|April 8, 2004—Combating corruption requires a comprehensive approach that tackles its many causes and the structural issues that allow it to thrive.
It also requires courage and perseverance from political leaders, public servants, civil society, the media, academics, the private sector and international organizations.
The Bank has assisted anti-corruption operations in nearly 100 countries. Since 1997, the Bank's anticorruption strategy has called for action in four key areas:
How Corruption Keeps Poor People in Poverty
Poor governance and corruption can be the greatest obstacle to economic and social development.
It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. It hurts the poor because it diverts public services from those who need them most and stifles private sector growth.
The World Development Report, 2004: Making Services Work for the Poor again raised corruption as a major inhibitor of poverty reduction.
Noting economic growth and financial resources were needed to achieve freedom from illness and illiteracy (two of the most important ways that poor people can escape from poverty), it said countries were too often held back by corruption.
Too often basic services such as water, sanitation, health, education and electricity failed poor people - in access, quality and affordability. More often than not there were deeper problems of accountability lurking behind these failures. These problems led to high teacher absenteeism rates, missing drugs in health clinics, money that did not reach the frontline service provider and corruption.
The report said strengthening accountability could help rectify these problems. Enabling the poor to monitor and discipline service providers and strengthening incentives for providers to serve the poor were identified as key areas.
The Bank shares the experience it has gained in its projects with the international community.
A joint World Bank-Transparency International (TI) workshop last year outlined the formidable challenges inherent in fighting corruption. It was concluded that demand for reforms must be increased from within societies, vested interests who benefit from corrupt systems confronted and the political drivers of corruption tackled.
In May 2003, the 11th International Anti-Corruption Conference (IACC) and the subsequent intergovernmental Global Forum III, held in Seoul, Korea emphasized that laws, regulations and enforcement cannot alone address the problems of corruption in societies. Instilling values and ethics is critical for success.
In December, 2003, the Bank actively supported the creation of the United Nations Convention Against Corruption, which was signed in Merida, Mexico.
In February, the Bank participated in a workshop with members of the OECD's Development Assistance Committee, the African Development Bank, the Secretariat of Transparency International, the Soros Foundation and International IDEA to discuss lessons learned in the fight against corruption. Among the issues identified were the need for international aid donors become more co-ordinated in the efforts to combat corruption. They also agreed there was a need to better manage the large amount of knowledge that has been generated on the corruption fight.
The Bank's Anti-Corruption Work With Countries
In recent years, the Bank has lent more than $5 billion a year to help countries build efficient and accountable public sector institutions. Governance and anti-corruption measures are addressed in Country Assistance Strategies, the Bank's medium-term country-level business plans. This helps spotlight not only governance shortcomings but what the government and the Bank are doing to address these issues.
Its governance programs promote:
- Public expenditure management;
- Civil services reform;
- Judicial reform;
- Tax policy; and
- Administration, decentralization, e-government and public services delivery.
Promoting Extractive Industries Revenue Transparency
In December last year, the Bank endorsed the Extractive Industries Transparency Initiative and pledged to work with several developing nations, as well as companies on ways to publish revenues accruing from the oil, gas and mining sectors. The initiative was launched by British Prime Minister Tony Blair at the World Summit on Sustainable Development in Johannesburg. In many developing and transition countries, revenues from oil, gas and mining companies - in the form of taxes, royalties, signature bonuses, and other payments - have been an important engine for economic growth and social development. However, research has found that in some nations with weaker institutions the lack of accountability and transparency about these revenues can exacerbate poor governance and lead to more corruption, conflict and inequality.
An example of a cutting edge revenue transparency project is the Chad-Cameroon Pipeline. The Bank is working with Chad, one of the world's poorest countries, to improve governance and the transparency of revenues from a major petroleum project to ensure the benefits are passed on to the country's citizens.
The Bank supported the construction of a 1,050km pipleline in Chad to oil loading facilities in Cameroon to help finance much-needed development. The Bank established a safeguard program with clear rules for the allocation of oil revenues to ensure the country's oil money is managed for the well-being of all of Chad's citizens. Under the rules the oil money goes into an escrow account in London, subject to full disclosure and audit. After debt servicing to the World Bank and the European Investment Bank, the rules specify that 10 percent be set aside for a "future-generations" fund, and that 80 percent be allocated to priority sectors, including health education, infrastructure, rural development, water and environment. An allocation of five percent is set aside for oil producing areas themselves for special development projects. An oversight committee bringing together members from the administration, the Parliament, civil society, human rights groups, and faith-based organizations must approve spending from the petroleum account.
The Case for Prevention
Bank research shows that anti-corruption efforts pay off when they focus on preventative measures that reduce opportunities for corruption. These include:
- Reducing the likely benefits from corruption. Promoting competition in the private sector through lower barriers to entry, regulatory reform where there are natural monopolies and ensuring competition in government procurement through national advertising can help reduce corruption.
- Import liberalization, removing price controls, industrial and trade licensing requirements can cut corruption. When India liberalized industrial licenses in the early 1990s, a large industry aimed at obtaining licenses and the corruption associated with it disappeared.
- Increasing information, transparency and public oversight. Corruption often occurs because of a lack of information. Governments may lack information on what their agents are doing on the ground, consumers of government services may not be aware of the rules. Clarifying rules and increasing transparency can cut corruption. Involving the beneficiaries in the oversight of government programs also reduces opportunities for corruption.
Recent Anti-Corruption Efforts
- Fighting Money Laundering and Combating the Financing of Terrorism
The Bank and the International Monetary Fund have joined the international effort to combat money laundering and the financing of terrorism. The Bank has 40 projects benefiting 115 countries on its books. The projects provide a range of assistance including training programs and help with drafting legislation, strengthening the capacity of legislators and establishing Financial Intelligence Units.
- Combating Corruption in the Forestry Industry
The World Bank has continued to intensify its effort to improve governance and contain illegal activities in the international forestry industry. The annual global market value of losses from illegal cutting of forests are estimated at over $10 billion. In the Amazon, for example, 80 percent of timber harvests are estimated to be illegal. The Bank has been working with Brazil through its strategy for sustainable land use to improve its governance structure to contain predatory logging, tax avoidance, and the introduction of log-tracking and independent certification of forest harvesting and management operations.
- Legal and Judicial Reform
The Bank has prepared a policy note which can be used as a guide by governments on best practice in the writing of an anti-corruption statue. It also maintains a web site with the latest information on model anti-corruption laws. The Bank is providing assistance to the judicial systems of over 40 client countries to, among other objectives, help them enforce laws outlawing bribery, nepotism, and other corrupt acts. Recognizing that corruption feeds on opaque processes and a lack of information, it is assisting clients to develop and implement freedom of information laws, regulations requiring public servants to disclose their assets and income, and other measures to open government up to public scrutiny.
$1,000,000,000,000 and counting…
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