___________________________________________________________________________ 2006/SOM1/ACT/WKSP/007a Recasting Governance for the XXI Century - Presentation Submitted by: Miguel Schloss, Managing Partner DamConsult Ltd. APEC Workshop on Anti-Corruption Measures for the Development of SMEs Ha Noi, Viet Nam 24-25 February 2006
Implications Implications APEC WORKSHOP ON ANTI-CORRUPTION MEASURES FOR THE DEVELOPMENT OF SMEs February 24-25, 2006 Hanoi, Vietnam � More costly public investments � Lower government revenues RECASTING GOVERNANCE TO � Lower expenditures on operations and COMBAT CORRUPTION AND UNLOCK maintenance COMPETITIVENESS � Lower resource surpluses ⇓ Poorer economic performance Poorer economic performance Miguel Schloss Controlling Bribery and Civil Liberties Controlling Bribery and Civil Liberties BRIBERY HIGH CORRUPTION CORRUPTION THA CMR NGA AGO IDN NIC PHL HND GTM VNM MOZ RUS Bribery (GCS97+) VEN KEN COL IND GRC EGY UKR POL UGA TZA CIV JOR ARG MEX ETH KOR TUR BRA CRI ISL ZWE ITA CHN BFA HUN GHA MYS MWI SVK ZMB MAR PER MUS TWN CZE THE DEMAND SIDE THE DEMAND SIDE SWZ LSO NAM ESP PRT ZAF ISR BEL FRA TUN CHE CHL NLD JPN AUT NZL DEU AUS IRL CAN USA SGP GBR LUX DNK FIN LOW SWE r=0.67 NOR BRIBERY L OW HIGH Civil Liberties (Freedom House) Source: Kaufmann and Sachs (1998) 1
Bribery vs. Civil Service Professionalism Bribery vs. Civil Service Professionalism Even more important (than regulatory interventions) in understanding bribery and corruption is the degree of regulatory discretion. Corruption and Regulatory Discretion Discretion Corruption and Regulatory HIGH High HND corruption IDN NIC PHL THA GTM RUS VNM NGA VEN IND COL COL GRC VNM RUS MEX ARG VEN CHN IND JOR PHL THA IDN POL TUR SLV MEX BRA UKR BGR Corruption KOR CRI BRA ISL KOR TUR ITA CHN ITA MYS ZAF POL ZWE HUN MYS TWN Bribery BEL CZE GRC HUN SVK ESP CHL ZAF PER CRI TWN FRA JPN CZE PRT HKG USA AUT PRT ESP GBR ISR ISR KAZ DEU IRL FRA SGP CHE LUX AUS NOR CHL NLD JPN SWE FIN CAN NZL DEU CAN r=0.86 CZE DNK USA IRL SVK HKG NZL DNK CHE r=0.76 NLD Low SGP corruption SWE LUX NOR GBR LOW FIN Low High Civil Service Professionalism LOW HIGH Regulatory discretion (GCS97) Time Management Spent with Time Management Spent with Corruption and Rule of Law Corruption and Rule of Law Bureaucrats and Frequency of Bribery Bureaucrats and Frequency of Bribery % Management Time % Management Time with bureaucrats with bureaucrats HIGH IRQ S&P-DRI Corruption Index UZB UZB ZAR 30% 30% TZA TZA TZA TCD CMR TCD KEN BLR BLR COL IRN BOL BOL GIN GIN MLI KOR KOR MLI MMR AZE AZE PAN LBY GEO GEO KAZ KAZ ARM ARM ZMB BEN BEN BGR BGR ZWE COG COG PAK NGA ZAF AGO MDA MDA EGY KEN KEN CIV CIV UGA SYR BOL 20% KGZ KGZ 20% MDG MDG GHA VNM MEX MEX GNB GNB THA THA RUS RUS PHL UGA UGA MOZ MOZ PER RUS SEN SEN BGD BHR FJI FJI THA NGA NGA IND BRA TUR ECU DZA HKG JOR JOR LKA CIV UKR UKR SVK SVK IDN GHA GHA JOR MKD MKD CHN IND IND MAR COL COL ZMB ZMB TGO TGO BGR JAM JAM TUR TUR VEN VEN LVA LVA ROM HUN HUN LTU LTU VEN BWA MWI MWI CRI POL POL ECU ECU OMN SVK ZAF ZAF CRI CMR CMR MEX SAU ARG 10% 10% TUN DEU DEU EST EST ZWE ZWE MAR MAR MUS MUS URY HUN PRT PRT USA USA CZE AUT AUT CZE FRA FRA ITA ITA POL CZE SGP SGP ARE MYS KOR IRL IRL KWT MYS MYS QAT CAN CAN ESP ESP TWN GBR GBR CHL GRC BEL CHE CHE AUS HKG HKG R =.77 CRI ESP R =.77 PRT JPN NZL ITA AUT r=0.82 CHE FRA ISR USA FIN IRL SGP CAN GBR 0 0 LOW DEU NLD SWE DNK Low High NOR Low High LOW HIGH Frequency of bribery (WDR 1997) Frequency of bribery (WDR 1997) Rule of Law (ICRG, average 1990s) 11 Source: Kaufmann and Wei Source: Kaufmann and Wei (1998) Data analysis based on survey conducted under the World (1998) Data analysis based on survey conducted under the World Bank’s World Development Report 1997. Bank’s World Development Report 1997. 2
Corruption Control By APEC Corruption Perception By Corruption Perception By Corruption Control By APEC Countries Regions Regions Countries OECD East Asia Middle East and North Africa South Asia Latin America and Caribbean Former Soviet Union Sub-Saharan Africa 0 10 20 30 40 50 60 70 80 90 100 % Multipronged Strategy for Multipronged Strategy for Combating Corruption Combating Corruption CORRUPTION CORRUPTION Economic Policy: Economic Policy: Financial Financial •Deregulation Controls: Controls: •Tax Simplification Civil Service: Civil Service: •Audit •Pay •Procurement •Meritocracy THE SUPPLY SIDE THE SUPPLY SIDE Corruption Corruption Public Oversight: Public Oversight: Legal- -Judicial: Judicial: Legal •Parliamentary Oversight •Independence •Civil society and media •Judicial Strengthening •“Power of data”/Surveys •ADR Mechanisms • Independent agency/NGO 3
Bribers Payers Index 2002 Bribers Payers Index 2002 Bribery in Business Sectors Agriculture Domestic Light manufacturing Russia Fishery China IT Taiwan Forestry South Italy Civilian aerospace Hong Kong Banking and finance M alaysia Heavy manufacturing Japan Pharmaceuticals/medical care USA 1999 Transportation/storage France Spain Mining 2002 Germany Power generation/transmission Singapore Telecoms UK Real estate/property Belgium Oil and gas Netherland Canada Arms and defense Austria Public works/construction Switzerland 0 10 20 30 40 50 60 70 80 90 100 Sweden Australia 0 2 4 6 8 10 CORRUPTION CORRUPTION Multipronged Strategy for Multipronged Strategy for Combating Corruption Combating Corruption The Demand and Supply Response The Demand and Supply Response � OECD & Other International Conventions to Combat Corruption � Other governmental initiatives � Global business codes � Sectoral Codes � Professional codes � Donor actions � Stakeholders networks 4
Fighting Corruption Fighting Corruption Fighting Corruption Fighting Corruption Price Comparisons Public Hearings Price Comparisons Public Hearings � Professional Coordination � Meeting with Stakeholders, including media � Homogenous products � Levelling Playing Field; Technical Experts � Primary data (invoices, contracts) � Agenda, Trade-Offs Assessment, Discussion, � Information analysis (price ranges, averages) Minutes � Bulletin, Publications, Dissemination � Explicit Resolution of Issues � Monitoring Results Fighting Corruption Fighting Corruption Fighting Corruption Fighting Corruption Evaluation Integrity Pacts Integrity Pacts � No-bribery commitment by bidders � Strategic positioning (vulnerable areas). � Commitment of government to prevent � State-of-the-art expertise. extortion and acceptance of bribes � Constituency grounding. � Disclosure of payments � Opening to outside bidders. � Watch up-scaling implications � Sanctions against bidders who violate their no-bribery commitment � Risks of bureaucratization � Focus on systemic issues � Involvement of civil society in monitoring � Safeguards for whistleblowers, arbitration bid evaluation, award decision process and vehicles . implementation of the contract 5
Conclusions Conclusions From words to deeds From words to deeds � Actions requires ownership: demand for accountability, responsiveness, partnerships. � Performance requires surveillance: checks and balances, plurality, emancipation/empowerment. � Sustainable action requires incentives: motivation, alignment between public and individual wellbeing. � An isolated existence is possible -- but at a inordinate cost in development and competitiveness . 6
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