Some Reflections on Donor Sponsored Anti-Corruption

1. Some Reflections on Donor Sponsored Anti-Corruption Bryane Michael, Linacre College Tallinn, Estonia October 2004 Feel free to share this presentation or use it in lecture so long as attribution is given

2. Overview • Why Anti-Corruption? • Trends in Corruption Control • Why did anti-corruption evolve? • What does the anti-corruption “industry” look like? • Anti-Corruption in Central and Eastern Europe • Anti-Corruption in Africa • OECD Anti-Bribery Convention • OECD Anti-Bribery Convention Derivatives • UN Anti-Corruption Convention • Parliaments • IMF Codes • National Programmes • Second Wave of Anti-Corruption

3. The Underlying Reasons for Anti-Corruption • Liberalisation sets market price • for bribery • Non-locals don’t internal local • negative externalities • Bribes + fines as rational option • . • “Sauve qui peut” mentality • Diminishing Solidarity • No local sanctions for violating local norms • Privatisation increases public-private transactions • Regulations shifted to markets and civil society • Bureaucrats in business Shift from regulated to deregulated forms of national production cause “gap” where bribery is high return and low prob./cost of detection. Why Anti-Corruption?

4. Anti-Corruption as become very popular Concomitant with interest in corruption Engendered donor interest Politician's Logic (something must be done, this is something, therefore it must be done) Popularity of Anti-Corruption Source: (1) Why Anti-Corruption?

5. Control of Corruption Depends on Region • Control of Corruption is a mixed bag • Failure of national government suggests role of inter-governmental actors (UN, WB, etc.). • High stakes in Eastern Europe – tunneling, dirty privatisation, revision of nationalism and proto-communism. Trends in Corruption Control

6. Corruption where no Rule of Law • Corruption where no rule of law • Corruption where rule of law! • Donor response has been to write laws • Writing Laws ≠ Rule of Law! • Something more must be done. Source: Kaufmann (2003) Trends in Corruption Control

7. Supply and Demand for Anti-Corruption Supply Demand • Demand • Need for anti-corruption • Intermediate demand • Supply • “Practitioners” in a post-Washington Consensus world • Derivative products – media, training, etc. • If you build it, they will come (Say’s Law) α Source: (2) Why did anti-corruption evolve?

8. Donors Respond to (Political) Market Demand • Demand for anti-corruption increased • Supply increased for higher values of AC. • Donors get kudos and increased budgets. • National govts “supporting” anti-corruption while their firms get contracts Value Anti- Corruption S D’ D Level of Anti-Corruption Activity Source: (3) Why did anti-corruption evolve?

9. Anti-Corruption Schools of Practice Source: (5) Different theories about fighting corruption are emerging – based on theory and practice What does the anti-corruption “industry” look like?

10. The Anti-Corruption Industry: Overview • Anti-Corruption has become an industry • Global budget at least $100 million.* • Most active countries are Russia, Romania, Ukraine, Albania, Armenia and Indonesia.* • Over 2,500 “anti-corruption practitioners” • Large part of development agenda: 187 stories in week of 1-5 April 1-5 2003. * These figures are rough estimates based on partial data. Source: (2) What does the anti-corruption “industry” look like?

11. “Industrial Structure” of AC Work International organisations – national governments World Bank – AC Programmes IMF – Codes and Standards OECD – Convention UN – Conventions, programmes International business- national partners PwC Opacity Oxford Analytica “Derivative business” International NGOs – national NGOs TI – action plans Soros – programmes Globalisation is coming… What does the anti-corruption “industry” look like? Source: Michael and Langseth, 2002

12. Donor supported Anti-Corruption Agencies 7 2 Source: (5) What does the anti-corruption “industry” look like?

13. Propagation Mechanism: Example of the World Bank CEE/FSU USA 4 1 East Asia: Hong Kong 5 2 Latin America: Bolivia, Nicaragua, Venezuela Africa Uganda, Tanzania SE Asia: India Thailand 3 Source: (5). What does the anti-corruption “industry” look like?

14. The Anti-Corruption Ecosystem Governments Most developing countries World Bank Prestigious US Universities OSI Universities/ Research Centres Donors USAID Developing country facilities OECD UNDP Contractors Quasi- Think-tanks Transparency International NGOs Large consulting companies money ideas “Beltway Bandits” Community groups Source: (5). What does the anti-corruption “industry” look like?

15. Corruption’s First Wave: Awareness Raising (1990-2002?) • Global dissemination of anti-corruption action plans • Global: United Nations (UN) Conventions against Corruption or the UN International Code of Conduct for Public Officials • Regional: Interamerican Convention against Corruption, The Council of Europe's Anti-Corruption Treaties, European Union Against Corruption, OECD Convention • National: • Africa: Nigeria, Morocco, and Zimbabwe, Ghana, Malawi, Bénin, Maroc, Uganda, Kenya, Ethiopia, Tanzania • Eastern Europe: Albania, the Baltic republics, Bulgaria, Macedonia, Serbia, Ukraine • Former Soviet Union: Russian Federation, Georgia, and Kazakhstan • East Asia: Thailand, Philippines Source: (2) What does the anti-corruption “industry” look like?

16. Africa is a Large European Donor Target • African countries rate high on corruption • La Politique du ventre • Donors have done much work in Africa • Not shown: Most of these projects are “awareness raising” • Not “high stakes” region for donors. Anti-Corruption in Africa

17. Donor AC in Africa UNDP • Donor work “lumpy” • Led by work in East Africa • Africa centre of “first wave” activities • Few “hard” anti-corruption measures taken (compared with other regions) CICP 1997 1994-1998 1995-1998 1998 1998, 1999 9th IACC Anti-Corruption in Africa Source: Langseth (1998, 2002). Map from “The Africa Guide”

18. Disparity Across Africa Figure 4: Concentration in Africa’s South and East • Donor work in Africa uneven • Few reports from South Africa • East Africa still priority Source: Utstein Anti-Corruption Resource Centre (2004) Anti-Corruption in Africa

19. Some African Action Plans are Swishy Figure 9: The Specificity and Relevance of World Bank Sponsored Anti-Corruption Programmes (one is lowest score and five is highest) • Action-planning non-specific and not-relevant • Donor co-operation could be improved • Lack of political will on Africa’s part or guts on donors’ part? Source: (4) Anti-Corruption in Africa

20. Eastern Europe: A Failed Opportunity? • Unlike Africa, high possibility for positive change and high stakes region for donors • Collapse of Evil Empire • Lots of capital (potential effective demand) • Ostensibly can make institutions from scratch • Lots of Western money pouring in • Honeymoon Effects in New Public Administrations! • Ambivalence about corruption • de facto privatisation • Smart – tunneling and foreign Bank accounts • Without a map and without laws • One of us (European Union) Anti-Corruption in CEE

21. Anti-Corruption Training in CEE • Training needed in new systems • Donors practice de facto triage with unknown logic. • Training needed, but about what? Anti-Corruption in CEE

22. Anti-Corruption Training in Central and Eastern Europe • Wide variation between the level and focus of anti-corruption training • Integration into the European Union appears to be positively correlated with anti-corruption education. • Focus on anti-corruption legislation • But little consideration of how training and education can help with the implementation of this legislation. • Much anti-corruption training appears contingent on international technological assistance • A key priority for all the countries appears to be to define what their educational priorities are at a national level and to design anti-corruption training so as to fulfil those priorities. Source: (1) Anti-Corruption in CEE

23. Implicit Strategic Focus Emerging From the Case Studies Source: (6) Anti-Corruption in CEE

24. Recommendations to Candidate States and Training Needs • Welcome to the EU • Adopting recommendation will need training • Training should be targeted. Note: For training importance, 1 is little importance and 5 is very important. The measure of relative importance is taken from Michael (2004b) while a discussion of the type of training to be undertaken can be found in Michael (2004c). Anti-Corruption in CEE

25. Prelude to OECD Convention: International Conventions and Agreements • Council of Europe • Civil law Convention on Corruption • Criminal Law Convention on Corruption • Organization of American States • Inter-American Convention Against Corruption • EU • Convention of the European Union on the fight against corruption involving officials of the European Communities or officials of Member States • OECD • Convention on Combating Bribery of Foreign Public Officials in International Business Transactions • International Chamber of Commerce (ICC) • Rules of Conduct - Extortion and Bribery in International Business Transactions • United Nations • United Nations Convention against Corruption • United Nations Declaration against Corruption and Bribery in International Commercial Transactions OECD Anti-Bribery Convention

26. The OECD Convention • OECD is the group of rich countries • OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions • “a crime to offer, promise or give a bribe to a foreign public official in order to obtain or retain international business deals” • “the 35 signatory countries to adopt common rules to punish companies and individuals who engage in bribery transactions. So far, 28 countries have been subjected to close monitoring to determine the adequacy of their implementing legislation.” Source: OECD (2002) OECD Anti-Bribery Convention

27. Provisions of the Convention • Establish that "bribery of a foreign public official"is a criminal offence. (Article 1, Section 1-3) • “Penalties shall be comparable to that applicable to the bribery of the Party's own public officials” or “to effective, proportionate and dissuasive non-criminal sanctions, including monetary sanctions” in case of no criminal responsibility in the adopting country. (Article 3). • Bribes are seized • Also covers money laundering and accounting, mutual legal assistance, and extradition • Provisions for monitoring and follow-up • Provisions for amendment and withdrawal Source: OECD (2002) OECD Anti-Bribery Convention

28. A timeline 1997 Revised recommendation 1999 2000 2001 Convention enters into force Monitoring: Phase 1 Start 1999 Monitoring: Phase 2 Start 2001 Letter of the Law Spirit of the Law The Law OECD Anti-Bribery Convention

29. Countries which have ratified the Convention Source: OECD (2002) OECD Anti-Bribery Convention

30. Phase 1: Monitoring OECD Anti-Bribery Convention

31. Outreach (2): Role of CSOs • CSO “participation” in country reviews • CSO partnership in regional outreach activities: • ADB/OECD Anti-Corruption Initiative for Asia-Pacific • Baltic Anti-Corruption Initiative • Latin America Initiative • Stability Pact Anti-Corruption Initiative for South East Europe • Anti-Corruption Network for Transition Countries OECD Anti-Bribery Convention

32. Problems with the Convention • “Machine mentality” focused on legality • Resources • Political will • Doesn’t address “demand side” • “Defensive participation” ? • Over-Expansion? Sources: OECD (2002), Transparency International, Financial Times (2000) OECD Anti-Bribery Convention

33. The Anti-Corruption Network Steering Committee of 9 International Orgs and 24 countries covered. “The Network focuses on strategies to reduce public sector corruption through support for the implementation of appropriate political, institutional, and economic reforms” The Action plan covers Armenia, Azerbaijan, Georgia, Kyrgyzstan, Russia, Tajikistan and Ukraine Outreach reaches the FSU Source: (7) OECD Anti-Bribery Convention Derivatives

34. How It Works OECD Provides support for Steering Group Action Plan Evaluation Source: (7) OECD Anti-Bribery Convention Derivatives

35. Legitimacy Issues OECD must Confront • Does OECD have right to oversee the review non-member states? (Sovereignty?) • Participants not official State spokespeople • Undemocratic: not of the (Central Asian) people • Non-participants not invited • And role of IFIs and others unclear • One month passes between establishment and country reports • Funded by SECO: Swiss State Secretariat for Economic Affairs • Markets for Swiss firms? Source: (7) OECD Anti-Bribery Convention Derivatives

36. Attempting to expand the OECD Convention globally? Reaction to Sept. 11th? Successfully negotiated in October 2003 Adopted in early November 130 governments participating "Vienna Declaration” in April 2000 UN Convention Against Corruption UN Anti-Corruption Convention

37. How “tight” is the Convention? • Just as Action Plans are not specific, neither is this Convention • Not very binding • Does lack of specificity offer greater or less possibility for reducing corruption? Source: (8) UN Anti-Corruption Convention

38. Role of Parliaments • Parliament key watchdog for other social actors • Actually composed of other “stakeholders”! • Parliamentary sovereignty as key political principle. • Corruption as vital part of electoral politics • Incentive compatibility of passing AC? Parliaments

39. Recommendations from the Inter-Parliamentary Union Source: Adapted from Inter-Parliamentary Union (2001). Would you do it if you were an MP? Parliaments

40. How Incentive Compatible are IPU’s Recommendations? Source: (3) Parliaments

41. IMF Codes of Fiscal and Monetary Transparency • Dictate transparency of the public sector in four areas: • Clarity of Roles and Responsibilities • Public Availability of Information • Open Budget (Process of Policy Making) Preparation, Execution and Reporting • Assurances of Integrity • Public Sector here is mostly executive and Central Bank IMF Codes

42. Correlation between fiscal and monetary transparency • Transparency helps fight corruption • Also encourages investors • Institutions matter (duh!) • Good government as cause and effect of AC Source: (9). Correlation Coefficient: 0.64 IMF Codes

43. The Bases of the Donor Sponsored Anti-Corruption Project • Laws • Corruption Prevention Law • Procurement Law • Freedom of Information Law • Law on political finance Corruption Prevention Council • Activities • National anti-corruption programme • Custom training • Police training • Investigative journalism training • Legislative training • Administrative training • Ethics training • Handbooks • Distance education • Software-IT • Sectors • Police Judges • International cooperation • Politicians • Civil society training • Civil servant training • Municipal • Public Administration Institute National Programmes

44. The Donor Sponsored Anti-Corruption Programme Survey ¡Vaya con dios! National or Specialised Workshop “Implementation” Source: World Bank, TI and UN National Programmes

45. An Example of a Survey • Nuanced policy data not really used to assign priorities • Puts numbers to “everything is bad” • Difficulty comparing across institutions and countries • No a priori or even a postiori theory to explain numbers. National Programmes

46. Uganda: Partial Action Plan Third National Integrity Workshop, May 28–29 1997, Uganda • Based on impressions • Link with Data? • Continuing commitment by donors needed • Training must be more than cheerleading conferences • No real sanctions for non-implementation. • Donor project managers okay, their political overlords weak. Source: World Bank National Programmes

47. Components of Bolivia’s National Integrity System • Perfect on programme on paper • Lack on will to follow through on both donor and country side. • No incentives to implement • Every party gets a share of the patronage –- why change? National Integrity Plan Judicial Reform Modernisation of the State Fight Against Corruption Source: www.integridad.gov.bo National Programmes

48. Overlapping generations of Bolivian governance reform • Should this have been done in reverse? • How does our programme affect local incentives? • Analysis of political interests! First generation reforms SAFCO IDC Judicial reform National AC Plan Second generation reforms PP and Decentralisation time National Programmes

49. Why is the First Wave of Anti-Corruption Finished? • “Awareness” raised a Corruption no longer a four-letter word. • Conference fatigue of organisers and attendees • Eclipsed by “Corporate Governance” as hot topic. • Few demonstrable impacts in reducing corruption • Little impact of international conventions and national laws • No cool theory ever emerged like in transition pushed by powerful Western professors • Though “anti-corruption” did get its face-men • (and you know who they are). Second Wave of Anti-Corruption

50. The “Second Wave of Anti-Corruption”? Figure 7: Comparison between First and Second Wave Anti-Corruption • Knowledge Management • “Real knowledge” in enforcement and financial management. • “Anti-Corruption knowledge” (knowledge about anti-corruption) is real • Optimal method of knowledge management • Business Activity • Tighten the OECD Convention • Self-enforcement anti-corruption contracts • From roving bandit to public goods • Media Activity • Deconcentration • Localisation (increase returns to investigation) Source: author. Second Wave of Anti-Corruption