Tuesday, August 08, 2006

Where is the “Worst and Best List” in the development debate?

Alan Beatti of the Financial Times in The Great Unknown, July 7, debates lucidly the Development Debate and to that effect enlists the opinions of some of the most prominent Development Talkers. What again is left out from the debate, perhaps as it is another inconvenient truth, is the fact that just a little bit more of real accountability for the actions of the developers could go a long way to stimulate better thinking and better implementing.

The following is an extract of my Voice and Noise where I recount part of my experience as an Executive Director at the World Bank.

"The standard feature of any evaluation and monitoring system we know of, is the use of some sort of distribution function, be it the normal bell-shaped curve or any other type. It somehow indicates the extremes; for instance, the worst 5% of the organization’s performance and the best 5%.

Any board, if it wants to be effective, cannot spend a lot of its time in the grayish middle area of the function, but has to concentrate its attention on the extremes of the curve, weeding out poor performance and learning from bad experiences, so as to avoid being dragged down into mediocrity, while guaranteeing the promotion of the best and learning from its successes, so as to advance the organization’s goals.

These distribution curves are totally absent in the evaluation brought forward for the Board to consider . . . it behooves us to make certain that they are adequately introduced. On a daily basis, the needy people of our constituencies are harshly evaluated by life in very cruel terms, so we might as well ask ourselves whether we should not be a little stricter in our assessments, living up to the accountability we so much preach to others."

Lacking the worst and best lists, budgets are allocated more on a per capita or on a per program basis than on the basis of what is working and what not. What private organization could function or survive this way?

Lacking the worst and best lists, scarce resources are further diluted. The possibility of concentrating the use of resources on a few countries and on a few programs to get some issues completely right in a sustainable way is almost non-existent. What private organization could function or survive this way?

I am absolutely sure that Robert Calderisi, William Easterly, Joseph Stiglitz, Andrew Charlton, Jeffrey Sachs and even the raconteur Alan Beattie are all great professionals and are all doing a splendid role verbalizing development issues but, except for passing some exams and delivering some papers in time, has anyone of them really been in a position of “either you deliver or you get out?” I wonder, not because I have anything against them, on the contrary, I wonder because it is our duty to wonder whether that might be part of the Problem, most especially since because of the Problem people are dying and the world is getting to be a nastier place. Friends, can we really afford not to step up our requirements that World Bank, IMF, and UNDP really deliver?

Tuesday, August 01, 2006

The world needs more than a theme park of anticorruption efforts

My comments on Strengthening the World Bank Group's Work in Governance and Anticorruption

Dear Friends,

Recently Moisés Naím in an article, Bad Medicine, in Foreign Policy (March–April 2005), suggested that the world might have become too fixated on battling corruption. Of course, blaming corruption for all evil is stupid, and Naím’s article is a good aide-mémoire on that, but the alternative of turning a blind eye on corruption sounds so much worse! Therefore, we very much welcome the World Bank’s efforts to do more and better. The Naím article also cited Daniel Kaufmann as saying, “The last 10 years have been deeply disappointing . . . Much was done, but not much was accomplished. What we are doing is not working,” but this has to be interpreted as a clamor for better strategies and not as a capitulation.

Given our current global problems, a corrupt world—a world where everyone is looking for his or her short-term gratification—is just an unsustainable world, and so it is imperative that the many difficulties that come up while fighting corruption should only strengthen our will to fight it. That it has to be done intelligently is obvious. Also, while doing so, we need to heed Naím’s warning that “before we engage the enemy, we should take the equivalent of the Hippocratic oath, and promise first to do no harm,” That goes without saying.

I can in many ways demonstrate the importance I have given to the issue of fighting corruption, in any of its manifestations, not the least during the two years when I was an Executive Director of the Bank, and when, as an example, I requested that some major documents relevant to the issue should be discussed at a full Board meeting, with the presence in person of the Bank’s president. The fast-track procedure that had been envisaged in my mind belittled its importance.

In this respect, I am very grateful for this opportunity that allows me once again to voice my opinion publicly on the issue of fighting corruption and the World Bank’s role in this struggle. I will do my utmost to try to keep it as brief and concise as possible. Likewise, I shall use as a reference the discussion document presented as part of this consultation process.

1. First and foremost, corruption, in all its manifestations, has its origin in those frailties that affect all human beings. In this respect, any attempt to classify the world in terms of the corrupted and the not corrupted is in itself corruption. Accepting this fact, with humility, is an absolute prerequisite if we are going to reach the necessary enlightenment to move forward and upward as a civilization. In fact, what we now observe in many of the supposedly corruption-free developed countries may in fact just be some better-camouflaged and more resistant strains of the same virus. In this respect, we urge the World Bank to eliminate from all its documentation any holier-than-thou manifestations, explicit or implicit, since these serve no useful purpose. That the Bank should listen to its shareholders and look for guidance goes without saying. However, to qualify some shareholders as having “significant experience in assuring sound governance policy and practices,” (1) in this context, is not helpful since in its anticorruption efforts the Bank will do its best when it works to help all shareholders, and not some specially singled out. This, of course, has nothing to do with limiting the possibilities of the World Bank to speak out in very clear terms against any particular outrageous manifestations of corruption. Indeed, we believe it should, much more forthrightly than it has in the past.

2. The fight against corruption, like so many other aspects of life, lies on a continuum where it is impossible to ascertain validly and precisely just how much has been achieved. The Bank should refrain from trying to categorize achievements in these matters, and most especially its own, since the resulting flag-waving contains many elements that bear uncomfortably close resemblance to corruption. For instance, a phrase like “The World Bank has come a long way on governance and anticorruption in a brief period” (8) is a no-no, not only because the distance traveled in that short time might be almost insignificant relative to the distance we need to travel, but also because it is disrespectful of all the efforts that must have been made earlier. In many of our developed and developing countries, one of the most disgraceful manifestations of corruption occurs when governments and politicians use taxpayer money to advance their own image. Thus, the Bank needs to set an example and refrain itself as much as possible from doing just that.

3. Corruption has many faces. Unfortunately, we tend to single out just some of them by placing them in a display case that contains the typical products of “administrative corruption—such as petty bribes to utility officials.” (11) Likewise, we highlight those that have “deep political roots—such as state capture and procurement corruption” (11). Selecting these and remaining silent about so many other forms of corruption is, again, to corrupt the debate. It is somehow like buying some cheap souvenirs as evidence of “having-been-there.” In my own country, Venezuela, the single worst corruption taking place is so large and so encompassing that most people do not even see it. I refer to the fact that the domestic price of gasoline is kept, in terms of United States currency, below 4 cents per liter, below 15 cents per gallon. That artificially low price transfers about 10 billion dollars per year as regressive subsidies from those that do not buy gasoline to those that do. In the same vein, the way much public indebtedness is contracted all over the world in order to support consumption and then it is justified on the dubious grounds that the debt level is considered to be sustainable, when the grim reality is that it will have to be repaid by future generations. This is a massive corruption to which we have just conveniently decided to turn a blind eye. The challenges in front of us, in issues such as global warming, do indeed require the World Bank to step up its efforts to find adequate mechanisms for cutting down carbon usage. It must do so in noncorrupt ways and that minimize the number of free riders, as far as possible. Therefore, in this respect, we cannot afford to let the Bank limit its concept of corruption, or its anticorruption efforts, until they become merely the equivalent of a theme park with a couple of fun-and-games distractions.

4. Many expressions of corruption are hideous and then again many seem almost harmless. However, where to draw the line that differentiates them, we must decide by personal conscience and by public law. And we must do so without releasing external forces of an inquisitorial nature, witch hunting that could be even more corrupt than the corruption it is fighting. In this respect, we should be a bit concerned when reading about an explicit call for fighting corruption “as assessed by staff professional judgment.” Staff members, of course, like all the rest of us human beings, do make implicit judgments all the time, but this should not confer on us any formal attributes of judges. A conscious effort should be made at all times to be very descriptive and open and clear about what the Bank’s terms-of-engagement are. We must leave as little as possible open to nontransparent judgments.

5. Notwithstanding all that has been said and that reflects how hard it is to get a solid handle on the issue of corruption, these difficulties are further compounded by the fact that fighting it still requires being able to draw some very clear lines. In this respect, we need to warn that when it is said that the Bank, through “Country Governance and Corruption Assessment,” (23) “calibrates the level of attention to governance and corruption to the assessed levels of risk which these issues present to effective poverty reduction” (24), we could be instructing the Bank to enter into a formal and quantitative approach that, by trying to measure corruption in relative terms, entails a moral hazard that could in fact make the fight against corruption more difficult.

6. Paradoxically we must also remember that corruption is about breaking societal norms and, though most people might not be able to specify exactly where that line should be drawn, most frequently they still have quite an accurate idea of when they or others are crossing that line. Therefore when the document mentions that “A more explicit anticorruption focus in fiduciary approaches is to be adopted,” (33) we need also to warn about the possibility of then drawing lines in such a way that it would permit actions that until that moment had been quite correctly prohibited though not in an explicit way. This is, by the way, exactly what many of us coming from developing countries believe might have happened when we observe very strange and almost inexplicable consequences of laws that regulate lobbying activity. We urge the Bank to dare help the world draw up and enforce lines. However, let us be very clear about it, that doing so carries with it huge difficulties and responsibilities.

7. In fighting corruption we always need to be aware that ineffectively wasting scarce resources is just another form of corruption. For instance in the extremely important issue of environmental protection, currently a lot of resources are wastefully spent on inefficient, stopgap measures, like hybrid cars, instead of developing the efficient and sustainable long-term solutions we all need. Similarly, in fighting corruption, the Bank also needs to be careful not to waste resources on microlevel enforcements, just for show, instead of helping to develop the sustainable and effective anticorruption tools the whole world needs.

8. With regards to the Bank’s own direct role and responsibility in the anticorruption fight, we would like to ask questions about or comment upon the following:

a. What should the consequences be for Bank staff if they are conclusively found out to have participated directly in an act of corruption? In the same way as it should be of the highest priority to protect Bank staff adequately from all risks related to their work, including of course all those that could be derived from fighting corruption, it is also important, for the credibility of the Bank, that these protections do not unduly isolate the Bank’s staff from the necessary accountability. The operational guidelines in this area need to be very transparently disclosed since the current situation of having a public list of professionals barred from engaging with the Bank on the basis of some fraudulent and corrupt actions, named and shamed, while not one single Bank staff name appears on any list, is obviously incompatible with the role the World Bank wants to play.

b. “Reputational risk” (23) as currently presented is irrelevant to this public debate and should be deleted. Of course there are risks for the Bank’s reputation, basically in anything it does. That is just how it is, but discussing its avoidance sounds quite similar to an investor banker expressing to his clients his concerns about how to minimize his own reputational risk, were they to lose all the money he manages for them.

c. The “reputational risk” that we find really relevant though, is greatest when the Bank’s own good reputation could risk being seen as camouflaging acts of corruption of others. In this respect, I recommend that in the public documentation of all projects financed, there should appear a simple one-page Public Notice that lays out the most important risks for corruption in the operation, what is being done to diminish them, and, much more importantly, what the World Bank cannot and should not be expected to do. That note should then be placed on the Web in order to enlist the civic-minded civilians in the fight.

9. Many of the specific suggested actions in the document point in a correct direction, but in order to help make the most out of them, we would like to make the following comments:

a. Of course, the World must strive to give noncriminals shelter from criminal pursuit when they cross a border. However, it likewise needs to avoid allowing criminals impunity while protecting the noncriminals. We are not exactly sure about the role of the Bank in this issue but, in its role of promoting global applicable knowledge, we absolutely agree that in the “restitution of assets to countries plundered by corrupt leaders,” “it has an important advocacy role to play.” (40)

b. The Bank should help to make the most of the new information technologies in terms of advancing the general transparency of governments. But, to do so effectively, the best way to move forward is to develop a series of good-practices and how-to-do-it standards and then to make them available to everyone, not only to the usual suspects. In this respect we very much would commend all efforts aimed at a “common framework specifically for diagnosing corruption at the sector level.” There could be no more effective start against corruption than knowing specifically how it works, something that is also quite correctly being brought up when mentioning the value of IFC gaining “experience and familiarity with industry practices” (38).

c. In the case of innovative Global Partnerships such as the Extractive Industry Transparency Initiative, we can just speculate on how much more results and credibility they could deliver if they could be developed and tested in rich countries, instead of having to make their very brave debuts in the most difficult places and circumstances.

d. Corruption—it takes two to tango—and so with respect to the role that the World Bank should play in generating global conscience about the need of joining together when fighting it, and fighting it on all fronts, the sky is the limit. For instance the Bank should be willing to accept playing an Independent Evaluation Unit role with regard to initiatives like the OECD’s Anti-Bribery convention.

e. The document calls for more actions enlisting the Private Sector in the fight and building up on some very valuable initiatives that bear resemblance to the Equator Principles methodology used by IFC with respect to the environment. We much applaud them, but we need to remind them that the true sustainable worth of these programs lies in their absolute fiduciary honesty. Therefore, it is vital to maintain the strictest of safeguards and always make sure that independent civil society ombudsmen are sufficiently empowered to make very sure that these programs are not captured by other agendas.

e. The document asks, “Can civil society be used as an instrument for ensuring accountability and minimizing risk in Bank projects? Are there individual or institutional ‘champions’ of good governance—whether within government or among local civil society—whose efforts can be supported by Bank analysis advice or operations? especially through lending?” (21). To these questions, we have to answer, “Of course! Is there any other way?”

10. As most anticorruption efforts are closely related to the societies’ general law-enforcement capabilities, starting with the investigative (38), we also need to remind ourselves of the importance of not imposing demands that exceed a government’s capability. Doing so could lead to a further erosion of its credibility, or, even worse, to opening up new growth opportunities for all those forces who generally participate in illegal and illicit markets. In this respect, an enforceability assessment needs to be a part of any anticorruption initiative.

11. Also the World Bank should look into how corruption is sanctioned, and whether resources for fighting it exist in a way that truly helps the society to advance. In many of our countries, one of the main hurdles in the fight against corruption is the lack of resources needed to be able to sanction the faults, like prisons that could be deemed human. This is a very real problem, unfortunately much ignored until now by the World Bank and others, not least the governments involved. Given some recent experiences, most notably how criminal bands like the Central Americans’ mara salvatrucha were born in prison facilities in the USA, and that is making it so much more difficult to fight poverty, we cannot afford to ignore the problem of how inadequate sanctioning facilities might even make the problems worse.

Friends, let me end by assuring you that these opinions are, as far as possible, not intended to preach a puritan unachievable perfection. They are given only in the sincere hope that they could help stimulate those small efforts needed to be just a little bit better, and which, at the end of the day, is what can move us all forward toward a better future. If some of the observations have fallen into the category of being obnoxiously self-evident, excuse me, but in this issue of corruption it is not that easy to separate the extremely important from the absolutely vital.

Yours sincerely
Per Kurowski
A former ED 2002-2004
Now just a private citizen