governance & human development governance & accountability in human development hd learning...

Governance & Human Development

Governance & Accountability In Human DevelopmentHD Learning WeekWashington, DC

The World Bank

Danny LeipzigerVice President and Head of Network

Poverty Reduction and Economic Management

November 10, 2008

Danny Leipziger,

Six Key MessagesSix Key Messages

Governance is a key aspect of poverty-reduction & service delivery

The GAC Strategy: There is much we can do togetherThe GAC Strategy: There is much we can do together

Governance & anticorruption have come a long way:PREM “Everybody’s Business”

Sector governance – including HD – is at the core of GAC: Tackling leakages, mapping vulnerabilities, mitigating risks

Transparency, community monitoring, accountability & expenditure tracking can improve results & service delivery

Public sector management (PFM, procurement, civil service reform, tax) strengthens systems for everyone’s benefit

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Danny Leipziger,

Public sector governance refers to the manner in which public officials and public institutions acquire and exercise the authority to provide and manage public goods and services, including the delivery of basic social services and infrastructure and a sound investment climate

Corruption is only one symptom of poor governance: others include poor quality of public services, insecure property rights and ineffectual law enforcement

Extensive research over the last 15 years shows that the quality of governance has a significant impact on growth and poverty reduction

For many of the Bank’s client countries, improving governance is crucial for sustained development

Danny Leipziger,

Classical economists including Adam Smith and John Stuart Mill recognized the importance of political institutions and effective government for development

But these topics were largely ignored until the 1980s, when new work in economic history and political economy (e.g. by Olson and Bates) argued that

Disruption of “sclerotic distributional coalitions” facilitates rapid growth

Lack of predictability in policy making hampers development

Organized vested interests within countries are able to facilitate a disproportional transfer of resources from unorganized to organized sectors

Revival of political economy in development

Danny Leipziger,

Governance is core to everything we do …

It is about health services being delivered properly

It is about teachers showing up to school

It is about the investment climate being predictable

It is about less corruption in procurement

It is about accountability in the use of public resources

Governance is Everybody’s Business

Danny Leipziger,

Governance: The manner in which the state exercises its authority for the public good, depends on interaction between:

Stakeholders – leaders, political parties, bureaucracy, parliament, judiciary, private sector, civil society, media – and their interests

Capacity – human, technical, financial – of stakeholders to perform their role

Incentives & Accountability – rules & norms that provide incentives, rewards & sanctions to act in the public interest

Outcomes of Governance Systems: Corruption, quality of service delivery, investment climate

Corruption: is an outcome of poor governance

Governance definition & framework

Danny Leipziger,

Good governance is pro-poor

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0 10 20 30

increaseby 10points

increaseby 15points

increaseby 20points

Reduction in the percentage of population living on less than $2/day due to the increase in the quality of governance (ICRG composite index)

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Additional annual income growth due to an increase in the quality of governance (ICRG composite index) by 1 point

An increase in the quality of governance (measured by ICRG) by 1 point on the 50 point scale is associated with 0.33% extra income growth for the poorest quintile versus only 0.16% growth for the richest quintile (left graph below)

ICRG: International Country Risk Guide

Danny Leipziger,

Political Actors• Political competition, broad-based political

parties• Transparency & regulation of party financing

Citizen

s/Firm

s

Citizens/Firms

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izen

s/F

irm

s

Citizens/Firms

Decentralization and Local Participation• Decentralization with downward accountability• Community Driven Development (CDD)• Oversight by parent-teacher associations & user groups

Civil Society & Media• Free press, FOI• Civil society watchdogs

Private Sector Interface• Contracting out • Extractive Industry

Transparency Initiative• Collective business

associations

Public Sector Management

• Transparent budgeting & procurement

• Civil service meritocracy & adequate pay

• Accountability for performance in service delivery agencies

Outcomes: Services,

Investment climate,

Corruption

Formal Oversight Institutions

• Independent judiciary• Legislative oversight • Independent

oversight (SAI)• Global initiatives: UN,

OECD Convention, anti-money laundering

Governance System: Actors, Capacities & Accountabilities

Danny Leipziger,

The ‘Prohibition’ Era

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

WDR on Institutions 1982

JDW “Cancer of Corruption” Speech (10/96)

State in a Changing World (97)

• Diagnostic/Data/ Monitoring Tools

• Public Financial Management & Procurement

• Administrative & Civil Service Reform

• Civil Society Voice, Transparency, & CDD

• State Capture

• Legal & Judicial Reform

Broadening & Mainstreaming

TI CPI (5/95)

Anti-corruption Strategy (97)

Governance Strategy (00)

1st set of firms Debarred from WB (99)

Formalization of INT (01)

Strategic Compact (97)

O.P. Mainstreaming AC in CAS (99)Governance

Pillar - CDF (98)

Internal AC unit created in WB (98)

Gov/A-C Diagnostics start (98)

2004 2005

Board endorses Integrity Strategy (04)

Strengthening WBG Engagement on GAC (March 07)

GAC Launch with RBZ (Dec 07)

The Bank began work on governance over a decade ago – a long distance in a brief time

2006 20072008

GAC 1 Year Progress Report (Oct 2008)

Danny Leipziger,

GAC: Three key issues for HD

1. GAC aims to help countries build more capable and accountable states – it is about strengthening country systems

2. Helping countries improve sector governance (education, health, extractive industries, transport) is at the core of GAC

Tackling absenteeism, leakages, patronage in HDStrengthening public management, transparency, user participation, competition in school & health systems

3. In light of DIR findings, GAC is not about ring-fencing or avoiding risk, it is about:

Identifying, mitigating & monitoring risk, and Strengthening national systems to mitigate risk for all public money, including the Bank

Danny Leipziger,

Monitoring PFM Performance: HIPC-PEFA

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Percent of Benchmarks Met by Indicator (2001-2006)

Budget comprehensiveness, donor funds on-budget, medium-term perspective, internal audit, relatively weaker areas

Danny Leipziger,

Contract Implementation

Procurement Planning

Preparation

Pre-qualification

Bid Evaluation

Award of Contract

Advertisement

Specifications & scope of work altered

No clear criteria for project selection

Estimates inconsistent w/ market prices

Requirements vague, unrelated

Subjective notional point system

Arbitrary post-qualification

Restricted advertisement

Procurement process & ‘red flag’ areas

Danny Leipziger,

• “Complementary” bidding

• ‘Round robin’

• ‘Divide the pie’

• Coercion

• Low balling/ “Change orders”

• Bidders have same address or bid price

• Wide gap between winner & all others

• Winning bidder subcontracts to losers

• Qualified bidders do not bid

• Lowest bidder later submits substantial change orders

Bid rigging schemes & red flags

Danny Leipziger,

MDB Financed Rural SchoolMDB Financed Rural School

“SC39”, a rural school in South Asia, funded via a multi-donor project …

What was behind the wall in the “school”?

… Onions!

Meanwhile, here’s the actual school some 500 fee away

Danny Leipziger,

Indicators of Poor Governance: Absenteeism among health workers typically 35-40%Patronage or purchase of public positions Drugs & Supplies: Leakages & high costsFunds leakage & informal payments

Implications of Governance Reforms:

Stronger internal management & accountability: supervision, transparent procurement, audits

Local control (the 1987 “Bamako” Initiative to decentralize health decision making to local levels; decentralization of health in Ceara, north-east Brazil)

Contracting out to private providers

Community voice & monitoring

Governance in Health: An illustration

Danny Leipziger,

Mapping Health Sector Vulnerabilities Addressing Corruption in the Delivery of Essential Drugs

Manufacturing

Registration

Selection

Procurement

Distribution

Prescription & Disbursement

Production of sub-standard drugs

Lengthy procedures with weak legal framework

Warehouse theft

Biased prescriptions (info asymmetry between doctor/

pharmacist & patient)

Under-inclusion or over-inclusion

“Tailor fit” drug specifications

Vulnerabilities in …Vulnerabilities in … … … some ways to combat some ways to combat these vulnerable points …these vulnerable points …

Random inspections

Monitoring based on transparent & uniform

standards (WHO prequal list)

Media coverage of drug selection committee meetings

Competition & Transparency

Tracking systems/third party

monitoring

User surveys

Source: J. Edgardo Campos and Sanjay Pradhan, The Many Faces of Corruption: Tracking Vulnerabilities at the Sector Level, The World Bank, 2007

Danny Leipziger,

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1990 1991 1993 1994 1995

Equiv. US$ per student

Intended grant Actual grant received by primary school (means)

2001

Source: Uganda Public Expenditure Tracking Surveys; Source: Reinikka and Svensson (2001), Reinikka and Svensson (2003a)

Public Expenditure Tracking Surveys (PETS) in Education Dollars in Uganda

Public info campaign

The power of transparency & monitoring:

Over 80% not reaching schools

Danny Leipziger,

International PETS evidence: significant share of intended resources

do not reach the frontlineCountry Year Sample Leakage Estimate

Ghana 2000 200 Clinics 80% Non-Salary

Ghana 2000 200 Schools 49% Non-Salary; 35% Salary (Primary)52% Non-Salary, 25% Salary (Secondary)

Honduras 2000 805 staff; 35 Clinics

2.4% of all workers on the payroll considered ‘ghosts’. Absenteeism estimated at 27%. 5.2% of workers were not actually in the assigned post but had moved to other location

Madagascar 2003 185 Schools 16-29% of cash transfers

Papua New Guinea

2002 214 Schools 16-29% of subsidies

Peru 2001 120 municipalities

Leakage in ‘Glass of Milk’ program estimated at 71%

Tanzania 1999 36 Clinics Leakage of non-salary funds est at 41%

Tanzania 1999 45 Schools Leakage of non-salary funds est. at 57%

Uganda 2000 155 Clinics Leakage of specific drugs and supplies est. at 70%

Uganda 1999 250 Schools 83% in 1993; 22% in 1996

Source: World Bank (2005) PETS Review (Illustrated in prior slide)

Danny Leipziger,

Philippines Textbook Delivery Tracking: DeptED & G-Watch Alliance

Reform-minded technocrats in Department of Education requested G-Watch to track production & distribution of textbooks to schoolsIn 2002, 40% of textbooks disappeared

The Partnership for Transparency Fund (PTF, partially funded by the Bank) supported G-Watch effortIn 2006, 6,000 Boy & Girl Scouts recruited to monitor delivery at school levelCoca-Cola assisted delivery in many communitiesResults: Successful delivery of over 95% of textbooks, saving hundreds of thousands of dollars

Danny Leipziger,

2005 Ad

The Textbook Count project: A partnership that includes 6,000 boy/girl scouts, the government, donors, civil society … delivered by Coca Cola trucks

Danny Leipziger,

Media

Private Sector

Municipal Government

Military

State (Bureaucracy)Political Parties

Civil Society

International Legislative Branch

Judiciary

1

The Case of Montesinos in Peru

Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000

Vladimiro Montesinos

Alberto Fujimori

Entrenched corruption networks:

Danny Leipziger,

PSR lending accounted for $2.3 billion per year from FY00-07

Public financial management (PFM) is in more than 80% of these operations and accounts for 48% of this spending

Civil service reform is in more than half of these operations and accounts for 33% of PSR spending

Others: tax administration, justice sector, and anti-corruption

Source: Public Sector Reform: What Works and Why? An IEG Evaluation of World Bank Support, The World Bank, 2008

Public Sector Reform is core to our business

Danny Leipziger,

1. Improve results in LICs and

Fragile States

Mainstream political economy into PSM AAA products and project preparation

Roll out reform ‘platforms’ in PFM and extend to civil service reform

Strengthen central finance agencies – our key interlocutor and frequent driver of reform

Mainstream political economy into PSM AAA products and project preparation

Roll out reform ‘platforms’ in PFM and extend to civil service reform

Strengthen central finance agencies – our key interlocutor and frequent driver of reform

2. Target products to MICs

Create a global excellence practice in results-based public management

Roll out peer-learning, with benchmarking

Create a global excellence practice in results-based public management

Roll out peer-learning, with benchmarking

3. Monitor for results

Improve civil service reform analytics based on internationally accepted set of actionable indicators

Continue to implement PEFA, including second round

Improve civil service reform analytics based on internationally accepted set of actionable indicators

Continue to implement PEFA, including second round

4. Strengthen our capacity & knowledge

Strengthen capacity and create career stream to scale up work on country procurement reform

Invest in our thinking and learn from what works and why

Strengthen capacity and create career stream to scale up work on country procurement reform

Invest in our thinking and learn from what works and why

Cementing the Bank as leader in Public Sector Management

Danny Leipziger,

CAS level

South Sudan: GAC for CAS diagnostic on Civil Service Reform, Decentralization, Anticorruption

Sector level

Bangladesh PER

Bolivia: IGR on CSR & Decentralization

6 AFR & 4 EAP countries: politics around the value chain in extractive industries (including revenue collection & expenditure)

Project level

Mongolia, Philippines: Stakeholder Analysis on PFM, AC

Mainstream PE into PSM AAA products & project preparation

Source: See “Study of measures used to address weaknesses in Public Financial Management systems in the context of policy-based support,” by Peter Brooke, at www.pefa.org

Platform 1A credible budget delivering a reliable and predictable resource to budget managers

Platform 2Improved internal control and public access to key fiscal information to hold managers accountable

Platform 3Improved linkage of priorities and service targets to budget planning and implementation

Platform 4Integration of accountability & review processes for both finance & performance management

Enables a basis for account-

ability

Enables focus on what is done with

money

Enables more accountability for

performance management

Cambodia – Sequence of Platforms

First in Cambodia, a platform-type approach is being rolled out in Sierra Leone, Niger and Uganda

‘Platforms’

Improve results in LICs & Fragile States

http://www.pefa.org/

Danny Leipziger,

The GAC Strategy From Country Strategies to Development Outcomes

Country Strategies (CGAC)

Demand Side

Country Systems

Development Outcomes: Services, Regulations, Control of Corruption

GAC in Sectors

GAC in Projects

Danny Leipziger,

Continue roll-out of PEFA PFM Performance Report (PFM-PR)

Public Expenditure & Financial Accountability

(PEFA)

Monitor for results

• The PFM-PR provides an overview of the performance of a country’s PFM system

• As of November 1, PEFA’s PFMPR has been utilized in more than 100 countries, of which 61 are IDA borrowing countries

• Disclosure: 42 assessments are now available on the external website (www.pefa.org)

• While the majority of assessments to date have been led by the Bank, 22 other development agencies have participated

Danny Leipziger,

Fiscal leakages – definitions & impactsLeakage Definitions

The gap between hypothetical/potential revenues and actual collectionsThe gap between intended and actual expenditures, e.g., for front-line service delivery units such as schools and clinics

Leakage ImpactsLess resources to meet development objectives through public expenditures and investmentDistortion of expenditure patternsDistortionary and worsened regressive domestic revenue collection structurePublic capital stock that is lower in quality and quantity

PolicyWeak

Sources of Revenue Leakages

Tax Evasion

Tax Avoidance

Policy Shadow Economy

Weak Admin Capacity

Corruption

Danny Leipziger,

Major Program Major Program AreaArea

Illustrative Areas of Bank Intervention Examples of Bank InterventionsEnabling

Environment Engagement with

Non-Central Government Actors

I. Build-in participatory prioritization of policies & public spending

-Participatory poverty reduction strategies (PRSP) as basis for Bank programs in IDA countries-Notice &

comment on draft policy legislation

-Facilitation of PRSP consultative processes -Participatory nat’l and

local budgeting

Investment OperationsRural Poverty Reduction Project – Rio Grande do Norte (Brazil); Third Social Action Fund (Malawi) Development Policy LendingArmenia SAC IV; Laos PRSC1; Timor-Leste Consolidation Support Program Policy Grant, Vietnam PRSC (I to IV)

II. Strengthen transparency & oversight over the use of budgetary resources

-E-procurement-Improving quality

and transparency of national budget systems

-Supreme Audit Institution capacity-Parliamentary Accounts

Committees-Civil society monitoring of

procurement-Participatory Public

Expenditure Reviews-Expenditure Tracking

Studies (PETS)

Investment OperationsPublic Procurement Reform Project (Bangladesh)

Development Policy LendingHaiti Economic Governance Reform Operation I and II

What can task managers do to improve efficiency, accountability & governance?

Five illustrative areas:

Adapted from the Bank’s GAC Strategy, “Strengthening World Bank Group Engagement on Governance & Anticorruption,” March 21, 2007. See: www.worldbank.org/publicsector

Danny Leipziger,



Environment Engagement with

Non-Central Government

Actors

III. Integrate user participation & oversight in service provision

Reforms to empower users (parental participation in schools, water users associations, community conservation groups)

- Strengthening capacity of user groups

- Service delivery scorecards

Investment Operations

Andhra Pradesh District Poverty Initiatives Project (India); Initiative for Human Development Support Project (Morocco);

Development Policy Lending

Brazil PHDSRL I; Georgia PRSC; Peru PSRL III

Ethiopia, Protection of Basic Services

IV. Strengthen participatory local governance

-Intergovernmental reforms to realign assignment of resources and responsibilities;-Resources for

community based infrastructure

-Local government capacity, including in participatory processes-Facilitation of

community-based decision-making on local public infrastructure priorities


Community Works 2 Project (Albania); Local Governance Support Project (Bangladesh); Capacity Building for Decentralized Service Delivery (Ethiopia); KDP (Indonesia);


Sierre Leone ERRC III


Danny Leipziger,



Environment Engagement with Non-

Central Government Actors

V. Strengthen other formal oversight institutions

- Administrative appeals

- Participatory regulatory impact assessment

- Publishing income & asset declarations

- Judicial & public defenders capacity

- Ombudsmen

- Parliamentary capacity development


Judicial Reform Project (Guatemala); Institutional Reform and Capacity Building Project (Kenya); Legal & Judicial Other

WBI Parliamentary

Strengthening Program

VI. Other actions (Freedom of Information; regulatory framework, Media, CSOs)

-Right to information (RTI)-Enabling legal and regulatory framework for civil society and media

-Media capacity development-Other civil society capacity

development


Bangladesh DSC III

Other

WBI Media Program

Community Radio Initiatives

Partnership for Transparency Fund


Q & A

The World Bank

Danny Leipziger,

Vulnerabilities: Identify & manage risksBuild-in upstream fiduciary controls in design & implementation; strengthen transparency, oversight, participation & 3rd party monitoring (social accountability)

Politics: Understand the underlying incentives

Assess the underlying political economy aspects & drivers of decision-making esp. in the context of a particular operation

Institutions: Strengthen institutional accountability to help public systems deliverStrengthen public financial management, procurement & human resource management systems, & track the use of public expenditures


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