STRENGTHENING WORLD BANK GROUP ENGAGEMENT on governance and corruption implementation.pdf

7/29/2019 STRENGTHENING WORLD BANK GROUP ENGAGEMENT on governance and corruption implementation.pdf

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IMPLEMENTATIONPLAN FOR STRENGTHENINGWORLDBANKGROUPNGAGEMENTN

GOVERNANCEAND ANTICORRUPTION

Operations Policy and Country SewicesSeptember 28,2007


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ABBREVIATIONS AND ACRONYMSAAA Ana lytic and advisory activitiesAML Anti-money launderingAU SA ID Australia Agency for InternationalB PC ASC D DC F A AC F TCPARCPI ACS OD F I DD P OEITI

F A T FF LEG

FSAPG A CHIPCHRIBRDIDAI E GIF CIF 1I M FI N TISN

- .DevelopmentBan k ProcedureCou ntry Assistance StrategyComm unity-driven developmentCountry Financial Accountabil ityAssessmentComb ating f inancing of errorismCou ntry Procurement AssessmentReportCountry Policy and Inst itut ionalAssessmentC iv il society organizationDepartment for InternationalDevelopment (United Kingdom)Development po licy operationExtrac tive Industries TransparencyInit iat iveFinancial Actio n Task ForceForest La w Enforcement andGovernance regional MinisterialinitiativesFinan cial Sector AssessmentProgramGovernance and Anticorrup tionHe avil y indebted poor countryHum an ResourcesInternational Bank forReconstruction and DevelopmentInternational D evelopmentAssociationIndependent Evalu ation GroupInterna tional Finance Co rporationInternational f inancial inst itut ionInternational Monetary Fu ndDepartment o f nst itut ional IntegrityInte rim Strategy Not e

MDBMDGM I G AN E P A DN G ON V PO A SO E C DO ECD-DAC

O EDPAC1P B APEFAPERP F MPRSPQAGQERR V PSSIUT AUNU N E C AUSAIDV D PV P UW B IW D R

Multilateral development bankMillenniumDevelopment Goa lMult i lateral Investment GuaranteeAgencyNew Partnership for A fricasDevelopmentNongovernmental organizationNetw ork V ice PresidentOrganization o f Ame rican StatesOrganisation for Economic Co-operation and DevelopmentOrganisation o f Economic Co-operation and Development-Dev elopm ent Assistance CommitteeOperations Evaluations De partmentPartnership Against Corrup tionInit iat ivePerformance-based allocation(system)Public Expenditure and FinancialAccountabil ityPublic Expenditure R eviewPublic f inancial managementPove rty Redu ction Strategy PaperQu ality Assurance GroupQuality Enhancement ReviewRegional Vic e PresidentSector Strategy Implem entatio nUpdateTechnical assistanceUnite d Nat ionsUnite d Nat ions EconomicCommission for A fr icaUn ited States Agency forInternational DevelopmentVolun tary D isclosure ProgramVic e Presidential UnitW or ld Bank InstituteWo rld Development Report


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IMPLEMENTATION P LA N FOR STRENGTHENING WORLD BANKGROUPENGAGEMENTN GOVERNANCEND ANTICORRUPTION

CONTENTSI BACKGROUND....................................................................................................................................... 1I1 HOW WOULD SUCCESSFUL IMPLEMENTATION OF THE GAC LOOK?............................. 2111. THREE LEVELS OF ACTION ........................................................................................................... 2

A . COUNTRYLEVEL.................................................................................................................................. 3B PROJECTEVEL.................................................................................................................................... 6C. GLOBALLEVEL..................................................................................................................................... 8

I V STAFFING AND BUDGET: CHANGE MANAGEMENT AND LEADERSHIP.......................... 9V. EVALUATION, TIMING, RESULTS, AND NEXT STEPS............................................................. 11V I RISKS................................................................................................................................................... 12VI1 GOVERNANCE AND ANTICORRUPTION ACTIONS AND RESULTS FRAMEWORK..... 4ANNEX A. GOVERNANCE INDICATORS AND THEIR USES........................................................ 19ANNEX B. SUMMARY OF FEEDBACK............................................................................................... 23ANNEX C. REPORT OF THE EXECUTIVE DIRECTORS, STRENGTHENING WORLD BAN KGROUP ENGAGEMENT ON GOVERNANCE AND ANTICORRUPTION...................................... 27BoxesBOX 1 POTENTIAL WBG SUPPORT FOR IMPROVED GOVERNANCE ANTICORRUPTIONNCOUNTRY

ASSISTANCETRATEGIES (CASs) .......................................................................................................... 5BOX 2: BANKPOLICIES, PROCEDURES, AND GUIDANCE:ADAPTATIONTO REFLECT GAC AND CLIENT NEEDS............................................................................................................................................................... 6BOX 3: WHAT FACTORSOULDHINDERACIMPLEMENTATIONLANIMPACT?....................................... 13


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IMPLEMENTATION PLAN FOR STRENGTHENING WORL D BANKGROUPENGAGEMENTN GOVERNANCEND ANTICORRUPTION

I.BACKGROUND1. This Imple me nta tion Pla n articulates concrete steps to implement th e Governanceand Anticorru ption (GA C) strategy o f the Wo r ld Bank Group (WBG) approved by theBoard o f Directors in M arc h 2007. The details o f the proposed action and associatedresults are se t out in the attached ma trix. In addition, fo r ease o f reference, the Report o fthe Executive Directors to th e Development Comm ittee on Strengthening Wo rld BankGro up Engagement on Governance an d Antic orru ption o f Mar ch 28, 2007 (DC2007-0005) i s also appended. A draf t of the Imp leme ntation Plan (IP) was discussed at th eCommittee on Development Effect iveness on Ju ly 30, 2007. I t s comments wereincorporated into a version that was distributed to the Bo ard o n August 17th, and thenmade available for comment (see paragraph 24).2.StrategyThe plan i s based firmly on the GACs seven principles o f the WBGs G A C

0 The WBGs focus o n GA C i s based on i t s mandate to reduce poverty- capableand accountable state creates opportunities for th e poor.0 The WBGs G A C w o rk must be country driven.0 Implementation i s adapted to ind ividu al country circumstances.0 The WBG will rema in engaged even in po or ly governed countries so that the poordo not pay twice.

The WBG aims t o engage in t s G A C w o rk with a broad array o f stakeholders.The WBG ill trive to strengthen, no t by-pass, country systems.

0 The WBG wi ll work with governments, donors, and other actors at th e country andglobal levels to ensure a harmonized and coordinated approach.3. The G A C Strategy articulated the rationale for a deeper W orld Bank Group focuso n G A C issues and outl ined broadly the sorts o f activit ies that can support and strengthenG AC outcomes at the country leve l . The Imple me nta tion Pl an (IP), therefore, does no trevisit these topics. Rather, this plan focuses on what the W or ld Ba nk Group itse lfwil ldo to support the GAC agenda and how i t will w o r k with governments, domesticstakeholders, and development partners to support country-level governanceimprovements and region al and global initiatives.


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211. H O W WOULD SUCCESSFUL IMPLEMENTATION OF THE GAC LOOK?

4. At th e center o f the G A C s trategy i s th e emergence o f a shared vis ion in w h ic hcountries recognize th e l i n k s between governance, corruption, growth, an d po ver tyreduction, and where governments are taking active steps to address the governancebarriers to faster and more i nc lus ive gro wt h and improv ed service delivery, and thus topoverty reduction. The v is ion o f success fo r G A C implementa tion w ou ld be whengovernance obstacles to sustainable developm ent are reduced so that th e po or have accessto services and grow th opportunit ies. Fo r this to occur, w e w ou ld envis ion that:A signif icant and grow ing number o f countries were seriously addressing the irkey governance impediments to development effectiveness and thus povertyreduction, and the WBG w o u ld be work ing c lose ly with them in this regard;our partners program s and projects supported by the WBG were increasinglyaddressing these G A C imped iments in a systematic way; andcountries and global partners value and respect the WBGs capacity in th isarea.

5. The init iatives under the I P intended to imp rove country pol icy and inst i tut ionalgovernance and thereby po ve rty reduction, should, over time, also be reflected clearly inimprovements inmeasured governance performa nce.

111. THREE EVELSF ACTION6. Fo l low ing the G A C strategy, th e Implementat ion Plan f i r s t outlines WBG actionso n three ma in levels-country, project, and global. I t then articulates the correspondinginternal actions that are needed to support G A C implementation, focused o n staff ing,budget, and change management. This p lan builds on a long h is to ry o f wo rk in h i s area atth e Bank, especially over the last 10 years, and focuses o n deepening and improv ing, no treinventing. I t presents what should be regarded as a menu o f activities, not a l i s t o finstructions, with the shape and nature o f the WBGs involvement in any country beingdetermined by country teams and management, and by Regional and Net work in i t ia t ives.Thus, while th e size o f the menu may seem ambitious, it reflects the fact that differentcountries will select different aspects o n wh ic h to focus their efforts, and the priorit ies willemerge no t as a centralized prior itiz atio n exercise but as th e resul t o f an intensifiedprocesso f dialogue amo ng partnersand country teams.7. This pla n aims to k ick-start the implem entat ion o f he G A C agenda, wh ich wil l bea long t e r m effort. I t s focus i s o n the mo re imm ediate actions the WBG can take ove r thenext 12 m on ths or so-the specific actions to be taken by country teams, o n changes inBa n k systems and processes, and th e resource requirements needed to support an

The full paper, Strengthening Wo rld Bank Group Engagement on Governance and Anticorruption(DC2007-0005), the summary o f which i s attached as Annex C , outlines the Banks history o fengagement on governance and provides many examples.

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intensive process o f learning-by-doing. As this year-long learning-by -doing processunfolds, the medium-term challenges and actions will become clearer-and will bedetailed in an implem entation progress report that will be prepared afte r the f i r s t year.A. CountryLevel8. At the heart o f he Implementation Pla n should be country strategies that eff ectiv elyand systematically address G A C impediments to development and poverty reduction.Dialogue with government and stakeholders on h ow G A C issues impinge o n developmentwou ld be significantly enhanced, and country teams would take every opportunity-Country Assistance Strategy (CAS) preparation, choice o f projects, preparation andimplementation, high-level off i cia l visits, analytic and advisory activities (AAA), engagingsystematically with government, business, and ci v il society stakeholders, po lic y dialogue,and Consu ltative Groups-to deepen the understanding betw een the countries and the Banko f wha t can be done to support G A C improvements as part o f the governments overalldevelopment strategy, and to deepen WBG support. Implementation thus requires thatWBG country teams address two distinct sets o f challenges: (a) better incorporating th eG A C dimensions o f development into CASs, and (b) and implementing CASs so tha t GA Cinterventions support greater developm ent effectiveness.9 . Many country teams have been doing just this, support ing c l ients working onways to increase development effectiveness and service delivery as part o f countriespoverty reduction strategies and Poverty Reduction Strategy Papers (PRSPs). Thisinvolves provid ing support for building transparent and effective institutions andincorpora ting governance improve men t activit ies at th e project level . TheImp lem enta tion Pla n envisages ways to deepen, systematize, and mainstream suchapproaches to a wider group o f countries in esponse to their demands.10. This country-lev el process proposed for strengthening W o rl d Bank G roupengagement o n governance and anticorruption-which w e are lab elin g the C G ACprocess for short-would in fo rm the CA S in a fundamental way, based o n considerationo f several e l e m e n k 2

a) Buildingo n the s igni f ican t knowledge o f G A C issues that exist in th e countryan d in the Bank, t ak ing stock o f and understanding th e crit ica l governance andcorr uptio n impedimen ts-including those in th e overal l countryenvironment- to the countrys development and pov erty re duc tion goals;b) work ing with government and a wide range o f other stakeholders3 o n a

feasible strategy for addressing these G A C impediments, ident i f l ing potent ia lNote that the G AC implem entation plan does not address the question o f how IDA resources wil l beallocated. This question was answered decisively in the 2007 Board paper, which affirmed that theperformance-based allocation (PBA) approach comprises the basis for IDA allocation. Similarly, thisCGAC process does not affect the Country Policy Implementation Assessment (CPIA) system thatunderpins the PBA, but rather should permit more systematic determination o f the governancecomponents o f he CPIA.See paragraph 24.


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4entry points an d areas o f engagement, o r ways to deepen this engagement inthe m any countries where the WBG i s already successfully collaborating tosuppo rt core an d sectoral governance challenges;

c) elaborating the tools and instruments thro ug h w hi ch the WBG can helpgovernment enhance G A C reforms an d address cri t ical impediments todevelopment;d) assessing more systematically how governance and corruption affect the

WBGs projects and portfolio, and deve loping strategies to m itigate those risks;and

d) ensuring that the country team has the organizational capacity and resourcesto ef fec t ive ly deliver on the WBG s con tribut ion to a n enhanced country-levelengagement strategy on the GAC-d evelopme nt nexus.11. The G A C strategy consultations revealed that many countries wanted these issuesto be addressed mo re systematically, and wo ul d welco me the WBGs deepenedinvolvement. For these countries, the CAS wo uld articulate this augmented partnership,as have several recent CASsa4 For others where G A C issues are judged to be a seriousobstacle to po ve rty reduction, but where the c l ien t i s no t yet ready to address these issuesor to have WBG support in these areas, in keeping with the guiding principle ofrema ining engaged, the C AS wo uld ou tl ine potential ent ry points, seek creative ways o fproviding support (for example using instruments such as community-drivendevelopment or third party delivery systems, so that the poo r dont pay twice), an do rpropose AAA activit ies designed to increase awareness o f the im p ac t o f G A C issues an dpromote a shared understanding o f appropriate G A C reforms. Care ful attent ion wi ll beg iven to h ow best to address GAC-related issues in fragile states where th e insti tut ions o faccountable states are no t well developed, but where commitment to reform can of ten bestrong.12. Such country team CG AC processes wo uld increasingly inf or m the WBGsCASs, w hic h wo uld ref lect systematic treatment of G A C impediments to developmenteffectiveness: h o w th e WBG would support GAC reform in the country to enhancedevelopment and poverty reduction and increase the development effectiveness o fcountries publ ic pol icy and publ ic expenditure efforts, as well as Bank-supportedprograms. The areas o f emphasis will, o f course, differ across countries; Box 1highl ights some where th e Ba nk already has built a track r eco rd o f engagement. In FY08,it i s expected that a sig nifica nt share o f new CASs-for a cross-section o f countriesacross Regions and with different governance situations-would be i n formed by such astocktaking and engagement on G A C issues, or C G A C process, and that the qual it y o ftreatment o f G A C issues in CASs wou ld show a ma rked improvement. Some country

Examples include Albania, Bangladesh, Honduras, Indonesia, and the Kenya CAS Progress Report.In awareness o f the fact that development assistance can play a supportive and sometimes evencatalytic role, but remains inconsequential if there i s not already some momentum and a sufficientlyinfluen tial support base for a reform agenda. Poverty, A i d and Corruption, TransparencyInternational Po lic y Paper, Washington, D.C. 2007.

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teams may also initiate the process at an interim poin t during the CA S cycle, respondingproactively to entry points that emerge. After a years experience and evaluation o fresul ts to date, i t would be determined how such CGAC processes could bemainstreamed.

Box 1: Potent ia l WBG Suppor t fo r Impr o ved Gover nance & Ant icor r upt ion in C o u n t r yAssistance Strategies (CASs)

Main stream governance refo rm in sectors by systematically addressing sector-specific G A Cimpediments to delive ring outcomes, and b y enhancing sector-level transparency, participation, andaccountability.Strengthen core cross-cutting governance and accountability systems inc luding publicman agem ent systems (e.g., fina nci al and budget management, procuremen t, pu blic ad ministration ,and independent oversight intuitions (e.g., SAI, PA C Supreme Au dit Institut ions, Public AccountsCommittees, judicia ry).Strengthen demand-side enabling frameworks and capacity by enhancingtransparency/information disclosure, CSO capacity, us e o f social auditlaccountability tools.Wo rk collaboratively with the private sector and civil society in re for m processes (businessassociations, chambers, CSOs, media).Mo nito r progress vi a results and governance indicators ( including new generation o f actionableindicators under development).

13. As noted, such efforts to strengthen countries po licy and institutiona l governanceshould, over time, be reflected in improvements in measured governance performance.Therefore, a critical part o f the Implementation Plan w ould be to measure governancebetter, in particular through more actionable indicators, in areas where goo d progress hasalready been made (such as public finance management), but increasingly in othersectors, where better governance shou ld be ref lected in impr oved service delivery. I t salso important to continue to re f ine those tools that already exis t in this area, and toremember that governance i s multi-dimensional, that different indicators capture differentaspects o f governance, and that the appropriate indicato r to use depends o n the purpose(see Annex A, Governance Indicators and Their Uses).14. For the f i r s t year, the IP mainly shows th e internal WBG process resul ts that areneeded to generate the governance results that are intended. Over time, these shouldevolve increasingly into results that reflect changes on the ground more fully (forexample, th e governance outcomes reflected in the new CASs built on CGACs; project-l e v e l serv ice delivery improvement measures; indicators o f better core governance inareas such as judicial reform and public finance management; and qualitativeimprovements derived fr om enhanced attention to demand-side issues).

In supporting reforms in hese areas, the W B G w i l l w o rk with donors, international in stitutions andother age ncies to ensure a harmonized approach and coordination based on respective mandates andcomparative advantage.


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6B. Project Level15. At the sector and proje ct levels, the emphasis wi ll be on identifying and integratingopportunities to improve development effectiveness through GAC-related actions.Governance can thus be seen as the facilitating mechanism to achieve developmentoutcomes through, for example, imp rove d service delivery. This requires an emphasis onthe appropriate incentives and accountability mechanisms needed at the proje ct and sectorlevels to make good sector governance a reality. Fundam entally, it also requiresdeveloping strong country f iduc iary systems and sound country systems o f transparencyand accountability. I t s through the development o f such country systems, and reducingopportunities for corruption by streamliningexcessive regulation or a pp rov al processes andeffecting demand-side initiatives (including enhancing information access and developingcommunity and other third-party oversight mechanisms), that the strongest likelihood foreffective m itigatio n can be found. Recent wo rk in the transport, education, and healthsectors shows the potential o f such approaches. Institutional capacity buildingwould p laya critical role, especially for systems o f public procurement, f inancial reporting, andauditing and accountability, in wh ich the Ba nk has already registered success and i s wel l -placed to support countries wishes to go further. As implementation proceeds, suchelements o f ins ti tu t iona l and other capacity building, regulatory and sector reform, andincentive frameworks that reduce opportunities fo r corruption will be seen in an increasingnumber o f projects.16. Processes have also been launched and will be deepened to ensure a systematicana lysis o f G A C issues in sector work, sector programs, and projects. (B ox 2 highlightsthe ongoing review o f WBG pol icy and procedures to ref lect good pract ice GACapproaches.) The key i s t o identify at an early stage where G A C r i sks are present an dwhat the drivers are, and focus mitig atio n efforts on this group o f act iv i t ies. This mightinclude: (a) support for improved budget execution at the sectoral level, (b) improv ingBox 2: Bank Policies, Procedures, and Guidance: Adaptation to Reflect GAC and Client NeedsBank staff are guided by policy, procedures, and a variety o f published and online guidance notes. These are beingreviewed to ref lect good practice approaches on governance and anticorruption. These include the following.

Guidance on Country Assistance Strategies, including BP2.11, which aims to have more detailed guidance ongovernance-related content, including detailed advice on how to review the nature of GAC risks, record emerginglessons of good practice, and note how to effectively consult and engage civi l society and other stakeholders.systematically release information about project supervision or dialogue with the country about concerns thatemerge during implementation. Operations Policy and Country Services (OPCS) and the Legal Department(LEG) are currently examining ways to make th e WBGs disclosure policy less restrictive.INT guidelines and INT-sponsoredBankwide stafStraining. Existing procedures would be updated and revised obetter deliver development impact in he country program context, drawing as appropriate on the Volcker Reportand other inputs.Legal remedies. Guidance from L EG and OPCS on more systematic and appropriate approaches to exercisinglegal remedies.Publicfinancial management monitoring and controls. Implementationo f key recommendations of hePublicFinancial Management Working Group and the Financial Management Sector Board on monitoring and controlsand related efforts to implement the new portfolio and risk management (PRIMA) system, and the financialmanagement quality control framework, which i s currently being strengthened.

The WBG sdisclosure policy andproject implementation details. Under current rules, the WBG does not

Procurement policy review (OPCS)to enhance the efficiency and effectiveness of he Banks procurement rules.


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l ine ministry capacity and incentives to undertake economic analysis o f projects and pla ninvestments, (c) dev elop ing mo re robust regulato ry instit ution s and (where feasible)competi t ive provis ion under light regulation, (d) changing incentives to improve theaccountabil ity o f state-owned enterprises and other governme nt-controlled servicedelivery providers, (e) supporting enhanced information disclosure and beneficiary orc iv il society demand-side oversight mechanisms, inc lud ing commu nity-drivenapproaches and ( f ) improv ing l ine ministry procurement and financial managementprocesses. These approaches, w hi ch are no t new fo r the WBG, will be consideredsystematically in develop ing programs and project^.^17. These and other mi tiga tion measures are being incorpora ted upstream in smartpro ject design. In some cases, e xplicit G A C actio n plans wh ich spe l l out expl ic i t ly aseries o f measures designed t o mitigate the G A C r isks associated with the program orproject have been found usefu l at th e project level,. This experience will bedisseminated. G A C foca l points will be appointed in country and sector teams, andRegions m ay create G A C advisory teams-as in Albania, Bangladesh, Cambodia, India,and Indonesia-or other mechanisms to ensure t h a t G AC issues are assessedappropriately in projects and AAA. Regions will also ensure that as necessary peerreviewers will advise o n treatment o f GA C issues beginning at the concept stage. Aspartners are fully integrated int o this endeavor, I F C and MIGA will also scale-up severalongoing approaches, inc lud ing prom oting th e business case for G A C as a value-addingproposit ion for domestic and fore ign businesses (integrity i s good fo r business);strengthening th e corporate governance practices o f a l l investee companies; an d assessingcorporate codes o f ethics as part o f the corporate control environment. This will be donein collaboration with other stakeholders, who have developed significant experience inthis area in recent t imes: one area the WB will be exp lor ing i s creating externalverif ic ation m echanisms fo r such codes.18. The G A C Imp lemen ta tion P lan i s fundamentally about helping countries im prov etheir systems o f governance, so that in turn the probab i li t y o f funds being misused i sreduced-it i s about strengthening and prevention, rather than better pol ic ing andsanctions. Nevertheless, mo re systematic and appropriate approaches to remedies clearlyhave a ro le to p la y in strengthening he WBGs approach to GA C. Upd at ing and revisingth e existing procedures o f he WBGs Department o f Inst i tut ional Integrity (INT) will beone aspect o f this, but there i s also other wo rk t o be done in th e area o f remedies8 Aswas noted in the recently issued Independent Panel Review o f INT (the Volcker report),there i s a need to develop a feedback loop in wh ich the lessons learned through INTswork are systematically captured and incorporated into future project designs and sectorand system refor ms supported by the WBG.

For a systematic discussion o f hese issues, see The Many Faces o Corruption: TrackingVulnerabilit ies at the Sector Le vel, Campos and Pradhan, W or ld Bank, 2007.One proposal that wi l l be investigated further i s to introduce into standard Bank contracts thecommitment o f he contractor to have anti-bribery prog rams in place.


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C. Global Level19. There are many initiatives under way around the wo rld to address GA C issues inboth t h e countries o f th e Organisat ion for Economic Co-operat ion and Development(OECD) and in developing countries. The Implementat ion Plan ident i fies five part icularareas for increased WBG involvement to support global initiatives-to fulfill th ecommitment , enshrined in the G A C strategy, not to act alone. The aim i s to leveragepartnerships t o establish harmo nized policies, support the poo ling o f resources, addresstransnational GAC issues, and ensure that th e actions o f one player in the internat ionalsystem are no t undone or undermined by another. These ini t iat ives includ e the fo l lowing:

Intensified support for multi-stakeholder engagement, including for peerlearning networks and collaborative governance initiatives, such as theExtract ive Industries Transparency Initiative (EITI) an d the ini t iat ives beingdeveloped in other sectors, such as in construction and forestry. Fo r some, theWBG will be a sponsor (as inEITI), and fo r others an active participant.In countries where GAC challenges pose serious obstacles to development,imp rov ed donor coordination-including the com mon response principles fordonors in high-risk countries developed by the Governance Network-Collect ive Acti on Against C orru ption o f OECDs Development AssistanceCom mittee (OECD-DAC)-can av oid negative compe tition andsign ifican tly enhance efforts to support change.Harm onizat ion o f GA C p ol icies and procedures (includ ing investigativepractices) with other multi lateral development banks (MDBs) and improvedinformation sharing with national prosecutors, especially with respect tosanctions. I t s proposed to revive the MDBs Wo rking Group on Governanceand Corruption.Support o f global and regional le gal conventions, with a special emphasis onasset recovery, notably by encouraging countries to sign and implement th eUN Convention Against C orru ption and the OE CD Anti-bribery Convention,oan d by th e development and promot ion o f th e Stolen Assets RecoveryInit iat ive (StAR).Working to build consensus on how GAC work can enhance developmenteffectiveness, including through sponsoring a biannual conference on suchl inkages and financial support for research into the i mp a ct o f G A C issues o ndevelopm ent effectiveness.

lo These co mm on response principles are now being pi loted through OECD-DAC.The formal name o f this convention i s th e OE CD Convention on Combat ing B r ibe ly o Fore ign Pub l ic

OfJicials in Inte rnatio nal Business Transactions.


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GAC Strategy Implementation:Global Level

The Bank is com mitted to not acting alone.Five areas targeted for increased Bank involvement:Donor coordination,including comm onresponse principles,especially where GACpose serious obstaclesto development,

Build global consensuson ho w GAC enhancesdevelopmenteffectiveness - biannualconference and supportfor GAC related researchMulti-sta keholderengagement andvoluntary code s ofconduct (e.g.,Extractive IndustriesTransparencyInitiative)

Harmonize GACpractices with other

Support globa l legalconventions (e.g., UNConvention AgainstCorruption, OECD Anti-Bribery Convention ,Stolen Asset RecoveryInitiative (Star))

Iv . STAFFING AND BUDGET: HANGEMANAGEMENTND LEADERSHIP20. Staffing. An Imp lem enta tion Pla n for a sound, well-accepted strategy will achievel i t t l e without the right approach to staff ing and resources. N o r will it succeed i fgovernance issues are perceived internal ly as a matter o f concern on ly for staf f o f apart icular N etw ork o r V ice President ia l Unit (VPU), rather than-on the principle thatgovernance i s everyone s business-for a ll WBG staff, On staffing, there are twodistinct needs. First, i t i s cr i t ica l to identify a group o f staff to act as fo cal points in theRegions and Networks to focus o n G A C issues, ask th e relevant questions at the righttime, and support management and task teams. While the WBG has some such staff,there i s a need fo r a clear a nd enhanced mandate for them t o wo rk in such roles, and forthem to be linked o each other through an infor ma l network.21. In addition, it i s clear that in areas where unsatisfied demand already exists orwhere increased activities already can be anticipated-public financ e management,f iduciary systems, governance diagnostics, judicial reform, and social accountabilitymechanisms, fo r example-incremental sta ffin g will be needed. This applies in particularto field offices, where enhanced specific governance skills, staff t ra in ing could beespecially valuable. The WBG will proceed cautiously, developing a comprehensive G A Chuman resources strategy that covers b ot h enhancement o f sta ff sk i l l s and recruitmentwhere necessary. Re-skilling o f staff, especially those in sectors, can help to increasecapacity to address GA C issues, and train ing courses will therefore be developed o n this, aswell as o n better linkages with ex ist ing courses, such as ethics train ing. This said, the skillneeds, staffing profiles, and therefore the associated staffing gaps cannot all be anticipated:x-ante, since such needs will become clearer during the course o f implementation.Therefore, the huma n resources pla n and i t s associated training would be developed over


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10the course o f th e f i r s t year o f the G AC Implementat ion P lan in close collaboration withRegions and the Learning Board.22. Budgeting. Already, some o f he incremental f inancia l needs are clear: Su pport i sneeded for the C G A C processes that will start right away; Regions and Networks arealready clear on th e most cri t ical staff ing needs for country and sector governanceexpertise; and a more active participation in a range o f glob al ini t iat ives such as StARwill n e e d to be supported f inancial ly. Fo r FY0 8, to support the build-up o f theimple me ntation process, an incremental requirement o f about $14.8 m i l l i o n s envisaged,in pa rticula r to supp ort these areas. This wou ld represent an increase o f eight percent onthe estimated $167 mi l l i on o f budget expenditures related to governance activities thatwere supported in F Y 0 7 (including projects, AAA, and other governance -related tasks).I t ca n be anticipated that incremental support will have to r ise beyond this level, but thiswo uld depend on the ini t ia l results, patterns o f demand, and lessons o f nit ia l experience.23. Change Management and Leadership. A number o f alternative approaches toleadership o f governance and anticorrup tion efforts at th e WBG have been reviewed.Considerations about leadership have to be dominated by one core aspect o f the approachalready noted: governance i s everyone's business. I f G A C concerns are to be reflectedthroughout the WBG and in a ll sectors, and to be ref lected in development effectivenessconcerns, G A C cannot be perce ived as th e business o f a part icular unit. Moreover, thereare advantages to using existin g ins titutio nal structures. Therefore, the fo l lowingarrangements are proposed, at least for the f i r s t year o f the implementation o f the G A C

The G A C agenda and i t s implementation wou ld continue to be overseen bythe responsible Managing Director. As th e Volcker Report stressed,leadership i s central ly important to building go od governance into the thinkingo f a l l s taff throughout the B ank...There would be a Steering Committee or Governance Council created, to bechaired by the Managing Director. T h i s body would be composed o f high-levelmanagement representing the Regions, Networks, and other uni ts withresponsibilities for implementation o f the plan. T h i s group wou ld meet regularlyto oversee progress in mplementation, to re view sta ff and managerial incentivesand their effectiveness," and to ensure participation across t h e institution.There w o u l d be a Secretariat for this Commit tee and for the responsibleMa na ging Director, wh ich w ou ld gather materials, share them across the Bankto staff involved, develop a n internal and an external website, and maintain aroster o f resource persons; this Secretariat would be housed in the Publ icSector Governance group.

'' The strengthened incentive systems could include focused peer review and Quality EnhancementReviews (QERs), Quality Assurance Group (QAG) reviews, CAS Guidelines, Independent EvaluationGroup (IEG) evaluation, appropriate staf f recognition, and other such approaches.


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11

d) Af te r one year, this se t o f arrangements wo u ld be revisited and, once the bestapproach to mainstreaming t h i s funct ion was determined, suitably m odif ied tofit the new needs.24. Staf f incentives will also be cr i t ica l in this effort. These come in three types.First, addit ional budget i s be ing prov ided fo r this init iative, and this i s always a strongincen tive. Second, senior management will continue t o emphasize the crit ica l importanceo f this in i t ia t ive as part o f the WBGs mission, and staff respond well to such signals.F ina l l y third, and perhaps key, sta ff performance, especially o f managers, in crit ica l areaswil l be judged by their demonstrated com mitm ent to the implementa t ion o f this strategy.

v. EVALUATION,IMING, RESULTS,ND NEXTTEPS25. As noted, this plan aims to k ick-start an intensive process o f earning-by-doing, aspart o f a longer mult i -year agenda. Giv en the wide interest in this agenda and th e m a n ystakeholders around the world, the IP was subjected t o a process o f stakeholder feedback.The draft p lan was sent to a l l those w ho part ic ipated in th e successful consultations forthe G A C strategy i tself . I t was posted o n the WBGs external web for a month, and mo rethan 60 submissions have been received, analyzed and incorporated as appropriate intothis reviseddraf t o f he plan. Face-to-face meetings with c iv i l society were held towardsth e end o f he feedback period. A summary o f he feedback i s attached as Annex B, anda full analysis i s beingposted on the Banks website.26.came through very strongly in he feedback that was received on he draft:Ongoing Stakeholder Feedback: There are three key and related messages that

The need for the W o r ld Bank Group to be wor king closely at the country leve l with awide range o f stakeholders, including grassroots organizations, and not to be work ingout CG ACs only with governments, e nsur ing that processes at the country l eve l weretruly participatory;The need for some form o f independent oversight o f progress, bo th at the countrylevel as well as at the level o f he overall program, for example through a possibleexternal advisory council2; and

0 The advisability o f further outreach activities, so that governments and otherstakeholders are better aware o f what the G A C strategy i s and what i t i s not, andespecially tha t i t s not a new f or m o f W o r l d Bank Group conditionality.

27. Measuring Progress and Impact. The intended results o f this in i t ia l p lan areout l ined in th e attached matrix. As highlighted earlier, these results focus on what theWBG i t se l f will do, but the actions outl ined in the plan should also be mirrored inl2 Consideration o f his suggestion s now being reviewed n light o f and together with the Volcker

Panels similar recommendation to establish an Independent Advisory Oversight Board for INT.


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12changes at th e country l e ve l over time. Clearly, building institutions, changing systemprocesses, and strengthening inst i tut ional and demand-side accountabi l i ty forperformance are long-te rm processes. How eve r, as these take root, governance indicatorsshould also improve; for example, sector policy and institutional reforms supported bythe WBG should in due course be ref lected in measures of, fo r example, education orroad qual ity; r efo rm o f pub l ic expenditure inst i tut ions and processes should bediscernable over time in measures o f publ ic procurement performance; and glob alinitiatives should be evidenced by greater corporate transparency in key sectors, andsome successes in esto ring assets lo st to countries throu gh corr uption .28. As this year-long learning-by-do ing process unfold s i t will be important to trackprogress and identify th e medium-term challenges and actions as well as any neededrefinements. A methodology to t rack progress on GAC implementat ion will bedeveloped that will info rm a n implemen tat ion progress report to be prepared after oneyear. The expertise and assistance o f th e Independent Evaluat ion Group will be soughtfo r this evaluation. Responding to Bo ar d in terest in GAC strategy implementation,regular repo rt ing on implementat ion i s anticipated while the strategy i s mainstreamed.

VI. RISKS29 . There are several r i s ks that cou ld hinder the plans impact, in clu din g deficienciesin t s design as presented here and as to be modif ied, timing, sequencing, a nd resources.(Box 3 outlines some o f hese risks an d the mi tiga tio n measures that are proposed in theplan.) The greatest danger i s that o f business as usual or even o f a revers ion to the timebefore the importance o f governance to development was m ore fully recognized. I t s theresponsibi l i ty o f Senior Management together with staff to ensure that this does nothappen. The best mitig at ion strategy i s therefore to continue to keep this key agenda insharp focus in the cri t ical f i r s t few years o f he plans implementation.


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13B o x 3: What Factors Could Hinder GAC Implementation Plan Impact?

Risk Mitigating ActionThe W B G will rev ert to business as usual inassessing and addressing go vernance cons traints todevelopment.

GA C engagement i s viewed predominantly b yinternal and external stakeholders as prim ari ly aboutanticorruption in projects, and no t more broadly asabout helping countries build capable andaccountable states.

The W B G will not have the capacity or f lex ibil it y torespond qui ckly to country expectations o fincreased support for governance reform-whichhave been heightenedas a consequence o f theglobal consultations.

Lessons about how engagement on G AC can mosteffectively increase development prospects are notadequately learned and institutionalized.

Donor coordination in countries where G A C i sseriously obstructing development i s inadequate.

Senior Managem ent effectively communicates theimportance o f addressing governance constraints todevelopment a nd appoints co untry and sectormanagers wh o h ave the skills, commitment, andresources to translate this message into action.Implementation i s systematically monitored b y theSteering Comm ittee, supported by a secretariat.The strengthened incentive systems could includeappropriately focused peer review, and QERs, Q A Greviews, C AS Guidelines, IEG evaluation, staffrecognition, and other HR incentives) wou ld also beimportant m it igating factors.Senior Management cle arly communicates thedevelopmental aspects o f GA C wo rk to internal andexterna l stakeholders, to be reinforced through abiannual conference. Country systems continue tobe strengthened an d considered as the preferredmechanism to deliver development assistance, andring-fencing i s avoided. Reme dies are applied in anappropriate way.Regions, supported byNetworks, organize theirstaffing and resources to increase their capacity toprovide just-in-timeadvisory services ongovernance. Imp rove d consultant rosters andsources o f financing help to supplement staffshortages. Budget f lex ibi l i ty w i l l be cr i t ical in thisregard-so that teams can respond qu ick ly asopportunities arise.Creation and dissemination o f earning mechanismsthrough the Pub lic Sector Governance Board, theNe two rk Anchors, and the promot ion o f hebiannual conference to disseminate learning on thelinkages between governance and development.The W B G and other donors implement newcomm on response principles-currently beingpiloted by OECD-DAC-to strengthen coordinationin dif fic ul t settings. Other MDBs and emergingdonors are asked to jo in this effort.


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14

VII. GOVERNANCEND ANTICORRUPTIONACTIONS AND R E S U L T S FRAMEWORK

wi ll agree wit h OPCS which FY08 CASs wil lincorporate such a process. Af te r a years experienceand evaluation o f results to date, it would bedetermined ho w such CGAC processes could bemainstreamed.

Action Area DescriDtion o f Ban k Activities ResDonsible Outlin e ResultsCAC Strategy at the Country Level

Action Area:Co un tr y teams conduct a stocktaking C G A C process to assess G A C mplications for develcDeepened engagementwith countries on ho wGA C issues impinge onpoverty reduction.Support countries todevelop enhancedprograms t o address theseissues and reflect such anenhanced understandingin he CAS.

Each country team with an upcoming CA S wi ll deepenit s engagement with i t s client and partners to take stocko f the countrys critical governance and corruptionimpediments to achieving development goals at thecountry, sector, and project levels, assessingimplementation, reputational, and fiduciary risks.

RVPs,CountryTeams

Each country team w il l ident ify the further analytic,institutional, or diagnostic work needed to enhance theBanks Group knowledge.RVPs,CountryTeams

Action Area:Mainstreaming GAC in sectors and improving core systems for development effectiveness-Countries are betterequipped to address GA Cissues at the sector level,where opportunities forinterventions are oftenmore immediate.Skil ls are adequate toaddress coregovernance systemsimprovements.

Netwo rk VPUs o\IVPs) w il l develop and pilot a newgeneration o f GAC-focused diagnostic andmon itoring A A A products-both sector-specific andcross-cutting-for use on a demand-driven basis byclients and by country teams.

Wi th Ne two rk assistance, each R V P wi ll take stock o fwhether the supply of specialist core pub licfinancial and administrative management skil ls i ssufficient to meet the underlying demand.Facilitatin g country team engagementon the demand-side of governanceCountries are supportedto enable them to have astrengthened ocus ondemand-side drivers o faccountability.

PREM andNV P sectorspecialists

PREM,RVPs, HR

me nt effectivenessSignificant and credibleincreaseof GACprograms o f supportbuilt nto the CAS by theend o f FY08.These CASs wil l haveexplicit governanceindicators to monitor forpositive change.

SD and HDwi l l haveissued guidance in thisregard in the areas o ftransport, health, andeducation. Other sectorsw i l l be encouraged to dolikewise.GAC HR strategy issuedto accompany 1 t yearevaluation.

SDN to (i)ponsor training f or countries and TheWo rld Ba nk Group staff to enable them to betterincorporate demand-side andci vi l society initiatives(including supp or t fo r demand-s ide in i t ia t i ves a tsub -na tion al levels) into programs and operationssupported by theBank; (ii)ponsor training f or socialdevelopment staff to enable them to m ore effectivelywo rk w ith sector and technical staff on the demand-side o f Th e Wo rld Ban k Group operations; (iii)esignand implement quality management andM&Esystems to assure the effectiveness o f hese scaled-upefforts; and(iv) institute programs o f esson-learning on what

SDN, EXT,WBI

Significant increase innew operations in FY08in which there i s supportfor th e demand side o fgovernance in allRegions.


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15

Action Area

Ensure resources areavailable on termssuitable to supportdemand-side activities.

Provide guidance to staffon demand-side goodpractice and mandateissues vis-& -vis civ ilsociety engagement.

Description o Ban k A ctivitiesworks, and disseminate them widely through openwebsites, training, toolkits, and guidance notes.Bu ild ing on past experience, wo rk wi th partners todevelop a funding mechanism that can effectivelyfinance p roject and program-related demand-sideactivities, including capacity build ing and training fo rci vi l society groups, to complement existing butlim ited resources for this (DGF, t rus t funds).Prepare staff guidance for ci vi l society engagement,including on demand-side approaches to ensurepositive civ il society roles in such areas.

Working collaboratively with the private sectorEncourage and work w ithf i r m s to incorporateanticorruption ntocorporate governance.

Help professionalizevoice o f organizedbusiness and relatedstakeholders in dialogueon investment climate.Enhance quality o f TheWorld Bank Groupengagement incollaborative initiativesthat set voluntarystandards o f businessconduct.

IFC and WBI w il l take lead to intensify efforts tomake the business case for antico mp tion, wo rkingespecially wi th new I FC partner companies.

Scale-up programs o f support to business associations,chambers o f commerce, and pro fess iona l associationsto strengthen their capacities to p articipate n publicpolicy dialogue on the business environment.Establish a W orld BankGroup-wide technicalworking group to provide, in collaboration with expertexternal stakeholders, knowledge management andsupport on market-focus edglobal collaborativeinitiative s; to ident ify good practices and share themboth internally and wi th non Ba nk stakeholders; togenerate research on their developmental impact; andto deepen our knowledge as to h ow these voluntarycommitments can usefully be applied at country level.

Me asu ring governance betterCountries, stakeholdersand staff use indicatorsmore systematically obetter monitorope rational effectiveness,and understand the linksbetween GAC anddevelopment.

Responsible

PREM,SDN, WBI

SDN, EXT,LE G

IFC, WBI

WBI

PREM,GlobalProgramsGroup, IF Cand otherNVPs

Establish a technical workin g group to promote themore systematic utilization in relevant Bankoperations and strategies o f governance indicators anddiagnostic tools b y:educating staff on the appropriate use o f differe nttypes o f ndicators;actively engaging operational ask teams to promo tethe mainstreamed use o f appropriate indica tors formonitoring performance of relevant Bank lendingproducts.

PREM,WBI, andOPCS

The Bank w il l support broader country use o f PublicExpenditure and Financial Accountability (PE FA)indicators and advocate countries voluntary disclosureo f PEF A ind icators and analyses.

RVPS

Outlin e Results

Funding mechanism inplace and new grantsavailable in FY08.

Guidance note issued.

Signif icant increase innew IFC and other TheWorld Bank Groupengagements in whichthe firms have adoptedenhanced corporategovernance measures(including explicitantico rruption plans).Such associations wi llhave developed newadvocacy programs inthis area.Ne w collaborativeinitiatives adoptprograms to enhancetheir developmentalimpact, includingvolun tary codes o fconduct where possible.

New governanceindicators and associatedguidance issued.

PEFA exerciseundertaken in ncreasednumber o f countries, andwi th increased number


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16

I

Countries build GACissues moresystematically nto theirprojects, notably forcapacity building,including those supportedby the Bank.Address GACdimensions ofdevelopmenteffectiveness throughoutproject cycle.

Strengthen qualitymanagement on GAC-related aspects ofoperations.

Improve donorcoordination on GACapproach.

Description o Bank Activities

Sectoral networks to develop governance indicators atthe sectoral level, and apply them in sector operations,focused on indicators that can be replicated acrosscountries.The Research Committee w il l issue a call forproposals for research that explores empirically, usingnew and existing governance indicators, therelationship between specific governanceinterventions and development outcomes.

GAC Strategy Implemeatation in Bank Support4Increase the number o f projects that include elementsto address GAC issues, including capacity andinstitution building for country systems in financialmanagement and procurement, accountability at thesector level, and participation n decision making andother demand-sideapproaches for strengtheninggovernance.Country and project teams will systematically addressgovernance and corruption risk to developmenteffectiveness throughouttheproject preparation andimplementationcycle through means such assystematic analysis of corruptionrisk in projectpreparation; smart project design; enhancedinformation disclosure; stronger supervision,including throughparticipatory or third-partymonitoringand review o f GAC-related aspects o feach operation; more systematic pursuit o f remedies;and, where appropriate, development o f project-specific anticorruption plans. Bank systems will beadjusted to reflect good practice approaches ongovernance and anticorruption.For projects ncorporating governance andanticorruption plans (GAAPs) or corruption-relatedmeasures, supervision wi ll include review o f GAC-related aspects, and each implementation supervisionreport (ISR) wi ll explicitly report on progress inimplementing GAAPs and project-relatedmeasures toimprove governance and mitigate corruption

Responsible

NVPS

DECVP,ResearchCommittee

RVPs,OPCS, WBI

RVPs,projectteams,OPCS

RVPs,Projectteams, QAG

OPCS,RVPs

eve1

The Banks quality management processes will assureadequacy o f coverage o f he GAC dimensions ofdevelopment effectiveness for relevant country AAAand operational productsHarmonize GAC policies and procedures (e.g.investigative procedures, sanctions) among MDBs,possibly through a revivedMDB GAC workinggroup.Investigate scope for common response principles fordonors to improve donor coordination in countrieswith severe GAC constraints to developmenteffectiveness.

GlobalINTLEG

PREM

Outline Resultsof countries disclosingtheir indicators.Governance indicatorsfor transport, health, andeducation issued.New research proposalsin his area approved.

New operations includecapacity building insector governance andfiduciary institutions.Indicatorso f measurablechange would beincluded.Guidance on addressingrisk in projects,including GAC risks,has been issued. Annualreport to be prepared onhow GAC issues havebeen addressed andmitigated hroughout theRegions.

Target agreement onharmonization ofsanctions policies byend-2008.


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17Action Area Description of Bank Activities

Strengthen support fo rmulti-stakeholderengagement.Support global andregional GACconventions.Foster global learningonthe GAC-developmentnexus.

OrganimiIdentify a group o f staffto improve GACcoordination andawareness in RVPs andNVPs.

Strengthen the Bankshuman resources forGAC strategyimplementation.

Provide the financialresources for GACimplementation, hroughnew resources andinternal reallocations.

Scale-up support for collaborative governanceinitiatives and peer-based networks, such as EITI .

Intensify support for the implementationof GAC-related conventions and initiatives, including theUnited Nations Convention Against Corruption, andthe StolenAsset Recoverv fStAR) Initiative.Coordinate a biannual conference on GAC at theWBG Annual Meetings.Intensify global research on the impact o f GAC ondevelopment, including establishment o f an electronicworking paper series.Country teams and S M U s (both within RVPs andNetwork anchors) wi l l designate a senior staffmember to bethe focal point on governance andanticorruption and wi ll allocate time in the workprogram to enable that staff member to advise onGAC-related ssues o f he units products.Each RVP wi ll put in place an appropriate egionalcoordination process andor structure andoperationalize his in FY08; t h i s process wil l workunder th e leadership of a senior person(s) designatedby th e VP.For Networks, HD and SDN will each establishimmediately a VPU-level steering group (includingrepresentation from RVPs) to facilitate and monitorimplementation of actions to mainstream GAC.The Networks, supported by Regional governancefocal points, wil l work wi th th e Regional earningcoordinators to develop GAC-related earningprograms and event, and wi ll identify critical GACstaff shortages that may need to be filled byrecruitmentInitiate a GAC skills needs and assessment exercisethat will be completed by the f i rs t annual review. Th eplan will lay the basis for a more comprehensivescale-up strategy to be implemented n FY09 andbeyond, and will include(i)dentificationof anyspecific GAC frontier areas where additional n-houseski l ls wi ll be required; (ii) ttention to the specificneeds of field offices; and(iii)o how commitment toGAC strategy implementation can be incorporatedinto staff (especially management) performanceevaluations).Make availablean additional $14.8 million inincremental resources to fund the f i rst year ofimplementation of he GAC strategy in FY08 for theCGACs ($2.6m), immediate ski l l s gaps ($7.2m),supporting governance work in sector anchors,PREM, DEC, WB I ($2.8m), and support for globalinitiatives and communications $2.2m).

ResponsibleEXT, WBI,Networks

PREM,WBI, NVPS

DEC, WBI,PREM

RVPs

RVPs

HD, SDN

SectoralVPUs withPREM andRegionalfocal pointsOPCS andHR, withPREM, HD,SD, Legal,and FP

CSR

Outline ResultsSupport provided fornew peer-basedarrangements (e.g.,construction ndustry).StAR has facilitated theasset recovery process inadditional countries.First biannualconference in 2008.Relevant esearchproposals approved.

en ationBankwide team in placebefore end 2007.

GAC HR strategy to beissued along with f irstyear report.

First annual report tojetail incremental:xpenditures andissociated esults.


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ANNEXA. GOVERNANCEN D I C A T O R S A N D THEIRU S E S1. Governance i s mult i -d imensional. A governance system comprises a wid e varietyo f processes, systems, organizations, and ru les (that is , inst i tut ions) on the publ icbureaucracy supply side and on the demand side through which non-execut iveoversight institutions and cit izens hold the bureaucracy accountable for performance.Governance can thus be measured by using (a) broad indicators that mo nitor the overal lperformance o f the system (for example, Transparency Internationals CorruptionPerception Index); and (b) spec@ indicators that focus more narro wly o n the qua l ity o fdisaggregated elements o f a countrys ove ral l governance system (for instance, the Publ icExpenditure and Fina ncial Accou ntabil ity, or PEFA, sub-indicators for pu blic f inancialmanagement).2. While b o t h types o f indicators are useful , they serve different needs. Broadindicators better track overall outcomes, such as growth, while specific indicators aremore suited to m oni tori ng changes in particular areas o f governance. Specific indicatorso f governance are also mo re likely to be actionable (that i s , they provide informationthat can be acted o n through particular reforms). Ho wev er, merely because they areactionable does not necessarily also mean that they focus on actions that are the mostrelevant in e rm s o f mp rov ing governance outcomes.3. A further distinction, for bot h broad and specif ic indicators, i s between(a) measures o f th e qua li t y o f the institutions and processes themselves (the fo rmal andinformal rules o f the game), and (b) measures o f the outcomes produced by theseinstitutions. Inev itably , because the qua l i ty o f ns t itu tions and what they produce areusually n ot direc tly measurable, governance measurement o f bo th rules an d outcomeswill contain an element o f subjectiv ity .4. A t ypo logy o f nd ica to rs i s shown in Table A 1 I t distinguishes between specificand broad measures as well as measures o f the qua l i ty o f p rocessesh les and o f theoutcomes produced by these rules. As the second and third co lumns o f the tableillustrate, there ex ist a wide variety o f specif ic indicators that can be used to m easure th equa lity o f particular governance p roce sses hles and o f governance outcomes. And, inrecent years, there have been substantial advances in b o t h th e range and quality o fgovernance indicators.5. Examples o f widely-used indicators that measure processes or rules include:

The Pub lic Expenditure and Financial Accoun tabili ty (PEFA) ind icator set,wh ich comprises 28 specific measures to t rac k the qua l i ty o f pub l ic f inanc ia lmanagement systems, and which has been appl ied in over 75 countriesJwww .pefa. ora).The in stitutio nal sub-indicators in cluded in the W or ld Bank s Country Policyand Institutional Assessment (CPIA) index-notably CPIA 13 (the qua li ty o fpubl ic f inancia l management systems) and CPIA15 (the qua l i ty o f pub l ic


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20 ANNEXAadministration), wh ich are pu bl ic ly available for a ll IDA rec ip ient countries(;www.worldbank. ord ida) .The Global Integrity Index (GII), which measures at a very disaggregate l e ve lthe qua lity o f check-and-balance arrangements to prevent th e abuse o f power,curb corruption, promote public integrity, and assure citizens access to theirgovernment in 43 countries (www.nlobalintearity.orq).The Open Budget Index (OBI), which assesses the publ ic avai labi l ity o f keybudget documents, the qual i ty o f nform ation they provide, and th e t imel inesso f their dissemination in 59 countries (www.internationalbudg;et.org).

0 The OECD Procurement Index, which assesses the qual i ty o f procurementsystems in 22 p ilo t countries (www.oecd.org).

0 Do in g Business indicators, wh ich measure the qual i ty o f forma l governmentregulatory ru les o n business fo r 175 countries.6. As Table 1 also shows, these spec@ process measures generally canstraightforwardly be aggregated to produce broad measures o f the qual it y o fprocesses/rules (such as in he second ro w in column 2).

Table A l . A Typolopy o f Governance Indicators, with ExamplesMeasuring Quality o ProcessesLWes Measuring Outcomes

Specific Measures 0 PEFA indicators* 0 Investment Climate Assessments**0 Business Environment& EnterprisePIA sub-indicators*

0 Global Integrity Index (GII) sub-0 Open Budget Index (OBI) sub-

0 OECD Procurement Index*0 Doing Business

Surveys (BEEPS)**

(WGI) - selected sub-indicators)***indicators* 0 Worldwide Governance Indicatorsindicators*

BroadMeasures 0 Overall CPIA*0 Overall GII*0 Overall OBI*0 OverallDB Index*

0 Transparency International* *0 WGI***0 Freedom House*0 Polity I V (executive constraints)*

Sources: *Expert assessments **Surveys ***Combination.

7. The third co lumn o f Table 1 l i s ts an add i t ional se t o f indicators that measure-bo th broa dly and narrowly-the outcomes produced by governance institutions. Le ad ingexamples includ e th e fo l lowing.a) The Enterpr ise Surveys (sometimes branded as Investment Cl imate

Assessments and, for EC A, the Business Environment and Enterprise Survey,or BEEPS), wh ich measure for up to 100 countries the perceptions o f firms as


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21 ANNEXAt o th e quality o f performance o f specific public regulatory and infrastructuralagencies (www.enterprisesurveys.org).

b) The Worldwide Governance Indicators (WGI) produced by DEC and WBI,which provide six aggregate measures (based on 33 different survey sources)of the outcomes produced by governance systems, inc luding the extent o fcorruption, for over 200 countries since 1996. I t s important to note that W G Ido not constitute an off ic ial W or ld Ban k rating for governance, and that W G Iare also not used for resource alloca tion at the B a M I D A , w hi ch i s th e ro le o fthe CPIA in th e IDA performance-based allocation (PBA) system(www.govindica tors .or&.

c) Transparency Internationals Co rrup tion Perceptions Ind ex(www.transparency.org/policy research/surveys indi ced cpi) .d) Freedom Houses indexes that measure the state o f po li t ical r ights, civil r ightsand economic freedoms arou nd the wo rl d (www.freedomhouse.org).e) The Pol i ty IV measures o f the extent o f executive constraints on the decision-mak ing power o f he executive (www.cidcm.umd.edu/polity).

8. Governance indicators can be used fo r multiple purposes. They can be used toraise broad awareness about the impo rtance o f governance; as a diagnostic to ol to in fo rmgovernance reform at coun try level; to m oni tor the progress o f governance re form overtime and benchmark governance improvements regionally and/or internationally; toallocate aid (by bilateral and m ultila tera l agencies); to conduct research o n the economicimpac t and determinants o f governance; and to assess country risk (for example, by riskagencies and investors).9. Wh ich indicato r is the r igh t one to use thus depends on the purpose. Thei llustrations below hig hlight four quite different ways in which the Bank uses governanceindicators :

a) For allocation o f aid resources:0 The CPIA (and more specif ical ly i t s governance subcomponent) i s th eonly governance indicator used in IDAS P B A system to allocate IDAresources across e lig ible countries.

b) Fo r diagnostic AAA and poli cy advice at country l eve l :H e r e the hll ange o f governance indicators (broad and specific; measureso f processes/rules o r o f outcomes) mig ht be used, with the choicedependent o n the purpose o f the AAA, which could include betterunderstanding o f th e governance situation in the country; awarenessraising concerning these issues; in-depth diagnosis o f specific governanceshortfalls and their consequences; and th e comparative assessment o f thequality o f governance sub-systems.


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22 ANNEXA

c) For the design and m oni tori ng o f specif ic governance reforms supported byB an k operations:0 Specific indicators are the appropriate ones to use here-with the choice

as to which specific indicators (for example, specific measures within thePEFA, DB, GII, or enterprise survey data sets) dependent on wh ich onescan help most closely track progress in the specific governance areasbeing reformed. At the sectoral level, the most appropriate indicators mayn o t be survey or expert-based but technical outcome indicators amenableto improvement through governance reform, including transmission anddistribution losses in energy, or percentage o f centrally allocated fundsreac hing schools in education.

d) Fo r research, tw o types o f ndicators co uld be used:Fo r research o n broad governance outcomes, broa d cross-countryindicators with wide cou ntry coverage (fo r instance, WGI).

0 An emerging research agenda i s l in kin g ne w specific process indicators tospecific governance outcomes (that is , assessment o f th e action-worthiness o f he wide range o f specific governance reforms).10. First, an indicator i s just one tool forprovid ing a broad-brush picture o f evels and trends over time in governance performanceat the country or sector level. Governance i s complex and mult i -d imensional, andassessments o f governance sho uld be based o n a wide var iety o f indicators, and no t justone or a few in isolation. In this context, there i s often value for analysts andpol icymakers to review the underlying disaggregated data used to construct a broadindicator, together with in-depth country-specific governance and anticorruptiondiagnostics.

Some final caveats about indicators.

11 . Second, any estimate o f governance i s accompanied by margins o f error. Theseare not unique to indicators based on perceptions data, but are present in all efforts tomeasure governance or th e investment climate. Fo r ma ny indicators, the margins o f errorare no t acknow ledged or disclosed-that is , th e (unavoidable) degree o f imprec is ion inmeasuring governance i s not made explicit; others such as WGI transparently indicatethese margins. I t s importa nt to take these margins o f error in to account when assessinglevels and changes in governance, a nd to recognize that m an y sm all differences observedbetween observations and over time are unlikely t o be statistically or practicallysignificant.


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Annex B, Summary o f FeedbackIMPLEMENTATION PLAN FOR STRENGTHENING WORLD BANKGROUPENGAGEMENTN GOVERNANCEND ANTICORRUPTION

CONDUCTED UGUST 00 7 - SEPTEMBER 20071. IntroductionBackground. A draft Implementation Plan for Strengthening WorldBank Group Engagement on Governance and Anticorruption ("Implementation Plan" forshort) was prepared, o n w hi ch feedback was sought during the period August 20 -September 20, 2007. Since the governance and anticorruption (GAC) strategy wasapproved in Ma rch 2007 fo l lowing an ex tens ive con~ u l ta t ion , '~he process focused onobta ining feedback fro m a cross sample o f hose who ha d participated earlier. This notesummarizes the m a in messages and recommendations received. Full statements filed byorganizations and a longer summary o f sample comments can be found atww w. wo rld ba nk. org/governancefeedback.2. Description of feedbaciImp lementa t ion Plan wassought via the web an dthrough focused discussionswith stakeholders in Europe,Washington, and severaldeveloping countries. Themajo r i ty o f part ic ipants in thewinter consultation processwere in formed about thefeedback exercise on theImp lementa t ion Plan v iaema i l so they wo uld have anoppor tun i ty to p rov ideaddit ional input. Thefeedback process wasorganized by EXT, OPCS,a n d P R E M in conjunct ionwith WBG country teams.The WBG received 60

process and guiding questions. Feedback on the draftGuiding Questions fo r GAC Consultations

1. Does the Impleme ntation Plan proposal for developing cou ntry-level G A C strategies (CGACs) give sufficient emphasis to countryownership and leadership in governance reform and antico rruptionefforts? I fnot, how can this proposal be strengthened?2. Does the Implementation Plan give sufficient emphasis topoverty reduction and improved development effectiveness as thefocus of World Bank Group engagement on governance andanticorruption? I fnot, h ow can this emphasis be strengthened?3. Does the Implementation Plan identify the prior i ty skill gaps thatthe W orl d Ba nk G roup needs to address in order to strengthen i t s 'wo rk on governance and anticorruption? I fnot, what other prio rityskill gaps need to be addressed?4. Does the Impleme ntation Plan provide an adequate pla tform forengaging systematically with government, business, and civilsociety stakeholders on G A C re form and development outcomes?How can the partnership and stakeholder engagement aspects o f heImplementation Plan be further strengthened?5 . D o yo u have other suggestions that will strengthen the Wor ldBank Group's efforts to help countries improve governance andanticorruption, and thereby development effectiveness?

l3 Between November 2006 and January 2007, the World Bank Group conducted a global multi-stakeholder consultation process on i t s strategy paper, Strengthening W orld Bank G roup Engagement onGovernance and Anticorruution. M or e than 3,200 representatives fro m governments, ci vi l society, donoragencies, parliaments, and the private sector participated in the consultations, which were held in 37developing countries, 12 developed countries and 4 global dialogues through face-to-facemeetings/workshops, videoconferencing, and electronic feedback via the W orl d Bank's website. Feedbackprovided during the consultations was reported to the Wo rld Bank's Executive B oard o f Directors andhelped to i nfo rm he revised strategy paper, which was unanimously endorsed by the Board in Mar ch 2007.


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24 ANNEXBsubmissions, mostly via the web and emai1.I4 N o w that the country governance andanticorruption (C GA C) process has started, additional dialogues and fo llow -up activit ieswith stakeholders will continue at the country and project levels, and in some areas (forexample, stolen asset recovery) internationally.3. Overview o main findings. Overall, the ma jori ty o f he stakeholders respondingwelcomed the WBGs increased emphasis on GAC issues. There i s continued debateabout how best to balance development efforts focused o n economic growth, eff iciencyand poverty reduct ion with a focus o n imp rov ing governance a nd reducing corruption.Stakeholders appreciated th e comp lex i ty o f the governance strategy adopted by th e WBGand sought more detailed information on implementation. In particular, they soughtc lar i ty on the ro le and d iv is ion o f abor between stakeholders, including donors, and theWBGs procedures to address instances when the government i s no t an active part icipantin th e governance work, or when weak relations exist between governments and otherstakeholders. Some o f he recurr ing themes provided in the feedback include: i) o w t oprov ide support for country-owned, country-leve l G A C strategies; ii) nhancing andinteg ratin g systematic engagement a mong stakeholders, iii) nsurin g adequate resources,sta ff and capacity building for effective implementation, and iv) im pr ov ing transparency,comm unication capacity, and info rm atio n sharing.4. Support for country-owned country-level GAC strategies. There wasconsiderable support that the Implementat ion Plan should be country-dr iven and therewas a suggestion that governments make a formal pledge in writing stating theircommitment to good governance [Bangladesh, cit izen; Mongolia, civil society;Anonymous]. Several stakeholders reiterated the need fo r the Ba n k t o fully recognizecountry specific-sensitivities and unique operating environments, and thereby customizethe Implementat ion Plans accordingly [ Indiv idual, D om inican Republ ic ; F ormer WBGOmbudsman]. Stress that countries an d fragile states ,. need special att entio n that startsby restoring systems and capacity. [Mu lti latera l Deve lopme nt Ba nk]. In te rms o finformation sharing, i t was recommended that th e WBG prov ide details o n roles andresponsibil it ies o f the WBG staff and other stakeholder agencies, including contactin fo rmat ion ha t wou ld be read ily accessible for cit izens [M exico, C iv i l Society].5. Enhancing and integrating systematic engagement among stakeholders.Response was mixed, and m ost respondents wanted t o see more systematic engagementn o t just between the WBG and stakeholders, but t o see programs that foster suchengagement among different stakeholders in order to build country ownership andincrease th e l ike l iho od o f success. This requires a participatory approach and the us e o fwatchdog monitors o n the one side, and on the other, more p ublic -priva te partnerships[Mauritania, C iv il Society; several individuals]. Reviewers understood why th e WBGwas targeting governments for action plans, but thought that civil society and otherstakeholders were men tioned marginally.y [C iv il Society], The p la n must place greaterl4Written submissions received (in addition to feedback submitted through the web-based form that wasprovid ed include: Afric an Dev elop men t Bank, Economic Ban k for Reconstruction and Development,Federal Ministry for Economic Cooperation and Development and German Technical Cooperation, UnitedStates Agency for International Development, Partnership for Transparency Fund, TransparencyInternational, World Vision.


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25 ANNEXBemphasis on the inv olvem ent o f all actors and stakeholders. Society must be invo lved insuch a wa y that i t can inf luence th e direct ion o f eforms [Afr ica, Academia]. The p lanhas no t emphasized th e creat ion o f an environment in w hic h par t ic ipants f rom d i ffe ren tsegments o f society can wo rk together to review resul ts o f successful (and unsuccessful)practices and reforms. [C iv il Society; several indiv idua ls].I s the Bank work ing in partnership with other actors and donors systematically? There i sa need for one-stop shopping, and the Bank should take the lead in creating such aplatform. [Canada, Academia]. The plans focus o n governance cooperation among theinternational f inancial institutions (IFIs) could be strengthened and broadened, and notlimited to cross-debarment and investigatory procedures. [M ult ila te ra l Developm entBank; C iv il Society, several individuals]. It was suggested that the plan did not m akeclear that the countrylevel process for developing CGACs must build o n existinganalysis and strategies that may already have significant country buy-in. This m ayinvo lve jo in ing up with other donors such as USAID, DFID, o r the E C in assessing thestatus o f governance in a particular country.6. Adequate resources, staff and capacity building. While acknowledging that thisi s a one-year pl an with a budget likely to expand in uture, there was considerable interestand debate about the adequacy o f resources that acco mpany the Implem entat ion Plan.Comments ranged fr om crit i cal (resources insu fficien t to the tasks described) to cautious(wait ing to see wha t subsequent budgets would be made available). [Multi lateralDevelopment Bank; C iv i l Society] .Reviewers noted that the Implementat ion Plan al locates only re lat ively smal lincremental resources and staff ing towards the G A C plan. [C iv il Society]. Fulfillingthe G A C Strategys objectives wo uld seem to require a s ignif icant commitment o fresources above and b eyon d what i s inc luded in he plan, inc lud ing signif icant personnelchanges, and perhaps the creation o f a Governance Unit with cross-cuttingresponsibil it ies [Mu lti latera l Deve lopme nt Ban k].There were numerous comments about the need fo r the WBG to engage in capacitybuilding with stakeholders in pursuit o f governance, but skepticism about whether i t so w n existing staff could be adequately prepared to meet the challenge through capacitybuilding for staff. Re-skilling existing staff i s probably not suff ic ient [Mult i la tera lDevelopment Bank].7 . Transparency, communication and in ormation sharing. Several commentsfocused on transparency, comm unication and inform ation . One cal led for demystifyingand standardizing governance indicators. I t was also suggested that indicators need to bemo re accessible to citizens th rou gh loc al newspapers and other channels, no t just throughth e in ternet since ma ny cit izens do no t have in te rnet connections. Reviewers said that fo rgovernance e fforts to succeed, com mun ication wo uld be essential at a ll levels, and urgedthat there be more capacity b uilding for com mun ication specialists in governanceissues. It was also suggested that research showed the importance o f support for freedomof information and media development init iatives, including reform of in ormation


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26 ANNEXBsectors, and that the WBG should take a stronger role in these areas, including lendingand tech nica l assistance. [Canada, Academ ia; several ind ividu als].8. Other issues. The feedback process high ligh ted several other themes o f nterestto stakeholders. A few commentators questioned the WBGs credibility to imp lement thegovernance agenda, saying that in their op in ion i t lacked internal governance andtransparency i tsel f. In general, stakeholders urged the WBG to make sure theimp lem enta tion process i s a bottom-up participatory approach involving cit izens at thecommuni ty l e ve l [C iv il Society, Mo ngo lia, several individuals]. Greater emphasis shouldbe p laced on lessons learned fro m co untry experience, and to the po l i t ica l economy o fthe change process. Several particip ants expressed the need fo r the WBGs cont inuedsupport for judicial sector reforms [Afr ica, Academia; Mu lt i la tera l Development Bank].Some participants reiterated the need fo r th e Ban k to more read i ly invo lve multinationalcompanies and the private sector, in general, in t s development wo rk and in governance.9. Next steps. At the request o f the Board, Management i s revising the draftImp lem enta tion Pla n to take in to account the recommendations received during th efeedback exercise. The WBG will continue to engage with stakeholders at the global andcountry leve ls. Stakeholders will be invo lved in bo th th e formulat ion and implementat iono f C G A C strategies.


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27 ANNEX CANNEXc. REPORTF THE EXECUTIVE IRECTORS,TRENGTHENING WORLDBANK

GROUPNGAGEMENTN GOVERNANCEND ANTICORRUPTIONThis paper (DC2007-0005) i s attached as Annex C.


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DEVELOPMENTOMMITTEE(Joint Minis ter ia l Committeeo f heBoards o f Governors o f the Bank and the FundOn theTransfer o f Real Resources t o Developing Countries)

DC2007-0005Ma rc h 28 ,2007

REPORT OF THE EXECUTIVE DIRECTORSSTRENGTHENING WORLD BANK GROUP ENGAGEMENT ON

GOVERNANCE AND ANTICORRUPTIONAttached for the April 15,2007, Development Commit tee Me et in g s a report to theExecu t ive Directors and accompanying paper enti t led Report o f he Execut ive DirectorsStrengthening W o rl d Ba nk Group Engagement o n Governance and Ant icorrupt ion . Theaccompanying paper consists o f(i)one-page summary o f he guidingpr inciples for

engagement o n governance and anticorruption; a nd (ii)he Execut ive Summ ary o f he documentthat was endorsed at the m eet ing o f he Execut ive D i rectors he ld on M ar ch 20,2007.

* * *


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DEVELOPMENT COMMITTEEREPORT OF THE EXECUTIVE DIRECTORS

STRENGTHENING WORLD BANKGROUPNGAGEMENTN GOVERNANCEAND ANTICORRUPTION

At the 2006 Spring Meetings, the Development Committee asked the World Bank Group(WBG) t o set out a broad strategy fo r helping member countries strengthen governanceand deepen the fight against corruption. In September 2006, th e WBG presenteda paper,Strengthening Bank Group Engagementon Governanceand Anticorruption, at th eAnnual Meetings in Singapore.The Development Committee on that occasion issueda communiqui5 (DC2006-0017)which included he following guidance:

Actions to prom ote good governance are cru cial to successful development andpove rty reductio n, and helping member countries on these issues is thereforeimportant to the Banks mission and to achieving the MDGs. Tackling corruptioneffectively an dp rm ly is a significant pa rt of this. The pr inc ipa l objective of theBanks governance w or k should be to help develop capable and accountablestates to deliver services to the po or , promote, private sector led grow th a ndtackle corruption effectively. We supported the Ban ks engagement ingovernance and antic orru ption w ork. Country ownership and leadership are keyto successful implementation. Gove rnments are th e key partn ers o the Bank ingovernance and anticorrup tion programs, while, w ithin its mandate, the Bankshould be open to involvement wit h a broad range o domestic institutions takinginto account the spec ijkit ie s o each coun try. We also emphasized tha tpred ictab ility, transparency, and consistent and equal treatment across membercountries a re the Banks guiding principles. In stepping up attention togovernance and an ticorru ption in C ountry Assistance Strategies] we asked theBank to further develop and use disaggregated and actionable indicators,recognizing that ID A resources w il l continue to be allocated through the existingCountry P oli cy and Ins titution al Assessment and Performance Based Alloc ationsystem. We recog nize that the strategy w il l evolve wi th implementation and inl ight o experience, but th e paper sets out a rame work for continued Bankengagement in this wo rk and the urther consultation wh ich is planned withpartner countries, wit h the Fund and wit h other donors and mu ltilaterals, w ithciv i l society, and w ith the private sector. Given the importance of this issue, westressed the importance o Bo ard oversight of the strategy as i t is furtherdeveloped and then implemented, and we look orw ard to a report f ro m the Boardat our next meeting. I


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In ight o f his guidance, the WBG undertook an extensive ro und o f nternationalconsultations to explore the v iews o f stakeholders as t o ho w the WBGs work ongovernance and anticorruption can be strengthened t o reduce poverty. F r o m November10,2006 to January 26,200 7 t h e WBG he ld consultations with representatives fr o mgovernments, d ono r agencies, parliaments, c iv il society organizations, p rivate sector,media, and othe r stakeholders. The consultations were held in 35 develop ing countriesand 12 donor countries, during four glo ba l events, and throu gh online web feedback-reaching more than 3,200 stakeholders worldwide. Summary reports from theseconsultation s are posted on the Wo r ld Banks external website.Ma nag em ent presented the feedback from these consultations to the Executive Direcctorson January 30,200 7. As agreed with the Board, Manag ement subsequently updated thepaper that was presented to the Development Committee in Singapore, to r eflec t ke ymessages fr o m he consultations and respond to issues and concerns stated in theDevelopm ent Committee Communiqu6. This updated version o f he paper was discussedat a meet ing o f he Boards Comm ittee o f Developm ent Effectiveness (CODE) o n Ma r c h 7,2007. Suggestions and comments made at the CODE mee ting were then incorporated intoa revised version o f the paper that was discussed at a formal meeting o f he ExecutiveDirectors o n M ar ch 20,2007. At that meeting, the E xec utive Directo rs unanimous lyendorsed the Strategy, and agreed to send to the Development Com mittee for informationthe attached paper, Strengthening World Bank Group Engagement on Governance andAnticorruption, which i s the Executive Summary o f the longer Board-endorsed strategy.An implementat ionplan i s

Documents

STRENGTHENING WORLD BANK GROUP ENGAGEMENT on governance and corruption implementation.pdf