World Bank Anticorruption Strategy May Spark Changes in Disclosure Policy

13 November 2006

Adoption of a new anticorruption strategy at the World Bank may lead to changes in the Bank’s disclosure policy. The broad suggestions of such changes must still be converted into specific proposals, however–a process that has only just begun.

If fully implemented, the changes could bring about improved transparency on proposed Bank projects and their implementation. A revised disclosure policy might also yield more information on supervision reviews, procurement, and financial management. The proposed strategy also recommends disclosure for the new anticorruption strategies the Bank has planned.

Other recommendations are aimed not at Bank internal procedures but at improving transparency at the country level, encouraging freedom of information and assistance to the media. Such country-level reforms cannot be directly implemented by the Bank, but the Bank is expected to exert its influence and invest in supportive programs. However, little information is available about Bank thinking in these areas.

Bank officials are beginning to operationalize the anticorruption strategy, adopted in Singapore in mid-September. It is not apparent whether the Bank will solicit public comment about implementation plans, such as changes to its own disclosure policy.

The 82-page anticorruption strategy paper includes a wide range of policy suggestions, including improved assessments of corruption risks, preparation of anticorruption strategies, better project supervision, and reform goals in many related areas, including financial management, procurement, auditing, and others. Transparency is frequently emphasized. For example, the report states, "Transparency is a system-wide feature that helps to make accountability relationships work."

The overall mission is summarized in the Executive Summary:

The Bank, within its mandate and in collaboration with other multilateral and bilateral organizations, will also support participatory and transparency initiatives, enabling citizens to access information and participate in the development of policies, spending priorities, and service provision; promote community participation to improve local governance; build media capacity; and broaden oversight over public procurement, asset declarations, and other important dimensions of government performance. The Bank will revise its disclosure policy to improve the Bank’s own transparency.

Bank’s Own Disclosure Policy Also Cited

One major area of potential changes regards information about projects. The Bank states that one goal is: "Improving design and supervision methods, and enhancing oversight and monitoring of Bank-financed projects through the transparent disclosure of project information, in particular anticorruption action plans."

Justifying more transparency, the Bank states:

Prevention of corruption, which remains the best protection against fiduciary risk, requires the integration of anticorruption approaches into the early stages of project design. At the identification stage, staff assess the project’s susceptibility to corruption by considering country and sector environments as well as the nature of project activities. Projects must be appropriately designed with a focus on enhanced oversight mechanisms, disclosure of project information, timely handling of complaints, and strengthened supervision. Projects should seek to increase the accountability of implementing agencies and service providers through instruments that give voice to beneficiaries (such as beneficiary surveys and citizen scorecards). To allow for subsequent supervision, recordkeeping and documentation by project entities must be improved. In addition, supervision must be cognizant of "red flags" identified by INT work, indicating possible corrupt behavior at various stages of project implementation."

INT is the acronym for the Bank’s Department of Institutional Integrity.

Promotion of more project information dissemination also crops up in Annex C, where a section on "Prevention," includes the sentence, "Project design should increasingly include enhanced oversight mechanisms, disclosure of project information, complaints handling, and strengthened supervision."

The key question among transparency critics of the Bank in recent years has been the timing of disclosure about project information, and enhanced assessment of anticorruption issues for projects would likely be included in the Project Assessment Document (the PAD) which now is released after project approval. The Bank has resisted calls for the "draft" PAD–essentially the staff’s final recommendation’s to the Bank’s Executive Board–to be released at the same time it is sent to the Board to allow for more public scrutiny.

In a somewhat vaguer reference to disclosure, the strategy in Annex C states:

Strengthened anticorruption measures will also include an enhanced focus on internal controls, audits, and readiness of fiduciary arrangements for project implementation. Other measures might include technical assistance components, especially in fiduciary areas; enhanced transparency and disclosure on project procurement and financial management issues; and stronger monitoring mechanisms (including physical and value-for-money audits). Since an effective dialogue on issues of fraud and corruption (amongst other matters) is critical to project success, a communications strategy that covers all phases of the project should be developed.

In the context of discussing governance reform strategies used in three counties, the Bank document notes the importance of "vigorous investigation of and follow-up to allegations of corruption in Bank-financed projects, and public disclosure of the results."

Country-Level Proposals Included in Strategy

The anticorruption strategy prescribes stronger efforts to improve "governance," of which disclosure policy is a part. The Bank assesses its own performance in this regard as "uneven," and the preamble states that the Bank "aims to scale-up engagement on governance and anticorruption in a way that ensures more systematic and consistent treatment of governance issues across countries, so as to attain measurable and demonstrable improvements." The Executive Summary continues, "For the Bank, a stronger approach also means reviewing staffing, skills and the incentives guiding managers and staff, as well as striving to deepen the Bank’s engagement on governance and anticorruption activities with partner countries on the ground."

One key paragraph in the anticorruption strategy is Paragraph 27, which states:

Transparency. A key cross-cutting priority is to help states become more transparent by facilitating greater participation and oversight by civic organizations and the media. Citizens and media that have broad access to information on the operation of state institutions are crucial for holding the state to account. Such access may include publication of budget and procurement data, access to state records and reports, and the state’s active dissemination of information on its operations and performance including through e-government. Moreover, greater transparency can help to establish the credibility of decision-makers through the public disclosure of their income and assets.

The theme of involving the private sector, the media, and civil society occurs at other places in the strategy as well, such as Paragraph 43, in which the Bank says it will "strengthen partnerships" with civil society organizations and the media at the country and global levels as a powerful force for holding government accountable."

The most fulsome explanation of the Bank’s intention, however, is stated in Annex C:

Strengthening Transparency in Government. Assuring that the executive operates in a transparent way by making information broadly available to citizens on the operation of the public sector can help strengthen accountability, and so improve public sector performance. Citizens and media that have broad access to information on the operation of state institutions are crucial for holding the state to account. Such access may include attendance at key meetings where important state decisions are made, publication of information on budget and procurement data, access to state records and reports, and the state’s active dissemination of information on its operations and performance including through e-government. Moreover, greater transparency can help to establish the credibility of decision-makers through the public disclosure of their income and assets. Box C4 provides some examples of how some of the Bank’s development policy operations (DPOs) have helped strengthen transparency and foster opportunities for greater civic engagement. Working with partners, the Bank will push for a significantly greater focus on assuring greater access by citizens to information on how government operates, including expanded production of information that can allow citizens to assess the services they are getting from government.

In a discussion of the private sector, the Bank strategy (Paragraph 28) speaks of "helping governments improve the investment climate, eliminate red tape and nontransparent regulations, reduce monopolistic practices, transparently and competitively privatize state-owned businesses and banks, and facilitate the entry of small and medium-sized enterprises to help level the playing field, reduce incentives and opportunities for corruption, and stimulate better corporate citizenship…"

The strategy continues in this vein by pledging that the Bank’s private sector lending arms, IFC and MIGA, will among other things encourage businesses "to join public-private coalitions for reform, such as the Extractive Industries Transparency Initiative and Publish What You Pay…"

"The World Bank Group will continue to monitor the investment climate through its Doing Business reports, and also, in collaboration with outside partners, continue to carry out enterprise surveys providing publicly available indicators that monitor corporate practices by domestic and multinational firms at the country level, including measures of bribery and undue influence by firms," according to the strategy.

"Entry Points" for Improving Governance Listed

The Bank strategy lists five "potential entry points" for strengthening incentives and improving governance.

"The first comprises reforms to improve the capacity, transparency, and accountability of state institutions. Government reforms have historically been the strongest area of Bank engagement in countries, although less attention has been paid to institutions outside of the executive branch of government."

"A second category comprises reforms that help to increase opportunities for participation and oversight by civil society, the media, and communities. The Bank has been engaged in this work during the past decade, but in a limited and uneven way.

The third category concerns reforms "to create a competitive and responsible private sector." The fourth area is about encouraging "country-level champions" for reform. The fifth category is "reforms to strengthen political accountability, for instance, through political competition, and transparency and regulation of political parties. However, this area is outside the Bank Group’s mandate and legal framework, and work where needed will be supported by other development partners."

Annex A also refers favorably to government requirements that senior public officials disclose their income and assets. "In the first six months of 2006 alone, Cameroon, Liberia, Mongolia, Serbia, and the Kyrgyz Republic all instituted disclosure requirements, bringing to 103 the number of World Bank clients with such requirements. Of these 103, almost one-third also require the statements be disclosed to the public as well." In Annex C, the Bank states, "Moreover, greater transparency can help to establish the credibility of decision-makers through the public disclosure of their income and assets."

The strategy also concludes, "Well-functioning and transparent financial markets and institutions are a powerful force for improving governance and combating corruption by imposing discipline on public and private agents."

By Toby McIntosh

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ABOUT IFTI WATCH

In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
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