On the Power of Evidence-Based Analysis Daniel Kaufmann Plenary II: - PowerPoint PPT Presentation

On the Power of Evidence-Based Analysis Daniel Kaufmann Plenary II: Peace, Equality and Social Justice: Fighting Corruption in Development and Investment Beyond 2015 #16IACC, Malaysia, September 3, 2015 1

Data The scale of the challenge and its impact: • Extent of worldwide bribery is roughly US$1.5-US$2 trillion, about 2 percent of world’s GDP. • However, this figure is not the whole “cost” of corruption. • The 300 percent development dividend of good governance matters for per capita income, infant mortality, education. • The 20 percent “corruption tax” on foreign investors; the tax on the poor, financial instability.

Governance Matters: Development dividend of improved governance in resource-rich (and other) countries 45,000 Res esou ource rce-Ric -Rich C h Cou ountr ntries Non on R Reso esour urce ce Rich ich GDP per capita (PPP) 30,820 12,712 10,272 6,851 10,000 3,941 5,000 0 Poor Corruption Control Average Corruption Good Corruption Control Control 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 3 Control of Corruption scores. “Resource Rich” country classification according to IMF (2010).

Select countries showing large improvement or deterioration in voice and accountability (2000-2013) 100 Improvement Deterioration from 2000-2013 Voice & accountability % rank 90 from 2000-2013 80 70 60 50 40 30 20 10 0 2000 (Improved) 2013 (Improved) 2000 (Deteriorated) 2013 (Deteriorated) Source: Worldwide Governance Indicators, http://www.govindicators.org

Select countries showing large improvement or deterioration in rule of law (2000-2013) 100 Improvement Deterioration from 2000-2013 90 from 2000-2013 80 Rule of law % rank 70 60 50 40 30 20 10 0 2000 (Improved) 2013 (Improved) 2000 (Deteriorated) 2013 (Deteriorated) Source: Worldwide Governance Indicators, http://www.govindicators.org

Accountability must complement transparency : control of corruption vs voice & accountability (WGI) 3 2.5 2013 control of corruption Worldwide r = 0.78 2 Governance Indicator score 1.5 1 0.5 0 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 -0.5 -1 -1.5 -2 2013 voice & accountability Worldwide Governance Indicator score 6 Note: Red data points are the 55 resource-rich countries according to the IMF. Source: IMF, 2013 World Bank Worldwide Governance Indicators.

Select countries showing large improvement or deterioration in control of corruption (2000-2013) 100 Improvement from Deterioration from 2000-2013 Control of corruption % rank 90 2000-2013 80 70 60 50 40 30 20 10 0 2000 (Improved) 2013 (Improved) 2000 (Deteriorated) 2013 (Deteriorated) Source: Worldwide Governance Indicators, http://www.govindicators.org

Malaysia: Worldwide Governance Indicators for voice & accountability, rule of law, and control of corruption 100 Governance Indicator % Rank 75 50 25 Voice & Accountability Rule of Law Control of Corruption 2004 2013 Source: Worldwide Governance Indicators, http://www.govindicators.org.

Corruption has Morphed: Networks, and Legal & State Capture 10

Entrenched corruption networks: the case of Montesinos in Peru Judiciary Civil Society Legislative International Branch Alberto State Political Parties Fujimori (Bureaucracy) 1 Vladimiro Montesinos Media Military Municipal Private Government Sector 11 Source : “ Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy. School of Government Case Program, Case C14-04-1722.0, based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000.

Source: AFP, http://www.abs-cbnnews.com/sports/06/02/15/look-key-players-fifa-scandal.

Petrobras Source: Ministerio Publico Federal, http://pt.slideshare.net/arykara7002/fluxograma-do-dinheiro-da.

Cross-cutting mechanics: secret corporate vehicles Image source: Radio Free Europe (2012), “Azerbaijani Government Awarded Gold-Field Rights To President's Family.”

Corruption across the decision chain License allocations Commodity sales e.g. Griffiths (Chad), e.g. Sphynx/AOGC & Cobalt/Nizaki (Angola) Gunvor (Congo-B), Swap contracts (Nigeria) Subcontracting Saving revenues e.g. Petrobras (Brazil), e.g. SocGen/Goldman Skanska (Argentina) Sachs? (Libya)

Implications • View corruption differently: beyond an illegal transaction between two individuals it is a problem of high-level capture of state assets, policy, regulation and laws. Hence: Corruption as “the privatization of public policy.” • Understanding corruption as a problem of networks and use of innovative tools • To make progress on fighting corruption, integration needed between rule of law (end to impunity), vibrant civil society and effective transparency (incl. political and corporate [beneficial ownership]) • #16IACC “Small Idea”: a multi-stakeholder initiative to fight impunity and corruption • Toward an “impunity index”