Transparency & participation
Competition in service provision
Sector-level corruption issues (EITI, forestry)
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17. Step 2: Involve institutions to limit corruption
Judiciary
Legislature
Decentralization with accountability
Constitutionally independent accountability institutions
Anti-corruption agency
Election Commission
Ombudsman
Supreme audit institutions
Media
NGOs
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18. Beware: Sectors and Institutions Most Affected By Corruption
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Source: Transparency International Global Corruption Barometer 2005,

19. Step 2: Choosing the mix of assistance instruments for an entry point
Undertaking and disseminating ESW
Grants for institutional capacity building
WBI capacity building programs
Sponsoring in-country dialogue events
Fitting lending operations with anti-corruption plans
Free standing lending/TA operations in support of governance improvement
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20. Step 2: How to be selective in entry points/ assistance instruments
Whether and how effectively the CAS interventions in the selected entry points likely to :
Reduce opportunities for corruption
Increase risk of exposure and punishment
Increase severity of punishment
Reduce incentives for corruption
Increase public demand/pressure for reducing corruption
Strengthen accountability of public sector programs
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21. Entry Point Categories Number of Modalities of CAS Interventions
Entry Points and Modalities of FY06 CAS Interventions
Entry Point Categories
Number of Modalities of CAS Interventions
AAA TA
LEN
1. Capable and Accountable States. 9 5 14
2. Increasing Transparency. 2 8
3. Participation and Oversight by Civil Society, Media, Communities. 4
4. Competitive and Responsible Private Sectors. 11
5. Financial Sector Governance. 15
6. Supporting Champions and Leaders of Reform. 1 3
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22. FY06 CASs: Checks and Balances Institutions
Indicator
Discuss
Support
B. Does the CAS discuss any of the following checks and balances institution
Freedom of information 31 13
Media 38
Civic Society Organizations 44 25
Competitive Private Sector 75 69
Community Participation 56
Supreme Audit Institution 63
Chambers of Commerce
Judiciary 50
Legislature
Anti-corruption agencies
Ombudsman
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23. Step 3: Risk assessment and mitigation
Bank shareholders, partners, and other stakeholders expect highest standard of integrity and accountability.
INT investigations show that the Bank needs to do more to ensure the proper use of funds.
New GAC strategy calls for:
Regular risk reviews of project pipeline and lending portfolio to identify the subset most at risk.
Elevate review of riskier projects to senior levels and focus resources on them.
Supporting actions by government’s investigation and prosecution systems/institutions.
Use of special risk mitigation tools for high risk environments
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24. Step 3 : Risk Analysis and Mitigation
Upstream-assess risks to the Bank
CPIA ,governance indicators, country knowledge assessment, red flags tools
Country team self assessment validated by selected external interviews
Commonly used mitigation measures to reduce risks to the World Bank:
Fiduciary controls (procurement and financial) and INT review
Integrating social accounting mechanisms
Integrating strong results monitoring framework
Screening of new projects for corruption risks; preventive measures
Increasing transparency (disclosure, hotline)
Strategic communications and partnerships
Proactive sanctions enforcement
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25. FY06 CASs: Assessing and Mitigating Risks
Indicator
Ratings (%)
Inadequate
Adequate
Not at all
Low/ Some
Middle/ adequate
High
A. How well does the CAS
1. Assess the reputational risk to the World Bank 87 13
2. Discussed the risk that the governance environment will deteriorate during the CAS period 69 19
3. Assess the risk of fraud and corruption in Bank-financed projects 31 25
4. Include a result based framework suitable for independent monitoring 6 38 50
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26. Risk Mitigation Measures proposed in 16 FY06 CASs
Detection and deterrence
Use of CSOs
Corruption risks as part of CPR
Anti-corruption plans for projects
Disclosure and transparency
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27. Step 4 : Develop partnership, consultation and communication plan
Expectation for cooperation among donors
Partnerships and Coalitions effective tools for improving governance
Instruments: joint or parallel (coordinated) activities with domestic and/or external partners for:
**Studies **Funding
**Joint statements **TA projects
**Coordination group **Public dialogue events
**Mass communications **Dialogues with gov’t.
Regular consultations and communication with and for results
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28. Step 5: Monitor progress and evaluate results
Set clear and monitorable results and set up M and E systems
Push beyond Disclosure Policy to supply information to public that make activities transparent
Set reporting and independent auditing systems
Put in place social accountability mechanisms
Encourage beneficiary participation in planning/evaluation
Propose GAC related triggers for lending scenarios.
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29. Step 5: Course Corrections During CAS Implementation
In more volatile country settings be prepared for mid-course corrections adjusting program in response to improvements or deterioration during implementation.
In case of new information (e.g. from INT) about confirmed instances of corruption in Bank-financed projects the appropriate response may be to:
curtail operations and agree on risk mitigation measures
switch scenarios within the existing CAS
propose a revision in the CAS Progress Report, or move to an ISN.
In the event of demonstrated improvements in governance and anticorruption be prepared to scale assistance.
If changes in country circumstances warrant a shift in the WBG’s approach, an appropriate document will be presented to the Board for discussion.
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30. Indonesia
Diagnosis: Chapter on the Special problem of corruption. Money politics. Risks: very high both to the Bank and country. Political will risk. High risk to the Bank’s credibility/reputation. Country Vision: part of government’s package of policy actions. Weak program .
CAS Objective: Address the key issue of governance improvement thru all CAS activities- set standard for the Bank to address corruption and governance issues.
Public Sector Management Finance and procurement reforms Tax, customs. Public expenditures reforms Effective Implementation of Decentralization Local government governance improvement
Institutional Checks & Balances Judiciary and legal reforms Anti-corruption institutions Disclosure by public officials Corruption perception survey
Entry
points
Civil Society Voice & Participation Public participation and monitoring Full collaboration to promote governance
Competitive Private Sector *Corporate governance *Anti money laundering
Assistance Approach: Four principles applied to promote good governance thru all activities. Lending Instruments: CDD programs; tax, customs, financial; media/CSOs components; loans to districts AAA Instruments: Investment climate surveys; WBI; expenditure tracking; governance surveys; TA grants for judiciary; parliament . Results and Performance Indicators: Many -See Hand Out. Partnerships: Joint AAA and funding; CDF; Partnership for Governance Reform
Triggers: To Stay in the Base Case: Improvements in government fiduciary management and anti-corruption institutions. To Move to the High Case: Improvements in fiscal accountability, governance in the justice sector, and fiduciary management.
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31. That is all – Thank You Very much for your attention.
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Vinay Bhargava