By: Vinay Bhargava Director, Operations and International Affairs, EXT

1. Mainstreaming Governance and Anti-Corruption in the CAS and Operations: A Guide for Country Teams with Country Applications By: Vinay Bhargava Director, Operations and International Affairs, EXT Presentation at the Core Course on Public Sector Governance and Anti-corruption February 14-16, 2006 The World Bank Vinay Bhargava

2. What do you think is the most important problem facing the world? In a Voice of the People Survey by Gallup International the responses were: TI: Global Corruption Barometer 2005Level of corruption in next three years expected to: Decrease a little CORRUPTION Decrease a lot Increase a lot Stay the same Increase a little Vinay Bhargava Source: Gallup International – Voice of the People 2005

3. OutlineFive Phases in Mainstreaming • Diagnose governance environment and causes/drivers of corruption • Choosing entry points and designing anti-corruption program suited to operating governance environment • Assessment of risks to the Bank and design of mitigation measures • Building coalition of external/internal supporters • Monitor progress, evaluate results and adjust Vinay Bhargava

4. A quick review of the Bank’s Guidelines for addressing governance issues in CASs • Upstream Review • Significance of corruption/governance issues in the country • Risks to country development and the Bank operations • Proposed Bank assistance and risk mitigation approaches • Downstream CAS preparation and Review • Diagnosis of corruption and governance issues • Country’s strategy and programs for improving governance • Bank’s proposed assistance program and results • Analysis of fiduciary, developmental, and reputational risks to country and Bank and mitigation measures Vinay Bhargava

5. Anatomy of Governance Elements in Ghana 2004-6 CAS Diagnosis:CPIA-3.0. Major structural issues.Risks: to country - high; to Bank - no mention. Country Vision:Stronggood governance and accountability program – 1 of 5 PRSP Pillars. Civil Society Voice & Participation Improve capacity of civil society groups Triggers: To Stay in the Base Case: Progress on financial management, in particular on the 16 benchmarks (now 28 PEFA indicators) of HIPC Accountability Action Plan. To Move to the High Case: Progress on public sector including civil service reforms. CAS Objective:Support to Improve Governance and Empowerment -3rd Pillar of CAS Public Sector ManagementFinancial management reformsCivil Service reformsDecentralization of service delivery provisionLocal government and public expenditureImprove M & E capacity Institutional Checks & BalancesParliament Other accountability institutions Lending Instruments:PRSCs; M&E components; Community Empowerment loansAAA Instruments:WBI; Development Dialogue sessions; Outreach/media programs; CPAR; CFAA; Community Empowerment study; PER; M&E assessmentResults and Performance Indicators:Well specified Vinay Bhargava

6. A Review of 107 CASs produced in FY99-05 shows: Very good coverage… However quality issues: • Weak diagnostics • Generic prescriptions • Selection criteria not clear • Risk-response not balanced • Risks to the Bank not fully assessed/mitigated • Success stories scarce Vinay Bhargava

7. Phase 1–Diagnosis: Assembling knowledge(Practical Tips) • Governance indicators (e.g., KKZ, CPIA, TI, etc.) • Political landscape and degrees of freedom for action • Summary findings of diagnostics and evaluations (AAA) • Government strategy—current and historical • Key anticorruption institutions (executive/non-executive branches) • Key anti-corruption champions (in and out of government) • Legacy issues: past donor assistance; media • On-going and recent Bank anti-corruption activities (last CAS) • Relatively high risk ministries/public enterprises Vinay Bhargava

8. Causes: Opportunity to abuse power Vinay Bhargava Source: Transparency International Global Corruption Barometer 2005, http://www.transparency.org/policy_and_research/surveys_indices/gcb/2005

9. Causes: Ambiguous Laws and Regulations; Weak Rule of Law; and Crime Vinay Bhargava Source: Transparency International Global Corruption Barometer 2005, http://www.transparency.org/policy_and_research/surveys_indices/gcb/2005

10. Causes: Low Income; Historical; Quality of Public Administration; Political Corruption Vinay Bhargava Source: Transparency International Global Corruption Barometer 2005, http://www.transparency.org/policy_and_research/surveys_indices/gcb/2005

11. Phase 2: Designing an anti-corruption program suited to local conditions A typical program includes the following elements: • Objectives and approach to assistance • Proposed entry points • Proposed mix of lending and non-lending instruments • Expected results (country and CAS/CSP performance indicators) • Proposed triggers (if any) associated with CAS/CSP scenarios Vinay Bhargava

12. Phase 2-Objectives and Assistance Approach: Key Trade-Offs depending upon situation • Supporting development imperatives vs. risks to the Bank • Balancing help to executive branch with help to non-government institutions of accountability • Selectivity of entry points for results and credibility vs. comprehensive 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 Vinay Bhargava

13. Phase 2: Choosing Entry Points The range of entry points is very broad Governance systems of actors, capacities, and accountability (supply-side and demand-side relationships) Many dimensions of good governance (a menu of entry points) Criteria to use in selecting entry points Vinay Bhargava

14. Governance Systems: Actors, Capacities and Accountability Citizens/Firms • Political Actors & Institutions • Political Parties • Competition, transparency Executive-Central Govt • Civil Society & Private Sector • Civil Society Watchdogs • Media • Business Associations • Check & Balance Institutions • Parliament • Judiciary • Oversight institutions Cross-cutting Control Agencies (Finance, HR) Citizens/Firms Citizens/Firms Service Delivery & Regulatory Agencies Subnational Govt & Communities Outcomes: Services, Regulations, Corruption Source: Sanjay Pradhan Citizens/Firms Vinay Bhargava

15. Citizens/Firms • Political Accountability • Political competition, broad-based political parties • Transparency & regulation of party financing • Disclosure of parliamentary votes • Effective Public Sector Management • Ethical leadership: asset declaration, conflict of interest rules • Cross-cutting public management systems: meritocracy, public finance, procurement • Service delivery and regulatory agencies in sectors • 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, FOI • Civil society watchdogs • Report cards, client surveys • Private Sector Interface • Streamlined regulation • Public-private dialogue • Extractive Industry Transparency • Corporate governance • Collective business associations Citizens/Firms Citizens/Firms • Decentralization and Local Participation • Decentralization with accountability • Community Driven Development (CDD) • Oversight by parent-teacher associations & user groups • Beneficiary participation in projects Citizens/Firms Good Governance has many dimensions Source: Sanjay Pradhan Vinay Bhargava

16. Phase 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 Vinay Bhargava

17. Phase 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 Vinay Bhargava

18. Phase 2: Analysis of entry points and instruments chosen in 21 FY05 CASs Note the dominance of public sector management interventions and none in political accountability Vinay Bhargava

19. Phase 3: Building partnerships • Expectation for cooperation among donors • Coalitions are more effective 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. Vinay Bhargava

20. Phase 3: Build Coalition to shift balance of power between vested interests and reformers • Cultivate political support • Get the public behind reform • NGOs • Media • Business Associations • Donors • Students and Academics • Cultivate internal supporters • Build on scandals and crisis Vinay Bhargava

21. Phase 3:Involve institutions to limit corruption • Judiciary • Legislature • Decentralization with accountability • Constitutionally independent accountability institutions • Anti-corruption agency • Election Commission • Ombudsman • Supreme audit institutions • Media • Disclosure laws, policies and regulations Vinay Bhargava

22. Sectors and Institutions Most Affected By Corruption Vinay Bhargava Source: Transparency International Global Corruption Barometer 2005, http://www.transparency.org/policy_and_research/surveys_indices/gcb/2005

23. Phase 4: Assessing Risks to the Bank • Country team members to rate the extent (on a scale of 1 to 5, with 5 being highest risk situation) to which the state of corruption and governance can: • Undermine results/effectiveness of Bank assistance • Reduce the ability to mobilize resources for development • Raise concern in public that Bank assistance increases opportunities for corrupt officials • Result in corruption seeping into Bank financed projects and • Pose personal security risks to Bank staff and counterparts Vinay Bhargava

24. Phase 4 :Risk Analysis and Mitigation • Upstream-Categorize country by risks to the Bank • CPIA ,governance indicators, and country knowledge assessment • 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 Vinay Bhargava

25. Phase 5: Monitor progress, evaluate results and adjust • Set clear and monitorable results • 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 Vinay Bhargava

26. Phase 5: Social Accountability Mechanism Source: Social Development Paper No. 76. World Bank, 2004. Vinay Bhargava

27. Thank you. Vinay Bhargava