Miguel Schloss November 3, 2016
Agenda There is no such thing as a free lunch Milton Freedman Governance: why and what for The approach: where s the problem Efforts to-date: from diagnosis to action Implications and lessons for the future 2
S Weak governance normally associated with: More costly public investments Lower government revenues Lower operations & maintenance expenditures Lower resource surpluses Policy distortions normally involve: Foreign exchange overvaluation Loss of competitiveness of nonextractive sectors Please effect incremental recurrent expenditures Diminishing human capital formation Poor economic performance 3
Agenda You cannot fish with a tennis racket Nicolás Eyzaguirre! Governance: why and what for! The approach: where are the problems! Efforts to-date: from diagnosis to action! Implications and lessons for the future 4
BRIBERY HIGH Controlling Bribery and Civil Liberties D Bribery (GCS) LOW BRIBERY CHN r=0.67 VNM AGO KEN CMR IDN NGA MOZ EGY TZA UGA UKR CIV JOR ETH MEX TUR BRA ZWE BFA MWI GHA MYS MAR ZMB SVK PER TWN SWZ THA NIC GTM PHL RUS COL IND TUN SGP LSO ZAF HND VEN GRC ARG KOR NAM MUS ISR POL HUN CZE FRA ITA CHL JPN DEU CRI ESP USA GBR DNK ISL PRT BEL CHE NLD NZL IRL SWE AUT AUS CAN LUX FIN NOR LOW Civil Liberties (Freedom House) HIGH 5
6 Bribery vs. Civil Service Professionalism BGR CZE SVK KAZ BRA CAN CHE CHL CHN COL CRI CZE DEU DNK ESP FIN FRA GBR GRC GTM HKG HND HUN IDN IND IRL ISL ISR ITA JOR JPN KOR LUX MEX MYS NIC NLD NOR NZL PER PHL POL PRT RUS SGP SLV SVK SWE THA TUR TWN UKR USA VEN VNM ZAF ZWE r=0.86 Civil Service Professionalism Bribery HIGH LOW LOW HIGH D
7 Corruption and Regulatory Discretion ARG AUS AUT BEL BRA CAN CHE CHL CHN COL CRI CZE DEU DNK ESP FIN FRA GBR GRC HKG HUN IDN IND IRL ISR ITA JPN KOR LUX MEX MYS NGA NLD NOR NZL PHL POL PRT RUS SGP SWE THA TUR TWN USA VEN VNM ZAF r=0.76 Regulatory discretion (GCS) Corruption High corruption Low corruption Low High D
Unofficial Economy and Corruption Index Unofficial economy as percent of GDP D BOL 60% PER PAN GTM UKR HND 40% LVA HUN GRC BGR URY BRA ECU RUS COL VEN MEX 20% SWE NLD CAN DNK GBR NOR DEU IRL CHE USA AUT CRI CHL PRT ESP FRA EST JPN ITA BEL POL CZE SVK ROM ARG BLR r = 0.79 0% Low corruption Corruption High corruption 8
9 Corruption and Rule of Law ZWE ZMB ZAR ZAF VNM VEN USA URY UGA TZA TWN TUR TUN THA SYR SWE SVK SGP SAU RUS ROM QAT PRT POL PHL PER PAN PAK OMN NZL NOR NLD NGA MYS MMR MEX MAR LKA LBY KWT KOR KEN JPN JOR ITA ISR IRQ IRN IRL IND IDN HUN HKG GRC GHA GBR FRA FIN ESP EGY ECU DZA DNK DEU CZE CRI COL CMR CIV CHN CHL CHE CAN BWA BRA BOL BHR BGR BGD BEL AUT AUS ARG ARE AGO r=0.82 Rule of Law (ICRG) S&P-DRI Corruption Index LOW HIGH LOW HIGH D
S Bribers Payers Index YEAR 1 1 YEAR 2 YEARYY Y 10
11 S
Role of governance countries with significant extractive industries tend to have low rankings in governance indicators 90th 100th percentile 75th 90th percentile 50th 75th percentile 25th -50th percentile 10th 25th percentile 0th 10th percentile 12
Agenda Sunlight is the best disinfectant U.S. Supreme Court Justice L. Brandeis! Governance: why and what for! The approach: where s the problem! Efforts to-date: from diagnosis to action! Implications and lessons for the future 13
Multipronged Strategy for D Combating Corruption Public Oversight: Parliamentary Oversight Civil society and media Power of data /Surveys 14 Independent agency/ngo
D The Response Corruption 15
Governmental Actions Sectoral Codes Business & Professional Codes UN Convention Inter-American Convention Asia-Pacific Action Plan OECD Convention for Combating Bribery Foreign Officials Integrity System Sourcebook (J. Pope) Wolfsberg Global Anti-Money-Laundering - Banking EITI; Natural Resource Charter (Mining) TI Business Principles and Global Compact Intl. Chamber of Commerce ICC Rules World Bank Gov. & Anti-Corruption Prog. & Proc. Guidelines IBA (lawyers), IFAC (accountants) codes 16
Walking the talk of Codes of Conduct! Unequivocal, hands-on commitment by top management! Clear policy statements and detailed guidelines prohibiting employees or third parties giving anything of value! Internal controls, record keeping, disclosure and strict enforcement arrangements! Independent feedback loops, audits, contestation arrangements, protection of whistleblowers 17
Agenda Everything is in the execution Napoleon Bonaparte! Governance: why and what for! The approach: where s the problem! Efforts to-date: from diagnosis to action! Implications and lessons for the future 18
! Focus on substance as much, if not more, than on process not just laws, regulations, policies and institutional arrangements, but also incentives, actions, leveling playing field! It takes three to tango emphasize incentives structures, inclusive institutions and parties seemingly peripherally involved who can play critical and often leading roles in enabling or constraining corruption! Emphasis on fact finding and not symptoms focus on ground-level, inside-out analysis to diagnose problems and develop solutions! A customized and adaptable approach fit and adapt to unique corruption challenges in country, and able to evolve as conditions change 19
The need for continuous iterations to arrive at good fits! This is work in progress the best approach will be adaptive and iterative, with continued improvements! This would require a shift of emphasis from replicating good practices towards designing good fits! Have guidelines more than rules the emphasis is on probing, figuring out how specific institutions work, identifying critical vulnerabilities, and crafting a strategy from the ground-up! This demands interactive approach to address problems corruption, governance, etc. is unwieldy, often times pervasive, and dynamic involves continuing adaptive approaches, emphasis on systemic issues and cross-sector teams, new skills/competencies. 20