The World Bank’s Approach to

Combating Corruption
By: JAKHARIA SAGAR

Director, Operations and International Affairs, EXT

JAKHARIA SAGAR 1
 Outline: Cancer of Corruption
 A world wide concern
 Undermining society
 A National and international problem
 Poses:
 Development effectiveness risks
 Fiduciary risks
 Reputational risks
 That must be addressed
 Along with fighting poverty
JAKHARIA SAGAR 2
 The World Bank’s Approach to
combating corruption

 Helping countries that ask for help

 Making anti-corruption a key feature of

assistance in lending and analysis

 Preventing fraud and corruption in Bank

financed projects and programs

 Contributing to international corruption

fighting efforts
JAKHARIA SAGAR 3
 World wide concern
In a Voice of the People Survey by
Gallup International the responses were:
26%
Poverty; gap between rich and poor
12%
Terrorism
9%
Unemployment TI: Global Corruption Barometer 2005
8%
Wars and conflicts

Economic problems
7% Level of corruption in next three
Environmental issues 6% years expected to:
5%
Drugs and drug abuse
Decrease
Decrease a lot
4%
CORRUPTION
Corruption
a little Decrease a little, 14%
Decrease a lot, 5%
DK/NA, 7%
4%
Crime
4%
HIV/AIDS and other diseases
Increase
4%
a lot
Increase a lot, 23%
Globalisation/fairer world trade

Religious fundamentalism 2% Stay the

Stay the same, 30%

Educational issues
2% same
2%
Human rights
1%
Increase
Increase a little, 21%

Refugees
a little
Source: Gallup International – Voice of the People 2005
JAKHARIA SAGAR 4
$1 Trillion in Bribes being paid everywhere !

JAKHARIA SAGAR 5
 Cancer of Corruption Undermines
Society, Economy and Institutions
Political Parties 4

Parliament/Legislature 3.7

Police 3.6

Legal system/Judiciary 3.5

Business/Private sector 3.4

Tax revenue 3.4

Customs 3.3

Media 3.2

Medial services 3.2

Utilities 3

Education system 3

Military 2.9

Registry and permit services 2.9

NGOs 2.8

Religious bodies 2.6

Source: Transparency International Global Corruption Barometer 2005, JAKHARIA SAGAR 6

http://www.transparency.org/policy_and_research/surveys_indices/gcb/2005
 Cancer of Corruption
National and International Problem
 Grand corruption: where did the money go ?
 Marcos: $5-10 billion
 Mobuto: $5 billion
 Suharto: $15-35 billion

 UN Oil for Food Scandal

 2200 companies from 66 countries
 International bankers, diplomats, church officials

 Multi-national Corporate corruption

 Enron
 Permalat
 Tyco International
JAKHARIA SAGAR 7
Corruption Poses Risks for Donors
 Development effectiveness: undermine
impact of development projects

 Fiduciary risks: development funds lost

due to corruption

 Reputational risks: lending to corrupt

regimes and not safeguarding funds

JAKHARIA SAGAR 8
 The World Bank’s Approach to
combating corruption

 Helping countries that ask for help

 Making anti-corruption a key feature of

assistance in lending and analysis

 Preventing fraud and corruption in Bank

financed projects and programs

 Contributing to international corruption

fighting efforts
JAKHARIA SAGAR 9
 Helping countries upon request
(public sector reforms, governance, rule of law)

 $2.9 billion ( 13% of total) in FY05

 Half of new Bank project’s have

governance component

 All CASs include governance components

 World Bank Institute – capacity building

and research on governance indicators.
JAKHARIA SAGAR 10
 Helping countries: Many Entry Points
Institutional
InstitutionalChecks
Checks&&Balances
Balances
• •Independent, effective judiciary Political
Independent, effective judiciary PoliticalAccountability
Accountability
• Legislative oversight • Political competition, credible political parties
• Legislative oversight • Political competition, credible political parties
• •Decentralization with accountability • Transparency in party financing
Decentralization with accountability • Transparency in party financing
• •Global initiatives: OECD Convention, anti- • •Disclosure of parliamentary votes
Global initiatives: OECD Convention, anti- Disclosure of parliamentary votes
money • •Asset declaration, conflict-of-interest rules
moneylaundering,
laundering,WCO
WCO Asset declaration, conflict-of-interest rules

Civil
CivilSociety
SocietyVoice
Voice&& Competitive
Participation CompetitivePrivate
PrivateSector
Sector
Participation • •Economic policies
Economic policies
• •Freedom of information GOOD • •Restructuring of monopolies
Freedom of information Restructuring of monopolies
• •Public hearings on draft laws
Public hearings on draft laws
GOVERNANCE • •Effective, streamlined regulation
Effective, streamlined regulation
• •Media/NGOs • Robust financial systems
Media/NGOs • Robust financial systems
• •Community empowerment • Corporate governance
Community empowerment • Corporate governance
• Report cards, client surveys • Collective business associations
• Report cards, client surveys • Collective business associations

Public
PublicSector
SectorManagement
Management
• Meritocratic civil service with adequate pay
• Meritocratic civil service with adequate pay
• Public expenditure, financial management, procurement
• Public expenditure, financial management, procurement
• • Tax and customs
Tax and customs
• • Frontline service delivery (health, education, infrastructure)
Frontline service delivery (health, education, infrastructure)
11

JAKHARIA SAGAR
 Helping countries: Trade offs
 Supporting development imperatives vs. risks to the
Bank

 Balancing help to executive branch with help to non-

government institutions of accountability

 Selectivity of entry points for results and credibility

vs. comprehensive approaches

 Balancing lending vs. non-lending mix and sequence

of assistance

 Prerequisites and Selectivity in When, Where, How

and How Much to lend in high risk situations

2/16/2006 JAKHARIA SAGAR 12

Anti-corruption in Country Assistance
Strategies

100
90
80
70
60
50
40 FY99-01
30 FY02-04
20
10 FY05
0
Mention ACG ACG Assess
ACG TA/LEN Triggers ACG
Risks

JAKHARIA SAGAR 13
 Preventing Fraud and corruption in Bank
financed projects
 Fiduciary controls (procurement and financial)

 Integrating social accounting mechanisms

 Integrating strong results monitoring

framework

 Screening of new projects for corruption risks

 Increasing transparency

 Strategic communications and partnerships

JAKHARIA SAGAR 14
 Investigating Allegations and Applying
Sanctions
 International Hotline (1-800-831-0463)

 244 open cases (closed 2,500+ since 1999)

 Sanctioned 330 companies and individuals

 Fiduciary reviews

 Voluntary Disclosure Program (companies)

 Financial disclosure program for staff

JAKHARIA SAGAR 15
 Contributing to International Efforts
 International Anti-corruption Conferences

 Global Governance Forum

 Financial Action Task Force (FATF)
 UN Convention Against Bribery and Corruption
 OECD Anti-corruption Initiative

 Joint Action Program of MDBs

JAKHARIA SAGAR 16
Summary: The World Bank’s Approach to
combating corruption calls for….

 Helping countries that ask for help

 Making anti-corruption a key feature of

assistance in lending and analysis

 Preventing fraud and corruption in Bank

financed projects and programs

 Contributing to international corruption

fighting efforts
JAKHARIA SAGAR 17
Thank you.

JAKHARIA SAGAR 18