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Global Issues Seminar Series
May 4, 2006
Global Economy: Governance and Corruption
Vinay Bhargava, Director International Affairs, The World Bank
Slide 1: Definition
The World Bank
defines corruption as:
the abuse of public office
for private gain
Slide 2: Corruption is present in all countries in the world—pervasiveness varies
TI 2005 Corruption Perceptions Index
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Slide 3: Consequences—corruption lowers incentives for investment
Slide 4: Consequences—corruption affects the personal lives of citizens and hurts the poor the most
Slide 5: Consequences— corruption undermines institutions
Slide 6: Consequences—corruption undermines trust in institutions
Slide 7: Globalization of the Fight Against Corruption
UN Oil-for-Food Scandal
Slide 8: Globalization of the Fight Against Corruption
UN Oil-for Food Scandal Of $100-billion-plus worth of transactions,
$1.8 billion diverted as illicit payments More than 2,200 companies were involved Illicit kickbacks came from companies and
individuals from 66 countries Illicit surcharges were paid by companies
from or registered in around 40 countries
Slide 9: A Global Consensus for Fighting Corruption
Millennium Declaration adopted by the UN General Assembly in 2000 commits member to good governance nationally and internationally—reaffirmed in Monterrey Consensus of 2002 and 2005 World Summit
NEPAD (2001)—African leaders pledged to fight corruption; G8 matched this with support under G8 Africa Action Plan and at G8 Economic Summit in 2005
European Consensus on Development stresses good governance (European Parliament, Council, and Commission)
Slide 10: Forces Shaping Evolution
of Corruption as a Global Issue Demand: Policies to increase transparency in
public, corporate, and international finance arenas; research supplying credible information
Supply: Anticorruption measures —national and international
Institutions: Speed at which national and international governance institutions mature
Integrated financial systems—harder to monitor; increases risks of corrupt behavior
International TI: CPI (1995-), Source Book, BPI (1999-),
GCR (2001-), GCB WBI (1996-) IFC: Costs of Doing Business and Enterprise
Surveys National
SWS in Philippines Opinion survey in Norway
ADVOCACY
Slide 11: Demand for Controlling Corruption
Slide 12: Disclosure—The Right to Know
Slide 13: Increasing the Supply
of AC Measures ADB-OECD Anti-Corruption Initiative for Asia-Pacific: 2000, 36 members launched, 25 endorsed (2005); 3 pillars
Transparent systems for public service Anti-bribery actions and integrity in business
operations Active public involvement
Anticorruption Institutions National Integrity System: judiciary, regulatory
agencies, ACAs, Ombudsman, media, civil society, etc.
Slide 14: International Actions to Combat Corruption
Ensuring that loans and grants to developing countries are used effectively
Bolstering donor support for reform Reducing the incentives for multinational
businesses to pay bribes Promoting international programs to control
organized crime and the flow of illicit funds Improving the institutional framework for
resolving international disputes
Slide 15: International Actions to Combat Corruption
UNCAC: 133 signed; 30 ratifications to enter into force reached on Sept. 15, 2005—preventive measures, criminalization and law enforcement, international cooperation, asset recovery
OECD Convention Against Bribery: all 30 OECD members and 6 non-members have complied with making it a punishable offense to bribe an official in a host country; as of 2005, only 4 have prosecuted more than 1 case; uses a 2-step peer review system
FATF: national and international policies vs money laundering and terrorist financing; 30 countries + HK, EC, and Gulf states are members
Slide 16: Civil Society Initiatives Transparency International
EITI: 8 countries implementing; 14 more have endorsed; IFIs, donors, mining and oil companies, NGOs included
Global Witness: investigative org to break link between natural resource exploitation and the funding of conflict and corruption—led to demise of Khmer Rouge, now active in Asia and Africa
Global Organisation of Parliamentarians Against Corruption (GOPAC): 400 parliamentarians from 70 countries fighting corruption
Slide 17: Raising International Disclosure Standards in Corporate Sectors International Accounting Standards: 10 countries in
1974 to over 70 countries to date International Chamber of Commerce: published Rules
of Conduct to Combat Extortion and Bribery in 1977 (revised in 1999)
International Organization of Securities Commissions has benchmarks for transparency—members regulate 90% of global securities markets
Global Reporting Initiative: GRI Sustainability Reporting Guidelines released in 2000— now over 800 companies from 80 countries file reports
Slide 18: Raising International Disclosure Standards in Corporate Sectors Publish What You Pay (George Soros, 2002): now a
coalition of over 280 NGOs worldwide Wolfsberg Group: 11 major international banks
published the Wolfsberg Anti-Money Laundering Principles of Private Banking
Partnership Against Corruption Initiative: WEF in 2004 Global Compact: 10th principle against corruption
added in 2004—hundreds of companies have committed to the compact which urges them to lobby for ratification and implementation of the UNCAC and collaborate with other anticorruption efforts
Slide 19: World Bank governance and anticorruption strategy (PW 4/11/06) Country approach
Expand World Bank’s anticorruption work at the country level to support country-partner reforms
Invest in professional expertise Back up teams in the field with governance specialists
Develop strategies in high-risk countries to mobilize all World Bank instruments, loans, grants, research, technical assistance, and private-sector investment to strengthen the fight against corruption
Increase investments in such key areas as judicial reform, civil service reform, the media, freedom of information, and decentralization of public-service delivery
Slide 20: World Bank governance and anticorruption strategy (PW 4/11/06) Implement a new system for minimizing the risk of
corruption in World Bank–funded projects Deploy anticorruption teams in many Country Offices to
work with local institutions like government audit units and anticorruption commissions to protect Bank projects and strengthen public procurement systems
Re-design projects to address the incentives and opportunities to fight corruption right from the start
Example: communities can determine village investments, control funds, and monitor project results
Strategies are published on the Web; Investigations Unit empowered with staff, skills, and resources to detect and follow-up allegations of corruption in Bank-financed projects
Slide 21: World Bank governance and anticorruption strategy (PW 4/11/06) Expand partnerships with stakeholders
Private sector—work with firms and individuals to identify misuse of funds in World Bank–financed private-sector projects
Multilateral development banks—heads agreed on a common approach to the problem
Common strategy to blacklist firms that engage in corruption on MDB projects (WB publishes list)
Share information on these firms Civil society—key to holding governments
accountable; can help ensure that aid dollars flow to communities that they are intended to go to
Slide 22: Role of the World Bank in Combating Corruption In February 2005, the Bank released its first
annual report on corruption and fraud investigations involving Bank-financed projects as well as internal cases
The Bank spends $10 million annuallyon investigations and sanctions—more than all other MDBs combined
The INT has over 50 staff and is larger than any other unit in similar organizations
Among MDBs, the Bank pioneered in the use of voluntary disclosure
Slide 23: Role of the World Bank in Combating Corruption The Bank actively supports international
and inter-agency programs Joined the IMF and the RDBs in reaching a
consensus agreement on the broad policies and practices needed to address corruption within the organizations and in member countries
Partners with institutions for research such as BEEPS with EBRD
WBI research is highly participative; has partnership agreements with nearly 200 organizations from all sectors