AT A GLANCE: The World Bank Group’s strategy to scale up assistance to improve governance and fight corruption in client countries was unanimously endorsed by the Board on March 20, 2007. An Implementation Plan was discussed by the Board on October 11, 2007 and launched by World Bank President Robert B. Zoellick on December 6, 2007.
The Bank is the leading donor globally in providing support for strengthening public sector management. In FY07, Bank support for governance and rule of law was US$3.8 billion – US$3.4 billion for public sector governance and US$425 million to support improvements in the rule of law. This comprised 15.5 percent of total Bank lending.
The Bank helps strengthen governance and address corruption through projects and programs that improve transparency in public financial management; strengthen tax and customs administration; enhance civil service performance; support legal and judicial reform; combat corruption; and enable local and central governments to deliver services and regulate the economy more effectively.
The Bank is a leader in the development and application of governance diagnostics, such as Doing Business reports, Investment Climate surveys, Public Expenditure and Financial Accountability (PEFA) indicators, World Bank Institute’s (WBI’s) Governance and Anticorruption country diagnostics, and the WBI Governance Indicators.
The Department of Institutional Integrity (INT) investigates allegations of fraud and corruption in Bank-financed projects – inside and outside the Bank – and refers its findings to the Bank’s Sanctions Management system.
The World Bank Group’s Sanctions Management system was approved by the Board in July and August 2006. It consists of a two-tier process conducted by the respective Evaluation and Suspension Officers (EOs) and the Bank Group’s Sanction’s Board. The new system has been operational since March 2007 when the appointment of the EOs and Sanction Board members was announced.
Since 2001, the Integrity Department has handled close to 3,000 cases of alleged fraud, corruption, or other wrongdoing, resulting in the public debarment of 340 companies and individuals, whose names have been listed on the Bank’s website.
In September 2007, the Bank launched the Stolen Asset Recovery, or StAR initiative, in partnership with the United Nations Office on Drugs and Crime, to help developing countries recover and channel assets stolen by corrupt leaders towards effective development programs. The initiative aims to strengthen institutional capacity of government agencies to locate and repatriate stolen assets. It also calls for developed nations to proactively assist in the recovery of stolen assets and for greater global and bilateral cooperation.
Overview The World Bank Group’s assistance to improving governance and combating corruption is aimed at helping countries deliver basic services better to the poor and create growth and employment opportunities by encouraging private investment—both means of lifting people out of poverty. The Bank Group also has a fiduciary responsibility to its stakeholders to ensure that development funds are used for the purpose intended, and not jeopardized by corruption. The Bank Group is scaling up its already substantial focus on governance assistance. On March 20, 2007, the Board of Directors unanimously endorsed the sector strategy paper on “Strengthening World Bank Group Engagement on Governance and Anticorruption.” The paper incorporates feedback from consultations with governments, civil society, private sector, and multilateral and bilateral development partners, in over 50 countries—reaching a total of more than 3,200 stakeholders worldwide. Key messages of the strategy included: A call to stay engaged, even in poorly governed settings;
Engage not just with governments, but with a range of stakeholders, including non-executive institutions such as parliaments and the judiciary, the private sector, civil society, and media;
Strengthen country systems to fight corruption;
Increase emphasis on disclosure, participation, and third party monitoring in Bank operations;
Complement aggregate indicators with country monitoring and evaluation and disaggregated governance monitoring; and
Harmonize actions with donors and other actors.
Incorporating feedback from the consultations, the new strategy has three key pillars: i) Building capable, transparent, and accountable institutions and country systems, through assistance to countries; ii) minimizing corruption in Bank-funded projects by assessing corruption risk in projects upstream, actively investigating allegations of fraud and corruption, and strengthening project oversight and supervision; and iii) expanding partnerships with multilateral and bilateral development institutions, civil society, the private sector, and other actors in joint initiatives to address corruption. An Implementation Plan was discussed by the World Bank's Board in mid October 2007. Implementation was launched by World Bank President Zoellick at an event attended by more than 400 staff from across the Bank on December 6, 2007. The Bank has signaled top management commitment and leadership for the governance and anticorruption agenda – a Governance Council with vice president-level representation from across Regions, Networks, the International Finance Corporation, and the Multilateral Investment Guarantee Agency, and chaired by the Managing Directors on a rotating basis, was established in November 2007. The Council meets monthly to monitor progress on GAC, share lessons and provide guidance on key implementation challenges. The Bank’s approach to the implementation of the new Governance and Anticorruption strategy is country-focused. In order to strengthen governance and anticorruption in country level work, regional departments have identified 26 priority countries, where Country Governance and Anticorruption processes are being implemented. These are intended to ensure adequate resources and support systems for frontline staff to mainstream the agenda into country operations.
World Bank Initiatives at Country Level Helping countries strengthen governance is an element of the Bank’s Country Assistance Strategies (CASs) in many countries, and in some countries, such as Albania, Bangladesh, and Indonesia, forms a central element of the CAS. In regions such as Africa, support for governance reform is also central to the Bank’s strategy, using a mix of lending, grant, analytical and advisory instruments. At the country level, the Bank’s approach is to help state institutions become more efficient, accountable, and transparent. For instance: Support for better and more transparent management of public finances ensures more accountable policymaking and narrows the scope of financial mismanagement or leakages;
Support for civil service wage reform and codes of conduct creates enables better delivery of services to citizens and lessens incentives for corruption;
Assistance to strengthen local governments enables them to be more responsive and accountable in the delivery of public services; and
Support for legal and judicial reform and parliamentary capacity strengthens checks and balances to executive power and enables better delivery of justice.
The Bank is the leading donor globally in providing support for strengthening public sector management. In FY07, the Bank’s support for governance and rule of law was US$3.8 billion – US$3.4 billion for public sector governance and US$425 million to support improvements in the rule of law. This comprised 15.5 percent of total Bank lending. The World Bank Institute (WBI) supports operations by strengthening country capacity in all these areas. WBI particularly works to strengthen societal instruments of accountability by supporting media development, parliamentarians, legal and judicial reform, civic participation, private sector capacity for collective action against corruption, and youth leadership. The Bank Group also undertakes a range of empirical diagnostics and assessments, using tools such as Doing Business reports, “Investment Climate” surveys, Public Expenditure and Financial Accountability (PEFA) Indicators, and Business Environment and Enterprise Performance Surveys (BEEPS). WBI Governance Indicators periodically monitor reforms and WBI Transparency Indices measure economic/institutional and political transparency dimensions in over 200 countries; and WBI Indicators of Media Sustainability assess the enabling environment for media development.
Fighting Corruption in Projects At the project level, the Department of Institutional Integrity (INT), an independent unit reporting to the World Bank’s President, investigates allegations of corruption regarding Bank Group operations, as well as possible staff misconduct, and provides its findings to Bank management for decisions. For external cases, if INT finds sufficient evidence to support an allegation that a firm or individual has engaged in fraud, corruption, coercion, collusion, or obstructive practices, it refers the case to the Bank Group's new two-tier sanctions management process. The first tier is the Evaluation and Suspension Officer (EO), who evaluates INT's evidence, determines whether or not a temporary suspension should come into effect, and recommends a sanction. The second tier is the Sanctions Board, comprised of three Bank staff and four external members. The Sanctions Board members will review and make final decisions regarding sanctions cases if a respondent contests the allegations and/or the recommended sanction of the respective EO (one each for IBRD/IDA, IFC, MIGA, or Bank Guarantee Projects). If a respondent does not contest, the Sanctions Board imposes the sanction recommended by the EO. Since its establishment in 2001, INT has handled close to 3,000 cases of alleged fraud, corruption, or other wrongdoing. As a result, the Bank has debarred 340 companies and individuals, information on whom is publicly available on the Bank's website. When appropriate, the Department also refers its findings to the prosecutorial authorities of relevant member countries for further action. INT is now incorporating lessons from past investigations upstream in project design and program development. INT also initiates a proactive diagnostic tool called the Detailed Implementation Review (DIR), which is designed to assess the risk of fraud, corruption, and mismanagement in Bank-financed projects. Investigations following from DIRs have led to the debarment of 140 firms and individuals for fraud and corruption. In FY2007, the Bank's Board of Executive Directors approved the programmatic elements of a new Voluntary Disclosure Program (VDP), a proactive investigative tool designed to elicit voluntary cooperation in the fight against corruption from firms that have previously engaged in wrongdoing in Bank-financed projects. In FY2007, INT also released the Integrity Report of the World Bank Group, Fiscal Years 2005 - 2006, which details actions the Bank has taken to investigate fraud and corruption and to sanction companies found to have engaged in wrongdoing. The Bank offers multiple outlets to report allegations of fraud, corruption, and other misconduct in bank-financed projects, including an international hotline (1-800-831-0463). In January, the Bank Group announced that it would fully implement the recommendations of an Independent Review Panel headed by former Federal Reserve Chairman Paul Volcker (the Volcker Panel), which aimed to strengthen the Department of Institutional Integrity (INT). A Vice President for INT is being recruited; a Preventative Services Unit has been created within INT to provide upstream services to Bank operations; guidance for enhanced disclosure is being formalized; and a task force is developing the details for the transfer of internal investigation cases not involving significant fraud and corruption to the office of the newly appointed Chief Ethics Officer. In addition, an Independent Advisory Board will be selected to ensure the independence and accountability of INT. These comprehensive reforms and others recommended by the Volcker Panel should better integrate INT and its expertise into Bank Group operations; clarify roles and responsibilities of different parts of the Bank Group, and document processes and procedures which will guide the Bank’s approach to investigations. Global Partnerships
To strengthen coordination and collective action, the World Bank works in partnership with other stakeholders, private sector companies, civil society groups, and multilateral and bilateral development partners. It is an active participant in promoting the OECD Convention on Combating Bribery of Foreign Public Officials (1997), the UN Convention Against Corruption Treaty (2003), the Extractive Industries Transparency Initiative (EITI) (2002), and the Forest Law Enforcement and Governance (FLEG) Ministerial Processes, among others. Through the Bank Group’s private sector investment arm—the International Finance Corporation—it works to promote better corporate governance in private sector companies to address the supply side of corruption through such mechanisms as the Global Corporate Governance Forum. The Bank also works closely with several international anticorruption organizations and networks such as Transparency International, Partnership for Transparency Fund, Financial Action Task Force, and the OECD-Development Assistance Committee. The Stolen Asset Recovery (StAR) Initiative
There should be no safe haven for those who steal from the poor. A partnership with the United Nations office of Drugs and Crime (UNODC) that was launched during the UN General Assembly last fall, the StAR initiative is helping developing countries recover stolen money, which not only can be used to fund development programs, but will also send strong signals to corrupt leaders that they cannot escape the law. Developed countries must do their part; in particular, ratify the UN Convention Against Corruption (UNCAC) and other measures to reduce barriers to asset recovery. Countering Illicit Financial Flows
The Bank is engaged in a number of other activities aimed at countering illicit financial flows, including through our continuing work in providing analysis, advice, capacity building and dissemination of good practice in anti-money laundering and counterterrorist financing; provision of advice and financial support to national customs and tax authorities to help curb tax evasion and the use of fraudulent invoicing and transfer pricing; membership of the international task force on the development impact of illicit financial flows; and support for the International Tax Dialogue, which among other things aims to reduce harmful tax practices. Further research on the issue of illicit flows and a conference planned for next fiscal year will inform international discussion on the topic. Effective management of natural resource endowments On average more than 40 percent of the wealth of low-income countries comes from natural resources. Managing these resources poses major challenges of economic management and governance, particularly at times like the present when commodity and energy prices are high. The Bank Group provides support to help countries manage their natural resources through a range of activities. In this effort we collaborate with other donors and IFIs, and are currently managing several donor-funded global programs and partnerships, including the Extractive Industries Transparency Initiatives (EITI). We see the EITI with its emphasis on transparency in revenue reporting as a key entry point for sound natural resource management. The Bank is working with governments and other partners to expand the EITI approach, the so called “EITI++”, which aims to bring transparency to all stages of the value chain: from the awarding of contracts, to monitoring operations, to collecting taxes and royalties, to resource extraction and economic management decisions. - ### - Updated March 2008 Contact:
Alejandra Viveros, (202) 473-4306
aviveros@worldbank.org |
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