Natural Resource Governance Daniel Kaufmann President & CEO, - - PowerPoint PPT Presentation

Evidence-based reflections on Corruption & Natural Resource Governance

Daniel Kaufmann President & CEO, NRGI At the Norad Policy Forum on Natural resource management and corruption – the role of transparency Oslo, October 8, 2019

Voice & Accountability 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

Control of Corruption 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

Control of Corruption 2000 & 2018 (WGI): Resource Rich vs. Non-Resource Rich Developing Countries

Good Poor

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. IMF: Resource Rich.

• 1.25
• 1.05
• 0.85
• 0.65
• 0.45
• 0.25
• 0.05

0.15 0.35 0.55 0.75

Resource-rich Non Resource-rich

2000 2018

Base sample has 137 developing countries, of which country groupings include Resource-rich (79), Non Resource-rich (58).

5

The 3-to-1 Development Dividend From Improving Governance & Controlling Corruption

High Corruption Medium Corruption Low Corruption

$300 $3,000 $30,000

Data Source for calculations: KK 2004. Y-axis measures predicted GDP per capita on the basis of Instrumental Variable (IV) results for each of the 3 categories. Estimations based on various authors’ studies, including Kaufmann and Kraay.

The large development dividend of controlling corruption: Resource Rich countries vs. Others

Sources: GDP per capita (atop each column) from World Bank World Development Indicators, 2012. Corruption Control data from Worldwide Governance Indicators (WGI, 2012) Countries grouped into terciles based on WGI Control

• f Corruption scores. Resource Rich country classification according to IMF (2010).

Poor Corruption Control Average Corruption Control Good Corruption Control

GDP per capita (PPP)

Res esou

• urce

rce-Ric

• Rich C

h Cou

• untr

ntries Non Non R Res esour urce ce Rich ich

5,000 10,000

6,851 3,941 12,712 10,272 45,000 30,820

6

Share of Poor in Resource Rich Countries: 20% Share of Poor in Non- Resource Rich Countries: 80% Share of Poor in Resource Rich Countries: 50% Share of Poor in Non- Resource Rich Countries: 50%

Share of the # of Poor living under $2.00 a day in Non- Resource Rich Countries vs. Resource Rich Countries, 1990 & 2030

1990 2030

7

Close link between WEF Global Competitiveness (2018) & WGI Control of Corruption (2017)

8

Source: Worldwide Governance Indicators (http://www.govindicators.org) and World Economic Forum Global Competitiveness Report 2018 (https://www.weforum.org/reports/the-global-competitveness-report-2018)

Australia China Hong Kong Indonesia Japan Cambodia South Korea Laos Mongolia Malaysia New Zealand Philippines Singapore Thailand Taiwan Vietnam South Africa

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 30 40 50 60 70 80 90

Conrol of Corruption Indicator Score Global Competitiveness Indicator Score r = 0.83

Sovereign Bond % Yield vs WGI (Composite) Indicator:

The ‘1,000 basis points dividend of good governance’

Argentina Australia Austria Belgium Botswana Brazil Bulgaria Canada Chile China Colombia Croatia Czech Republic Denmark Egypt, Arab Rep. Finland France Germany Greece Hong Kong SAR, China Hungary Iceland India Indonesia Ireland Israel Italy Japan Kenya Korea, Rep. Lithuania Malaysia Mexico Netherlands New Zealand Norway Pakistan Philippines Poland Portugal Qatar Romania Russian Federation Singapore Slovenia South Africa Spain Sweden Switzerland Taiwan, China Thailand Turkey Uganda United Kingdom United States Vietnam

2 4 6 8 10 12 14 16

• 1.50
• 1.00
• 0.50

0.00 0.50 1.00 1.50 2.00

2018 Sovereign Bond % Yield 2016 Worldwide Governance Indicator Score

r = -0.73

Sovereign Bond % Yield is obtained from countries’ 10-year bonds as of February 14, 2018. Source: Worldwide Governance Indicators, available at: www.govindicators.org and 10-Year Government Bond Spreads, available at: www.investing.com/rates-bonds/government-bond-spreads.

9

10

Costs of State Capture – Private Sector grows and

invests less

5 10 15 20 25 30 High capture Countries Low capture countries Average rate of growth '97-'99 Output Investment

AFG ALB ARG ARM BFA CAF CIV CMR COG COL DEU DOM ETH GBR GHA GIN GTM GUY HND IDN IRQ KAZ KGZ LBR MDG MEX MLI MMR MNG MOZ MRT MWI NGA NLD NOR PER PHL PNG SEN SLE STP SUR SYC TCD TGO TJK TMP TTO TZA UKR ZAR ZMB ALB ARG BFA CIV CMR COG COL DOM GHA GIN GTM HND IDN IRQ KAZ LBR MDG MEX MLI MNG MOZ MRT MWI NGA NOR PER PHL PNG SEN SUR TCD TGO TTO TZA UKR ZAR ZMB

• 2.50
• 2.00
• 1.50
• 1.00
• 0.50

0.00 0.50 1.00 1.50 2.00 2.50

• 2.50
• 2.00
• 1.50
• 1.00
• 0.50

0.00 0.50 1.00 1.50 2.00 2.50

Control of Corruption Indicator Score Voice and Accountability Indicator Score Resource Rich EITI BOTH

r = 0.78

Voice and Accountability & Control of Corruption 2018 (WGI)

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. IMF: Resource Rich. EITI: Countries on EITI. Squares represent countries that have joined EITI. Dots represent all remaining countries, including those who are resource-rich colored in red.

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• 1.5
• 1
• 0.5

0.5 1

No Freedom/Rights Some Freedom/Rights Satisfactory Freedom/Rights

Press Freedom / Women's Rights / Transparency

Control of Corruption

Press Freedom Gender Equality Transparency

Good

Freedom of the Press, Gender Rights & Transparency are Associated with Corruption Control

(Emerging Economy sample-- 135 countries)

Source for Control of Corruption: : 'Governance Matters IV: Governance Indicators for 1996-2004’, Kaufmann, D., A. Kraay and M. Mastruzzi, (http://www.worldbank.org/wbi/governance/govdata/); Source for Press Freedom: Freedom House. Source for Gender Equality: CPIA 2004. Source for Transparency: Transparenting Transparency”, A. Bellver and D. Kaufmann. Satisfactory Freedom/Rights reflect higher ratings from Press Freedom, women’s rights, gender equality and transparency ratings.

Older EITI sample covers the 28 emerging EITI countries that were members as of 2011. EITI Newcomers sample covers the 19 emerging EITI countries who joined between 2009 and 2017. A conservative assumption is used for countries missing data in EITI+2 (11 countries) by using the data from the last year with available data. Number of countries with actual data per period are as follows: EITI (47 countries), EITI+1 (47 countries), EITI+2 (43 countries), EITI+3 (42 countries), EITI+4 (41 countries), EITI+5 (36 countries).

• 0.8
• 0.7
• 0.6
• 0.5
• 0.4
• 0.3
• 0.2
• 0.1

EITI-5 EITI-4 EITI-3 EITI-2 EITI-1 EITI EITI+1 EITI+2 EITI+3 EITI+4 EITI+5

Governance Indicator Score (EITI)

Older entrants (28) vs. Newcomers (19) – Cutoff: 2011

Older EITI EITI Newcomers

Voice & Accountability pre- & post-EITI candidacy

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. EITI: Countries and joining date on EITI.

Older EITI sample covers the 28 emerging EITI countries that were members as of 2011. EITI Newcomers sample covers the 19 emerging EITI countries who joined between 2009 and 2017. A conservative assumption is used for countries missing data in EITI+2 (11 countries) by using the data from the last year with available data. Number of countries with actual data per period are as follows: EITI (47 countries), EITI+1 (47 countries), EITI+2 (43 countries), EITI+3 (42 countries), EITI+4 (41 countries), EITI+5 (36 countries).

• 1
• 0.9
• 0.8
• 0.7
• 0.6
• 0.5

EITI-5 EITI-4 EITI-3 EITI-2 EITI-1 EITI EITI+1 EITI+2 EITI+3 EITI+4 EITI+5

Governance Indicator Score (EITI)

Older entrants (28) vs Newcomers (19) - Cutoff: 2011

Older EITI EITI Newcomers

Control of Corruption pre- & post-EITI candidacy

Source: Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. EITI: Countries and joining date on EITI.

| WWW.RESOURCEGOVERNANCEINDEX.ORG

2017 Resource Governance Index country scores and rankings

17

| WWW.RESOURCEGOVERNANCEINDEX.ORG

State-owned enterprises assessed in the RGI

18

Source: OECD 2017 Survey of anti-corruption and integrity in SOEs.

Corruption & related irregular practices in SOEs, by sector

(Survey by OECD)

EITI & the Anti-Corruption Agenda

• Achievements: Dialogue, Data, Civil Society Protections, some
• Accountability. Board focus now (with NRGI, Norway support)
• Ahead: For legitimacy of the initiative: Open & Concrete
• 1. Diagnostics: Incentives for countries to assess and address

corruption & capture risks -- at outreach/sign-up, MSG workplans; validation

• 2. Safeguarding Civil Society Protections -- fundamental
• 3. Companies stepping up -- including MNC majors & SOEs
• 4. Service Contracting (following progress on traders)
• 5. Energy Transition – corruption an obstacle
• 6. Partnerships: EITI about transparency - hence partners: OECD,

IMF, Norway/bilaterals; NRGI, CSOs, researchers -- Political

Thank you