This paper explores the evolution of the World Bank’s anti-corruption programming and examines its driving and limiting factors. Building on a novel dataset of World Bank anti-corruption activities and on expert interviews, the paper investigates the impact of factors internal and external to the World Bank on the institution’s anti-corruption programming. The analysis distinguishes three agendas operating under the anti-corruption label that differ in their conceptual understanding of corruption as “a crime”, “a matter of public administration”, and “a matter of power and politics”. The paper finds that internal factors related to the World Bank’s legal and policy mandate, the underlying financial model, and the organizational culture are among the most significant in explaining the evolution of the institution’s anti-corruption programming. Findings suggest that addressing those factors will be crucial for the effective renewal of the World Bank’s strategic and operational approach to doing anti-corruption.
Report Series: Working Papers
EU Aid and the Quality of Governance
Using a panel dataset on 103 developing countries, this paper empirically analyzes the impact of the European aid flows on quality of governance in aid recipient countries. The analysis employs aggregated Official Development Data as well as disaggregated project level data. The results show that while bilateral aid from the largest European donors does not show any impact, multilateral financial assistance from the EU Institutions leads to an improvement in governance indicators. These findings thus suggest that European development assistance can help to promote good governance if aid is allocated at the EU supranational level rather than at the national level of the member states.
Multi-Nationals and Corruption Systems: The Case of Siemens
Scholars tend to agree and evidence has shown that domestic businesses adapt to the local type of corruption, but little is known whether large multinational corporations also adapt to the local forms of corruption. Institutionalist theories of corruption and of international political economy would suggest that this would be the case, but the hypothesis has not, to our knowledge, been systematically tested. This paper, drawing on investigative materials about the activities of one such multinational, the German corporation Siemens AG, examines how it used corruption and bribery to advance its business around the world. We extrapolate from the logic of four “syndromes of corruption”, as Michael Johnston terms them, to develop specific hypotheses about the kind of behavior multinational corporations would be expected to exhibit when doing business in each of the four kinds of syndromes. We examine and compare Siemens’ activities in the United States, Italy, Russia and China. We find that Siemens did adapt to the local corruption form (or “syndrome”) and used, among others, different types of intermediaries to approach the local elites. The evidence from these case studies supports the institutionalist argument that multinationals distinguish between corrupt environments and further supports the argument that there exist different types, or syndromes, of corruption.
Anti-Corruption Revolutions: When Civil Society Steps In
This working paper explores the question of whether an empowered civil society with access to public information, can make a difference in the fight against corruption, using India and the recent rise of an anti-corruption party as a case study. Through a mixed methodology that combines quantitative and qualitative research tools, the authors find evidence that the availability of channels for accessing information has a positive effect on control of corruption, provided that civil society is engaged and able to actively participate in matters of public concern. In addition, this paper seeks to understand if and how collective action problems are overcome by civil society and determine whether the so-called anti-corruption revolutions are manifestations of this process.
The quantitative model builds upon previous work that has found separate effects for both factors (access to information and civil society) on control of corruption, and introduces an interaction term between the two of them. Additionally, the quantitative analysis explores the effects of perceived levels of corruption in a given period in subsequently controlling corruption.
The qualitative model, in turn, inquires more deeply into the interaction of these two variables using India as case study. Here, access to information legislation has been in place for almost a decade and civil society has shown itself outstandingly active. This case is particularly interesting given that the mobilization against corruption initiated in 2011 managed to achieve the introduction of a federal law creating an ombudsman. Altogether, this paper aims to shed light on the factors and processes shaping a sustained demand for accountability.
The Struggle for Effective Change: An Assessment of the APRM’s Achievements
In July 2002 the New Economic Partnership for Africa’s Development (NEPAD) was established. This collective action taken by African Heads of State and Governments demonstrated the willingness to strengthen governance and achieve sustainable economic and political development. The African Peer Review Mechanism (APRM) was set up to monitor the commitment to the NEPAD and thereby increase responsibility and accountability. It was also designed to enable mutual assistance based on the concept of Peer Review, therefore seen as an effective and self-driven tool for enhancing change and strengthening governance throughout Africa. Over the last decade, 34 countries acceded to the APRM. This number demonstrates the want for self-improvement and transformation but cannot be regarded as a measure of performance for the APRM. Indeed only 17 countries have completed the first cycle of the APRM process. Even though the statistical and qualitative analyses performed in this thesis show marginal improvement in favour of the APRM, they do not show that governance has improved. The negligible progress recorded by the evaluation of governance performance from 2003-2012 as a function of the APRM demonstrate the APRM’s ineffectiveness. The results reveal the issues encountered by the APRM’s member states to profit from the APRM. The structure and process are found to be too complex to be adopted adequately by countries, consequently deferring beneficial outcomes. Member states lack commitment and compliance to the process as they do not encounter immediate benefits. To fully exploit the certainly existing potential of the APRM, the author recommends following actions to be taken. Based on (1) a common understanding of the mechanism and (2) its limitations, the APRM process can be simplified by (3) ensuring an efficient and comprehensible monitoring, and (4) incorporating SMART standards for recommendations. (5) Strengthening the existing capacities of the APR Secretariat, (6) conducting independent evaluations of the APRM and (7) clarifying the role of the African Union (AU) will further improve the capabilities and appeal of the APRM. As an efficient and effective tool the APRM is predestined to become the instrument to facilitate sustainable change in Africa.
Bulgarian Anti-Corruption Reforms: A Lost Decade?
The Worldwide Governance Indicators show that Bulgaria has made significant progress in the area of “control of corruption” since 1996. This finding contrasts with the general opinion of the Bulgarian population who perceive Bulgarian institutions as corrupt, and contradicts the decision of the European Commission to continue monitoring Bulgaria’s progress in fighting corruption and organised crime. Hence, there is a need for careful consideration and analysis to understand how much progress Bulgaria has really made in the fight against corruption. Can Bulgaria be considered an anti-corruption success story?
In this paper, the authors seek to answer the above questions by providing a background analysis on Bulgaria’s governance regime. According to research, Bulgaria has made some progress in its transition from patrimonialism to open access order but the main features of its governance regime remain these of competitive particularism. In legal terms Bulgaria displays some open access order features but they do not translate into practical implementation.
Following the country’s EU accession in 2007 progress has been uneven, and has mostly been driven by civil society demands for change, which culminated in mass street protests in 2013. Progress in the political corruption domain has been limited. Power distribution in Bulgaria has opened up to competition but is still concentrated in few political party leaders and powerful business conglomerates, interlinked in a complex web of dependencies with former secret service and communist party elites, which still have privileged access to state resources. Convictions, in particular of high-ranking politicians and administrators are non-existent or rare, a sign that the rule of law and accountability have not yet taken hold in the country.
Tax Simplification and Informal Economy in developing and transitioning countries
Informal economy is present in all countries; however it is in low and middle income countries that it has its deepest roots with some measurements estimating it to average at above 40% of national GDP. This represents a large part of the economy and poses serious problems for economic development and the relationship between state and society. It also means a significant loss in tax revenue, that poor countries need for the provision of public goods, resulting in the undermining of state capacity (Fukuyama, 2004). This leads to a vicious cycle, since without the efficient provision of public goods the incentive for tax compliance further decreases.
As tax structure and bureaucratic burden haven been identified as primary causes for informal economy, in the following we want to analyze whether lower costs of compliance actually lead to lower levels of informal economy. Given that in recent years some countries have implemented flat tax as tool for tax simplification, the authors explore the question of whether flat taxes have actually lived up to their promise and increased tax revenue or lowered levels of informal economy.
Pedro Obando and Johannes Wahner are both Master’s of Public Policy candidates at the Hertie School of Governance in Berlin.
Corruption in Qatar? The Link between the Governance Regime and Anti-Corruption Indicators
Qatar is judged by international anti-corruption indexes to be among the highest performing countries in the Middle East and North Africa. The Qatari government has streamlined its regulations regarding business practices and engaged in reforms from above that have liberalized the Qatari economy and increased its strength and viability. However, Qatar is a neo-patrimonial absolute monarchy in which the state is not immune from private interests, and where the ruling family can bypass the rule of law. The complete control by the monarch of state institutions and policies leaves no space for bottom-up calls for reform, or for independent assessment of the performance of the state and the actions of the ruling family by civil society and the media. The permeation of informal networks (mainly in the form of tribal relations) within state institutions and civil society, the lack of interest in and avenues for political participation among Qatari citizens, and the clientelistic relationship between citizens and the state support the continuation of this status quo. Author Lina Khatib analyzes the structures and mechanisms of Qatar’s governance regime that reveal the contradictions inherent within the categories covered by anti-corruption indexes. In doing so, she suggests a number of shortcomings in the methodologies and scope of those indexes as they specifically apply to Qatar, and poses a number of questions regarding the kind of information that is difficult to find but which is crucial to address in order to form a clearer picture of corruption and anti-corruption practices in Qatar. The author concludes that the absence of this information in the first place casts a shadow of doubt over the performance of Qatar in anti-corruption indexes. Additionally, the indexes’ focus on measuring the scope of state functions while overlooking measuring the strength of state institutions is a key reason behind the discrepancy between Qatar’s anti-corruption ranking and the mechanisms and structure of its governance regime. Instead, Khatib proposes specific indicators related to the governance regime that allow for a more comprehensive look at corruption and anti-corruption practices in Qatar.
Are EU funds a corruption risk? The impact of EU funds on grand corruption in Central and Eastern Europe
Fazekas et al explore the impact of EU structural funds on institutionalised grand corruption in three countries where corruption is systemic – Czech Republic, Hungary, and Slovakia – between 2009-2012. They examine whether EU funds have contributed to weakening institutional quality in terms of wasteful public spending and increased ‘legal’ corruption conducted through public procurement. By exploiting a unique pooled database containing contract-level public procurement information for all three countries they are able to systematically examine corruption risks associated with EU funding at the micro-level. The authors also develop a composite corruption risks indicator based on the incidence and logical structure of ‘irregularities’ in individual public procurement transactions.
Fazekas et al. ultimately claim that EU funding impacts institutionalised grand corruption in CEE in two ways: first, by providing additional public resources available for corrupt rent extraction; second, by increasing the controls of corruption for the additionally allocated funding. Their preliminary calculations indicate that the first effect increases the value of particularistic resource allocation in the three countries up to 1.21% of their GDPs, while the second effect decreases the value of particularistic resource allocation by up to 0.03% of GDP. However, the latter beneficial effect is entirely driven by Slovakia, which has a high national corruption risk level; while in Czech Republic and Hungary this impact is even negative. The authors conclude with several policy recommendations calling for a radical improvement of the monitoring and controlling framework.
The Transparency Paradox: Why do Corrupt Countries Join EITI?
Rules that require actors to make their finances transparent have become a key part of the anti-corruption toolkit, under the assumption that sunlight is the best disinfectant. This logic underpinned the creation, in 2002, of the Extractive Industries Transparency Initiative (EITI), an international club aimed at reducing corruption in oil, gas and mining. The initiative has proved popular, with 16 countries now EITI compliant and 23 others having achieved candidate status. However, as a soft law standard to which countries voluntarily commit, EITI presents a paradox: why would corrupt governments voluntarily expose themselves to sunlight? Does its popularity imply that it is meaningless? The authors argue that governments join because they are concerned about their reputation with international donors and expect to be rewarded by increased aid. David-Barrett and Okamura’s quantitative analysis demonstrates that countries do gain access to increased aid the further they progress through the EITI implementation process. However, they also find that EITI achieves real results in terms of reducing corruption. The authors suggest that this is because EITI requires countries to build multi-stakeholder institutions which improve accountability, and provide qualitative evidence about how this has worked in several countries.
Bottom of the Heap. The Case of Romania
The suspension of EU payments in four operational programmes in 2012 showed how problematic Romania’s correct and effective management of EU funds is. Such funds aim primarily at decreasing the socio-economic disparities among EU members and support the economic convergence with their Western counterparts of less developed new EU members. Consequently, a poor absorption rate of EU funds threatens income convergence between old and new member countries, thus representing a major challenge for EU integration. Currently, Romania has the poorest absorption rate among all the EU Member States and the worst among the ten new Member States. Moreover, the financial corrections, which amount to roughly 22% of the assimilated European funds, further reduce the real absorption rate, a loss which can be attributed entirely to corruption and mismanagement. The present report investigates the proportion of EU funds which can reasonably be considered at risk because of mismanagement and corruption, asks what are the main defrauding tactics used at national level to obtain European money illicitly, and considers the extent to which the suspension or cancellation of EU assistance might be the best policy for dealing with the situation. In addition, the report will put forward a list of recommendations for the next EU programming period which are intended to mitigate the effects of corruption and mismanagement that result in a waste of public resources.
Hidden Depths. The Case of Hungary
This report investigates corruption risk of EU funds spending in Hungary within the framework of the Public Procurement Law. Its finding is that in spite of what is a tight regulatory framework EU funds are likely to fuel the abuse of public spending. Even though public procurement using EU funds faces considerably more stringent regulation, their use poses much greater corruption risks when compared with funds procured domestically and corruption risks are particularly pronounced for large projects. The report also argues that large-scale institutionalized corruption in Hungary may be widespread and driven primarily by political cycles. Such corruption, often labeled “legal corruption”, typically involves neither bribery nor collusion between lower level bureaucrats and private individuals; rather, it operates through contractual relationships which benefit the highest echelons of the political and business elite. There are a small number of new anti-corruption initiatives of the new government which entered office in 2010, but while they might indicate a positive step towards higher public sector integrity, their results are yet to be seen.
The Good, the Bad and the Ugly: Controlling Corruption in the European Union
For many years corruption was seen as a problem only of developing countries, while the European Union (EU) on the contrary was the temple of the rule of law, exporting good governance both to its own peripheries and worldwide. Many European countries indeed remain among the best governed in the world, although the downfall of the Santer Commission on charges of corruption, the enlargement of the EU by its incorporation of new member countries with unfinished transitions, and the economic crisis all strongly indicate that control of corruption is difficult to build and hard to sustain. Older member countries Greece, Italy, Portugal and Spain have all regressed rather than progressed since they joined – the first two of them to worrying levels – and that has raised doubts about the EU’s transformative effect on its members.
FOIA as an Anti-Corruption Tool
This paper tests, explores and exemplifies the role of freedom of information legislation as an anti-corruption tool. In the first part, its tests freedom of information separately and in comparison with other more popular anti-corruption tools, such as an anti-corruption agency. In the second part, it proposes a more elaborated model explaining control of corruption and argues that transparency legislation is intermediated by the existence of civil society and does not work in its absence. In its last and final part it exemplifies with a project in Romania how freedom of information can be used as an integrity building tool.
Corruption and Politics in Uruguay
Transparency scores in Uruguay have improved in the last fifteen years in both absolute and comparative terms. This paper argues that this change is the result of a long-run process of transformation in Uruguayan politics from competitive particularism to an open access regime. First, this paper briefly reviews the political and institutional changes that led governance in Uruguay to be based on universalistic norms. Next, it uses public opinion and elite survey data to provide descriptive evidence about citizen perceptions of levels of corruption. Third, the paper uses media data to explore the place that corruption held in the public agenda during the last fifteen years. Finally, using court records, it evaluates the efficacy of existing structures to punish abuses. These analyses help to clarify the main features that lie behind the categorization of Uruguay as a contemporary achiever in terms of government transparency.
The Long Transition to Good Governance: the Case of Estonia. Looking at the changes in the governance regime and anti-corruption policy
This paper deals with the post-communist positive outlier Estonia, which made according to international comparisons perhaps the most spectacular progress in the world, from a totalitarian regime to a quality democracy in less than twenty years. The country has seen improvement in all four dimensions of control of corruption described in the equilibrium model of Alina Mungiu-Pippidi (2011) since the restoration of its independence in 1991. The changes in the different dimensions happened almost simultaneously. During the first government of Mart Laar (1992-1995), policies that reduced material resources and strengthened legal constraints were implemented. Estonia pioneered important liberal reforms, for instance the adoption of a flat tax which then became very trendy in Eastern Europe and a very advanced e-government inspired from the neighbouring Finland. It also had the most radical policy towards Soviet time judiciary, replacing most of it and restarting practically all over with new magistrates. Normative constraints are also high, with a public opinion intolerant of particularism, an active civil society and a free press. The paper tries to explain why Estonian elites succeeded in promoting good governance and anti-corruption measures more than most other Central and Eastern European countries. In addition, author is looking for integrative understanding how to improve the control of political and administrative corruption mechanisms via the better regulation measures (e.g. impact assessment, participation, simplification) and support of political motivation.
Corruption: A Modern Day Hydra. Understanding the monster through the eyes of the people.
The present paper considers corruption to be a deeply complex phenomenon that should be broken down to its essential components in order to develop a deeper understanding of it. Therefore, in this study, corruption shall be broken down into three categories which are namely judicial, bureaucratic and political corruption. These three forms of corruption are “same but different” as even though they all entail the deviation of norms, the scale and effects they have on the society are in fact very different. This paper shall seek to fill the gap by examining and identifying the drivers of corruption through the lens of the general public by using data obtained from TI’s Global Corruption Barometer (GCB). In addition, this study shall also seek to prove that people’s perception of corruption offer valuable insights and should thus be used to triangulate with expert’s opinions to derive a more robust and holistic measure of corruption.
Contextual Choices in Fighting Corruption: Lessons Learned
Why is it that despite unprecedented investment in anti-corruption in the last fifteen years and the implementation of global monitoring and legislation, so few countries managed to register progress in fighting corruption? This new report commissioned by the Norwegian Agency for Development Cooperation (NORAD) to the Hertie School of Governance aims to see what could be learnt from weaknesses in current support to ﬁghting corruption at country level and identify approaches that can be more effective in ﬁghting corruption in different governance contexts.
The report revealed that conceptual flaws, imprecise measurement instruments and inadequate strategies are to blame for the lack of progress in fighting corruption. But it also argues that the quest for public integrity is a political one, between predatory elites in a society and its losers and fought primarily on domestic playgrounds. As such, the donor community can play only a limited part and it needs to play this part strategically in order to create results. Based on new statistical evidence, the report recommends cash-on-delivery/selectivity approaches for anti-corruption assistance. Effective and sustainable policies for good governance need to diminish the political and material resources of corruption and build normative constraints in the form of domestic collective action. Most of the current anti-corruption strategies, on the contrary, focus on increasing legal constraints, which often fail because most interventions are localized in societies that lack the rule of law.
Changing the Rule of the Game: a Diagnosis of Corruption in Brazil
In Brazil, corruption has always been part of political discussions, but changes in government hardly ever brought changes in the political and social structures. The great economic development of recent years might end up covering some of the problems. Therefore, it is fundamental to investigate whether in Brazil corruption is the norm or the exception, as well as to understand the main corruption mechanisms in order to design proper policies to tackle its most harmful forms so that the country can finally evolve towards good governance and impartial government.
Political Economy Analysis of Corruption in Ghana
Ghana on one hand, since its return to democratic rule in 1993, has experienced a continuous growth in consolidating its democracy, leading it to be one of the most referred to success stories of democracy in Africa. On the other hand, corruption continues to be a problem in spite of the several proclaimed measures by governments to curb it. This paper hence seeks to explore the question: has Ghana evolved on the control of corruption? If not, why and what can be done?
Control of Corruption: the Road to Effective Improvement. Lessons from Six Progress Cases
In the last two decades, the emergence of an international good governance agenda has fostered the implementation of anti-corruption efforts in several countries. Nevertheless, recent assessments of those efforts reveal that the vast majority of initiatives have not produced concrete positive results. Only a few countries have made considerable progress in reducing corruption, and there is still limited knowledge about what has determined their positive experiences. This paper attempts to contribute to this discussion by engaging in a comparative analysis of six countries that have improved in terms of control of corruption. These countries are: Uruguay, Estonia, Botswana, Taiwan, South Korea and Ghana. The framework for analysis is based on a model of corruption as a function of power discretion, material resources and legal and normative constraints (Mungiu-Pippidi, 2010). Additionally, particular attention is paid to the role of political agents as drivers of change, with a focus on political leaders, civil society, media and enforcement institutions.
Beyond Good Governance: Performance of the International Anticorruption Institutional Arsenal Put to the Test
With political corruption posing a serious threat to democracy and its consolidation, anticorruption efforts have in recent years shifted from a reduced reliance on political tools to an increased support of the legislative and institutional means. The present thesis, using quantitative cross-sectional models, analyzes the performance of four, highly advocated, institutional transplants. Results suggest that an installment of the Freedom of Information Acts (FOIA) can, in the presence of an active civil society and attentive opposition to the governing structures, significantly decrease levels of corruption in a country.
Aid Selectivity and Anti-Corruption Policy: a Case Study of the Millenium Challenge Corporation
This paper argues that corruption control is the most fundamental component of the good governance agenda, since it subverts all the other values of good governance. It is both cause and effect of inefficient and unaccountable institutions. In developing countries, were resources are scarcer and need to be used in the most effective manner, corruption is especially harmful. In an effort to clarify how this move to a more selective, performance based approach can have an influence in the control of corruption of developing countries and therefore serve as model for other donors to follow, this paper will first discuss the concepts of good governance, development, corruption and review its empirical links to aid effectiveness. It will also show the benefits and limitations of measuring governance and corruption and argue for the development of more broad assessments methods.
Transitions to Good Governance: the Case of El Salvador
El Salvador has changed much in the last 20 years. It has managed to move from a previous military regime and a civil war to a democracy, but this process is still in progress. The country must yet face a number of weaknesses to continue its transition to good governance, particularly regarding the development of an active civil society, a free and impartial press and lower levels of corruption. Assistance from foreign donors will be an important support to future improvements, especially concerning the strengthening of civil society and institutional capacity building to fight corruption more effectively.
Transitions to Good Governance: the Case of Albania
Albania’s progress of development has been hindered by the high rates of corruption. World Bank’s Control of Corruption measurement of 2008 placed Albania in the 25-50 percentile rank and Transparency International Corruption Perception Index (CPI) in the same year was 3,2 placing Albania 85th out of 180 countries ranked. In comparison to its neighbors since 2002 Albania is doing the worst it terms of control of corruption. Albania was doing quite well in 1996 after which it experienced a huge decrease in control of corruption and even though over the years steady positive progress has been made, it hasn’t recovered to the same level yet.