1. Slide 1 Drilling Down Through Selected Governance Diagnostic Tools Francesca Recanatini Sr. Economist, PRMPS The World Bank April 23, 2007

2. Slide 2 Objective of this session  Which empirical tools and approaches are already available?  How can we select among them?  How can such assessments be used for our operational work? Which governance tools are more operationally relevant for our work?

3. Slide 3 Governance is the door to anticorruption The manner in which the state acquires and exercises its authority to provide public goods & services Use of public office for private gain Governance Corruption Corruption is an outcome – a consequence of weak or bad governance Governance reform helps combat corruption by addressing its underlying causes

4. Slide 4  Governance receives extra weight in CPIA indicator- based allocations of IDA funds  All Country Assistance Strategies (CASs) are required to address governance issues, including corruption  Increasingly, CAS’s are centered around governance issues  A key focus of the Bank is to help countries to improve their governance systems to mitigate risks for all stakeholders How does governance fit into our operational agenda?

5. Slide 5 Existing WB Empirical Tools  BEEPS  IGR  Public Official surveys  PER and PETS  QSDS  Score Cards  Investment Climate Surveys  EC Audits  CFAA  CPAR  GAC  Case Studies  HIPC Exp. Tracking  ROSC  Life In Transition Survey (ECA region)

6. Slide 6 Existing Non Bank Tools (Sample)  TI Perceptions Index  UNDP GAC  Freedom House Press Freedom Indicators  MCC ratings  Afrobarometer Surveys  Global Risk Service  Business Enterprise Environment Survey  Latinobarometro Surveys  Media Sustainability Index  Business Risk Service  Transition Report  Global E-Governance  Global Competitiveness  Global Integrity Index  Human Rights Database  Open Budget Initiative  Reporters w/o Borders

7. Slide 7 Key starting points 1. What is the purpose of the assessment?  Research and analysis  Awareness raising  Policy and Action planning  Capacity building  Monitoring

8. Slide 8 2. What is the focus of the assessment?  Governance as a whole  Corruption  Performance of a specific agency/sector  Quality of a specific public service delivered Key starting points

9. Slide 9 Linking the Tools to State Institutions PER HIPC E.T. ROSC CPAR EC Audits CFAAIGR & GAC & Governance Cross- Country Ind. BEEPS & INVEST. CLIMATE SCORE CARDS QSDS Public Official Surveys PETs

10. Slide 10 Linking Governance Tools to Accountability Citizens Politicians/Policymakers PublicServants Delegation Delegation/Voice PoliticalAccountability Internal Accountability Delegation of Implementation public goods/ services client power/ social accountability PETs GAC; BEEPS; PETs Scorecards Doing Business

11. Slide 11 Monitoring CAS Operations & Capacity building Actionable indicators: PFM indicators (including PEFA, CPAR and CPAA); scorecards; Doing Business; GACs; BEEPS Political Governance Diagnostics; GAC Diagnostics, LITS Specialized technical reports: BEEPS; PETs; IGRs; GSDS; ICAs; PERs: GACs Linking Governance Tools to Accountability

12. Slide 12 Governance tools for operational work Three examples:  Public Expenditure Tracking Survey  BEEPS  Governance and Anti-Corruption Diagnostic Surveys

13. Slide 13 Goal: Assess fiscal leakages given significant share of intended resources do not reach the frontline CountryYearSampleLeakage Estimate Ghana2000200 Clinics 80 % Non-Salary Ghana2000200 Schools 49 % Non-Salary, 35% Salary (primary) 52% Non-Salary, 25% Salary (secondary) Honduras2000805 staff; 35 Clinics 2.4% of all workers on the payroll considered ‘ghosts.’ Absenteeism estimated at 27%. 5.2% of workers were not actually in the assigned post but had moved to other location (5.2%) Madagascar2003185 Schools 8-10% of cash transfers Source: World Bank (2005) PETS Review Public Expenditure Tracking Surveys (PETS)

14. Slide 14 Papua New Guinea 2002214 Schools 16-29% of subsidies Peru2001120 municip. Leakage in ‘Glass of Milk’ program estimated at 71% (includes ‘leakage’ of benefits at household level) Tanzania199936 Clinics Leakage of non-salary funds estimated at 41% Tanzania199945 Schools Leakage of non-salary funds estimated at 57% Uganda2000155 Clinics Leakage of specific drugs and supplies estimated at 70% Uganda1999250 Schools 83% in 1993, 22% in 1996 Goal: Assess fiscal leakages given significant share of intended resources do not reach the frontline Public Expenditure Tracking Surveys (PETS)

15. Slide 15 The PETS Cycle The Prototype: Uganda Education PETS  Remains Most Successful Case  “Leakages” of Funds Going to Schools Reduced Significantly (~ 13% (1996) to 82 % (1999)  Methodologically Relatively Straightforward Flow Central Government Disbursed Capitation Grant to Districts, Districts On-ward disburse to Schools. Allocations Largely Reached Districts, But Allocations Did Not Reach Facilities

16. Slide 16 PETS Coverage PETS have now been conducted in 24 countries, almost exclusively in health and education. Source: Chaudhury, N et. al. 2004 CountryYear EducationHealthWaterTransport/ Roads Agriculture/ Rural Albania2004 Azerbaijanplanned Cambodiaplanned Cameroon2003 Ghana2000 Honduras2000 Madagascar2003 Mozambique2001 PNG2002 Peru2001 Rwanda2000 2004 Senegal2002 Tanzania1999 2001 2003 (pilot) Uganda1996 1999 Zambia2001

17. Slide 17  Is corruption in Eastern Europe and the former Soviet Union getting better or worse?  What explains the changes?  What motivates reform?  Are there lessons for other regions? Goal: Analyze how corruption, regulatory burden, and public sector factors affect the business environment “Business Environment and Enterprise Performance Survey” (BEEPS)

18. Slide 18 “Business Environment and Enterprise Performance Survey” (BEEPS)  Joint initiative with EBRD  20,000 firms in 3 rounds (1999, 2002, 2005)  26 transition countries  6 European comparators in ‘05: Ireland, Germany, Greece, Portugal, Spain, Turkey (+ Korea and Vietnam)  Focus on corruption in enterprise-state interactions

19. Slide 19 BEEPS Results Corruption is falling for the region as a whole (though not yet to W.Europe levels)

20. Slide 20 … more in some countries than others … Bribe Frequency, 2002-2005 BEEPS Results

21. Slide 21 … and not all sectors saw improvement. BEEPS Results

22. Slide 22 Governance and A-C diagnostic surveys  A demand-driven process to improve governance and build local capacity  Key features: Three surveys: households, firms, and public officials Questions focus both on experience and perceptions Questions are tested and adapted to local realities Rigorous technical requirements in implementation Local institution implements, with guidance from international experts Goal: Greater local capacity, baseline governance data, & action plan for policy reform

23. Slide 23 The power of diagnostic data and key dimensions for analysis:  Unbundle corruption – administrative, state capture, bidding, theft of public resources, purchase of licenses  Identify weak and strong institutions  Assess the costs of corruption on different stakeholders  Identify key determinants of good governance  Input to develop concrete policy recommendations Governance and A-C diagnostic surveys

24. Slide 24 1. Establishment of Steering Committee 2. Diagnostic surveys + analysis 3. Draft of the NAS 4. Public dissemination + discussion 5. Revision of the NAS 6. Implementation by Government 7. Monitoring and Evaluation of NAS Challenge: poor governance and corruption WBI Technical Assistance Key Partnership: Government + Civil Society Country Implemented The study as part of a larger process CAPACITY BUILDING Local firm collects data Local enumerators trained Local supervision by technical cmte. Collects EXPERIENCE & PERCEPTIONS data from service USERS & PROVIDERS (3 sources) End WB T.A.

25. Slide 25 Country Survey Instruments Data CollectionReportDisseminationA-C Strategy Benin Finalized in 2005 Completed, 2006 In Progress (Summer 2007) Pending Haiti Finalized in 2005 Completed, 2006 Completed (release May/June 2007) Planned Summer 2007 Pending Malawi (Completed independently by Country) Completed (w/WB) February 2006 In Progress KenyaUnder review Pending (Summer 2007) Pending Mauritani a In Development Pending (Summer 2007) Pending El Salvador In Development Pending (Fall 2007) Pending BurundiFinalized 2007 Pending (Summer 2007) Pending Governance and Anti-Corruption Diagnostics 2006-2007

26. Slide 26 Country Diagnostic Results Extent of corruption, (Selected Countries ‘03-’05)

27. Slide 27 Corruption penalizes especially the poorest citizens Corruption penalizes especially the poorest citizens (% of monthly income paid for bribes as reported by households who sought a public service, 2000-2005) Country Diagnostic Results

28. Slide 28 Corruption increases inequality Country Diagnostic Results

29. Slide 29 Managers and bribes to obtain public services, Managers and bribes to obtain public services, Guatemala 2004 Note: Thin lines represent margins of error (95% confidence intervals) for each value. They show the range where the true (population) proportion would lie with probability 0.95 if we had drawn a random sample from this population. Figures are calculated for those managers who contacted the agency btwn July ‘03 and July ‘04. Selected services. Country Diagnostic Results

30. Slide 30 Cost of corruption, by firm size Cost of corruption, by firm size (as reported by managers, Guatemala 2004) Note: Figures are calculated for those enterprises that sought attention at the institution between July 2003 and July 2004. Services selected out of 12 for which data are available. Country Diagnostic Results

31. Slide 31 Country Diagnostic Results Corruption imposes barriers to households to access basic services, Corruption imposes barriers to households to access basic services, Sierra Leone 2003 Sierra Leone Roads Transport Authority

32. Slide 32 Corruption affects differently Urban and Rural areas Corruption affects differently Urban and Rural areas (as reported by managers, Zambia 2003) To obtain licenses and permits To speed up legal proceedings in the judicial branch To obtain basic public services To update/revise tax status To obtain contracts with state institutions % of managers reporting that bribes are very frequent… Country Diagnostic Results

33. Slide 33 Purchase of positions in their institutions among co-workers Purchase of positions in their institutions among co-workers, as reported by public officials, 2003-2005 Country Diagnostic Results

34. Slide 34 Practice of Purchasing Jobs Practice of Purchasing Jobs (as reported by public officials, Zambia 2003) % of public officials reporting purchase of jobs is a very common practice among... Country Diagnostic Results

35. Slide 35 % of Public Officials that said irregularities/(misappropriations) are frequent Public funds are mismanaged by agency Public funds are mismanaged by agency (as reported by Public Officials, Sierra Leone, 2003) Country Diagnostic Results

36. Slide 36 SouthNorthEastWestWHOLE Prov. AreaCOUNTRY Corruption in budget3543483940 Overall corruption2232353332 Corruption in public contracts1835293330 Corruption in personnel (2)3944555349 Accessibility for poor8574877478 Audit Mechanisms55596658 Enforcement of rules7067807371 Politicization2134223432 Quality of rules62 706163 Resources5451475552 Transparency5155535155 Citizen voice70596566 Meritocracy6665706968 Governance and corruption indicators by province, Sierra Leone, 2003

37. Slide 37 To sum: a few salient lessons  Governance and A-C (GAC) studies affect the policy debate and serve as an input in the design of a National A-C Strategy  Transparency and public dissemination of the results are key  The approach must be participatory at each stage of the process

38. Slide 38 A Few Salient Lessons, cont.  To unbundle corruption and institutional weaknesses allows to identify key areas for reform  Quality control and use of rigorous analytical methods enhance the credibility of the results

39. Slide 39 WBI Governance on the Web  About Governance Diagnostics and Statistical Capacity Building: http://www.worldbank.org/wbi/governance/capacitybuild/about.html http://www.worldbank.org/wbi/governance/capacitybuild/about.html  Governance Diagnostic Surveys Country Sites: http://www.worldbank.org/wbi/governance/capacitybuild/d- surveys.html http://www.worldbank.org/wbi/governance/capacitybuild/d- surveys.html  Worldwide Governance Indicators 1996-2002: http://www.worldbank.org/wbi/governance/govdata2002/index.html http://www.worldbank.org/wbi/governance/govdata2002/index.html  The Business Environment and Enterprise Performance Survey (BEEPS) 1999-2000: http://info.worldbank.org/governance/beeps/http://info.worldbank.org/governance/beeps/  The Business Environment and Enterprise Performance Survey (BEEPS II) 2002: http://info.worldbank.org/governance/beeps2002/http://info.worldbank.org/governance/beeps2002/  Courses and Surveys: Governance Diagnostic Capacity Building: http://www.worldbank.org/wbi/governance/capacitybuild/courses.htm l http://www.worldbank.org/wbi/governance/capacitybuild/courses.htm l  Step by Step Guide to Governance Diagnostic Empirical Tools Implementation: http://www.worldbank.org/wbi/governance/capacitybuild/diagnostics. html http://www.worldbank.org/wbi/governance/capacitybuild/diagnostics. html

40. Citizens Government Officials Enterprises Civil Society Private Sector The State Linking the Tools to the Respondents PET QSDS PER CFAA CPAR Score cardsGAC IGR BEEPS INV. CL.

41. The Governance Triad: A Framework Citizens Politicians/Policymakers PublicServants Delegation Delegation/Voice PoliticalAccountability Internal Accountability Delegation of Implementation public goods/ services client power/ social accountability Judiciary Constitutional bodies Rule of Law

42. The Governance Triad: A Framework Citizens Politicians/Policymakers PublicServants Delegation Delegation/Voice PoliticalAccountability Internal Accountability Delegation of Implementation public goods/ services client power/ social accountability Judiciary Constitutional bodies Rule of Law State Capture Nepotism Patronage Administrative Corruption

43. Primary focus of WB operations in governance Local Participation & Community Empowerment Decentralization with accountability Community Driven Development (CDD) Oversight by parent-teacher associations & user groups Beneficiary participation in projects Local Participation & Community Empowerment Decentralization with accountability Community Driven Development (CDD) Oversight by parent-teacher associations & user groups Beneficiary participation in projects Political Accountability Political competition, broad-based political parties Transparency & regulation of party financing Disclosure of parliamentary votes Political Accountability Political competition, broad-based political parties Transparency & regulation of party financing Disclosure of parliamentary votes Institutional Checks & Balances Independent, effective judiciary Legislative oversight (PACs, PECs) Independent oversight institutions (SAI) Global initiatives: UN, OECD Convention, anti- money laundering Institutional Checks & Balances Independent, effective judiciary Legislative oversight (PACs, PECs) Independent oversight institutions (SAI) Global initiatives: UN, OECD Convention, anti- money laundering Civil Society & Media Freedom of press Freedom of information Civil society watchdogs Public hearings of draft laws Report cards, client surveys Participatory country diagnostic surveys Civil Society & Media Freedom of press Freedom of information Civil society watchdogs Public hearings of draft laws Report cards, client surveys Participatory country diagnostic surveys Private Sector Interface Effective, streamlined regulation Transparent public- private dialogue Break-up of monopolies Transparency in Extractive Industries Corporate governance Collective business associations Private Sector Interface Effective, streamlined regulation Transparent public- private dialogue Break-up of monopolies Transparency in Extractive Industries Corporate governance Collective business associations Anticorruption has many dimensions Bank operations focus only on some Effective Public Sector Management Ethical leadership: asset declaration, conflict of interest rules Meritocratic civil service with adequate pay Transparency & accountability in budget mgnt Transparent, competitive procurement Anticorruption in sectors Effective Public Sector Management Ethical leadership: asset declaration, conflict of interest rules Meritocratic civil service with adequate pay Transparency & accountability in budget mgnt Transparent, competitive procurement Anticorruption in sectors GOODGOVERNANCEGOODGOVERNANCE

44. Slide 44 Corruption acts as a regressive tax, and small firms pay more in bribes, Corruption acts as a regressive tax, and small firms pay more in bribes, 2000-2005 (% of gross monthly revenue paid in bribes, as reported by managers)

45. Slide 45 Corruption while doing business with the Government, 2000-2005 When doing business with the government, average % of the invoice that firms forfeit to receive its payment from the government (as reported by managers) Note: Figures are calculated for those managers reporting that their firm have made sales to the government over the last two-three years

46. Slide 46 Corruption while doing business with the Government, 2000-2005 When doing business with the government, average % of the contract value the firm must offer in addition to secure contract? (as reported by managers)

47. Slide 47 Bribes and Quality of Service in Public Sector (as reported by public officials in Honduras, 2001)

48. Slide 48 Quality of service provided according to public officials, (Selected countries, 1999-2005)

49. Slide 49 Bribes to obtain contracts with the Government, as reported by public officials, 1999-2005

50. Indices of Service Quality and Bribery (based on public officials' responses, Peru; 2001) R=-0.733*** Note: Each dot on the graph represents data aggregated for one public agency. Indices of bribery and service quality rate the agency’s quality of service and level of bribery on the scale from 0 to 100. The equation of the fitted regression line is: Y=95.2-1.02*X

51. (based on responses of 31 government agencies) Quality of rules is associated with lower corruption, Sierra Leone, 2003

53. Citizen Voice Improves Accessibility of Public Services to the Poor (Bolivia, 1999) Based on 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

54. Slide 54 Governance Indicators, by agency (based on responses of public officials from 20 agencies, Guinea 2004) The indicators above take values between 0-100. To interpret them please keep in mind that: -The higher the value of the governance indicator the better the quality of that dimension. -The higher the value of the corruption index, the more severe the problem.