Comparative Public Policy

ANTI-CORRUPTION STRATEGIES
AT THE NATIONAL AND LOCAL LEVEL

10th January 2012

I. Defining Corruption
II. Measuring Corruption III. Tackling Corruption: Case Studies

I. DEFINING CORRUPTION

HOW CAN CORRUPTION BE DEFINED?

Transparency International: Corruption is the abuse of entrusted power for private gain. World Bank: corruption is the abuse of public office for private benefit. Asian Development Bank: the abuse of public or private office for personal gain. Corruption involves behaviour on the part of officials in the public and private sectors, in which they improperly and unlawfully enrich themselves and/or those close to them, or induce others to do so, by misusing the position in which they are placed.
I. DEFINING CORRUPTION

LEVELS OF CORRUPTION
Grand corruption
High level corruption Substantial amounts of money

Petty corruption
Low level corruption Junior officials

I. DEFINING CORRUPTION

TYPES OF CORRUPTION
Public corruption
Misuse of a public office for personal gain
Administrative corruption
Alters the implementation of policies

Political corruption
Influences the formulation of laws,

Private corruption
Between individuals in the private sector

I. DEFINING CORRUPTION

FORMS OF CORRUPTION
Bribery Extortion Fraud Clientelism Embezzlement Favouritism Nepotism Conflict of Interest as corruption

I. DEFINING CORRUPTION

II. MEASURING CORRUPTION

II.1 CORRUPTION PERCEPTION INDEX

CORRUPTION PERCEPTION INDEX

The CPI measures the degree to which corruption (frequency and/or size of bribes) in public sector (corruption which involves public officials, civil servants or politicians) is perceived to exist in 183 countries/territories around the world.

II.1 CPI

BRIEF METHODOLOGIES TO CALCULATE CPI

STEP I Collect 17 data sources from 13 institutions

Rescale the data collected by the Matching Percentile Method. Countries score are between 0 and 10 STEP II

Increase the standardized deviation among all countries by the Beta-Transformation Method STEP III
Determine CPI score by averaging all standardized values of every source for each country STEP IV

II.1 CPI

STRENGTHS & SHORTCOMINGS

Diversifies the risk of concentration on a few specific points of view. CPI is favorable for cross-country comparison, due to its simplicity and overall outlook.

The Perception-based measure does not imply actual corruption.

CPI cannot be used for comparison of one country over an extended period.

The CPI look s at the aggregate picture only. There could still be big loopholes on corruption in different forms, dimensions and sectors. Aggregating and averaging several disparate ratings, which measure different aspects of corruption, can exacerbate biases and inaccuracy.
II.1 CPI

RESULTS 2011 WORLDWIDE MAP

New Zealand (9.5), Denmark (9.4) and Finland (9.4) are perceived countries with lowest corruption level. In contrast Afghanistan (1.5), Myanmar, (1.5) North Korea (1.0) and Somalia (1.0) are countries with highest corruption perception.

II.1 CPI

II.2 GLOBAL CORRUPTION BAROMETER

OVERALL VIEW
Annual publication since 2003 Public opinion poll conducted for Transparency International mostly by Gallup International Intended to complement Corruption Perception Index and the Bribe Payers Index Assesses public perception and experience of corruption and bribery in selected countries worldwide Gives a better idea of how corruption permeates society and the extent to which support is available for anti-corruption efforts
II.2 GPB

WHAT IS BEING MEASURED?

Peoples opinion on most corrupted public sectors Governments anti-corruption efforts Peoples experiences with bribery Personal willingness to engage in the fight against corruption

II.2 GPB

STRENGTHS AND WEAKNESSES

Measures citizens perception of and experience with bribery in different public institutions Measures experience with corruption

Bribery is only form of corruption assessed Assesses perceptions of corruption, which may not be indicative of the actual level of corruption Does not assess institutional framework/quality

20
II.2 GPB

2010 REPORT: 91,781 PEOPLE IN 86 COUNTRIES

II.2 GPB

II.3 WORLDWIDE GOVERNANCE INDICATORS (WGI)

WORLDWIDE GOVERNANCE INDICATORS (WGI)*

Survey 200 countries since 1996
Voice and Accountability Political Stability & Absence of Violence and Terrorism Government Effectiveness Regulatory Quality Rule of Law Control of Corruption The WGI is a valuable tool for assessing cross-country differences & changes in country performance over time on key dimensions of governance.

If you cannot measure it, you cannot improve it. Lord Kelvin
II.3 WGI

The WGI draw on four different types of source data: Surveys of households and firms (9 data sources) Commercial business information providers (4 data sources) Non-governmental organizations (9 data sources) Public sector organizations (8 data sources)
Perceptions matter Agents base actions on perceptions, impressions & views. Citizens unlikely to avail themselves of public services if they are ineffecient. (voting, courts, police) Enterprises base investment decisions on perceived view of the investment climate & the government's performance. Few alternatives to relying on perceptions data Particularly for corruption, which almost by definition leaves no paper trail that can be captured by purely objective measures.
II.3 WGI

WGI

Process

Capacity

Respect

Voice and accountability Political stability and absence of violence

II.3 WGI

Government effectiveness

Rule of law

Regulatory quality

Control of corruption

Measurement Type

Conceptual Dimension of (Anti-) Corruption

Perception on extent of petty corruption-bribes

Input (Rulebased) vs. Output (Outcomesbased)

Outcome based

Composite vs. Original Data

Internal vs. External

Corruption Perception Index Global Corruption Barometer

Composite

Both. Uses 3rd party sources in aggregation of index Internal. Designed by TI, carried out by polling organizations External

Perceptions; Experience with corruption; Bribery

Outcome based

Original

World Governance Indicators

Assesses voice & accountability, government effectiveness, regulatory quality, rule of law, control of corruption

Hybrid

Composite

II.3 WGI

II.4 CORRUPTION AND SOVEREIGN CREDIT RATING The big picture where does corruption bite economically?

QUANTIFYING CORRUPTION
Different corruption measurement indices have a pseudo effect on fighting corruption Credit ratings on possibility of sovereign defaults have an immediate or stronger effect Credit ratings are based on prevalence of corruption in different countries
Strong correlation between CPI and Standards & Poor ratings Credit ratings by all three major agencies take political and economic stability into account

II.4 CORRUPTION AND SOVEREIGN CREDIT RATING

CORRUPTION AND ITS EFFECTS ON SOVEREIGN CREDIT RATINGS

Corruption shifts economic activity from the formal to informal (non-taxable) sector So, basically corruption is resource misallocation Credit ratings are dependent on how a government can pay back its debt through taxes or on other economic indicators (GDP, fiscal balance, oil supply) Direct, significant and negative correlation found between corruption and credit ratings
II.4 CORRUPTION AND SOVEREIGN CREDIT RATING

FINDINGS
Relation holds amongst all four types of bonds/debts (short/long or local/foreign currency) One standard deviation decrease in corruption translates into improved rating by a full category Simply put, for every US$ 1 Million, annual savings of US$ 10,100
Source: http://belkcollegeofbusiness.uncc.edu/cdepken/P/intl_corruption9.pdf
II.4 CORRUPTION AND SOVEREIGN CREDIT RATING

PECUNIARY BENEFITS FROM ANTI-CORRUPTION

Eg. 1 - Argentina in 2003 had an outstanding debt of $127,687 M. Reducing corruption by one standard deviation would have saved Argentina $1,289 M annually, equivalent to 1% of its 2003 GDP of $129,596 M. Eg. 2 - Chile had an outstanding debt of $35,727 M. Reducing corruption could have saved it $361 M annually in interest.

II.4 CORRUPTION AND SOVEREIGN CREDIT RATING

BUT DOES IT REALLY HELP US? CREDIT RATING AGENCIES THEMSELVES ARE CORRUPT
Dominated by three giants - S&Ps, Moodys and Fitch Ratings are issuer-requested Banks, investors require all bonds to be rated by these private, independent rating agencies to assess the quality of debt being sold Agencies and issuers conspire and fix the rating of a debt Any country looking to raise capital in international market will have to get their debt rated Corruption from a supra-national to a national level Ties with corruption from local and national level
Source: http://rru.worldbank.org/documents/CrisisResponse/Note8.pdf
II.4 CORRUPTION AND SOVEREIGN CREDIT RATING

III. TACKLING CORRUPTION

CORRUPTION: CHIMERA CHARACTERISTICS

multifaceted multi-functional multi-spatial phenomenon chimeric:
composed of parts that are of different origin and are seemingly incompatible (and operating differently in different contexts or spheres of society)
http://www.biology-online.org/dictionary/Chimeric
III. TACKLING CORRUPTION

SPHERES OF SOCIETY
Public to public
Diversion of resources Appointments and transfers Embezzlement and fraud in planning and budgeting

Corruption occurs between

Public to private
Procurement collusion, fraud, bribery Construction fraud and bribery
Private

Public Actors

Public Officials

Consumers

Public to Citizen
Illegal connections Falsifying bills and meters
Source: Janelle Plummer
Plummer, J. 2007. Making Anti-Corruption Approaches Work for the Poor: Issues for consideration in the development of propoor anti-corruption strategies in water services and irrigation. Swedish Water House, SIWI and WIN. [online] Available at www.swedishwaterhouse.se III. TACKLING CORRUPTION

CAUTION
No one-size-fits-all strategy
just ideas and adaptations from WB and TI

Workable strategy is context dependent Begin with WB schematic followed by TI Temple

III. TACKLING CORRUPTION

WORLD BANK STRATEGY

III. TACKLING CORRUPTION

TI NATIONAL INTEGRITY SYSTEM GREEK TEMPLE

Jeremy Pope (ed), TI Sourcebook 2000, p.35

III. TACKLING CORRUPTION

Institutional pillar Executive Legislature

Corresponding core rules/practices Separation of Powers Conflict of interest rules Separation of Powers Independence Fair elections Oversight: Parliamentary Integrity Commissioner Independence Good facilities to ensure effective performance Proper remuneration

Judiciary

III. TACKLING CORRUPTION

Institutional pillar Public Accounts Committee (of legislature) Auditor General

Public service Media

Corresponding core rules/practices Power to question senior officials Independence/Autonomy Adequate resources Public Reporting Public service ethics Codes of Ethics Freedom of information Freedom of speech Competition vis vis

III. TACKLING CORRUPTION

Institutional pillar Civil society Ombudsman

Corresponding core rules/practices Freedom of speech Records management Public reporting Raising public awareness Enforceable and enforced laws (Justiciability) Competition policy, including public procurement rules Effective mutual legal/judicial assistance

Anti-corruption/watchdog agencies
Private sector International community

III. TACKLING CORRUPTION

INTERNATIONAL CONVENTIONS
UN Convention Against Corruption (2003)

Council of Europe Criminal Law Convention on Corruption (2002)

Asian Development Bank/OECD Anti-Corruption Initiative for AsiaPacific (2001) OECD Convention Against Bribery of Foreign Public Officials in International Business Transactions (1999) Organisation of American States Inter-American Convention Against Corruption (1997) US Foreign Corrupt Practices Act (1977) African Union Convention on Preventing and Combating Corruption (not yet in force)
III. TACKLING CORRUPTION

WHAT DOES IT TAKE?

1. Generate political will and local ownership 2. Resource and capacity-based 3. Measurable 4. Transparent, non-partisan and mindful of relevant conflict of interest issues

III. TACKLING CORRUPTION

POSSIBLE SOURCES OF CONFLICT OF INTEREST

Friendship/kins hip ties Overlap between party, state and business

Conflicts of interest
Private Funding Political Parties

Transformatory economic policies (VAT)

www.issafrica.org
III. TACKLING CORRUPTION

SAMPLE INVENTORY OF ANTI-CORRUPTION MEASURES

1. Institutional Reforms: Limiting Authority Privatization Liberalization Competitive Procurement Competition in Public Service 2. Institutional Reforms: Improving Accountability Freedom of Information Legislation Financial Disclosure laws Open Budget Process Financial Management Systems and Audit offices Inventory of AntiCorruption Measures

III. TACKLING CORRUPTION

SAMPLE INVENTORY OF ANTI-CORRUPTION MEASURES

2. Institutional Reforms: Improving Accountability (cont.) Inspector General/Ombudsmen/ Anti-Corruption Agency Hot Lines and WhistleBlower Protection Sanctions Judicial Reform Elections
III. TACKLING CORRUPTION

3. Institutional Reforms: Realigning Incentives 4. Societal Reforms: Changing Attitudes and Mobilizing Political Will Public Relations Campaigns Investigative Journalism Civic Advocacy Organizations Workshops International Pressure

CASE STUDIES: SUCCESSES & FAILURES IN TACKLING CORRUPTION

Hong Kong
Political will for fighting corruption: creation of the ICAC and the succeeding support to it Multilevel strategy against corruption Adequate system of Checks and Balances Proper and clear legislation on corruption Active civil society and freedom of speech

Mexico
Lack of political will: only limited efforts and initiatives against corruption since the year 2000 Localized efforts directed only to some sectors of society The system of Checks and Balances confronts a crisis Strong legal framework, lack of enforcement, complex procedures Weak but quickly growing civil society

Specialized Anti-Corruption Body: Independent Commission Against Corruption ICAC

Ministry of Public Administration

Federal Superior Auditor

IV. CASE STUDIES

Source: 2009 ICAC Annual Report

IV. CASE STUDIES

HONG KONG
108,389 corruption complaints between 1974 and 2010
70,511 investigations, 13,808 persons prosecuted

MEXICO
200 million cases of bribery in 2010 in Mexico compared to the 197 millions in 2007 In 2010 around 1,768,696,133 EUR were paid in bribes On average, Mexican households spent in 2010 14% of their income in bribes 16,207 corruption related norms and regulations eliminated
Sources : Transparencia Mexicana, ndice Nacional de Corrupcin y Buen Gobierno 2010 / 2009 ICAC Annual Report

IV. CASE STUDIES

Evaluation
TI Corruption Perception Index 2011
Worldwide Governance Indicators 2011 / World Bank Control of corruption (-2.5 the lowest, 2.5 the highest) TI Global Corruption Barometer 2010 / Table 1: In the past three years, how has the level of corruption in this country changed?

Hong Kong
12

Mexico
100

1.94

-0.37

Decreased: 32% Stayed the same: 35% Increased: 33%

Decreased: 7% Stayed the same: 18% Increased: 75%

IV. CASE STUDIES

THANK YOU FOR YOUR ATTENTION