Enhancing-Government-Effectiveness-and-Transparency-The-Fight-Against-Corruption (2)

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized GLOBAL REPORT SEPTEMBER 2020 GEaEnnfofdhveaecTrntrnciavminneensgnpetassrency The Fight Against Corruption



EEaGnnfofdhveaecTrntrnciavminneesngnpetassrency The Fight Against Corruption

© 2020 International Bank for Reconstruction and Development / The World Bank Sasana Kijang, 2 Jalan Dato Onn, Kuala Lumpur 50480, Malaysia Some rights reserved. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution: Please cite the work as follows: World Bank (2020) “Enhancing Government Effectiveness and Transparency: The Fight Against Corruption”, World Bank, Washington, DC. Translations: If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations: If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content: The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third- party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: [email protected].

GLOBAL REPORT SEPTEMBER 2020 Revised on October 3, 2020 EGaEnnfofdhveaecTrntrnciavminneesngnpetassrency The Fight Against Corruption

Table of Contents viii x List of Abbreviations xi Acknowledgements About the Team Leaders xiii Preface xiv EXECUTIVE SUMMARY 1 1 SETTING THE STAGE 6 17 Jim Anderson 18 Rationale and Structure of the Report 28 Trends, Measurement, and Emerging Issues 34 40 PART I: CONFRONTING CORRUPTION IN SECTORS AND FUNCTIONS 52 62 Chapter 1: Public Procurement 76 84 Joel Turkewitz 94 Case Study 1: Strengthening Competitive Procurement in Somalia 103 Fiona Davies, Carrie Farley and Geoff Handley 108 Case Study 2: e-Procurement Reform in Bangladesh 114 Joel Turkewitz, Mihaly Fazekas and Zafrul Islam 122 Case Study 3: Reforming Procurement and Political Party Financing in Chile 135 Serena Cocciolo and Joel Turkewitz 140 152 Chapter 2: Public Infrastructure 158 162 Ida Richter Gade and Ian Hawkesworth 168 Case Study 4: Accountability in Infrastructure: The CoST Approach (Thailand, Ukraine, Honduras) Alexandra Habershon, Soren Kirk Jensen and Marcela Rozo Case Study 5: Managing Public-Private Partnership (PPP) Renegotiation David Bloomgarden Case Study 6: Open Contracting Reforms in Colombia Ida Richter Gade, Nicolas Penagos and Sophie Brown Chapter 3: State-Owned Enterprises Sunita Kikeri and Ruxandra Burdescu Case Study 7: Enhancing SOE Accountability in Colombia Ruxandra Burdescu, Ana Maria Palacio Jaramillo and Fanny Weiner Case Study 8: SOE Reforms in Brazil following “Lava Jato” Kjetil Hansen and Ruxandra Burdescu Case Study 9: SOE Reforms in Angola Kjetil Hansen, Soren Kirk Jensen and Ruxandra Burdescu Chapter 4: Customs Administration Odd-Helge Fjeldstad, Ernani Checcucci Filho and Gaël Raballand Case Study 10: Customs Reforms in Madagascar Andreas Henrik Fiebelkorn Case Study 11: Customs Reforms in Afghanistan Anna Custers Chapter 5: Public Services: Land, Ports, Healthcare Jana Kunicova Case Study 12: Land Administration Reforms in Rwanda Thomas Shipley Case Study 13: Collective Action for Reforms in Nigeria Ports Thomas Shipley Case Study 14: Reforms in the Health Sector in Ukraine Sarah Steingrüber iv Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

TABLE OF CONTENTS PART II: KEY INSTRUMENTS FOR FIGHTING CORRUPTION 177 178 Chapter 6: Open and Inclusive Government 186 192 Stephen Davenport and Emily Kallaur 202 Case Study 15: Boosting Accountability through Participatory Budgeting in Kenya 214 Blair Cameron 224 Case Study 16: Enhancing Social Accountability in Ethiopia 232 Blair Cameron 238 248 Chapter 7: GovTech 266 268 Kai Kaiser 275 Case Study 17: Digital Transformation in Andhra Pradesh, India Pooja Churamani, Shashank Ojha and Kai Kaiser 289 290 Chapter 8: Asset and Interest Declarations 304 316 Dmytro Kotlyar and Laura Pop Case Study 18: Reform of Asset and Interest Disclosure in Ukraine 332 Dmytro Kotlyar and Laura Pop Case Study 19: Enhancing Effectiveness of Asset Declarations in Romania 340 Laura Pop, Laura Stefan and Silviu Popa Chapter 9: Beneficial Ownership Transparency Alexandra Habershon, Solvej Krause and Zosia Sztykowski Chapter 10: Exchange and Collaboration with Tax Administrations Prof. Jeffrey Owens, Joy Waruguru Ndubai and Siddhesh Rao Case Study 20: Inter-agency Collaboration to Detect Corruption Prof. Jeffrey Owens, Joy Waruguru Ndubai and Siddhesh Rao Case Study 21: Sharing Evidence with Joint Prosecution Teams Prof. Jeffrey Owens, Joy Waruguru Ndubai and Siddhesh Rao PART III: ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION Chapter 11: Anti-Corruption Agencies Alan Doig and Francesca Recanatini Chapter 12: Supreme Audit Institutions Seongjun Kim, Donald Mpande, Pooja Churamani, Manoj Jain and Carmen Loo Chapter 13: Justice System Klaus Decker COUNTRY SPOTLIGHT: MALAYSIA’S APPROACH TO FIGHTING CORRUPTION Firoz Abdul Hamid and Jeevakumar Govindasamy CONCLUSIONS Enhancing Government Effectiveness and Transparency: The Fight Against Corruption v

TABLE OF CONTENTS List of Boxes Box A Corruption Risks Stemming from COVID-19 2 32 Box 1.1 Timeline on Somali National Army Rations Re-tendering 58 63 Box 2.1 IFC’s Integrity Due Diligence (IDD) 64 66 Box 2.2 The Evolution of Multi-Stakeholder Approaches to Accountability in Infrastructure 81 82 Box 2.3 The Role of the CoST Secretariat 104 106 Box 2.4 The Open Contracting for Infrastructure Data Standard (OC4IDS) 109 110 Box 2.5 Transparency in Renegotiation for Public-Private Partnerships 130 131 Box 2.6 Present Value of Revenue Contracts in Infrastructure Partnerships 143 180 Box 3.1 About Empresas Públicas de Medellin 183 188 Box 3.2 Power Sector Reforms in Colombia and the Success of EPM 204 205 Box 3.3 The Impact of Operation Car Wash across Latin America 235 250 Box 3.4 Brazil’s National Strategy against Corruption and Money Laundering (ENCCLA) 255 257 Box 4.1 Standard Operating Procedures and Internal Audit Capacities in Latin America 267 319 Box 4.2 Comprehensive Modernization of Customs: The Uruguay case 321 322 Box 4.3 Donor Support to Afghanistan Customs Department 323 325 Box 6.1 What Does Open Data Have to Do with Open Government? 326 Box 6.2 The Extractive Industries Transparency Initiative (EITI) Box 6.3 The 10-Step Process to Implement Participatory Budgeting Box 7.1 Brazil’s Tribunal of Accounts Robots Box 7.2 Singapore’s SkillsFuture Program and Fraud Detection Box 8.1 Scope of Asset and Interest Disclosure Form Box 9.1 What is a Beneficial Owner? Box 9.2 The Beneficial Ownership Data Standard (BODS) Box 9.3 Key Data Questions for Policy Makers to Consider Box 10.1 The Extent of Corruption Box 13.1 Romania’s National Anti-Corruption Directorate (DNA) Box 13.2 Specialized Anti-Corruption Courts: Political Commitment or Implementation Gaps Box 13.3 Specialized Anti-Corruption Courts in the Philippines and Indonesia Box 13.4 International Cooperation and Mutual Legal Assistance (MLA) Box 13.5 Court User and Multi-Stakeholder Justice Surveys Box 13.6 Trade of Influence in the Judiciary vi Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

TABLE OF CONTENTS List of Figures Figure A Percentage of Enterprises making Informal Payments (Gifts) to Tax Inspectors, among those 9 with Contact (89 Countries) 38 Figure 1.1 Trends of Electronically Administered Tenders and their Value 39 62 Figure 1.2 Change in Corruption Risk Indicators as a result of the e-GP Intervention 62 65 Figure 2.1 Core Elements of the CoST Approach 68 69 Figure 2.2 CoST Goals benefit from Synergies with other Multi-Stakeholder Initiatives 70 79 Figure 2.3 Increase in number of Projects fulfilling CoST Data Disclosure Requirements (2015-2019) 137 138 Figure 2.4 Disclosure and Assurance of Infrastructure Projects in Thailand 142 144 Figure 2.5 Multi-Stakeholder Working at the Project Level 155 179 Figure 2.6 Making Infrastructure Data Useful for Planners, Implementers and Policy Makers 235 243 Figure 2.7 Causes of Renegotiation, based on 48 Projects that experienced Renegotiation Figure 4.1 Excessive Interaction between Inspectors and Brokers Figure 4.2 Evolution of Average Delays Figure 4.3 ACD Presence and Main Transit Trade Routes Figure 4.4 Customs Revenue (in USD) Figure 5.1 Disaggregating Corruption Typology within Service Delivery Sectors Figure 6.1 Unpacking Open Government Figure 8.1 Implementation Timeline of Electronic Asset and Interest Disclosure System in Ukraine Figure 8.2 Final Findings of ANI Reports between 2008 and 2019 List of Tables Table 2.1 GIH Study: Prevalence of Renegotiation by Region 78 Table 4.1 Revenues Doubled in 4 Years 138 Table 5.1 Corruption in Public Services: Estimating the Magnitude of the Problem 154 Table 7.1 Public Sector Fraud and Corruption Domains 206 Table 7.2 Major Technology Trends for Public Sector Fraud and Corruption 207 Table 7.3 Navigating GovTech for Public Sector Fraud and Corruption 212 Table 7.4 AP’s Transformational Technologies 215 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption vii

List of Abbreviations 1MDB 1 Malaysia Development Berhad EACC Ethics and Anti-Corruption Commission (Kenya) ABMS Anti-Bribery Management System EEEB Empresa de Energia Electrica de Bogota  ACA Anti-Corruption Agency e-GP Electronic Government Procurement ACC Anti-Corruption Commission EIC Economic Intelligence Council (India) ACCC Auditing in Complex and Challenging Contexts EICE Empresas Municipales de Cali  ACD Afghanistan Customs Department EITI Extractive Industries Transparency Initiative ACE Anti-Corruption Evidence Research Program EIU The Economic Intelligence Unit ACGA The Asian Corporate Governance Association Brazil’s National Strategy Against Corruption and Money ACT Anti-Corruption Organization of Thailand ENCCLA Laundering, ADELE Analysis of the Dispute in Electronic Bids Economic and Organized Crime Office AEOI Automatic Exchange of Information EOCO Empresas Públicas de Medellin AfDB African Development Bank EPM Enterprise Resource Planning AG Auditor General ERP Ethiopia Social Accountability Program 2 AI Artificial Intelligence ESAP 2 Environmental, Social and Governance AID Asset and Interest Disclosure ESG European Union AI-ML Artificial Intelligence-Machine Learning EU Financial Action Task Force ALICE Analysis of Bids, Contracts and Public Calls FATF Federal Bureau of Investigation (USA) AML Anti-Money Laundering FBI Foreign Corrupt Practices Act AMLD5 Fifth Anti-Money Laundering Directive FCPA Fragile, Conflict and Violence ANI National Integrity Agency (Romania) FCV Financial Expertise Centre (Netherlands) AP Andhra Pradesh (India) FEC Federal Land Development Authority APIs Application Programming Interfaces FELDA Financial Governance Committee (Somalia) ASYCUDA Automated System for Customs Data FGC Financial Intelligence Centre AUSTRAC Australian Transaction Reports and Analysis Centre FIC Fédération Internationale de Football Association BIAC Business and Industry Advisory Committee FIFA Treasury Department’s Financial Crimes Enforcement Network BODS Beneficial Ownership Data Standard FinCEN Financial Intelligence Unit CAC Corporate Affairs Commission (Nigeria) FIU Financial Management Information System CAG Comptroller & Auditor General FMIS Freedom of Information CBi Convention on Business Integrity FOI Fundo Soberano de Angola CCAGG Concerned Citizens of Abra for Good Government FSDEA Ghana Audit Service Colombia Compra Eficiente (National Public Procurement GAS Gross Domestic Product CCE Agency) GDP General Data Protection Regulation Account Register of National Financial System GDPR Grey Economy Information Unit (Finland) CCS Closed-circuit television GEIU National Centre for Governance, Integrity and Anti-Corruption CCTV Community Driven Development GIACC Global Infrastructure Hub CDD Central Economic Intelligence Bureau (India) GIH Geographic Information System CEIB Chief Executive Officer GIS Government-Linked Companies CEO Center of Public Studies GLC Government Technology CEP Comptroller General’s Department (Thailand) GovTech Global Positioning System CGD Corporate Governance and Property Administration GPS The Group of States against Corruption CGPAR Commission on Human Rights and Administrative Justice GRECO Government-Tenderers’ Forum CHRAJ National Council of Justice GTF Income and Asset Declaration CNJ National Copper Corporation IAD Internal Audit Service CODELCO Council of Europe IAS International Budget Partnership COE National Congress of Chile IBP Internal Criminal Judicial Assistance (China) CONGRES Infrastructure Transparency Initiative ICJA Information and Communications Technology CoST Corruption Perception Index ICT International Corruption Unit (UK) CPI Crown Prosecution Service (UK) ICU Integrity Due Diligence CPS Central Procurement Technical Unit (Bangladesh) IDD Independent Evaluation Group CPTU Civil Society Organizations IEG Independent external monitor CSO Cooperation and Verification Mechanism IEM International Finance Corporation (World Bank Group) CVM Department for International Development (UK) IFC Illicit financial flows DFID Digital Impact Alliance IFFs The Institute of Assets Management and State Holdings DIAL National Anti-Corruption Directorate (Romania) (Angola) DNA Disruptive Technology IGAPE Inspectorate-General of the Public Administration DT IGEA viii Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

LIST OF ABBREVIATIONS IIM Malaysian Institute of Integrity PETS Public Expenditure Tracking Survey IMF International Monetary Fund IMF PFM Public Financial Management INTEGRITI Malaysian Institute of Integrity National Anti-Corruption and Money Laundering Training INTOSAI International Organization of Supreme Audit Institutions PNLD Program INVIAS Public Roads Agency (Colombia) Public-private Partnership IoT Internet of things PPP Person of Significant Control IPCMC Independent Police Complaints and Misconduct Commission PSC Quick Response ISSAI The International Standards of Supreme Audit Institutions QR State Audit Institution (Bhutan) ITU International Telecommunication Union RAA Resource-based Loans JKKMAR Jawatankuasa Khas Kabinet Mengenai Anti-Rasuah RBLs National Network of Money Laundering Laboratories KPK Corruption Eradication Commission (Indonesia) Red-LAB Regional Economic Intelligence Council (India) KWAP Kumpulan Wang Persaraan REIC Radio Frequency Identification Trackers KYC Know Your Customer RFID Regulatory Impact Assessment LAPOP Latin American Public Opinion Project RIA Rwanda Natural Resources Authority M&E Monitoring and Evaluation RNRA Right to Information MACC Malaysian Anti-Corruption Commission RTI Brazilian Supreme Audit Institution MACN Maritime Anti-Corruption Network SAI Senior Advocate of Nigeria MAPS Methodology for Assessing Procurement Systems SAN South African Police Service MAT Multi-agency Team SAPS South African Reserve Bank MDA Ministries, Departments and Agencies SARB South Africa Revenue Services MLA Mutual Legal Assistance SARS Society of Engineers (Colombia) MOH Ministry of Health SCI Sistema Electrónico para la Contratación Pública MOI Ministry of Infrastructure (Ukraine) SECOP Serious Fraud Office (UK) MONICA Integrated Monitoring for Acquisition Control SFO Information and Monitoring System for Works and Supervision MOU Memorandum of Understanding Contracts (Honduras) MP Member of Parliament SISOCS Service Level Agreement MPLA The People’s Movement for the Liberation of Angola Scottish Limited Partnerships MSG Multi-stakeholder working group SLA State-owned Enterprise MTMC Ministry of Transparency, Monitoring and Control (Brazil) SLPs Guidance System on Facts and Evidence for the Auditor NACAP National Anti-Corruption Action Plan (Ghana) SOE Standard Operating Procedure NACP National Anti-Corruption Plan (Malaysia) SOFIA Stolen Asset Recovery Initiative (World Bank) NACS National Anti-Corruption Strategy SOP Special Investigation Service (Lithuania) NCA National Crime Agency (UK) StAR NEITI Nigeria’s EITI multi-stakeholder group STT Haji Pilgrims Fund Board NFCC National Anti-Financial Crime Centre TABUNG NGO Non-governmental Organization HAJI Tribunal de Contas da União NHSU National Health Service of Ukraine TCU Transparency International NIC News flow indices of corruption TI Transparency International’s Corruption Perceptions Index NIP National Integrity Plan (Malaysia) TI-CPI Tax Information Exchange Agreements NOC National Oil Companies TIEA Unmanned Aerial Vehicles NPA National Prosecuting Authority (South Africa) UAVs United Kingdom NRRET National Revenue Recovery Enforcement Team (Malaysia) UK Urban Local Bodies NTCA National Tax and Customs Administration (Netherlands) ULB United Nations Convention Against Corruption O&M Operation and Maintenance UNCAC The United Nations Commission on International Trade Law OACP Organisational Anti-Corruption Plan (Malaysia) UNCITRAL United Nations Conference on Trade and Development OC4IDS Open Contracting for Infrastructure Data Standard UNCTAD United Nations Development Programme OCDS Open Contracting Data Standard. UNDP United States of America OCP Open Contracting Partnership USA Technical Unit for Private Investment OECD Organisation for Economic Co-operation and Development UTIP Unexplained Wealth Orders OGP Open Government Partnership UWOs World Customs Organization OIA Official Information Act WCO World Development Report OOP Out-of-pocket Payments WDR Worldwide Governance Indicators- Control of Corruption PEFA Public Expenditure and Financial Accountability WGI-CC World Health Organization PEPs Politically Exposed Persons WHO The Wall Street Journal WSJ Enhancing Government Effectiveness and Transparency: The Fight Against Corruption ix

Acknowledgements The preparation of this report was co-led by Bernard The authors would like to thank the Government of Myers and Rajni Bajpai (task team leaders) from the Malaysia for their support as part of its ongoing joint- World Bank’s Inclusive Growth and Sustainable Finance research partnership with the World Bank Group. Hub in Malaysia. The thematic leads for the report A special thanks to Datuk Dr Anis Yusal Yusoff, include Jim Anderson (Setting the Stage), Joel Turkewitz former Deputy Director General, National Centre for (Procurement), Ian Hawkesworth (Infrastructure), Sunita Governance, Integrity & Anti-Corruption (GIACC), for Kikeri (State-Owned Enterprises), Gaël Raballand his guidance and support for the Malaysia case study. (Customs), Jana Kunicova (Services), Stephen Davenport (Open and Inclusive Government), Kai Kaiser (GovTech), The team is grateful to peer reviewers – Alberto Leyton, Laura Pop (Asset and Interest Declarations), Alexandra Charles Undeland, Knut Leipold, Steve Zimmerman, Habershon (Beneficial Ownership and Infrastructure Sanjay Pradhan, Roland Clarke, Emile Van Der Does Transparency initiatives), Francesca Recanatini (Anti- De Willebois, Jim Brumby, and Clive Harris – for their Corruption Agencies), and Klaus Decker (Justice). Other thoughtful comments and suggestions on either the key team members included Ruxandra Burdescu, Blair concept note and/or the full draft report. The team is Cameron, Ida Richter Gade, and Carmen Loo, who also thankful to all the Country Management Units for provided substantive inputs into multiple chapters providing helpful comments and timely clearances for and/or cases. Chapter 10 was written in collaboration country cases and references in the report. with the WU Global Tax Policy Center at the Institute for Austrian and International Tax Law. Graham Colin- Jones skillfully edited the report, Carmen Loo and Shanta Vincent Pillai provided editorial assistance, and Kane Chong and Francis Sim created the graphic design and layout. Lara Saade provided advice on strategic communications. Helpful inputs on design were also provided by Joshua Foong, Min Hui Lee, and Nick Nam. Moustapha Ndiaye, Special Advisor on Governance, supervised the work. The team worked under the overall guidance of Edward Olowo-Okere, as Director of the Governance Global Practice. Early direction and support were received from Debbie Wetzel, Jim Brumby, George Larbi, and Alma Kanani. The team closely coordinated with Mara Warwick, Achim Fock, and Firas Raad as the management team responsible for the Malaysia Hub. x Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

About the Team Leaders Rajni Bajpai is a Lead Public Sector Specialist at the Bernard Myers is a Senior Public Sector Specialist World Bank. She is currently based in Kuala Lumpur, for the World Bank, based in Washington, DC (as where she leads engagements on Public Sector issues of August 2020). Previously located in the Bank’s with the Government of Malaysia at the World Bank’s Inclusive Growth and Sustainable Finance Hub in Inclusive Growth and Sustainable Finance Hub in Malaysia, he led various engagements on Public Malaysia. Her most recent research includes work Sector Management issues. Mr. Myers’s previous is on public service reform and role of institutions assignments have taken him to over twenty-five in Malaysia’s transition to a high-income economy. countries across Europe and Central Asia, Southeast With over 25 years of experience in development, Asia, the Caribbean, and Africa. His areas of Ms. Bajpai has worked extensively with governments specialization include public investment management, on improving public sector performance. Her areas performance budgeting, medium-term planning, civil of expertise include institutional strengthening, service reform, and functional reviews of the public improving ser vice deliver y, local governance, administration. While based in Asia, Mr. Myers led the budgetary and fiscal reforms, civil service and public Bank’s work with the Public Expenditure Management administration reform. Prior to relocating to Malaysia, Network in Asia (PEMNA), a peer-to-peer knowledge Ms. Bajpai was working in India as the Program Leader exchange network for public finance officials in East for Economic Growth Finance and Institutions, South- Asia. Mr. Myers is a US national with 30 years of Asia Vice Presidency. She led the dialogue at the experience helping governments to enhance their highest levels of government and was responsible for performance. Prior to joining the Bank, he worked for coordinating the work of several teams on the ground. the US Government Accountability Office (GAO) and An Indian national, she holds a Master’s Degree in for the US Treasury’s Office of Technical Assistance. Economics from the Delhi School of Economics and Mr. Myers holds an MBA from Stanford Business an MBA in Finance from International Management School and a Bachelor’s degree in Political Economy Institute. from Princeton University. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xi



Preface Achieving economic growth and shared prosperity in a Emergency responses to the COVID-19 pandemic nation requires public sector interventions across a range have resulted in huge expenditures by governments of domains. And yet corruption – the abuse of entrusted circumventing the standard operating procedures and power for private gain – frequently undermines those approval processes. This may create new vulnerabilities efforts in many of the countries in which the World Bank and leakages that may only come to light after the operates. Although anti-corruption initiatives are often initial containment phase has passed. In the short term, a part of a country’s public administration landscape, procedures that strengthen accountability will have to many of them are insufficient to overcome deep-seated be balanced with the urgent need for governments to corruption as well as public perceptions of corruption. respond to the crisis. Over the medium term, the same policy instruments featured in this report will remain Though an abundance of literature exists on the relevant in the recovery and post-recovery phases. subject of corruption, the World Bank has undertaken a fresh assessment of challenges faced by governments The report is not in tackling corruption, with a focus on instruments and intended to be read from policies that have been effective and why, and how cover to cover and has incremental progress is being achieved in specific been structured in a country contexts. In many cases, the instruments and manner that allows the policy responses are not new, but merit a fresh look reader to easily identify at what impacts policy design and implementation and focus on a thematic of such measures. The report also discusses the area of interest. role of selected institutions and their impact in the fight against corruption, also demonstrated through This reference guide may inspire new innovations and country cases. experiences in the fight against corruption and bring to light areas where further work is needed to sharpen This “compendium” of case studies and country the application of traditional anti-corruption tools. examples is intended as a reference guide to What emerges from the cases is that multiple factors practitioners and civil society organizations working contribute to the impact of anti-corruption efforts, to shape their country’s approach to anti-corruption. It including political leadership, institutional capacity, builds on the existing body of literature, the experiences incentives, technology, transparency and collaboration. of World Bank staff around the globe, and the initiatives Enhanced collaboration with stakeholders within and undertaken in international fora. The report is not outside of government is a critical success factor intended to be read from cover to cover and has been in overall government effectiveness. Since such structured in a manner that allows the reader to easily collaboration involves civil society, the media, the identify and focus on a thematic area of interest. private sector and the country’s citizens, it is clear that strengthening the fight against corruption is a collective Corruption is still rampant in many of the countries responsibility. featured in the report, and examples presented in the report are limited because they do not fully resolve corruption risks. The endeavor is to present a candid picture of the progress and to highlight the limitations and risks of policy reversal. The cases are not “best practice”, but merely a “palette” of examples and approaches that are being tried, and which may be illustrative for other policy makers with similar challenges. While countries that are fragile and conflict- afflicted face persistent challenges in addressing corruption, middle-income countries are not free from their own political economy challenges. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xiii

Executive Summary

EXECUTIVE SUMMARY Introduction News headlines over the last few years have been initially may have limited impact, they could provide an filled with global scandals involving corruption important foundation for future actions. However, these on an unprecedented scale. They touch virtually impacts should be carefully assessed by public officials every continent, from Asia to Africa, Europe, and the and civil society as many high-profile anti-corruption Americas. The scale, magnitude, and sophistication of strategies have proven to be ineffective and only give a the operations has increasingly risen to levels that many veneer of government action. had not considered possible before. Governments are forever in search of new approaches and tools The purpose of this report is to equip public sector that can help identify loopholes and entry points for officials and civil society with a modular set of corrupt activities. While the containment of COVID-19 approaches, entry points and tools that can be and its devasting human and economic impacts have drawn upon and adapted to their specific country more recently been the focus of government actions, context. It is informed by international experience in it is almost certain that huge amounts of spending in what is and is not working to address corruption and a short time, circumventing the standard operating to enhance government effectiveness. Importantly, procedures, will result in new corruption scandals in the although the approach is modular, it is not a menu. post-COVID years. There are already reports in papers While the chapters and cases do not analyze the political regarding inflated food prices or favored medical economy of reform in each country or sector in depth, contracts to firms from a few countries. In drawing on they do recognize the relevance of political context and the past and looking ahead to the future, the time is elite bargaining that takes place to constrain options. ripe for the World Bank to take a fresh look at the state Rather, the report presents successful approaches and of play in tackling corruption and how countries are policy responses in various country contexts for the attempting to address this long-standing scourge on lessons they provide for reform-minded leaders and development. civil society. In so doing, it highlights the importance of institutions for implementing government The multi-faceted and complex nature of corruption policies, engaging civil society, and ensuring greater has shown that while technical solutions and transparency in government operations. compliance measures are enablers, they are rarely sufficient in themselves to root out corruption. The key messages of this report are the following: In many societies corrupt behavior is deeply rooted in the historical origins, social norms and political • Progress is not linear and reforms could suffer culture. It is not unusual to find strong inter-linkages due to political setbacks and/or institutional between power, politics, and money. Political parties weaknesses, yet even basic efforts could provide a and campaigns are often financed on the back of close foundation on which to build. links with business, which can be corrupt. Entrenched political elites are eager to maintain their grip on power • The “how” of reform can be as important as the and money. The scope for reformers to make changes “what” of reform, as it requires an understanding is therefore constrained by the limits of their political of how key obstacles could be overcome in a influence, and any significant impact on corruption particular context. usually takes a long time. • There is no single success factor; impactful reforms While corruption may be entrenched, the case usually require a combination of several layered studies in this report demonstrate that progress or sequenced interventions (described in the is possible even in challenging contexts. By design, Conclusions chapter). For example, technology the report focuses primarily on developing countries, can be an enabler for transparency, but is not a full where institutional capacities may be less established solution on its own. than in advanced countries. Impactful anti-corruption measures are often opportunistic, targeting specific • Open government reforms can lead to a stronger areas of vulnerability where and when the political relationship between government and citizens, space allows for actions to be taken. Though the actions increasing levels of trust and social capital. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xv

EXECUTIVE SUMMARY • Sector and function-specific interventions can single report can expect to address all the sources be effective and complementary to broader of corruption and approaches required to combat it. government-wide efforts to enhance transparency, The report examines the manifestations of corruption integrity, and good governance. and efforts to address them from three perspectives: • It is critical to look beyond the de jure of anti- I. Selected key sectors and functions of the corruption institutions and tools, to the de facto government impact and to make course corrections so that national anti-corruption strategies and institutions II. Policy tools and interventions used to control are not mere window-dressing; but are tailored to corruption the needs and contexts of countries. III. Institutions used by government for oversight and accountability • Collaboration and information sharing across Part I of the report covers issues, challenges and traditional agency boundaries, and across trends in five key thematic areas: public procurement; international boundaries are becoming increasingly public infrastructure; state-owned enterprises (SOEs); important to address corruption. customs administration; and delivery of services in selected sectors. These are intended to capture a • It is important to factor the historical, social, small selection of high-value functions and sectors of economic, and political realities of a country into public sector activity. Part II examines some of the anti-corruption reform efforts. policy responses that government and civil society may employ for corruption prevention and detection, Given the wide scope of behaviors considered to be while Part III assesses the role of three institutions corruption, and the diverse range of approaches, no (Supreme Audit Institutions, Anti-corruption Agencies PART I SELECTED THEMES PART III Compendium of Cases Functions government Oversight institutions performs PART II government uses Procures goods and Selected policy tools Anticorruption Agencies services government uses Open Government Provides public goods GovTech Supreme Audit Institutions e.g. Infrastructure Justice System Asset and Interest Runs Public Sector Disclosure Companies (SOEs) Collects revenue, Beneficial Ownership prevents smuggling: Transparency Customs Exchange of Tax Information Provides services and Identification of Tax e.g. Ports, land management, Crimes health care xvi Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY and the Justice system) that oversee, implement or they did not merit a detailed description and instead contribute to anti-corruption efforts, and draws lessons are cited as examples. The cases are intended to about their effectiveness (see Figure below). The report bring out the “how to” of the reform process, while also features a brief country case study on Malaysia also showing the influence of political economy and that traces the history of the country’s anti-corruption institutional capacity constraints. None of the individual efforts over the last few decades and the influences cases would be sufficient to demonstrate the broader on its development. It concludes with a reflection on lessons of international experience, but they do show several key reform characteristics or drivers that were how some experiences were adapted into a specific common across the case studies. context. Moreover, the cases are often incomplete stories of reform – either because implementation is still The structure and format of the chapters vary by ongoing or because corruption remains an ongoing and thematic area. In most instances, the chapter starts with significant challenge. By design, many of the examples an overarching chapeau that highlights key issues and are taken from countries and sectors where corruption lessons learned, supported by case studies that focus remains widespread but where public officials and civil on why and how specific actions were implemented. In society have not given up battling it. some chapters, cases are in-built into the chapeau as PART I: Confronting Corruption in Sectors and Functions Public Procurement the strength of resistance to reform. The experience with e-GP reflects the experience overall with reducing Often placed at the epicenter of discussions of corruption in public procurement, where technical corruption, public procurement has wide-ranging approaches to governance challenges have had ramifications for the economy and delivery of public sustained success only when they are understood as services. It accounts for anywhere between 10%-25% of enabling change rather than as the primary driver of public spending globally.1 Corruption in procurement is reform. While the success of anti-corruption reforms in rampant, with estimates of the cost of capital investment public procurement has varied greatly, the two factors projects being consumed by corruption ranging from that have been consistently associated with declines in 10% to 30%2, with repercussions that go far beyond the corruption in procurement across different jurisdictions price tag of capital projects as it impacts the poorest are transparency and increased frequency of audits. sections of society disproportionately. Corruption in procurement creates the wrong incentives for firms and Reducing corruption in public procurement requires distorts competition and economic growth. a country-specific approach. Focusing on incentives and the capabilities of the institutions; improving the There is a vast literature providing guidance transparency and efficiency of the procurement system; on the features of procurement systems that overcoming opposition to change; and harnessing operate with high degrees of integrity. While forces in the private sector and civil society who have a increasingly, electronic government procurement strong interest in improving procurement outcomes are (e-GP) is identified as a key platform for addressing key. The three case studies from Somalia, Bangladesh, corruption vulnerabilities, its impact on procurement and Chile demonstrate the country-specific anti- has differed significantly in countries that have adopted corruption reforms in public procurement along a e-GP systems. Variation in changes in the incidence governance continuum. of corruption reflects a combination of factors, including the overall governance environment, the • The Somalia case explores an effort to reduce technical aspects of the specific e-GP system used, corruption in a limited number of strategic high- the capacity of staff responsible for procurement, and value procurement contracts, using a specially Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xvii

EXECUTIVE SUMMARY designed mechanism established jointly by corruption also has reputational risks for governments, development partners and the Government of undermining public trust and disincentivizing public- Somalia. Success was achieved in restricting private cooperation from quality contractors. corruption in a number of transactions and demonstrates the ability to achieve results in even Every phase in an infrastructure project involves the most challenging of environments. distinct combinations of institutions and stakeholders, each with their own vulnerabilities • The Bangladesh case explores an effort to reduce to particular types of misconduct. During project corruption as one dimension of an overall reform of identification and selection, some stakeholders may the country’s public procurement system featuring seek to undermine merit-based procedures for project the adoption of an e-GP system. The reform has selection, while the subsequent procurement phase built momentum over a decade of implementation. tends to be where the most entry points for corruption While intensive work on monitoring progress has exist, and the biggest payoffs. The construction phase demonstrated a substantial reduction in corruption, is vulnerable to ex-post renegotiation of performance as measured by key corruption indicators, it has requirements in the contract details, and the losses to also revealed certain aspects of procurement that the public purse can be significant. The estimates of are resistant to change. Recognizing corruption losses to bribery in construction, i.e., downstream from upfront as a key issue ensured that the e-GP procurement, are as high as 45 percent of construction program factored it in explicitly in the design of costs.4 the procurement reform. For integrity to overcome the forces of corruption, • In Chile, the reform program was driven by a non- a broad and vigorous alliance is needed, using political task force that recommended steps to varied tools to foster transparency and openness. improve the coherence of the public procurement Corruption is a reflection of how things are currently system, within a larger program of reforms aimed at done by certain officials, businesses and politicians restructuring the role and transparency of private in specific situations. This doesn’t happen in a financing of political parties. The Chilean example vacuum; corruption is enabled by the conventions demonstrates how a well-performing state, with and approaches that have been allowed to develop a relatively high degree of capacity and integrity, over time. In some situations, these practices may addressed corruption in public procurement by not even be considered particularly harmful or wrong modifying the incentives and dynamics in an by the participants – as illustrated by the oft used overarching system of governance, in order to term for corruption: the price of doing business. This confront the causes of corruption and not just its chapter argues that if the political level commits to symptoms. systematically implementing integrity measures across the infrastructure cycle, it will have an impact at both a Public Infrastructure systemic and a project level. In addition, and crucially, mobilizing citizens and stakeholders and strengthening Studies show that the developing world’s their hand through greater project transparency and infrastructure needs are huge and attracting openness can build momentum, and change the quality private sector investment is critical to political economy and cultural considerations that closing the gap. As much as $3-4 trillion annually have allowed corrupt practices to happen. Through will be needed globally through 2030 to meet the such a sustained and broad-based movement, country infrastructure needs of the 1.2 billion people who lack examples demonstrate that change can happen at both electricity; the 663 million who lack adequate drinking the project and society level. water sources; the 1 billion who live more than two kilometers from an all-weather road; and the many Chapter 2 includes three case study examples millions who are unable to access work and educational of strategies to mitigate corruption risks in the opportunities due to the absence or high cost of acquisition of public infrastructure. transportation services.3 However, the size, complexity and long-run nature of infrastructure projects leaves • The Infrastructure Transparency Initiative them vulnerable to corrupt practices. The perception of (CoST) offers a multi-stakeholder approach to strengthening governance in the infrastructure xviii Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY sector through improved transparency, stakeholder State-Owned Enterprises (SOEs) engagement and accountability. The expansion of digital government and open contracting Corruption in SOEs has gained prominence in data has created a more enabling environment recent years due to high-profile scandals in for multi-stakeholder approaches than would countries like Brazil, South Africa, Angola, and have been possible in the past. Three country Malaysia. Corruption risks arise from various sources. examples are presented: Thailand shows the SOEs in high-value sectors often enjoy monopoly or evolution of a multi-stakeholder working group. quasi-monopoly rights that provide an opportunity for The Ukraine case examines the institutional abnormal profit generation, a privileged relationship foundations for actionable data disclosure. The with the government and state financial support. Honduras example focuses on how international This creates incentives and opportunities to extract support has been combined with local leadership significant rents. Such mechanisms are often used to to strengthen transparency and accountability in benefit political groups and party finances in order infrastructure. Each case represents an evolving to sustain the resource diversion over time. Risks also story, with no doubt significant hurdles and gaps in arise from weak legal and regulatory frameworks; implementation yet to be overcome. corporate governance weaknesses at SOE levels; a lack of transparency and disclosure over SOE finances • Public-private partnership (PPP) renegotiation compounded by poor financial reporting practices; of infrastructure projects has the potential for and limited effective government and citizen oversight. abuse, as evidenced in Brazil, which was the These risks are exacerbated by inadequate technology epicenter of one of the largest corruption scandals in SOE operations and weak citizen participation in in history. PPPs are renegotiated much more monitoring SOE performance. Corruption can be often than similar private contracts. Dishonest detrimental to the SOE itself, to the economy, and to contractors make lowball bids to win contracts, the people when SOEs fail to provide critical public knowing that they can later reap windfalls during goods and services. a less transparent contract renegotiation process. PPP renegotiations can also allow governments Phasing or sequencing of SOE reforms based on to elude spending controls and defer costs to their political and institutional feasibility can future administrations, while companies can use help overcome entrenched interests and provide renegotiations and bribery to build market share. confidence to policy makers to take further steps. While changes to a long-term PPP contract may be The Bank’s experience suggests several categories of inevitable, this case study offers guidance to reduce actions that can contribute to enhancing integrity in the probability of opportunistic renegotiations that SOE governance: (a) opening up markets to greater are motivated by corruption. competition to reduce monopoly power and market share and incentivize financial and fiscal discipline; (b) • The third case examines how the Colombia strengthening SOE legal and regulatory frameworks Society of Engineers (SCI) began supporting Open and practices; (c) building a commitment to good Contracting, when they suspected that tender governance and capacity of state-owned entities; (d) specifications were so narrow that they were professionalizing the SOE board of directors and senior being tailored to benefit particular bidders. The management; (e) establishing effective internal controls, case highlights how the government acted upon compliance, and risk management functions in the SOE; the SCI findings by making standard documents (f) promoting transparency and full financial disclosure, mandatory for all state governments in 2019, including of SOE debt; (g) digitalizing financial and and by updating the country’s e-procurement service delivery information to improve the accuracy of platform to publish data in the open, standardized, information available to the public; and (h) facilitating and reusable Open Contracting Data Standard citizen engagement in holding SOEs to account for (OCDS) format. Utilizing data analytics to assess performance and providing feedback to management these reforms, the government is already seeing on issues of particular relevance to them such as the increases in competition and better value-for- quality of service delivery for water or energy utilities. money for the public. Reforming governance of SOEs alone may not always be enough to prevent corruption and assure Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xix

EXECUTIVE SUMMARY efficiency. Additional measures could include SOE corruption cases. The implementation of the restructuring, which may involve breaking large SOE privatization program is still unfolding. multi-layered enterprises into smaller business units or bringing opportunities for greater private sector • Colombia stands out from the other cases, because involvement in the operations, management or even it reflects a proactive approach by an SOE to make ownership of SOEs through PPPs or privatization, itself accountable to citizens and shareholders when the necessary conditions are being met. Such through a series of transparency initiatives, conditions include reduced or contestable market digitization, and customer-engagement practices. share and economic dominance; transparency over With a robust legislative framework for corporate ownership, operations and finances including SOE responsibility set in place decades earlier, debts; increased capacity for monitoring and oversight; Empresas Públicas de Medellin (EPM) distinguished and improved efficiency. Especially important is itself from other SOEs in the country and in the ensuring that transactions occur without special region by emphasizing public transparency and privileges for insiders or other favored buyers, so that engagement as the core pillars of its integrity drive there is a level playing field with potential competitors. and of its corporate governance more generally. Where privatization or private sector participation is Citizens in the community are encouraged to see not a viable option, SOEs can still be exposed to capital EPM as belonging to them, through the company’s market discipline through partial listings. approach to service delivery, customer feedback, and even share price. The three cases presented in this chapter are ongoing stories that highlight the complex Customs Administration challenges that political leaders and citizens face to improve SOE governance: Customs administration is vital for its role in trade facilitation and protection of national borders, as • In Brazil, following the high-profile Lava Jato well as revenue collection. Collection of trade taxes scandal, the government passed the Law on the (tariffs, excises and import value added tax) account Responsibility of Federal State Companies to for a significant portion of government revenues – strengthen the internal control environment in commonly 30-50% – in low-income countries and even SOEs through the introduction of fiscal councils more in fragile states. Corruption in customs can be a and internal audit committees. The law also aims disincentive to foreign investors, especially those who to increase transparency around contracting intend to rely on smooth import of inputs and export and procurement, which was the main channel of goods. A low capacity customs administration also of kickbacks exposed by Operation Car Wash. presents challenges for national security in an age of However, effective implementation of the law international terrorism. Yet the customs administration and deeper sector reforms remain in question is highly vulnerable to corruption because officials often and subject to the full support of the political enjoy discretionary powers over important decisions, leadership. and risk-based systems of control and accountability are often absent or easily breached. The number of • In Angola, recent reforms of SOE governance are “success” stories in addressing corruption in customs in the early stages, and like Brazil, are set against is limited. Georgia and Rwanda traditionally stand out; a backdrop of massive scandals related to the both countries’ reform efforts involved a dismantling state oil company. Since mid-2017, actions have of old, discredited agencies and replacement with new included reforming SOEs’ public procurement, ones based on the principles of leaner bureaucracies opening up the income and asset declaration and administrative simplification, and both were made system, implementing a divestiture of SOE possible by the emergence of new leaders who broke non-core assets, increasing the transparency ties with the old networks. of the privatization process, establishing a new reinforced SOE unit in the Ministry of Finance to The chapter argues that legal and technical collect data and exercise more active oversight, reforms are necessary but insufficient to disrupt replacing most SOE board of directors, corrupt behavior in customs administrations. strengthening corporate governance in the Technical measures often include introducing an state oil company, and prosecuting suspected xx Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY upgrade to the legal framework, simplification of Service Delivery in Sectors (Land, processes and rate structures, automation, etc. But laws Health, Ports) and regulatory reforms must also be supplemented with other approaches that take into account deeply Corruption in public services takes many forms embedded norms and expectations of political and and imposes significant costs on the government, social life. The report argues for two broad principles: (1) citizens, and businesses. Estimates of the magnitude ownership of the reform among the officials involved in of dollars lost to corruption vary widely across countries reforming the customs administration is a critical issue and sectors. While these estimates rely on various for sustainability, and (2) opportunities for corruption assumptions, and are subject to critiques, they point can be reduced by designing mechanisms that create to the significant magnitude of the monetary costs of appropriate incentives, limit discretion by public corruption in public services. servants, and include enhanced controls. It concludes that understanding social normative pressures in a given Unpacking sector-specific issues is crucial to context can help practitioners design interventions to diagnose the root causes of corruption in public relieve those pressures, allowing collective behavior to services and design appropriate interventions. Even change. Reformers should target the informal networks within a sector, a reform could be narrowly focused on of patronage and social domination, which often rooting out a particular issue, such as bribery in surgery determine the behavior of customs officers. waiting lists, or adopt a multi-pronged approach to focus on the entire service. The correct diagnostics The two country cases show that effective customs also allows reformers to assess the feasibility of the administration reforms are possible even in fragile program, as well as to identify the loci of leadership states with limited capacity, when technical reforms and how to build stakeholder coalitions. are coupled with an understanding of the local political economy surrounding customs agents. Corruption in the three distinctive service delivery sectors of healthcare, land administration, and • Customs reforms in Madagascar are ongoing, port services impacts the economy in different but there have already been signs of significant ways. The three services are very distinct: healthcare, progress to reduce corrupt practices, facilitate that affects virtually all citizens, as seen during the trade, and increase revenue at their major port. current COVID-19 pandemic; land administration, Their performance-based pay program has helped a sensitive service impacting a large proportion of incentivize customs inspectors to curb tax evasion the population; and ports, a specific and narrower and expedite customs clearance. Importantly, the government to business service. If the health sector is reform was accompanied by extensive data mining plagued by pervasive corruption, human development and monitoring to detect corrupt individuals and can be impacted; corruption in land administration can practices. undermine land reform and citizens’ trust in government as a whole; and corruption in ports directly affects trade • Afghanistan’s government faced the daunting and the investment climate in the countries relying on challenge to curtail the parallel or shadow customs maritime commerce, hampering their development. regimes that operated beyond government The case studies describe reforms to address these control. For about 15 years now, the Afghanistan issues and improve service delivery. Customs Department has been progressively implementing a countrywide computerization of • Rwanda’s reform of land mapping and titling customs clearance operations. The strategy has aimed to modernize the entire sector through centered around the automation of procedures to enhanced transparency, thus increasing the cost significantly reduce face-to-face contact and the of malfeasance and reducing corrupt incentives resulting informal negotiations. Though significant in service delivery. It was focused on good vulnerabilities exist, including adaptation to “game” management practices in land administration, the system, Afghan authorities have witnessed including the digitization of records. increased revenue, improved clearance time, and improved transparency of trade transactions. • Ukraine’s ongoing health system reform is focused on changing the incentives of healthcare providers to improve outcomes. The reforms initiated so Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxi

EXECUTIVE SUMMARY far have included capitation financing in primary of a pro-reform coalition. Such a coalition in Nigeria care; raising health professionals’ remuneration; included private shippers, the United Nations designing transparent, merit-based medical staff Development Programme (UNDP) and three of the appointments; and initiating an eHealth digital country’s anti-corruption agencies. The network record-keeping system. These reforms aim to worked together with the Nigerian government to lower out-of-pocket expenditure, reduce the develop corruption risk assessments of five ports, number of acute medical events, and increase followed by standardizing procedures, using an patient satisfaction with their care providers. This e-governance portal, and establishing a grievance is an example of a true “ecosystem reform,” in mechanism. Surveys conducted by the network which changes to legislation went hand-in-hand and its partners suggest the measures have had with executive implementation and strong civic a positive impact in improving the functioning of engagement to serve as a feedback loop. ports, even though substantial work remains to be done. • Nigeria’s reform program in ports is an attempt to address corruption in service delivery with the help PART II: Key Instruments for Fighting Corruption Open Government Initiatives While there has been a surge in interest in transparency in recent years, the impact of Open government reforms aim to promote transparency on improving accountability hinges an ethos of transparency, inclusiveness and on several factors. These factors include whether or collaboration. The aim is to shift norms in a sustainable not stakeholders can easily find and understand the way by introducing changes that lead to enhanced information, and the ability and willingness of the transparency and promote an environment that is less officials to respond to requests for information. Other conducive to corrupt activity, and empowering citizens reasons include lack of civic space, political will and to demand better services from the government. The institutional capacity, which results in governments impact of these reforms depends on the existence of failing to meet the expectations of different other enabling factors, such as political will, a free and stakeholders. Under such circumstances, reform independent media, a robust civil society, and effective champions, coalitions for change, “infomediaries,” accountability and sanctioning mechanisms. such as journalists, an independent media where that exists and watchdog organizations, can play a critical Openness can lead to a stronger relationship role. Even though about 120 countries have passed between government and citizens, increasing levels a right to information law, evidence of the impact of of trust and social capital. An open government legal rights to access information on the extent and involves citizens in oversight of government functions by nature of corruption is inconsistent. Transparency by providing relevant information, creating opportunities itself cannot address corruption, although it is often for citizen engagement, and implementing mechanisms seen as a necessary first step and is certainly key in that strengthen accountability. While it is a challenge to shifting incentives and nudging behaviors. A broader make an empirically-grounded causal link between open enabling environment that supports the involvement government measures and reduced corruption, due to of a range of stakeholders in accessing, analyzing limited evidence, a growing body of case studies and and responding to information in the public domain experimental evidence demonstrates that well-designed helps access to information initiatives lead to more open approaches can lead to positive change. fundamental change. xxii Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY While measuring the impact of citizens’ delivery, the initiative likely had spillover effects in engagement on corruption is hard, there is reducing corruption, even if on a small scale. evidence that social accountability mechanisms, such as social audits, surveys, citizen report cards, GovTech or grievance redress mechanisms, can all be used to address corruption in service delivery. Impactful The broadening and deepening of global digitization interventions are effective when they address citizens’ of governments and citizens is changing the face private interests, and garner high levels of citizen of public sector governance and its impact on participation. Important enabling factors include access anti-corruption. While digitization as a ‘foundational’ to information, legislation, policy and practices, an factor is important, other factors like institutional active and independent media, citizens’ ability to hold incentives and capacities and strong leadership are institutions accountable through oversight institutions key for enhanced efficiency, improved service delivery and political channels, markets and institutions that and fewer opportunities for corruption. Reducing the prevent elite capture, credible sanctions, and the human interface in service delivery helps governments existence of coalitions among multiple actors.5 to curtail the risk of rent-seeking behavior. Yet, the traction of digital technologies in reducing fraud Open government measures can directly or and corruption depends on the institutional context. indirectly lead to a reduction in corruption even Any system will only be as good as the practices that though the impact can be difficult to measure. complement it. To gain greater traction for addressing However, if information is increasingly reaching citizens fraud and corruption, data needs to be captured and and the media, and officials are acknowledging its linked with other data. Mandating the use of the system accuracy, that is a step in the right direction. Over time, and validating and analyzing data using Artificial with a holistic approach tailored to the context, open Intelligence (AI) or other methods can prove to be governance may help change behaviors so that public effective. resources are directed not to the pockets of individuals but rather to the common good. Two case studies focus Digital government transitions, coupled with on engaging citizens: disruptive technological change, offer both opportunities and risks for anti-corruption. While • Kenya’s experience with open budgeting illustrates digitization can help improve transparency, with near that engaging citizenry in the budgeting process real-time feedback helping expose illicit behavior, it can enhance accountability of public officials. can also facilitate a rapid or scaled illicit syphoning of ‘Participatory budgeting’, an approach introduced resources. The options for leveraging opportunities that at the local government level (counties), involved new forms of digital data offer are very different for a allocating a portion of the budget for citizens’ country like Singapore (see Box 7.1) than those available priorities and creating a participatory process to economies reliant on paper-based workflows, and where citizens could work together to define and where existing systems are not set up to link to each vote on development priorities. While participatory other, at least in the short run. budgeting did not directly target corruption, it nonetheless had an impact on ensuring public Developing countries could leapfrog and deploy funds were spent on citizens’ needs, increased new disruptive technologies more widely to citizen oversight of public spending, and in some address public sector challenges. Digital technology cases resulted in cost savings. disruptions are being used in a number of areas, including for revenue, expenditure, regulation, and • Ethiopia’s Social Accountability Program, an effort financial and physical asset management. Framing to better engage its citizens and improve public technology-supported reforms as a public services service delivery at the local level, led to increased delivery agenda, rather than in the first instance as an trust between civil society, service providers, and anti-corruption crusade, may also be a more disarming the government. While the program’s goals were approach in light of the existence of the vested interests mostly to increase public participation, build better benefiting from corruption. However, the impact will relations between local governments, citizens, and be heterogenous and depend on complementary civil society organizations, and to improve service Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxiii

EXECUTIVE SUMMARY practices like the degree to which electronic channels Municipal Reform program demonstrates how the sub- are voluntary, and how discretion was used. national government progressively leveraged digital government platforms and emerging technologies to Big data, cloud-based platforms, biometrics and improve public services. fin-tech are all being used, but the full advantage can be realized only by addressing omissions and • In Andhra Pradesh, the government used drones biases. Greater access to digital data in usable form, to collect geospatial data and update maps, alongside technology tools, can empower civil society replaced paper-based systems with digital ones, and reform champions in government to detect fraud and trained both staff and citizens on how to use and corruption. While big data—and the related the new platforms. Citizens could access services application of Artificial Intelligence-Machine Learning or lodge grievances through multiple channels: (AI-ML)—can enhance detection and limit discretion online, by telephone or through a mobile phone abuse, the perseverance and skills to link and clean application. The reforms significantly reduced data will be key. Cloud-based platforms and services opportunities for fraud and corruption in key areas, are providing for on-tap computing, better data such as taxation and construction permits, and management capabilities, and storage capacities. improved revenue for local governments. Although biometrics have been used in identity validation, better targeting and access to services, Asset and Interest Declaration (AID) and to improve attendance of public servants, the risk of excluding genuine beneficiaries from government AID systems have increasingly become a multi- programs needs to be factored in. Finally, while fin- purpose tool aimed at preventing conflicts of tech innovations have increased the scope and scale interest, detecting unjustified assets and building for digital payments between governments and broader integrity of public service. While many citizens, blockchain technology is still evolving, and countries have AID systems, there is limited evidence sensor technology is increasingly gaining momentum. of their effectiveness. Most AID systems have yet to live Blockchain technology has the potential to improve up to their potential. Cumbersome filing procedures, trust in digital government in settings where trust is low. crucial gaps in the disclosure forms, and lack of The internet of things (IoT) and other sensor technology transparency and enforcement are limiting the role of are increasingly allowing for richer and more dynamic AID. Such weaknesses also may make it merely another tracking and feedback. check-a-box exercise to implement national anti- corruption strategies. Lack of control of submission and While different technologies have merit in ineffective verification of declarations undermine their their own right, the full impact lies in breaking importance as an anti-corruption tool. The chapter on technology silos and implementing interlinked AID elaborates on what an effective AID system should approaches across sectors and services. Given the look like and how it can be relevant in the context of expanse and diverse nature of public sector services, transnational financial flows, new ways of disguising the most productive strategies build on a mix of wider unjustified wealth, as well as domestic typologies of government digitization contexts and intersecting conflict of interest and hidden wealth. technology developments, rather than focusing excessively on a single technology. The roll-out of The chapter provides guidance on several critical the latest ICT systems, including those supported by AID system design questions: Who should file, how development partners, may be seen as potentially frequently to file, paper vs electronic filing, what to solving the problem, but this is not necessarily the declare, how to verify declarations, how to sanction case. What is essential is that for any country to adopt non-compliance, and how much transparency. new technology or ‘leapfrog’, the corresponding Though the direct impact of AID systems on anti- analog complements must be in place. In some corruption will always be dif ficult to quantif y, cases, they may indeed be game-changing, but care governments should nevertheless try to assess their must be taken that the next must-have technology effectiveness—public perception surveys, expert does not become an excuse to address persistent opinions, and quantitative review of compliance data challenges, such as poor service delivery and fraud are some methods available. and corruption. The case study on Andhra Pradesh’s xxiv Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY The two case studies highlight the impact of illicit practices and proceeds. Addressing the abuse enforcement, digitization, and transparency: of anonymous corporate entities is a global challenge. Regulatory loopholes in beneficial ownership disclosure • In Ukraine, the asset declaration system put in place requirements in one country have serious consequences in the 1990s had been nothing more than a formality. because illicit financial flows (IFFs) are not constrained But in 2014, civil society successfully advocated by national borders: illicit funds can find a safe haven an overhaul of the country’s anti-corruption in jurisdictions where regulations protect anonymity. infrastructure. When the new asset declaration Developing countries pay the heaviest price for these system became operational in September 2016, practices because of lost revenues or funds that are it was one of the most comprehensive worldwide. diverted as a result of fraud, tax evasion, and the illegal By the end of 2019, the system held over 4 million exploitation of natural resources. electronic documents, all of which were available for free public access, including in machine- Though still relatively new, the use of publicly readable format. However, at the end of 2019, due available registers of the beneficial owners of to concerns over effectiveness and impartiality corporate entities (beneficial ownership registers) of enforcement, Parliament adopted a law that is beginning to have an impact in two ways: (1) overhauled the anti-corruption agency in charge helping enforce illicit enrichment laws,6 and (2) of the system and further strengthened provisions helping detect and prevent conflicts of interest in on the disclosure and verification of assets and public procurement. Even before the release of the interests. Panama Papers, international bodies like the Financial Action Task Force (FATF)7 were emphasizing the • Romania reversed a long history of inactivity value of beneficial ownership disclosure as a tool for on tackling corruption with the introduction of law enforcement authorities. Since then, civil society AID forms for a wide range of public officials, organizations, thinktanks and watchdogs have been together with a verification mechanism focused on contributing ideas to help solve technical challenges detecting and sanctioning unjustified variations of associated with establishing credible and effective wealth, conflicts of interest and incompatibilities. public disclosure systems. One of the important Transparency has been critical to the system’s milestones is the development of the Beneficial effectiveness, as all disclosure forms are published Ownership Data Standard (BODS), a framework for on the website of the National Integrity Agency representing information about people, companies, (ANI) and used by civil society and investigative and relationships as structured data, in a standardized journalists. ANI uses the system to sanction format that can be replicated across countries and unjustified changes in wealth, as well as conflicts systems. of interest and incompatibilities. ANI’s work is also focused on prevention, most notably though the The path to implementing beneficial ownership PREVENT system, which issues early warnings to transparency reforms is not easy. The report contracting authorities about potential conflicts of presents three diverse country examples as to how interest in procurement procedures. they have approached the adoption of a beneficial ownership transparency policy: Beneficial Ownership Transparency • Nigeria is an illustration of how reforms that are The release of the Panama Papers and Paradise politically and technically challenging have been Papers in 2016 and 2017 shone a spotlight on initiated by leveraging international commitments the extensive use of anonymous companies for and policy platforms, building on existing concealing corrupt practices and proceeds. The institutional frameworks, such as the transparency sudden growth in publicly available information on this commitments in the extractives sector. Beneficial widespread practice has helped increase pressure on ownership requirements were introduced in 2019 policy makers to address the abuse of anonymously- as part of a bill to reform the private sector. The owned companies and other anonymous financial Nigerian Corporate Affairs Commission (CAC) is vehicles, given the role that they play in concealing now tasked with collecting beneficial ownership information for all 3.1 million Nigerian companies, Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxv

EXECUTIVE SUMMARY and making that information publicly available. penalties, and recovered assets amounting to $15 billion. • In Slovakia, companies are required to register as a Partner of the Public Sector through ‘authorized Chapter 10 presents two case study examples on persons,’ (e.g., attorneys, notaries, banks, or tax how tax administrations can play a stronger role advisors), who are jointly liable for false information. in the fight against corruption and specifically Free public access is another cornerstone of against illicit financial flows: Slovakia’s approach to verifying data. Slovakia shifted the burden of validating beneficial • Exchanging data to detect potential corruption: ownership information to companies through While most prosecutions for tax crimes related to these ‘authorized persons,’ given the technical and corruption can be undertaken by the tax authorities, administrative challenges inherent in verifying the they often require support in the form of information accuracy of beneficial ownership information. sourcing or expertise from other agencies. There are multiple obstacles to such information sharing, • The UK experience offers an example of how to but an increasing number of countries are creating balance data protection and privacy in a disclosure the legal precedence to overcome them. A policy, through: (a) publishing enough personally starting point is to establish bilateral agreements identifying information to distinguish between or memoranda of understanding (MOUs) to share beneficial owners and officers, while withholding information, while respecting relevant privacy sensitive information, and (b) allowing beneficial laws within the country. Establishing a national owners with privacy concerns to apply to have task force to enhance collaboration and improving their information removed from the register, but inter-connectivity among databases are also key only under very strict rules-based criteria. Out of steps to be taken by national authorities. millions of companies registered, only around 300 have applied to have their information removed, • Using tax data as evidence in the prosecution of and only 30 of these applications have been corruption: The level of cooperation between granted. tax administrations and other domestic law enforcement agencies is critical in countering Exchange of Tax Information and tax and financial crimes. Tax administrations are Collaboration on Tax Crimes granted access to the transactions and records of millions of individuals and entities, but they may Corruption is intrinsically linked to tax crimes, as be unaware of the typical indicators of possible corrupt persons do not report their income from bribery, corruption, and other financial crimes corrupt activities for tax purposes. FATF includes not related to tax. Moreover, in many countries tax crimes in the set of designated predicate offenses there are legal barriers to the ability of tax for money laundering purposes, explicitly recognizing administrations to share information with the police the linkages between tax crimes and money laundering. or public prosecutors in non-tax investigations. Moreover, the extensive level of corruption related to The ability of tax administrations to be involved in tax has serious implications for government revenues prosecuting financial crimes is often made easier and economic development. when tax crimes are recognized as predicate offenses to money laundering because it means The impact of inter-agency cooperation can be that a person may be charged with the offense of significant. In the Brazilian Petrobras investigation, money laundering and the predicate offense of tax tax auditors supported the transnational corruption evasion. investigation by analyzing suspects’ tax and customs data and sharing this with the police and public prosecutor as permitted by law. With that information, officials were able to uncover evidence of money laundering, tax evasion and hidden assets and the investigation has, so far, resulted in criminal fines, tax xxvi Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY PART III: Role of Institutions in Fighting Corruption Anti-Corruption Agencies Despite high expectations, ACAs have fallen short of achieving the organizational standards set by Anti-Corruption Agencies (ACAs) have in recent the United Nations Convention Against Corruption years received a great deal of attention and (UNCAC). ACAs have often been introduced in criticism because of the high visibility of their environments where other key institutions (for work and their seemingly limited impact compared example the judiciary) were weak and/or captured by to the resources devoted to them. The existing private interests. Moreover, the independence of the literature8 has highlighted the complexity and variety of institutions (functional, budgetary and appointments), these institutions and identified key elements for their strategic focus, human and financial resources, and effectiveness. Political will and high-level commitment mechanisms for collaboration and coordination have are the cornerstone of every successful anti-corruption not achieved the level that would enable them to be effort. Once political support is obtained, the next effective. ACAs have therefore not been successful in step is the introduction of a comprehensive and clear delivering according to their mandates and in line with legal framework for anti-corruption work. Such a legal citizens’ expectations, and in many cases have not had framework, although necessary, is not sufficient, and any significant impact on the trends, types, and levels laws and regulations need to be applied to make a of corruption in their jurisdictions. difference. Furthermore, inter-agency coordination and cooperation among different jurisdictions is required to The pervasive institutional limitations raise enhance the investigative capacity (and effectiveness) of questions as to whether the model of a stand-alone ACAs. Once this is assured, ACAs need an explicit role multi-functional ACA is the right one, or whether and mandate, and, as with every public institution, they the need can be addressed through existing require adequate resources to operate. ACAs, because institutions. Corruption has all too often been of the complexity of their work, must also position regarded as a stand-alone issue, with the establishment themselves clearly within the institutional environment of an ACA being a stand-alone response. In most cases, and establish effective inter-agency coordination and countries do not develop a national anti-corruption cooperation. A lack of clarity about their mandate strategy in advance of establishing an ACA and so do and position, and unclear political commitment, not tailor the design of such an agency to the problem. are two factors that have commonly contributed to There is often a lack of clarity over the roles and the emergence of ineffective ACAs that encompass responsibilities of other key institutions which also play a multiple ill-defined functions. Measures promoting the role in combating corruption, as well as the mechanisms ACA’s accountability and relationship with citizens and and incentives to ensure the inter-connectedness and the media (including the emerging social media) can be inter-dependence of the institutional landscape. Three powerful tools to create an enabling environment for case studies, the UK, Lithuania, and Bhutan, show three ACAs that face faltering political support. ACAs should different approaches to anti-corruption, each partly set an example and make themselves accountable for effective in its own way. their work by regularly sharing the outcome of their efforts and initiatives. Investing in programs to establish • The UK opted not for an ACA, but allocated a good relationships and communication with the public, number of anti-corruption roles to the International based on visible and relevant indicators of impact, has Corruption Unit (ICU) of the National Crime helped several ACAs to fend off political pressures and Agency, through a reconfiguration of expertise survive attacks aimed at undermining them. Clear and within existing institutional arrangements. The comprehensive performance indicators for ACAs are ICU was given dedicated staff and budget, and its not commonly used by ACA officials, making ACAs capacity was enhanced, yielding positive results. less able to track and report on results and impact and Success was also due to the flexibility of the parent even more vulnerable to political pressure and vested institution, and the leadership of a senior official interests. with a clear focus and a degree of executive Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxvii

EXECUTIVE SUMMARY authority that ensured availability of and control with respect to its size and capacity, and its staff and over resources necessary to maintain, to date, its activities were quickly ramped up. Furthermore, organizational development and consolidation. despite the very challenging environment, the ACC was set up without an institutional and corruption • Lithuania set up a dedicated ACA, the Special risk assessment, which could have helped identify Investigation Service (STT), as a unit within the institutional gaps and weaknesses that the ACC Ministry of Interior. It was able to handpick could have begun to address in its work. This lack experienced staff on enhanced terms and of strategic planning had consequences for the benefited from internal and international guidance. agency’s impact. Many reforms did not address The STT was seen as a quasi-law enforcement past cultural heritage issues. As a result, the ACC agency with strong leadership and technical continues to face challenges as it does not fit expertise. Its effectiveness can be attributed to entirely into the country’s environment and the the combination of a strategic approach taken environment does not fully facilitate its purpose. on the basis of informed intelligence, specific technical approaches, and continued guidance These experiences highlight the importance of having from international agencies. a political commitment to tackling the problem of corruption, developing a deep understanding of the • In Bhutan, the Anti-Corruption Commission (ACC) nature of the corruption problem, and mapping the was established as part of the 2005 constitutional existing institutional landscape before establishing a arrangements, with the aim of rooting out new anti-corruption agency if it is to be effective. corruption. It was given a disproportionate mandate xxviii Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY Supreme Audit Institutions audit model they follow, the country context, and the associated norms of behavior. The two case studies Supreme Audit Institutions (SAIs) can play a useful from Ghana and India demonstrate the effectiveness of role in detecting and preventing corruption, when the SAIs in two different contexts: they have the mandate, tools, and trust of the government to take on the fight against corruption.9 • The case study of SAI Ghana is an apt example of SAIs are the chief auditors of the government and play a an overlapping or hybrid model of a Westminster12 pivotal role in ensuring transparency and accountability. type SAI equipped with sanction powers. It The SAI’s independence and operating capacity are shows the transformation of a marginalized important foundations for providing fiscal oversight agency to a reform champion in the fight against through presenting credible and timely audit results to corruption. This was possible due to a seasoned legislatures, government, civil society, and the general and charismatic leader, operational autonomy to public. The primary purpose of the SAI is to report on investigate irregularities, and building alliances with the management of public funds and the quality and civil society to help communicate the importance credibility of the government’s reported financial data. of financial integrity. Their work has helped curtail Its recommendations can indicate ways to strengthen corrupt practices and lend added voice to CSO institutions. SAIs can contribute to combating advocates on a range of other related issues, such corruption by directly reporting on transactions and as asset disclosure. internal controls; and by assessing ways to improve the accountability and performance of government • The case study on India, also a Westminster agencies and anti-corruption bodies. SAIs are not model, demonstrates the key role played by the primarily responsible for tackling corruption and fraud. Comptroller and Auditor General in unearthing However, given the nature of work performed by SAIs, inappropriate financial transactions costing the including checking government accounts, verifying government huge sums of money. It revamped regulatory compliance and assessing the performance the manner in which future awards for the telecom of government entities, SAIs are capable of contributing spectrum were allocated. The core mandate to the anti-corruption agenda. allowed for not just examining expenditure programs, but also forgone revenue and potential To be effective in detecting fraud and corruption, conflicts of interest in government procedures. SAIs need to build capacity including guidance and training for auditors.10 They also need to strengthen Justice System their relationship with parliaments and anti-corruption agencies. SAIs could establish formal collaboration For the justice system to perform effectively, the agreements with law enforcement agencies, where constituent parts – courts, prosecutors, police, and the scope of collaboration extends to information supporting bodies – need to be supported by the sharing, joint conferences and workshops to share political leadership and encouraged to play their knowledge and experiences, referred case follow-up, role. Without strong political commitment, there is staff exchanges and joint agenda setting. often a gap between the laws on the books and the implementation on the ground. Under-resourcing of In an environment where corruption is widespread, the justice system (both financial and human resources) establishing the integrity of SAIs can be a is a long-standing problem in many countries and one challenge.11 Top management of the SAI can be that impedes performance, including as it relates to expected to lead by example in maintaining high prosecuting corruption cases. integrity and establishing zero tolerance regarding staff violations, failing which they will not be able to Enhancing the effectiveness of the justice system administer or propagate an organizational culture of in the fight against corruption needs to proceed integrity. This can be complex territory to navigate at multiple levels: system-wide, at the criminal justice as auditors are often insiders who are asked to play chain level, and at the institutional level. Governance the role of outsiders. While the effectiveness of an reforms at the system level need to ensure judicial and SAI largely depends on its operational and financial prosecutorial independence so decisions are made independence, it is also influenced by the external Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxix

EXECUTIVE SUMMARY without undue interference, while encouraging judges citizens with the justice system and surveys worldwide and prosecutors to be accountable to the public for indicate that many citizens in developing countries have their performance, including for non-compliance with experienced police corruption, for example with police integrity requirements. Reforms at this highest level to stopping or arresting vulnerable people to extort a increase performance in the fight against corruption bribe or other favors. Corruption among judges and should also target the process of selection, evaluation, court staff often involves the speeding up and slowing and promotion of judges, prosecutors, and court staff. down of case processing, or other manipulations of case Second level reforms should address the criminal files. Surveys also indicate that many countries struggle justice chain, i.e., how different institutions interact and with a lack of integrity among judges and prosecutors, collaborate on agreed performance targets. which affects their decision-making. Finally, each institution itself should diagnose its In an increasingly interconnected world, mutual performance bottlenecks as well as the corruption legal assistance and other forms of international challenges it faces internally (e.g., through court cooperation between jurisdictions are crucial to user and multi-stakeholder justice surveys). effectively fight against cross-border corruption. Indeed, justice institutions themselves are not exempt The Justice chapter highlights two recent examples from corruption and capture that affect the broader where such cooperation has been instrumental in public sector. Police is a common first interface for exposing large-scale and pervasive corruption. Malaysia Case Malaysia’s case study highlights both the government – a loosely formed coalition of opposition opportunities and challenges of building and parties led by the former Prime Minster (PM) – stressed sustaining an effective anti-corruption drive over the “rule of law” and took upon itself to revitalize the time. Despite several reform initiatives to address institutions that were put in place to fight corruption corruption, Malaysia continued to fair badly in global and to re-establish limits on the power of the PM. Yet, without the parliamentary majority needed to make perception surveys on corruption. Indeed, many of the changes in the Constitution, the scale of changes was necessarily limited. The actions taken by the Pakatan institutions that were set up to detect and sanction Harapan (PH) government during its two years in office boosted Malaysia’s ratings in global surveys of corruption became gradually compromised, with corruption perceptions in 2019. With the collapse of the PH government in March 2020, it is unclear whether increasing concentration of political power. Only when the momentum on anti-corruption reforms will be sustained. the magnitude and scale of corruption in the 1MDB sovereign wealth fund became widely known to civil society and the global media, did citizens become so outraged that they voted out the political party that had been in power for over 60 years. The new Conclusions Corruption is stubborn but not intractable, as and more subtle changes that governments and demonstrated by the dozens of cases of progress communities make that may go unobserved. The cases toward combating corruption presented in this presented here provide evidence of how opportunities report. The progress in the fight against corruption can be seized within a specific sector or function to enhance governance; in many cases, the push to more is not necessarily from the large government-wide transparency has been a common theme. However, the impact of the initiatives reviewed here may not always announcements and initiatives that garner extensive press coverage, but from the more focused efforts xxx Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY be measured in quantifiable savings from corruption • Incentives (often captured in social norms) drive or a jump in global survey rankings, as perceptions of behavior and the entry points for corruption vary corruption may be slower to adjust. Indeed, one of the across functions of government.  Therefore, one criticisms of the global survey rankings is that they are needs to focus on corruption at the micro-level and not actionable, and rather obtusely relate to the nature its manifestation in specific sectors or functions of the corruption problems being faced. and changing the incentives of the perpetrators. Effective anti-corruption strategies typically • Technology is enabling countries to standardize combine multiple measures, often including both processes, minimize human interaction, and sector-specific interventions and transparency capture comprehensive data that helps establish and accountability measures that apply to the accountability for a wide range of transactions. whole public sector. Corruption manifests itself in specific functions and sectors of government, and the • Finally, ef for t s that fos ter colla boration report emphasizes the relevance of this sector-based among multiple stakeholders, including across perspective. Yet, corruption at the sectoral level may international borders, to pursue a common goal flourish because of the existing social norms and a achieve greater success. governance ecosystem that encourages opacity or even secrecy, which either tolerates or encourages Sustaining the momentum for corruption- corruption. Broader governance measures may mitigating reforms is challenging but could be include strengthening institutions that help to combat aided by improving the measurement of their corruption on the one hand, and implementing specific impact. The current tools that are used internationally tools or policy measures that encourage transparency to measure corruption have the common problem of and make it harder to hide corrupt activity (and the relying on perceptions of experts. While there is some associated proceeds) on the other. benefit from such surveys as a broad proxy, they are not a substitute for having a more quantitative or evidence- While many factors may contribute to the based set of indicators. effectiveness of anti-corruption initiatives, there are six cross-cutting drivers of anti-corruption Achieving long-term economic growth and shared reforms that can be identified from the case prosperity depends upon governments, private studies. Not every factor is evidenced in every case sector, and communities working together to study, but these six are present in some combination in address corruption and its corrosive impacts. This each of the cases. report acknowledges that the challenges to confronting corruption are deep-rooted but shows that they are not • Strong and determined political leadership is impossible to overcome. Each case study gives evidence often needed to provide vision for reform and a of impact in reducing the risk of corruption, spanning a commitment to support increased integrity in the variety of country contexts: fragile states, low-income, face of opposition from vested interests.  and advanced countries. However, public policy practitioners and civil society advocates must recognize • Countries benefit as institutions become more that the success and sustainability of reforms cannot capable, providing checks and balances and be achieved solely through legislation, technology, or fostering accountability. Without strong institutions even citizen participation. What is needed above all, to assure implementation, reforms risk being short- is the commitment of all parties to engage proactively lived or only superficial. in the fight against corruption through collaboration, innovation, and mutual trust. Only then can the war be • Transparency can promote greater compliance won, with economic growth no longer being impeded, and improve human behavior. Open government but rather benefiting the whole of society, especially policies and access to information help make the poor and vulnerable. corrupt actions harder to hide and contribute to their prevention, particularly when they are linked to engaged and empowered communities and official processes. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxxi

EXECUTIVE SUMMARY Notes 1. World Bank. (2020). Doing Business 2020. Washington D.C.: 9. The Congress of the International Organization of Supreme The World Bank. https://www.doingbusiness.org/en/reports/ Audit Institutions (INTOSAI), held in 1998 in Montevideo, global-reports/doing-business-2020 Uruguay, discussed and delivered concrete recommendations for SAIs to make an effective contribution to the fight against 2. G. Ware, S. Moss, J. Campos, and G. Noone, Corruption in corruption. See also U4. 2018. “The Role of Supreme Audit Public Procurement: A perennial Challenge, in J. Campos Institutions in Fighting Corruption” for a more detailed and S. Pradhan, The Many Faces of Corruption: Tracking overview. Vulnerabilities at the Sector Level, World Bank, 2007. 10. According to the survey conducted in 2010 by INTOSAI 3. Rozenberg, Julie; Fay, Marianne. 2019. Beyond the Gap: Working Group on Fight Against Corruption and Money How Countries Can Afford the Infrastructure They Need Laundering (WGFACML), only one-third of SAIs (18 out of 54) while Protecting the Planet. Sustainable Infrastructure;. responded positively on the questions of availability of audit Washington, DC: World Bank. https://openknowledge. staff and training program specialized in audits related to worldbank.org/handle/10986/31291 License: CC BY 3.0 IGO; corruption or money laundering. http://wgfacml.asa.gov.eg/ and OECD. 2007. Infrastructure to 2030 (Vol.2): Mapping Policy for Electricity, Water and Transport. http://dx.doi. 11. INTOSAI provides IntoSAINT, a tool to assess the org/10.1787/9789264031326-en. vulnerabilities and the maturity of the integrity controls of SAIs and to strengthen integrity in SAIs. https://www.intosaicbc. 4. OECD. 2014. OECD Foreign Bribery Report: An Analysis of the org/intosaint/ Crime of Bribery of Foreign Public Officials. OECD Publishing. ht tps://w w w.oecd.org/corruption/oecd-foreign-briber y- 12. A model where the work of the SAI is intrinsically linked to the report-9789264226616-en.htm.; and Hawkins, John, and Bob system of parliamentary accountability. McKittrick. 2012. Construction Sector Transparency Initiative: making construction more accountable. Proceedings of the Institution of Civil Engineers-Civil Engineering. Vol. 165. No. 2. Thomas Telford Ltd. 5. DFID. 2015. “Why corruption matters: understanding causes, effects and how to address them – Evidence Paper on Corruption.” January 2015. https://assets.publishing. s e r v ice.g ov.u k /me dia /57a 0 8979e5274 a31e 0 0 0 0 0 d 0/61212- corruption_evidence_paper_final_16Feb15.pdf; Johnsøn, Jesper, Nils Taxell and Dominik Zaum. 2012. “Mapping Evidence Gaps in Anti-Corruption: Assessing the state of the operationally relevant evidence on donors’ actions and approaches to reducing corruption.” U4 Issue Oct. 2012 No. 7. https://www.u4.no/publications/mapping- evidence-gaps-in-anti-corruption-assessing-the-state-of- the-operationally-relevant-evidence-on-donors-actions-and- approaches-to-reducing-corruption.pdf. 6. Illicit enrichment is defined in Article 20 of the United Nations Convention Against Corruption as “a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income.” Some states have adopted laws that criminalize illicit enrichment to strengthen their ability to fight corruption and recover assets. Evidence of disproportionate or illicit wealth allows these states to prosecute public officials and confiscate proceeds, on the basis that unexplained wealth is evidence of corrupt conduct. See Stolen Asset Recovery Initiative, 2012 “On the Take: Criminalizing Illicit Enrichment to Fight Corruption” Lindy Muzila, Michelle Morales, Marianne Mathias, Tammar Berger. 7. FATF is an inter-governmental body that sets international standards that aim to prevent global money laundering and terrorist financing. First established in 1989, it is now comprised of 37 member jurisdictions and 2 regional organizations. 8. Doig, A., & Norris, D. (2012). Improving anti‐corruption agencies as organisations. Journal of Financial Crime, 19(3), 255 -273. ht tps://doi.org/10.1108/13590791211243101; Recanatini, F. (2011). Anti-Corruption Authorities: An Effective Tool to Curb Corruption?, in International Handbook on the Economics of Corruption, Susan Rose-Akerman and Tina Soreide, eds., 2011. xxxii Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

EXECUTIVE SUMMARY References DFID. (2015). Why corruption matters: understanding causes, effects and how to address them – Evidence Paper on Corruption. January 2015. https://assets.publishing.service. gov.uk/media/57a08979e5274a31e00000d0/61212-corruption_ evidence_paper_final_16Feb15.pdf. Doig, A., & Norris, D. (2012). Improving anti‐corruption agencies as organisations. Journal of Financial Crime, 19(3), 255-273. https://doi.org/10.1108/13590791211243101. Hawkins, John, and Bob McKittrick. (2012). Construction Sector Transparency Initiative: making construction more accountable. Proceedings of the Institution of Civil Engineers- Civil Engineering. Vol. 165. No. 2. Thomas Telford Ltd. Johnsøn, Jesper, Nils Taxell and Dominik Zaum. (2012). Mapping Evidence Gaps in Anti-Corruption: Assessing the state of the operationally relevant evidence on donors’ actions and approaches to reducing corruption. U4 Issue Oct. 2012 No. 7. https://www.u4.no/publications/mapping-evidence-gaps- in-anti-corruption-assessing-the-state-of-the-operationally- relevant-evidence-on-donors-actions-and-approaches-to- reducing-corruption.pdf. OECD. (2007). Infrastructure to 2030 (Vol.2): Mapping Policy for Electricity, Water and Transport. http://dx.doi. org/10.1787/9789264031326-en. OECD. (2014). OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials. OECD Publishing. https://www.oecd.org/corruption/oecd-foreign-bribery-report- 9789264226616-en.htm. Recanatini, F. (2011). Anti-Corruption Authorities: An Effective Tool to Curb Corruption?, in International Handbook on the Economics of Corruption, Susan Rose-Akerman and Tina Soreide, eds., 2011. Rozenberg, Julie; Fay, Marianne. (2019). Beyond the Gap: How Countries Can Afford the Infrastructure They Need while Protecting the Planet. Sustainable Infrastructure;. Washington, DC: World Bank. https://openknowledge.worldbank.org/ handle/10986/31291 License: CC BY 3.0 IGO. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption xxxiii

Setting the Stage

SETTING THE STAGE Rationale and structure of the report The centrality of corruption for society. Corruption creates an uneven playing field for growth and development firms, distorting competition and innovation. Corruption continues to make headlines around the While corruption impacts everybody, the impact on world in both developing and developed countries— the poor and most vulnerable is disproportionate, billions of dollars stolen from countries, leaks of off- thereby exacerbating poverty and inequality. shore databases helping to bring down governments, Empirical studies have shown that corruption hits the and mass protests over corruption threatening poor the hardest. Many studies find that the poor pay political stability. New governments come to power a larger share of income in bribes, consistent with the on the promise of clean, accountable, and transparent idea that many payments for services are flat charges. regimes—as in the case of Malaysia, which saw a Moreover, some have argued that the poor are more change in government in 2018 after 61 years. In rich likely to be victimized either because they rely more countries, the term “corruption” is routinely hurled at heavily on state services2 or because they are seen as political opponents, sometimes with facts to support having less power. In one study in Mexico, car accidents the allegations, sometimes not. Relatives of leaders find were staged in an experiment—the traffic police hit themselves losing court battles in foreign countries over up the drivers of old cars for bribes and waved luxury their unexplained wealth, triggered by the ostentatious cars along with warnings.3 While the rich gain access consumption of luxuries. Already in 2020, the record for to services by paying bribes, the poor and vulnerable the largest legal settlement for overseas bribery ever are restricted from accessing health, educational, was broken when Airbus SE agreed to a settlement of and justice services that, in theory, are open and $4 billion with France, the UK, and the USA. free.4 Likewise, some among the rich and powerful gain from grand corruption, while the poor suffer Recognition of the pernicious effects of corruption the consequences when money is siphoned off. Such helped establish its primacy as a development money could have been put to more productive uses issue. Since the founding of Transparency International to build human capital and infrastructure, or address in 1993 and James Wolfensohn’s candid speech on issues related to high-quality service delivery, jobs, the “cancer of corruption” in 1996, there have been gender equality, and climate change, to name a few. deepening analyses and evolving approaches to tackling corruption. Governments across the world are Corruption not only undermines credibility and trying to address this phenomenon, which manifests trust in governments but impacts the development itself in different ways in different sectors and services. of economic, social, and human capital, which is From 1Malaysia Development Berhad (1MDB) to the fundamental to long-term progress.5 For example, Fédération Internationale de Football Association the two key factors that produce human capital, (FIFA), from Operation Car Wash to the Luanda Leaks, namely education and health, see corruption of various recent headlines of corruption scandals only serve forms. Teacher absenteeism, kickbacks for school meal to highlight the continuing need for attention to the contracts, nepotism, and false degrees all weaken the problem of corruption. efficacy of learning-related spending, and the pernicious effects of corruption do not stop there.6 In the health Research has long examined the deep and far- sector, goals can be undermined by corruption in the reaching impact of corruption on economic growth, procurement of pharmaceuticals or medical equipment, management of public resources, and inequality. and has been associated with problems as wide- Early economic studies argued that corrupt practices ranging as antimicrobial resistance7 and HIV infection,8 distort the distribution and utilization of resources, and to child mortality9 more generally.10 In addition to leading to inefficiency.1 Corruption also affects the long-term consequences, corruption in the health public welfare when investment decisions are driven sector can have immediate effects as we see now in the by opportunistic, rent-seeking motives, rather than ability to efficiently address the COVID-19 pandemic the intrinsic value that such investments can bring to (see box below). Further, corruption in infrastructure, Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 1

SETTING THE STAGE BOX A Corruption Risks Stemming from COVID-19 At the time of finalizing this report, all countries are dealing with the crises surrounding the COVID-19 pandemic. Governments are responding not just to contain the disease, but to address the multiple challenges of providing health care, food, and security to people as well as keeping the economy from crumbling due to the closing of businesses and forced lockdowns across the world. This unparalleled crisis has caught most governments unprepared and has led to very large sums of unplanned money being spent on health care, social security and economic stimulus. Speed is key and hence regular or standard operating procedures are often not realistic. Billions of dollars are being raised, borrowed, and spent by countries, circumventing standard procurement and other accountability procedures as they try to control the spread and aftermath of COVID-19. The large scale of emergency spending by governments exposes them to a variety of corruption risks that may undermine the effectiveness of government responses. The strains placed on the public sector in responding to the current situation present enormous opportunities for corruption to flourish. Corruption can lead to the theft, wastage, and misuse of scarce resources, resulting in unnecessary suffering and death. It can also entrench elite privilege and inequality, and undermine institutions of accountability with lasting consequences. The risks and associated responses in such a situation are of a very different nature to those highlighted in the report, as this situation is unique and unprecedented. Key risks of corruption from the COVID-19 response in the health sector include those related to corruption in the procurement of emergency supplies and services; supply chain and service delivery; and in the administration of the response to the health crisis. Risks in responding to safety nets, food and livelihood security stem from the theft and capture of emergency funds. The use of these funds could be undermined by distorted targeting, capture by vested interests and inclusion or exclusion of certain populations, as well as by being stolen prior to reaching the intended beneficiaries. Finally, the risks associated with reviving the economy are multi-faceted and include unequal application of emergency powers granted for various economic activities, ranging from distribution of benefits to implementation of policies and decisions taken by the government, and abuse of power. Minimizing such risks, whether for health sector spending or safety nets or revival of the economy, requires mechanisms for oversight. This would involve defining and activating explicit processes and protocols for documenting emergency spending; tracking delivery of supplies involving central and decentralized authorities; publishing information on emergency spending; and conducting quick reviews. Such reviews would involve undertaking audits of spending as well as receiving feedback from beneficiaries through specific mechanisms, so that responses can take account of identified shortcomings and become more effective as the situation evolves. Use of pre-existing digital platforms both for distribution of benefits, as well as for addressing grievances and fostering partnerships with the private sector and civil society organizations for distribution and oversight, can build greater oversight and trust. In short, to foster greater accountability it is important that government actions are clearly articulated, rules are enforced, violations are addressed, and problems remedied as quickly as possible in a transparent manner. Follow-up actions include dismantling temporary or emergency powers and provisions, conducting post reviews and bringing perpetrators to task. Communication to the public on all government actions from the allocation of funds to their use, as well as publicly reporting about the measures being taken to prevent corruption and to follow up on violations, will not just deter corrupt behavior in this situation but will help maintain the focus on the broader corruption agenda. Source: World Bank. 2020. Ensuring Integrity in Governments’ Response to COVID-19 (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/801501588782665210/Ensuring-Integrity-in-Governments- Response-to-COVID-19. 2 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE with its effects on road quality, and corruption in the including fragile and conflict-affected countries. police, with its effects on safety enforcement, are both associated with road fatalities with consequent impact This report is structured to optimize its value and on human capital. Corruption to avoid environmental interest to government practitioners, researchers, regulations, kickbacks in procurement, bribes to pass international developmental organizations, civil building inspections, and state capture by interests society organizations (CSOs), think-tanks and the in pharmaceutical companies, all undermine the public at large. Within that sphere, the report should developmental impact of public sector expenditures. find an audience not only among anti-corruption agencies, but also ministries and institutions performing What makes this report on corruption functions that tend to be most vulnerable to corruption different? (e.g., public procurement, infrastructure, and customs administration). This report is granular as it slices the Since corruption manifests itself in many diverse issue of corruption into key thematic areas and specific ways, no single report can expect to address sectors that are prone to corruption. Examples suggest all the sources of corruption and approaches a set of potential entry points and platforms for future required to combat it. Instead, this report aims to engagement in specific areas. The structure along highlight accumulated knowledge on anti-corruption themes and approaches will enable practitioners, policy thematically. It curates stand-alone case studies in makers, and other audiences to zero in on sections that the fight against corruption, i.e., examples of where may be most relevant for their context. Hence most public officials have implemented promising initiatives sections of the report can be read as stand-alone to combat corruption and enhance public sector pieces depending on the area of interest. Cases aim performance. While a specific intervention or case to give a detailed account of not only what was done, may be showing signs of impact, it does not mean that but “how” the obstacles were addressed to achieve the these countries have made generalized progress in reform and results. reducing corruption at the country level. Nonetheless, it may be possible to scale up these limited successes The report approaches corruption by unpacking in difficult environments or to apply them to other it into selected themes and provides examples of countries keeping local conditions in mind. There may successful interventions. Focusing on emerging be learning in these cases. At the same time, as with stories of impact across a range of countries, sectors, many anti-corruption efforts, any of these successes and tools challenges the notion that little can be runs a risk of reversal due to a policy or political change accomplished. To focus on successes is admittedly in the country. risky, as reforms can be weakened or even reversed, sometimes quickly and sometimes through a gradual Case selection was done through World Bank staff erosion of commitment. Alternatively, there may even who have technical expertise in selected areas be non-observed aspects of the success, making and countries, and through an extended network attempted replication fraught with difficulties. However, of partners, practitioners, and think-tanks known there is merit in focusing on success; where there is to staff. This process was similar to that used to a will and an opportunity to confront the problem of produce Improving Public Sector Performance through corruption in one’s organization, seeing how others have Innovation and Inter-Agency Coordination, published successfully addressed similar challenges can spark in 2018 out of the World Bank’s Global Knowledge ideas and innovation. The case studies also provide and Research Hub in Malaysia. This approach implies examples of reforms driven not necessarily from within that there may be other cases across the world that are government but from civil society and by private sector known to individuals and practitioners, but they may interests. The cases also contextualize the design of not be documented or disseminated in a way that is reforms to warn against using those approaches blindly accessible to a wider audience. Cases were solicited with scant attention to the country context. Given and selected on the basis of themes and sectors the diverse nature and magnitude of the problem, covered in the report rather than their geographical it is important to understand the tools, policies, and origin. Hence, while there may be several cases from approaches that have worked in specific contexts to a particular country or none at all, overall there is a achieve goals at defined times. By no means exhaustive, broad geographic spread covering almost all regions, the selected tools, policies, and approaches may help with the design of appropriate interventions within Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 3

SETTING THE STAGE country contexts. While the chapters and case studies description and instead are cited as examples or boxes are modular, they do not make up a menu. Though within the chapter. Cases are used to draw lessons on the report does not claim to fully address the complex key elements that drove success and aim to provide political or social dimensions in each case, it recognizes hands-on guidance to practitioners and policy makers. the role or lack thereof of political leadership, cultural In contrast, for one or two thematic areas – such as the norms and other key factors in spearheading or putting use of tax data and collaboration with tax agencies – at risk some of the anti-corruption reforms. the focus is on the cases. Coverage, limitations and structure of The first part of the report covers issues, challenges the report and trends in five key thematic areas, supported by specific country cases that demonstrate some The report is selective about what manifestations degree of success or provide valuable lessons. of corruption are covered. The overarching criteria The five thematic areas include public procurement, for the selection of thematic areas are functions or infrastructure, state-owned enterprises (SOEs), sectors that are particularly prone to corruption and customs administration, and delivery of public services instruments or institutions that have experienced some in selected sectors. These themes were chosen not success in combating corruption. The report organizes necessarily because they offer the best possible these thematic areas in three broad categories. First, it solutions to address corruption but because of the drills down into selected sectors and functions that are central role they play in long-term economic and social prone to corrupt activity and that have a high impact development. Due to the centrality of these areas on development. Second, it zeros in on some of the for economic systems and the pervasiveness of their policy practices and tools that have been effectively interaction with the private sector and the general used by practitioners in different country contexts; population, they pose large risks for misappropriation and third it highlights the role of three key institutions of public funds, the capture of revenues by elites, and in preventing and detecting corruption. Beyond these collusive networks. three categories, the report highlights successes in expanding transparency, citizen engagement, The five thematic areas cover a large canvas but technological adoption, and stakeholder collaboration, are by no means exhaustive or distinct. Estimates which are critical across all sectors. As the report is show that procurement accounts for 10-25% of case-study based, the focus is on the perspective of spending globally and anywhere between 10-30% of leaders and practitioners and the sorts of issues that the cost of capital projects is consumed by corruption. they face in corruption-beset sectors. The chosen The report cites three cases of which two are from themes, instruments and institutions are not exhaustive, fragile and conflicted countries (Afghanistan and nor are they distinct sets as evident from linkages and Somalia). The first three thematic areas (procurement, overlaps discussed briefly below. The final section also infrastructure and SOEs) are inter-twined as many large has a country-specific focus on Malaysia, a case that corruption scandals in procurement are associated traces the history of a country’s anti-corruption efforts with infrastructure services, several of which stem from over the last few decades. SOEs. Case studies from Colombia, Brazil and Angola highlight the importance of transparency, citizens’ Each thematic area is covered in a separate oversight and integrity to foster greater accountability chapter that generally begins with an overarching in the functioning of SOEs. The report also examines chapeau that delves deeper into the sector or the importance of public-private partnerships (PPPs) in instrument-specific issues, supported by case this context through examples of poorly designed long- studies. It provides context to the reader about why term partnerships that have resulted in renegotiations the sector, instrument or institution is relevant for in several countries. Customs administration is governments’ anti-corruption efforts, possible entry another sector prone to both transactional and points for engagement, what works, and what is less systemic corruption, where deal-based relationships effective. It then draws on lessons from the two or three and political interference are rampant. The report country cases that support the issues discussed in the highlights an interesting case from Madagascar wherein chapeau. In some chapeaus, cases are in-built into ‘performance contracts’ were used to tackle corruption. the broader write-up, as they did not merit a detailed Finally, delivery of services, which is a key area as it impacts people’s day-to-day life, is covered through 4 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE three interesting and important sectors: health, land, and the United Kingdom, three countries with very and ports. Together, they represent a wide spectrum of different histories. A short piece on Supreme Audit services with unique approaches used in three country Institutions (SAIs) and their role in flagging dubious environments: health in Ukraine, land administration in transactions is supported by case studies from Ghana Rwanda and ports in Nigeria. and India. The last chapter discusses the role of Justice Institutions in controlling corruption and the challenges The second part of the report focuses on cross- they face in strengthening operational effectiveness cutting themes like transparency, citizen and independence. engagement, and GovTech, plus selected tools to build integrity and detect corrupt behavior. The A special country case study on Malaysia traces the chapeau on transparency and openness, a cross- evolution of the country’s anti-corruption efforts cutting and foundational tool to deter corruption, is and its political-economy dimensions over several supported by case studies from Kenya and Ethiopia that decades. The Malaysian case reviews the efforts, demonstrate the role citizens can play in bringing about opportunities and challenges faced by a country that greater accountability and integrity in government had one-party rule for over 60 years until 2018, following functions. New technologies and their use to deliver a very large corruption scandal at its sovereign wealth services and detect fraud and corruption are discussed in fund 1MDB. It also highlights Malaysia’s institutional the GovTech chapter. Asset and interest declarations and policy reform efforts to address corruption from with different degrees of sophistication are beginning the 1950s to the present. to show results in building integrity in some countries, as highlighted in the case of Ukraine and Romania. This The report concludes with a review of six cross- is followed by a discussion of beneficial ownership cutting factors that are common across the transparency, another powerful tool to end the corrupt case studies, as well as some reflections on the practices and proceeds of anonymous companies. Part agenda that lies ahead. It notes that while there are II concludes with a focus on two case study examples no panaceas for confronting corruption, the featured of how inter-agency collaboration with tax agencies cases exhibit a mix of reform drivers that contribute to can contribute to better detection and prosecution of their impact. The chapter highlights the importance corruption. of political leadership and alignment of incentives, coupled with information technology, to enable greater Part III uses a broader institutional lens to consider transparency and accountability in public expenditure. the role played by oversight institutions to support Institutional capacity enables effective and sustainable government-wide reforms to fight corruption. implementation of reforms, while collaboration across Lessons regarding the role, evolution, structure international institutions and countries across the globe and effectiveness of Anti-corruption Agencies are is critical to detect and confront illicit flows of funds. demonstrated by country cases from Bhutan, Lithuania Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 5

SETTING THE STAGE Trends, measurement, and emerging issues Global trends in implementing policies often see such laws used by investigative journalists and tools that help reduce corruption and civil society activists to uncover malfeasance of all sorts. Based on the Global Right to Information Rating The tools, policies and mechanisms for controlling (RTI Rating), which uses 61 indicators corresponding corruption have seen improvements in many areas, to features of a good RTI regime, both the number and are generally moving in the right direction, and quality of access to information laws have been despite some reversals. Systems of public financial increasing. An indicator that tempers optimism about management (PFM), access to information, and this trend is provided by the Open Government mechanisms for accountability have all become more Partnership (OGP), which tracks implementation of RTI sophisticated with the use of improved technology. commitments by OGP members. Between 2014 and Laws prohibiting overseas bribery are becoming more 2018, the number of OGP members implementing RTI prevalent and more widely enforced. On the other commitments dropped 15 percent and fewer members hand, in several countries, the right to information made such commitments in 2018 than in 2012. Since or to participate in public affairs is being curtailed, most OGP members already have RTI laws in place, the accountability mechanisms exist in name only, and concern is over commitment by countries to improve enforcement is lax. Freedom House, in its annual review, their RTI legal frameworks and ensure quick and finds steadily declining averages for their Functioning effective servicing of information requests.13 Access to of Government measure, which focuses specifically on information systems feature in the chapters on open measures for controlling corruption. There is a growing government (chapter 6), infrastructure, and public- need to address the role of secrecy and offshore private partnerships (chapter 2), and supreme audit jurisdictions, concern about the shrinking space for civil institutions (chapter 12). society, and distress over repressive means being used to curtail information. Public Financial Management. Strengthening PFM systems can help reduce the risk of some forms of While some of the common foundations for corruption through better accountability, improved controlling corruption appear to be moving in the spending and greater scrutiny of the budget, both by right direction, corrupt individuals are also finding legislatures and the public, and can help constrain the it easier to hide their illicit gains. The need to move ability to shift resources towards corrupt purposes. and hide large sums of illicit funds has contributed to One useful source for tracking progress on PFM is growth in the demand for services that facilitate these the Public Expenditure and Financial Accountability movements and for the creation of offshore structures.11 (PEFA) program, initiated in 2001.14 The PEFA program Secrecy-focused jurisdictions provide havens for hiding provides a framework for assessing and reporting on wealth, whether obtained legally or illegally, and some the strengths and weaknesses of PFM, using evidence- jurisdictions have competed for such business. While based indicators to measure performance. A recent the historical origins are deep, the competition has World Bank study15 demonstrates the usefulness of led to an increasing number of secrecy jurisdictions. matching measures of corruption with measures of the There is increasing recognition of the pernicious effects policy and institutional framework. It found that “firms that policies in these jurisdictions and the abuse of report paying fewer and smaller kickbacks to officials in anonymous companies and other legal structures have countries with more transparent procurement systems, on corruption.12 effective and independent complaint mechanisms, and more effective external auditing systems.” Overall, for Access to Information. The ability of citizens to make the subset of countries that have undergone the PEFA informed choices in their daily life and hold government exercise multiple times, some saw their assessments accountable is directly related to their ability to have get worse, but a larger number of countries saw access to government information in a meaningful improvements.16 Studies of PFM remind that reforms way. When access to information is the default, rather require long-term engagement with all stakeholders for than the exception, the public, the media, and civil successful implementation. Different aspects of public society can serve as watchdogs over the government. financial management are discussed in the chapters Countries that have passed access to information laws on procurement (chapter 1), public infrastructure 6 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE (chapter 2), state-owned enterprises (chapter 3), open Enforcement of Stricter Foreign and Domestic Anti- government (chapter 6), and supreme audit institutions corruption Legislation. While the United States of (chapter 12). America was the leader in pursuing its companies for overseas bribery, it is no longer alone. The Foreign Transparency and Participation in Decision-Making. Corrupt Practices Act (FCPA) of 1977 made it unlawful Transparency can help strengthen accountability for for entities to make payments to foreign government the implementation of policies. When coupled with officials to assist in obtaining or retaining business.19 mechanisms of participation, transparency can also Other countries have since enacted similar legislation, help limit the degree to which policies are biased especially following the adoption of the OECD in favor of certain groups, firms or individuals. When Convention Against Bribery in 1998. The UK Bribery working in concert, transparency and participation Act is even more stringent, and enforcement has also can help limit state capture. Based on a study by been increasing. While universal enforcement of such the World Bank, between 2001 and 2016, about 60 laws is still a long way off, some progress has been countries had adopted regulatory impact assessment made in the past decades.20 The passage in 2003 of (RIA) frameworks17 that were publicly available. As the United Nations Convention Against Corruption with access to information laws, however, developing (UNCAC), which obligated signatory countries to systems to implement RIAs as part of the legal and criminalize behaviors widely viewed as “corruption”, regulatory drafting processes is not trivial. Among the was an important milestone. While legal frameworks 57 countries whose reforms could be tracked, only 20 have moved closer to criminalizing the behaviors had operational and functional systems two years into widely seen as corruption, data on enforcement implementation. The authors noted that public officials is not easily available and most observers see a may resist RIA systems either because of the disruption large gap between de jure provisions and de facto to established processes and work patterns or because implementation. Internationally, efforts to rein in the associated transparency may expose practices overseas jurisdictions are bearing fruit, as the chapter which are not ethical or legal. The study argues that on beneficial ownership transparency (chapter 9) flexibility and patience are needed for the successful explains. Pressure has also been increasing through the building of reform constituencies inside and outside debarment processes of the multilateral development government. banks, including agreements to cross-debar firms and individuals that violate policies related to fraud and Accountability Mechanisms. Several accountability corruption. By the end of June 2019, more than 200 tools, such as income and asset declarations and firms or individuals had been debarred by the World conflict of interest disclosures for public officials Bank.21 are being more widely applied across governments. The percentage of jurisdictions with disclosure Measuring impact: Does the data help requirements has grown from 43 percent in the us? 1990s to more than 90 percent today. Many are taking advantage of electronic means for making Has the progress in improving policies and and verifying the disclosures.18 These are discussed institutions for controlling corruption been in greater detail in the case studies in chapters 8 and matched with progress in reducing corruption? 9 of the report. Indeed, technological advances are Have the tools and strategies adopted by countries strengthening mechanisms of accountability in many been effective? Have the anti-corruption agencies, tax ways. These include the use of biometrics to eliminate and audit institutions, CSOs and other institutions of ghost workers, e-GP for efficiency and integrity, public accountability been effective in reducing corruption? audit tools and beneficiary feedback mechanisms, The answers are not straightforward as they depend and the use of drones and remote sensing to monitor on the availability of indicators that robustly measure progress on infrastruc ture projec t s. CivicTech trends in different types of corruption over time. While and GovTech are providing promising avenues for the pros and cons of different measures—surveys on accountability and have shown some positive results experiences, perceptions of experts, and indexes of in conjunction with other tools. Chapter 7 discusses both—have been written about before, a brief review the latest trends in technology and their use to deliver may be useful.22 services and detect fraud and corruption. Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 7

SETTING THE STAGE It is important to distinguish between measures but is much more systemic since 57 percent of the that are based on the perceptions of experts and underlying data points are missing. A second reason those that track actual prevalence of corrupt is more direct. The WGI-CC is rescaled each year to behaviors over time. The former may have limited have a mean of zero and this reason alone means that it usefulness in tracking actual levels of corruption over cannot be used to track progress over time. Using these time since perceptions may be biased by perceived composite indicators to assess changes over time, while correlates, such as poverty or form of political system. commonly done, should be avoided. In addition, they tend to adjust slowly to changing realities. A range of biases can cloud perceptions of how Well-designed surveys, on the other hand, tend good or bad things were in the past, making questions to provide a more accurate understanding about perceived trends (“is corruption getting better of corruption trends over time, but they are or worse?”) poor proxies of actual trends.23 In contrast, intentionally narrower in scope. The World Bank’s surveys about contemporaneous experiences (“have Enterprise Surveys since the early 2000s have allowed you paid a bribe in the past year?”), evaluated at for systematic tracking of direct experiences with different points in time, provide better measures of corruption in business enterprises, using a consistent actual trends. Even if they are well designed, however, methodology (the same questionnaires and sampling). surveys on corruption experiences may not always get To track and understand trends, one needs to focus on honest answers, leading to underestimations of the the countries that were in at least two rounds of the extent of corruption.24 Enterprise Surveys. In the Europe and Central Asia region, such surveys have been carried out every three While index-based measures have helped raise to five years since 1999, and each round has showed general awareness of the magnitude of corruption, generalized reductions in administrative corruption.29 A they have limited usefulness for tracking changes global approach would need to focus on the years since over time. Two of the most well-known and widely used 2006 when survey questionnaires were harmonized indexes are Transparency International’s Corruption across regions.30 Perceptions Index25 (TI-CPI) and the Control of Corruption measure in the Worldwide Governance One benefit to working with certain survey data is Indicators26 (WGI-CC). Both of these use composites the ability to focus on specific types of behaviors, made up of more than one indicator, combining rather than the generic term “corruption.” Indeed, information based on availability. The TI-CPI continues speaking too generically about “corruption” not only to be influential in raising awareness about corruption, risks mashing up genuine successes and failures, but and the WGI-CC is often used for statistical analysis makes it hard to learn from either.31 The key corruption- given its long time series and broad country coverage. related questions on the Enterprise Surveys concern They both have their limitations,27 however, when it taxes, government procurement, operating licenses, comes to tracking progress over time. One reason has and import licenses. There is also a more subjective to do with the lack of conceptual clarity of the indexes. question about how much corruption is an obstacle to Imagine, for example, an index that comprises three doing business. sources of data: enterprise survey data on experiences with corruption at customs, expert perceptions of the The World Bank’s Enterprise Surveys show a decline, overall prevalence of “corruption”, and household on average, in administrative corruption on the surveys about informal payments and gifts for services. whole, even though the individual country results Such an index would have no natural units, a problem vary. Global results suggest a decline in corruption on that is exacerbated when the data is patchy. Only one bribes paid to tax officials at an annual rate of decrease or two of these may be available in some countries, of 3.7%. Among firms that made any informal payment leading to an index with many missing data points for a government contract in the past 12 months, the and making it inconsistent across countries or even annual decline was 6.6%. The estimated annual rate of within a country over time.28 In practice, the amount decline in the percentage of firms indicating corruption of missing information is huge. For the 210 countries as a major obstacle is 5.4%. The estimates of the annual covered by the WGI-CC in 2018, there are 127 different rate of change in the various measures of corruption are combinations of the sub-indicators—and, one may consistently negative, implying improvement over time, argue, 127 different definitions of “corruption”. The and most of them are highly statistically significant. issue is not a matter of a few missing observations (Figure A shows the percentage of firms that made 8 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE FIGURE A Percentage of Enterprises making Informal Payments (Gifts) to Tax Inspectors, among those with Contact (89 Countries) 70% 60% 50% Each line segment connects the endpoints for one country 40% 30% 20% The heavy black line shows the overall trend 10% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: Based on the 89 countries that had at least two rounds of the Enterprise Surveys between 2006 and 2018. For each country the implicit annual rate of change was calculated. (The average rate of change is negative and significant.) These were then averaged and applied to respective variables. The year with the most observations was used to benchmark the trend lines, and the growth was projected forward and backward. informal payments to tax inspectors for all countries surface, but the magnitudes are not known in a way that with at least two observations. Each line represents one facilitates comparison over time. It is clear that when country. The heavy black line is the average trend.) such cases do come to light, they are often massive— and consequential. Transparency International’s 25 It is worth noting that while administrative Corruption Scandals that Shook the World lists scandals corruption on average is declining, the pace of in football and jade mining, leaks that brought down decline is slow. At these rates of change it would take presidents, death squads and Hollywood parties. The nearly three decades (27 years) to reach a position imperative to address corruption is as strong as ever.32 at which the average country would have fewer than 5 percent of firms report that corruption is a major From technology to behavioral science, problem for doing business. Since the approach used in other trends that impact corruption this thought experiment is to calculate rates of change, rather than absolute change, this approach is, perhaps, Changing global trends and some additional factors biased toward estimates of long convergence periods. present opportunities to address corruption but also Even so, it is clear that while the general trend is in the create some challenges. Despite the improvement in right direction, the pace is slow and progress is not reducing the prevalence of administrative corruption in universally present in all countries. many places, the spotty record and continuous stream of scandals suggest the need for a re-examination Some forms of corruption, particularly corruption of approaches to controlling corruption. In addition, that is less frequent but of large magnitude, are other factors have changed and continue to change not well measured by surveys or any other existing rapidly, calling for a realignment of approaches. While method. Such grand corruption scandals routinely Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 9

SETTING THE STAGE by no means exhaustive, a few of these changes, remain hidden and others, such as distributed ledger including technology, globalization, human behavior, technologies, can also prevent fraud. E-GP can level politics and power, and the issue of incentives, are the playing field for bidders and facilitate the collection worth a mention. of data, which itself can help identify red flags that signal corruption risks.34 While the rapid advance of GovTech can be a game changer for strengthening technology holds great promise, it also poses cause for various aspects of governance and control of concern. The explosion of data and transparency needs corruption, but technology can also pose risks.33 to be met with a massive expansion in data literacy Online platforms can be used to enhance transparency, and analog complements, such as skills, infrastructure strengthen citizen engagement, and establish grievance and institutions, to reap the full potential of digital redress mechanisms, including whistleblower systems. dividends.35 At the same time, digital technologies can Digital technology can also speed up government also be abused to repress human rights or to transfer services and facilitate monitoring of service quality, and disguise large amounts of stolen assets. The role of obviating the ability to demand certain bribes. The GovTech is discussed later in the report (chapter 7) as ready availability of some technologies, such as mobile a thematic area with several country examples covering phone cameras, can make it harder for abuses to a wide range of services where technology is playing 10 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE a key role. Indeed, technology features throughout A deeper understanding of the power and this report for applications in procurement (chapter 1), political landscape of a country helps in designing customs (chapter 4), service delivery (chapter 5), open interventions that not only address corrupt government (chapter 6), asset and income declarations practices but also tackle resistance to their (chapter 8), and others. implementation due to a preference to maintain the status quo. As pointed out in World Development Increasing globalization has facilitated the Report 2017—Governance and the Law, approaches movement of people and assets across borders, that focus on transactions, without sufficient attention leading to expansion of cross-border illicit financial to context and history, or those that focus on particular flows. As discussed earlier, offshore financial centers forms of institutions, rather than the functions they have long been available as safe havens for illicit assets, perform, can have limited traction at best.41 In addition, but their use has expanded in recent decades with easy since advanced economies are significantly more access to services of lawyers and bankers that specialize “rule-following” than developing countries, powerful in cross-border financial dealings. At the same time, organizations benefit from rule of law and may work to stricter enforcement of laws against overseas bribery keep it because it is in their own interest to do so. In is increasing the risk to international investors that do countries where rule of law is weak, in contrast, powerful business with countries with endemic corruption, with organizations rely less on complex market contracts for fines running into the billions of dollars. Tools like their prosperity and are less interested in a generalized asset and interest declarations (chapter 8), beneficiary rule of law, making it harder for such reforms to stick.42 ownership transparency (chapter 9) and sharing of tax From a practitioner’s perspective, the “political administration data (chapter 10) are useful in addressing settlements” concept forces deeper thinking beyond some of these. specific transactions to the constellations of interests that may be benefiting from the extant situation. A more systematic understanding of behavioral patterns, and experiments with innovative Finally, a closer look is needed to consider how best approaches, can make anti-corruption efforts more to address incentives and influence the behaviors effective. Conceptual approaches have long viewed of individuals through reforming policies and corruption as a reflection of underlying governance institutions, with a view to reducing corruption. Much weaknesses.36 In the past decades, advances of the academic literature views corruption as the result in behavioral social science have revolutionized of a “principal-agent” problem. The principal, say the economics and are being harnessed for development legislature or even the general public, cannot perfectly work.37 However, the implications for anti-corruption control the behavior of the agent, say the public official, are just beginning to be explored. Social norms can who has different incentives. Changing the misbehavior sometimes explain the effectiveness or lack thereof of the agent, then, entails stronger oversight and of anti-corruption interventions.38 For example, in an accountability for misbehavior, using principled tools environment of systemic patronage, increases in salaries like greater transparency as well as instrumental ones have been argued to increase the expected payout like asset and income declarations, discussed later in to benefactors who provided the jobs. Such cultural the report. A second school of thought, however, looks expectations of reciprocity could fuel corruption as at individual instances of corrupt behavior as part of a pressure to conform to the average behavior can broader system. In places where corruption is systemic, override or redefine one’s personal integrity. Social it is argued, trying to alter the behavior of individuals norms and culture work the same way for those who is challenging and slow, and it is best approached as pay bribes. When individual citizens are asked “why a collective action problem. For practical purposes, they pay bribes”, many respond that “everybody does the different paradigms complement each other and it.”39 Changing perceptions of what is “normal” and should not be seen as substitutes.43 In this report, these shifting social norms and behaviors is challenging and paradigms are not purely theoretical, but have practical takes time. Many anti-corruption-oriented civil society implications. organizations at the national level are focusing on shifting behavior, and finding it a slow process.40 Social norms are prominent in the discussion of corruption in customs (chapter 4). Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 11

SETTING THE STAGE Notes 1. The literature on the costs of corruption is vast. Useful 11. See Emile van der Does de Willebois, Emily M. Halter, Robert summaries can be found in the WBG Governance and Anti- A. Harrison, Ji Won Park, J.C. Sharman (2011). The Puppet corruption Strategy (2007), and Sofia Wickberg (2013), Masters: How the Corrupt Use Legal Structures to Hide Stolen “Literature review on costs of corruption for the poor”, U4 Assets and What to Do About It. Washington: World Bank. Expert Answer 382. The April 2019 Fiscal Monitor from the Nicholas Shaxson (2011). Treasure Islands: Uncovering the IMF examines the fiscal costs of corruption. Damage of Offshore Banking and Tax Havens. New York: St. Martin’s Griffin. Oliver Bullough (2019) Moneyland: The Inside 2. Mogens K. Justesen and Christian Bjørnskov (2014). Story of the Crooks and Kleptocrats Who Rule the World. New “Exploiting the Poor: Bureaucratic Corruption and Poverty York: St. Martin’s Griffin. in Africa.” World Development. Vol 58, June 2014: 106-115. Caryn Peiffer & Richard Rose (2018). “Why Are the Poor More 12. Rankings of countries according to financial secrecy are Vulnerable to Bribery in Africa? The Institutional Effects of provided by the Tax Justice Network, although the rankings Services.” The Journal of Development Studies, 54:1, 18-29. do not facilitate comparisons in absolute levels of secrecy over time. 3. Fried, Brian J., Paul Lagunes and Atheendar Venkataramani (2010) “Corruption and Inequality at the Crossroad: A Multi- 13. Open Government Partnership factsheet. Method Study of Bribery and Discrimination in Latin America.” Latin American Research Review, 45(1): 76-97. 14. The original seven international development par tners were: The European Commission, International Monetary 4. Hyll-Larsen, P. 2013. “Free or Fee: Corruption in Primary School Fund, World Bank, and the governments of France, Norway, Admissions.” In Global Corruption Report 2013: Education, by Switzerland, and the United Kingdom. Transparency International, 52-59. Transparency International; Chow, S., and D. T. Nga. 2013. “Bribes for Enrollment in Desired 15. Knack, Stephen; Biletska, Nataliya; Kacker, Kanishka. Schools in Vietnam.” In Global Corruption Report 2013: 2017. Deterring kickbacks and encouraging entry in public Education, by Transparency International, 60-67. Transparency procurement markets: evidence from firm surveys in 88 International; Corruption Watch. 2013. “Low-Income Housing: developing countries (English). Policy Research working paper; More Transparency Needed.” https://www.corruptionwatch. no. WPS 8078. Washington, D.C.: World Bank Group. http:// org.za/low-income-housing-more-transparency-needed. documents.worldbank.org/curated/en/817871496169519447/ Deterring-kickbacks-and-encouraging-entry-in-public- 5. This section draws on World Bank (2019) Anti-corruption procurement-markets-evidence-from-firm-surveys-in-88- Initiatives—Reaffirming Commitment to a Development developing-countries. Priority. 16. Other sources tell a similar story: The Open Budget Survey 6. As noted in the groundbreaking The Many Faces of Corruption, (OBS), produced by the International Budget Partnership “in a surprisingly large number of countries in all regions of the (IBP), shows the general trend toward greater openness of world, corruption is pervasive at all levels of education, from budgets. “OBS 2019 finds a modest global improvement in primary schools through tertiary institutions. It can occur at budget transparency, which is consistent with the overall trend any stage and among any group of actors from policy makers measured by the survey over the past decade..” A recent paper at the ministerial level to providers at the school level such by the IMF draws on government finance statistics and tracks as teachers and contractors to beneficiaries of education changes for 186 countries in 2003–13. The authors found a such as students and parents. Corrupt practices in education gradual improvement in the overall comprehensiveness of can include bribes and illegal fees for admission and fiscal statistics, specific indices of the coverage of public examination; academic fraud; withholding teacher salaries; institutions, fiscal flows, and fiscal stocks. They also found that preferential promotion and placement; charging students for most countries’ reporting remains far from comprehensive. “tutoring” sessions to cover the curriculum needed to pass Rachel F. Wang, Timothy C. Irwin, and Lewis K. Murara mandatory examinations and that should have been taught (2015) “Trends in Fiscal Transparency: Evidence from a New in the classroom; teacher absenteeism; and illegal practices Database of the Coverage of Fiscal Reporting”. IMF Working in textbook procurement, meal provision, and infrastructure Paper WP/15/188. contracting.” Harry Patrinos and Ruth Kagia, 2007, “Maximizing the Performance of Education Systems: The Case of Teacher 17. Peter Ladegaard, Petter Lundkvist, Jonathan Kamkhaji (2018). Absenteeism,” in J. Edgardo Campos and Sanjay Pradhan “Giving Sisyphus a Helping Hand—Pathways for Sustainable (eds), The Many Faces of Corruption--Tracking Vulnerabilities RIA Systems in Developing Countries” World Bank Policy at the Sector Level. The World Bank. Research Working Paper 8367. March 2018. 7. Collignon P, Athukorala P-c, Senanayake S, Khan F (2015) 18. Ivana M. Rossi, Laura Pop, and Tammar Berger (2017) Getting Antimicrobial Resistance: The Major Contribution of Poor the Full Picture on Public Officials a How-to Guide for Effective Governance and Corruption to This Growing Problem. PLoS Financial Disclosure. Stolen Asset Recovery Initiative, UNODC, ONE 10(3): e0116746. and World Bank. 8. Goldstein, Markus, Joshua Graff Zivin, James Habyarimana, 19. United States of America Department of Justice. Cristian Pop-Eleches, and Harsha Thirumur thy. 2013. “The Effect of Absenteeism and Clinic Protocol on Health 20. Transparency International (2018). Exporting Corruption - Outcomes: The Case of Mother-to-Child Transmission of HIV Progress Report 2018: Assessing Enforcement of the OECD in Kenya.” American Economic Journal: Applied Economics, Anti-Bribery Convention. 5 (2): 58-85. 21. See World Bank Group Sanctions System Annual Report FY19. 9. Hanf M, Van-Melle A, Fraisse F, Roger A, Carme B, Nacher Some countries have adopted similar systems. M (2011) Corruption Kills: Estimating the Global Impact of Corruption on Children Deaths. PLoS ONE 6(11): e26990. 22. Stephen Knack (2006), “Measuring Corruption in Eastern Europe and Central Asia : A Critique of the Cross-Country 10. For a summary see Talha Burki (2019), “Corruption is an Indicators.” Policy Research Working Paper; No. 3968. World ‘ignored pandemic’”. The Lancet. Vol 19, p 471, May 2019. Bank. Christiane Arndt and Charles Oman (2006), Uses and http://www.thelancet.com/infection Abuses of Governance Indicators, Development Centre Studies, OECD Publishing, Paris. James Anderson (2009), 12 Enhancing Government Effectiveness and Transparency: The Fight Against Corruption

SETTING THE STAGE “A Review of Governance and Anti-corruption Indicators uploads/2019/02/ICT-corruption-24Feb19_FINAL.pdf, p. 35. in East Asia and Pacific”. World Bank. Charles Kenny (2017) Results Not Receipts—Counting the Right Things in Aid and 34. Liz David-Barrett and Mihály Fazekas (2019) “Using ‘red flag’ Corruption, Center for Global Development, Washington, DC. indicators to identify corruption and analyse reform efforts in the procurement process,” ACE Anti-Corruption Evidence 23. For an exposition about the biases that lead us to remember Research Program. July 8, 2019. the immediate past most prominently, and other biases, see Daniel Kahneman (2011). Thinking, Fast and Slow. Farrar, 35. World Bank (2016). World Development Report 2016, Digital Straus and Giroux, New York. For other excellent reviews of Dividends. how wrong perceptions can be see: Hans Rosling with Ola Rosling and Anna Rosling Rönnlund (2018) Factfulness: Ten 36. This point was made in World Bank (1997), Helping Countries Reasons We’re Wrong About the World—And Why Things are Combat Corruption: The Role of the World Bank, published Better Than You Think. Flatiron Books, New York. Stephen soon after it began to work more directly on anti-corruption. Pinker (2018). Enlightenment Now: The Case for Reason, “Corruption is a symptom of deeper-seated factors. The Science, Humanism and Progress. Allen Lane, UK. causes are complex, and the means to control it are not fully understood. Corruption thrives when economic 24. See, for example, Omar Azfar and Peter Murrell, (2009), policies are poorly designed, education levels are low, civil “Identifying Reticent Respondents: Assessing the Quality society is underdeveloped, and the accountability of public of Survey Data on Corruption and Values,” Economic institutions is weak—conditions that exist in many settings Development and Cultural Change 57, no. 2 (Januar y but are particularly prevalent in some developing countries. 2009): 387-411; and Aart Kraay and Peter Murrell (2013), Corruption often has a political dimension and reflects the way “Misunderestimating Corruption”, World Bank Policy Research power is exercised in a country. And it is constantly changing Working Paper 6488. its form in response to changes in the global economy and technical innovation.” (p. 5.) 25. Corruption Perceptions Index. 37. World Bank (2015). World Development Report 2015: Mind, 26. Worldwide Governance Indicators. Society, and Behavior. 27. See footnote 31 for some critiques. Responses to some of 38. See, for example, Cheyanne Scharbatke-Church and Diana the criticisms of the Worldwide Governance Indicators can be Chigas (2019), Understanding Social Norms: A Reference found here. Guide for Policy and Practice. The Henry J. Leir Institute of Human Security. The Fletcher School of Law and Diplomacy, 28. Anderson (2009), op. cit. Tufts University. David Jackson and Nils Köbis (2018). “Anti- corruption through a social norms lens”. U4 Anti-Corruption 29. These findings based on the WBRD-World Bank Business Resource Centre, Chr. Michelsen Institute (U4 Issue 2018:7). Environment and Enterprise Performance Survey (BEEPS) have Hope Schaitkin (2018) “Changing Social Norms: What Anti- been reported in the EBRD Transition Report, the World Bank’s Corruption Practitioners Should Read.” Corruption in Fragile Anti-corruption in Transition series, and other publications. States Blog. Tufts University. November 27, 2018. 30. As noted already, surveys on corruption experiences have 39. For example, Corruption According to Citizens, Firms, and been subject to criticism because some people do not Public Officials—Results of Sociological Surveys, World Bank, participate honestly. To the extent that the rate of being Government Inspectorate of Vietnam, UK-DFID, and UNDP. candid does not greatly change with time, this criticism Hanoi, Vietnam: National Political Publishing House, 2012. would not have much of an effect on our understanding of trends. In addition, the same studies argue that questions 40. An example of an attempt to systematically shape social on perceptions of corruption face similar challenges. See, for norms at the country level is Accountability Lab’s Integrity Idol example, Omar Azfar and Peter Murrell, (2009), op cit., and competitions. Aart Kraay and Peter Murrell (2013), op. cit. 41. World Bank. 2017. World Development Repor t 2017: 31. While this section has focused on what is known about trends governance and the law: Main report (English). World corruption in the past, an even more challenging set of Development Report. Washington, D.C.: World Bank questions centers on predictions of changes of corruption in Group. ht tp://documents.worldbank.org/curated/ the future. A current research project attempts to do just that: en/774441485783404216/Main-report.; Mushtaq H. Khan Alina Mungiu-Pippidi and Lucia Cizmaziova (2020) “Beyond (2018), “Political settlements and the analysis of institutions”, the lag. How to predict and understand evolutions towards African Affairs, Volume 117, Issue 469, October 2018, p. good governance?” European Research Centre for Anti- 636–655. Alina Mungiu-Pippidi. 2015. The Quest for Good Corruption and State-Building, Hertie School of Governance, Governance: How Societies Develop Control of Corruption. ERCAS Working Paper No. 61. May 2020. Cambridge, U.K.: Cambridge University Press. 32. While this section has focused on what is known about 42. Mushtaq H. Khan (2018), op. cit. corruption trends in the past, an even more challenging set of questions centers on predictions of changes of corruption in 43. See the debate on the pages of Governance. Anna Persson, the future. A current research project attempts to do just that: Bo Rothstein, and Jan Teorell (2013), “Why Anti-corruption Alina Mungiu-Pippidi and Lucia Cizmaziova (2020) “Beyond Reforms Fail—Systemic Corruption as a Collective Action the lag. How to predict and understand evolutions towards Problem,” Governance, Volume 26, Issue 3, July 2013, p. 449- good governance?” European Research Centre for Anti- 471. Heather Marquette and Caryn Peiffer (2018), “Grappling Corruption and State-Building, Hertie School of Governance, with the ‘real politics’ of systemic corruption: Theoretical ERCAS Working Paper No. 61. May 2020. debates versus ‘real-world’ functions,” Governance, Volume31, Issue3, July 2018, p. 499-514. Anna Persson, Bo 33. For a review, see Adam, I., and Fazekas, M. (2019). Are Rothstein, and Jan Teorell (2019), “Getting the basic nature of emerging technologies helping win the fight against systemic corruption right: A reply to Marquette and Peiffer,” corruption in developing countries? Pathways for Prosperity Governance, Volume 32, Issue 4, October 2019, p. 799- Commission Background Paper Series; no. 21. Oxford, United 810. Heather Marquette and Caryn Peiffer (2019), “Thinking Kingdom, ht tp://w w w.gov transparency.eu/wp-content / politically about corruption as problem-solving: A reply to Enhancing Government Effectiveness and Transparency: The Fight Against Corruption 13

SETTING THE STAGE Persson, Rothstein, and Teorell”, Governance, Volume 32, Issue Goldstein, Markus, Joshua Graff Zivin, James Habyarimana, 4, October 2019, p. 811-820. See also Alina Mungiu-Pippidi Cristian Pop-Eleches, and Harsha Thirumurthy. (2013). “The and Till Hartmann (2019). “Corruption and Development: A Effect of Absenteeism and Clinic Protocol on Health Outcomes: Reappraisal”. Oxford Research Encyclopedia, Economics and The Case of Mother-to-Child Transmission of HIV in Kenya.” Finance. March 2020. American Economic Journal: Applied Economics, 5 (2): 58-85. References Hanf M, Van-Melle A, Fraisse F, Roger A, Carme B, Nacher M (2011) Corruption Kills: Estimating the Global Impact of Corruption on Aar t Kraay and Peter Murrell (2013), “Misunderestimating Children Deaths. PLoS ONE 6(11): e26990. Corruption”, World Bank Policy Research Working Paper 6488. Hans Rosling with Ola Rosling and Anna Rosling Rönnlund (2018) Adam, I., and Fazekas, M. (2019). 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