Evolution of Bank policy through mid-2000’s
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Anti-corruption policies, political economy, and the World Bank
Philip KeeferDevelopment Research GroupThe World Bank
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Evolution of Bank policy through mid-2000’s Through to mid-1990s: Corruption a byproduct of
under-development. Address through overall development strategies. Corruption in Bank projects, specifically, a concern.▪ Rely on country systems and normal corporate fiduciary practices.
Mid-1990s – mid-2000s: Corruption a cause of under-development Support anti-corruption policies (e.g., Hong Kong style anti-
corruption boards, asset declaration, etc.). Governance (not specifically corruption) conditions IDA
allocations.
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Evolution of Bank policy: 2006-2007 Corruption THE obstacle to development:
Country corruption an overriding factor in conditioning lending;
Extractive Industries Transparency Initiative (EITI) No consensus on assessing corruption creates
organizational challenges (e.g., ad hoc suspension of country loans).
How to measure corruption and/or governance? Contentious – intellectually and politically. What government policies/actions are definitive
evidence of progress on governance/corruption?
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Evolution, 2007 – present: More fiduciary, less anti-corruption Internal:
Budgets for monitoring corruption in Bank projects significantly increased.
Integrity Vice Presidency created (above and beyond usual corporate practice).
External: Anti-corruption policies in countries: reduced emphasis. Significant attention to public sector financial management -
much less to other aspects of country systems (bureaucracy/judiciary/police/etc).
More attention to political economy (though ad hoc, not clearly actionable).
Some loans still halted on ad hoc basis: Bangladesh Jamuna bridge.
Still no consensus on measuring/conditioning on corruption/governance.
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Fit with research findings? Research: Corruption IS a by-product of over-
arching political economy. Underlying political dynamics simultaneously
influence : Rent-seeking Conversion of public resources into public benefits/public
goods. Implications: Where political incentives are friendly
to corruption ALL development efforts are hard to implement. Above all, though, anti-corruption policies won’t be
enforced; Public sector financial management reforms less likely to
succeed
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Research vs. policy evolution? To mid-1990s:
Reasonable to assume that corrupt behavior a “by-product” of development.
An error to ignore governance/political economy roots of development.
Mid-1990s to mid-2000s Key and important innovation to start paying attention to
governance/political economy. But disconnect in emphasis on anti-corruption reforms
without an integrated strategy to address governance/political economy obstacles to development.
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Research vs. policy? 2006-07
Conditioning loans on corruption a reasonable expression of moral indignation. But . . . An incomplete development strategy. Is donor influence strong enough such that
conditionality on governance leads to governance improvement?
Research ambiguous: We don’t know if fiscal crisis/necessity (the source of efficacy of conditionality) spurs political reform.
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Research vs. policy? 2006-07
Measurement agenda: tension between policy and research Gov’ts to Researchers: how can we improve governance
scores? Res to Gov: Governance is about responsiveness to citizen
interests! But – how to measure responsiveness?
focus on corruption, or government responsiveness to citizens, or citizen ability to act collectively to influence government, or simply policy performance?
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Research vs. policy? 2006-07
Extractive industries (EITI) What we care about is: natural resources turned into
public benefits. EITI accomplishes this only if information is the
missing link in government accountability. In many cases – not the case. Ignores the alternative solution: keep the stuff in the
ground; lump sum transfers.
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Research vs. policy? Now WB expenditures on WB integrity is a response to
external pressures . . . but development impact? Less specific attention to country corruption, per
se, consistent with research. But huge attention to PFM – not supported by research.
More attention to political economy – consistent with research. But still little systematic integration of
governance/political economy into development strategies.
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Persistent dilemma What to do in countries that exhibit severe
governance problems? Corruption? Governance generally? Fragile states?
These countries are the ones where development challenges – poverty, misery – are the greatest.
The biggest tool that donors have is money. But these are the countries where government
action least likely to improve development outcomes.
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Different paradigm? Collective action instead of Good Governance?
Governance = no accountability to citizens. Fundamental issue in accountability: ability of
citizens to act collectively. In weak governance countries:
Political parties underdeveloped. Efforts to organize are undermined.
Removing obstacles to collective action a donor priority? Remove obstacles to formation of civil society
organizations (Tunisia). Community-driven development. Not easy – we need research here!
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Conclusion Focus on corruption as a development issue has
waxed and waned. Growing understanding that political incentives
underlie corruption – and poor public sector performance, generally.
Implication: “supply-side” interventions (anti-corruption, PFM reforms) unlikely to succeed.
More effort needed on “demand-side” – increasing citizen ability to (act collectively to) hold government accountable.