Mainstreaming Governance and Anti-Corruption in the CAS and Operations: A Guide for Country Teams with Country Applications

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Mainstreaming Governance and Anti-Corruption in
the CAS and Operations A Guide for Country Teams
with Country Applications
By Vinay Bhargava Senior Advisor, PRMPS and EXT

Presentation at the Core Course on Public Sector
Governance and Anti-corruption April 23-27,
2007 The World Bank
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Outline of presentation

• GAC practices in CASs A retrospective
  (FY99-06)
• What will be done differently in CASs
  Expectations under the new strategy
• How To Mainstream GAC in CASs A Suggested Five
  Step Approach

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FY99-06 Main Findings and Conclusions

• Explicit discussion of GAC issues in CASs , as
  required under the guidelines, has become
  mainstream.
• Increasingly the discussion of GAC issues in CASs
  is grounded in the Banks AAA.
• Helping countries with governance and
  anticorruption has become a regular feature of
  the Banks assistance. About 90 CASs (FY99-06)
• GAC related triggers used in about 80 of the
  CASs.
• Increasingly CASs are discussing risks from
  corruption to the Bank financed projects.
• Coordination with other donors in GAC has become
  a regular feature of CASs.

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FY06 CASs Current Practices and Areas for
Improvement

• FY06 CASs were better than earlier years.
• Several potential areas for lifting the game.
• DIAGNOSIS In FY06 CASs CFAA,CPAR and PER main
  sources. Rare to see
• See Governance assessment/survey as the source
• See Relationship between GAC and growth
  discussed
• Find non-government checks and balances
  institutions discussed
• See an explicit connection between diagnosis and
  prescription

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FY06 CASs Current Practices and Areas for
Improvement ( Continued)

• Entry Points
• Building capable and accountable states
  dominates
• Half the CASs supported demand side of governance
  (transparency, CSOs , private sector)
• Assessment and Mitigations of Risks
• Only half of the CASs assessed risks to Bank
  operationsand only 30 discussed reputational
  risks.
• Majority did not assess risk of deterioration but
  75 specified GAC related triggers
• Main mitigation strategy Fiduciary controls and
  social accountability mechanisms

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Moving Forward What Will the World Bank do
Differently?
Scale up governance work where it matters most
for development alleviate governance
constraints to poverty reduction
Strengthen country systems while enhancing
anticorruption measures in WB operations a/c
action plans enhanced disclosure, participation
monitoring
Systematically scale up engagement with private
sector industrialized countries to tackle the
supply side of corruption
Work with donors other intl actors to ensure a
harmonized approach collective action based
on respective mandates comparative advantage
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What will be done differently in CASs ?
Expectations under the new GAC strategy.

• Explicit consideration of (based on improved
  diagnostics)
• GAC challenges and adequacy of governments
  program
• Risks posed by GAC challenges to the development
  and the Bank
• Ways to involve private sector and accountability
  mechanisms
• Stay engaged but tailor each CAS to Country
  Circumstances
• Weak governance but strong government GAC program
• Weak governance but uneven government commitment
• Most poorly governed settings
• Course corrections during the CAS implementation
  with the Boards involvement.
• Source guiding principles 3-6 and pages 11-17 of
  the GAC Strategy.

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How To Mainstream GAC in CASs? A Suggested
Five Step Approach

• Take stock of GAC landscape and legacy including
  the constraints GAC poses to growth and poverty
  reduction.
• Formulate C-GAC strategy and entry points
  suitable for the country GAC challenges and
  government commitment.
• Assess and mitigate risks (fiduciary and
  reputational) to the Banks proposed engagement.
  
• Formulate partnership (including coalitions),
  consultations and communication plan.
• Develop results framework including the M and E
  arrangements and GAC related triggers (as
  applicable).

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Step 1 Stock taking Objectives

• Determine adequacy of diagnostics (commission
  more?)
• DPR, ICA, IGR, GAC diagnostic surveys, Doing
  business
• PEFA, PER, CPAR, CFAA, ROSC, Country GAC
  Assessment
• DFID Driver of Change, TI- National Integrity
  Surveys, TI- Global Corruption Barometer, Global
  Integrity country report, OECD-DAC-MDB Joint
  survey, External intelligence sources
• Determine GAC as constraint to growth and poverty
  reduction
• Assess country circumstances faced.
• Weak governance but strong government GAC program
• Weak governance but uneven government commitment
• Most poorly governed country setting.

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Step 1Stock Taking A check list

• Aggregate and disaggregate governance indicators
  (e.g., KKZ, CPIA, TI, Global Integrity, Doing
  Business, ICA, Country client survey)
• Political economy of GAC reforms and degrees of
  freedom for action
• GAC as constraint to growth and poverty
  reduction Summary findings of diagnostics and
  evaluations (AAA),
• Government strategy and commitmentcurrent and
  historical
• Inventory and efficacy of key check and balances
  institutions in the government (executive/non-exec
  utive branches) and NGOs.
• Key anti-corruption champions/partners (in and
  out of government)
• Legacy issues donor assistance media
  monitoring corruption scandals
• On-going and recent Bank anti-corruption
  activities (last CAS)
• Relatively high risk ministries/public enterprises

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GAC As Constraint on Economic Growth and Poverty
Reduction
Indicator Ratings () Ratings () Ratings () Ratings ()
Indicator Inadequate Inadequate Adequate Adequate
Indicator Not at all Low/Some Middle/adequate High
How well does the CAS
1. Discuss the relationship between weak governance and corruption, and poverty reduction and economic growth. 25 38 31 6
2. Assess weaknesses concentrated in certain sectors or institutions. 25 25 50 0
3. Assess the governments commitment to strengthening governance and tackling corruption. 6 25 56 13
4. Discuss the governments track record of progress with strengthening governance. 13 31 50 6
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Main Sources of Governance Diagnostics in 16 FY06
CASs
Diagnostic Sources/Instruments
Diagnostic Sources/Instruments Frequency
Country Financial Accountability Assessment (CFAA) 9
Public Expenditure Review (PER) 7
Country Policy and Institutional Assessment (CPIA) 7
Doing Business Report 6
Country Procurement Assessment Report (CPAR) 6
Investment Climate Assessment (ICA) 5
Implementation Review (by INT) 4
Report on Standards and Codes (ROSC) 4
Country Economic Memorandum (CEM) 4
Public Expenditure Financial Accountability (PEFA) 2
Governance and Anticorruption Diagnostic Survey 1
Table 2 shows the number of CASs supporting
their governance and corruption diagnostics by
referring to AAAs. AAAs used in other contexts
than governance and corruption diagnostics will
not be included in the table.
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Step 2 Formulate Country specific GAC strategy,
entry points and assistance instruments

• A typical C-GAC program should include the
  following elements
• Objectives and approach to assistance
• Proposed entry points
• Proposed mix of lending and non-lending
  instruments
• Risk assessment and mitigation
• Results framework and triggers

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Step 2-Objectives and Assistance Approach Key
Trade-Offs depending upon situation

• Supporting development vs. managing risks to the
  Bank
• Balancing help to executive branch with help to
  non-government institutions of accountability
• Selectivity in entry points for results and
  credibility vs. comprehensive ( cover the water
  front) approaches
• Balancing lending vs. non-lending mix and
  sequence of assistance.
• Prerequisites and Selectivity in When, Where, How
  and How Much to lend in high risk situations

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Step 2 Practical tips for choosing entry points

• Whether and how effectively the proposed entry
  point is likely to
• Reduce opportunities for corruption
• Increase risk of exposure and punishment
• Increase severity of punishment
• Reduce incentives for corruption
• Increase public demand/pressure for reducing
  corruption
• Strengthen accountability of public sector
  programs
• Be feasible under the political landscape,
  institutional setting, and administrative
  capacity

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Step 2 Helping Countries- Various Entry-Points
Public Management Public financial management
procurement, monitored by PEFA Administrative
civil service reform
Civil Society, Media Oversight
Institutions State oversight institutions
(parliament, judiciary, SAI) Transparency
participation (FOI, asset declaration, user
participation oversight) Civil society media
Private Sector Competitive investment
climate Responsible private sector
Local Governance Community-driven
development Local government transparency Downward
accountability
Governance in Sectors Transparency
participation Competition in service
provision Sector-level corruption issues (EITI,
forestry)
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Step 2 Involve institutions to limit corruption

• Judiciary
• Legislature
• Decentralization with accountability
• Constitutionally independent accountability
  institutions
• Anti-corruption agency
• Election Commission
• Ombudsman
• Supreme audit institutions
• Media
• NGOs

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Beware Sectors and Institutions Most Affected By
Corruption
Source Transparency International Global
Corruption Barometer 2005, http//www.transparency
.org/policy_and_research/surveys_indices/gcb/2005
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Step 2 Choosing the mix of assistance
instruments for an entry point

• Undertaking and disseminating ESW
• Grants for institutional capacity building
• WBI capacity building programs
• Sponsoring in-country dialogue events
• Fitting lending operations with anti-corruption
  plans
• Free standing lending/TA operations in support of
  governance improvement

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Step 2 How to be selective in entry points/
assistance instruments

• Whether and how effectively the CAS interventions
  in the selected entry points likely to
• Reduce opportunities for corruption
• Increase risk of exposure and punishment
• Increase severity of punishment
• Reduce incentives for corruption
• Increase public demand/pressure for reducing
  corruption
• Strengthen accountability of public sector
  programs

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Entry Points and Modalities of FY06 CAS
Interventions
Entry Point Categories Number of Modalities of CAS Interventions Number of Modalities of CAS Interventions Number of Modalities of CAS Interventions Number of Modalities of CAS Interventions
Entry Point Categories AAA TA LEN
Entry Point Categories AAA TA LEN
1. Capable and Accountable States. 9 5 14
2. Increasing Transparency. 5 2 8
3. Participation and Oversight by Civil Society, Media, Communities. 4 2 8
4. Competitive and Responsible Private Sectors. 11 2 8
5. Financial Sector Governance. 15 4 5
6. Supporting Champions and Leaders of Reform. 1 1 3
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FY06 CASs Checks and Balances Institutions
Indicator Discuss Support
B. Does the CAS discuss any of the following checks and balances institution
Freedom of information 31 13
Media 38 0
Civic Society Organizations 44 25
Competitive Private Sector 75 69
Community Participation 56 44
Supreme Audit Institution 63 38
Chambers of Commerce 13 0
Judiciary 50 31
Legislature 50 50
Anti-corruption agencies 38 25
Ombudsman 0 0

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Step 3 Risk assessment and mitigation

• Bank shareholders, partners, and other
  stakeholders expect highest standard of integrity
  and accountability.
• INT investigations show that the Bank needs to do
  more to ensure the proper use of funds.
• New GAC strategy calls for
• Regular risk reviews of project pipeline and
  lending portfolio to identify the subset most at
  risk.
• Elevate review of riskier projects to senior
  levels and focus resources on them.
• Supporting actions by governments investigation
  and prosecution systems/institutions.
• Use of special risk mitigation tools for high
  risk environments

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Step 3 Risk Analysis and Mitigation

• Upstream-assess risks to the Bank
• CPIA ,governance indicators, country knowledge
  assessment, red flags tools
• Country team self assessment validated by
  selected external interviews
• Commonly used mitigation measures to reduce risks
  to the World Bank
• Fiduciary controls (procurement and financial)
  and INT review
• Integrating social accounting mechanisms
• Integrating strong results monitoring framework
• Screening of new projects for corruption risks
  preventive measures
• Increasing transparency (disclosure, hotline)
• Strategic communications and partnerships
• Proactive sanctions enforcement

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FY06 CASs Assessing and Mitigating Risks
Indicator Ratings () Ratings () Ratings () Ratings ()
Indicator Inadequate Inadequate Adequate Adequate
Indicator Not at all Low/Some Middle/adequate High
A. How well does the CAS
1. Assess the reputational risk to the World Bank 87 0 13 0
2. Discussed the risk that the governance environment will deteriorate during the CAS period 13 69 19 0
3. Assess the risk of fraud and corruption in Bank-financed projects 31 25 31 13
4. Include a result based framework suitable for independent monitoring 6 38 50 6
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Risk Mitigation Measures proposed in 16 FY06
CASs
Detection and deterrence
Use of CSOs
Corruption risks as part of CPR
Anti-corruption plans for projects
Disclosure and transparency
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Step 4 Develop partnership, consultation and
communication plan

• Expectation for cooperation among donors
• Partnerships and Coalitions effective tools for
  improving governance
• Instruments joint or parallel (coordinated)
  activities with domestic and/or external partners
  for
• Studies Funding
• Joint statements TA projects
• Coordination group Public dialogue events
• Mass communications Dialogues with govt.
• Regular consultations and communication with and
  for results

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Step 5 Monitor progress and evaluate results

• Set clear and monitorable results and set up M
  and E systems
• Push beyond Disclosure Policy to supply
  information to public that make activities
  transparent
• Set reporting and independent auditing systems
• Put in place social accountability mechanisms
• Encourage beneficiary participation in
  planning/evaluation
• Propose GAC related triggers for lending
  scenarios.

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Step 5 Course Corrections During CAS
Implementation

• In more volatile country settings be prepared for
  mid-course corrections adjusting program in
  response to improvements or deterioration during
  implementation.
• In case of new information (e.g. from INT) about
  confirmed instances of corruption in
  Bank-financed projects the appropriate response
  may be to
• curtail operations and agree on risk mitigation
  measures
• switch scenarios within the existing CAS
• propose a revision in the CAS Progress Report, or
  move to an ISN.
• In the event of demonstrated improvements in
  governance and anticorruption be prepared to
  scale assistance.
• If changes in country circumstances warrant a
  shift in the WBGs approach, an appropriate
  document will be presented to the Board for
  discussion.

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CAS Objective Address the key issue of
governance improvement thru all CAS activities-
set standard for the Bank to address corruption
and governance issues.
Public Sector ManagementFinance and procurement
reformsTax, customs. Public expenditures
reformsEffective Implementation of
Decentralization Local government governance
improvement
Institutional Checks BalancesJudiciary and
legal reformsAnti-corruption institutionsDisclos
ure by public officialsCorruption perception
survey
Entry points
Competitive Private SectorCorporate governance
Anti money laundering
Assistance Approach Four principles applied to
promote good governance thru all
activities.Lending Instruments CDD programs
tax, customs, financial media/CSOs components
loans to districtsAAA Instruments Investment
climate surveys WBI expenditure tracking
governance surveys TA grants for judiciary
parliament . Results and Performance Indicators
Many -See Hand Out.Partnerships Joint AAA and
funding CDF Partnership for Governance Reform
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That is all Thank You Very much for your
attention.