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Role of Governance in Developing CountriesGROUP -
PRATIK AGARWAL ()SAURABH SINGH()KOUSHLENDRA SINGH()
OUTLINE
Importance of Good Governance & Anticorruption
Governance: Framework & Measurement
Priority Areas for Improving Governance
Operational Strategy on Anticorruption
The direction of causality …
Burkhart and Lewis-Beck (1994) found that while higher per capita incomes foster democracy, democracy in turn does not foster higher incomes
B. Friedman (2005) argues that higher living standards encourage more open, tolerant and democratic societies
Growth causes governance to improve ...
… and better governance causes growth
Using measures of rule of law, bureaucratic quality and corruption, Chong and Calderon (2000) found significant causality from good governance to growth and vice versa – i.e. “good governance” both contributes to and results from strong economic performance
Other studies have dealt with the potential for reverse causation by using exogenous instruments for the governance indicators and concluded that good governance has a significant and strong causal impact on economic performance …
… but the debate on causality continues …
Governance & Corruption – Not the same thing!
The manner in which the Stateacquires and exercises itsauthority to provide public goods and services
Using public office for private gain
Governance
Corruption
Corruption is an outcome – a consequence of the failure of accountability relationships in the governance system
Governance Systems: Actors, Capacities and Accountability
Outcomes: Services,
Regulations, Corruption
Political Actors & Institutions• Political Parties
• Competition, transparency
Executive-Central Govt
Service Delivery & Regulatory Agencies
Subnational Govt & Communities
Check & Balance
Institutions• Parliament• Judiciary• Oversight
institutions
Civil Society & Private Sector•Civil Society
Watchdogs•Media
•Business Associations
Cross-cutting Control Agencies (Finance, HR)
Citizens/Firm
s
Citizens/Firms
Citi
zens
/Firm
s
Citizens/Firms
Political Accountability• Political competition, broad-based political parties• Transparency & regulation of party financing• Disclosure of parliamentary votes
Checks & Balances• Independent, effective
judiciary• Legislative oversight (PACs,
PECs)• Independent oversight
institutions (SAI)• Global initiatives: UN, OECD
Convention, anti-money laundering
Citizens/Firm
s
Citizens/Firms
Citi
zens
/Firm
sCitizens/Firms
Decentralization and Local Participation• Decentralization with accountability• Community Driven Development (CDD)• Oversight by parent-teacher associations & user groups• Beneficiary participation in projects
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
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
Good Governance has many dimensions
Control of Corruption: one Aggregate Indicator (selected countries from 204 worldwide, for illustration, based on 2004 research data)
-2.5
0
2.5
EQU
ATO
RIA
L G
UIN
EA
KO
REA
, NO
RTH
TUR
KM
ENIS
TAN
UZB
EKIS
TAN
TAJI
KIS
TAN
BA
NG
LAD
ESH
VEN
EZU
ELA
ZAM
BIA
RU
SSIA
KO
REA
, SO
UTH
MA
UR
ITIU
S
SOU
TH A
FRIC
A
GR
EEC
E
ITA
LY
BO
TSW
AN
A
SLO
VEN
IA
CH
ILE
FRA
NC
E
SPA
IN
UN
ITED
KIN
GD
OM
NET
HER
LAN
DS
NO
RW
AY
NEW
ZEA
LAN
D
FIN
LAN
D
Poor Gov-ernance
Governance Level
Margins of ErrorGood Governance
Source for data: : 'Governance Matters IV: Governance Indicators for 1996-2004’, D. Kaufmann, A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/); Colors are assigned according to the following criteria: Dark Red, bottom 10th percentile rank; Light Red between 10th and 25th ; Orange, between 25th and 50th ; Yellow, between 50th and 75th ; Light Green between 75th and 90th ; Dark Green above 90th.
Comprehensive Fiscal oversight:
Are the aggregate fiscal position and risks are monitored and
managed?
Information:Is adequate fiscal, revenue and expenditure information
produced and disseminated to meet decision-making and management purposes?
Comprehensive, Policy-based, budget:
Does the budget capture all relevant fiscal transactions, and is the process, giving
regard to government policy?
Budget Realism:Is the budget realistic, and implemented as
intended in a predictable manner?
Control:Is effective control and
stewardship exercised in the use of public funds?
Accountability and Transparency:
Are effective external financial accountability and
transparency arrangements in place?
PEFA’s Performance Measurement Framework
Six PFM System Aspects
Priority Areas for Improving Governance Strengthening Public Management Systems
Strengthening public finance management & accountability E-procurement for greater transparency and competition
Improving front-line service provision Instituting citizen report cards and monitoring Strengthen community monitoring and oversight
Strengthening Leadership & Ethics for good governance
Strengthening global checks and balances: Instituting transparency in extractive industries Strengthening global initiatives to curb transnational corruption
Budget realism Tanzania MTEF
Budget Comprehensiveness
Oversight by CSOs &Professional groups
Information
AAA support merging planning and budgeting in Lesotho
Control
IFMIS in Sierra Leone, accounting training in Africa
Civil society monitoring of Chad Oil Fund, Professional Accountancy Institutions in DRC, Mali, Guinea and Kenya
Internal control and audit support in HIPCs
Bank interventions to build capacity: multiple targets and tools (AFR)
Parliamentary Oversight
Support for Parliamentary oversight in Ghana, Kenya and Zambia; Supreme Audit Institutions in Cape Verde, Sierra Leone and Senegal
Fiduciary Risk
That donor resources will not be used for the purposes intended
Reputational Risk
That large amounts of aid in countries with corrupt leaders will tarnish donors’ reputation
Development Effectiveness Risk
That poor governance-corruption will undermine the impact of
development efforts in general and in donor-supported projects
Corruption pose three significant risks
1 Afghanistan2 Angola 3 Azerbaijan 4 Bangladesh 5 Belarus 6 Cambodia 7 Central African. Rep.8 Chad 9 Comoros 10 Congo, Dem. Rep.11 Cote D'Ivoire12 Djibouti13 Equatorial Guinea14 Gambia, The 15 Guinea 16 Guinea-Bissau17 Haiti 18 Iraq19 Kazakhstan20 Korea, North
21 Kyrgyz Rep.
22 Lao, PDR23 Lebanon
24 Liberia25 Libya26 Myanmar
27 Nigeria
28 Paraguay
29 Sierra Leone
30 Somalia31 Sudan
32 Swaziland
33 Tajikistan
34 Togo
35 Turkmenistan
36 Uzbekistan
37 Venezuela
38 Yemen, Rep.
39 Zimbabwe(Countries in blue are inactive WB borrowers)
Notes: Data on left: Countries listed in alphabetical order using 2004 data. These countries scored in the bottom quartile on the main corruption question in the World Bank’s 2004 CPIA which covered 135 countries AND scored in the bottom quartile on the 5 questions on broader governance issues in the 2004 CPIA OR scored in the bottom quartile on the 2004 Control of Corruption component of the WBI/DEC Kaufmann-Kraay Aggregate Governance Indicator. Countries not included in the 2004 CPIA but included in the WBI/DEC index are here if they fell in the bottom quartile of that index (Afghanistan, Iraq, North Korea, Liberia, Libya, Myanmar, and Somalia). This list includes inactive borrowers and ineligible countries. Inactive countries are defined as those with no lending/grants in SAP for FY04-06.
Challenges in Identifying High-Risk Countries Country
RankCountry
Source: TI Corruption Perceptions Index (CPI) 2005
2005 CPI Score
117 Afghanistan, Bolivia, EcuadorGuatemala, Guyana, LibyaNepal, Philippines, Uganda
2.5
126 Albania, Niger, Russia, Sierra Leone 2.4
130 Burundi, Cambodia, Congo (Republic), Georgia, Kyrgyzstan, Papua New Guinea
2.3
137 Azerbaijan, Cameroon, Ethiopia, Indonesia, Iraq, Liberia, Uzbekistan
2.2
144 Congo (Democratic Republic), Kenya, Pakistan, Paraguay, Somalia, Sudan, Tajikistan
2.1
151 Angola 2.0152 Cote d’Ivoire, Equatorial Guinea, Nigeria 1.9
155 Haiti, Myanmar, Turkmenistan 1.8158 Bangladesh, Chad 1.7
Help countries that request support in
their efforts to reduce corruption
Prevent fraud and corruption in donor-
financed projects
Anticorruption as key filter in design of
country assistance strategies
Support international efforts to reduce
corruption
Anti-Corruption Strategy
World Bank
Thanks