Diagnosis ⇒ Initiatives Strategy

406 views
316 views

Published on

Published in: News & Politics
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
406
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Diagnosis ⇒ Initiatives Strategy

  1. 1. Diagnosis  Initiatives  Strategy<br />Prof. Robert Klitgaard<br />Paramadina University, 6 July 2011<br />
  2. 2. Overview<br />The Costs of Corruption<br />Diagnosing Indonesia<br />Initiatives<br />Strategy<br />
  3. 3. 1. The Costs of Corruption<br />Corruption once called “the grease and the glue” (1965)<br />Contrary evidence mounts<br />Case studies<br />Econometric studies<br />Bottom line: “Corruption is a primary obstacle to development” (World Bank).<br />
  4. 4. The Kinds of Costs<br />How corruption undermines development:<br />Economic costs (distorted incentives)<br />Social costs (inequity and injustice)<br />Political costs (undercuts popular rule)<br />
  5. 5. Evidence about Costs<br /><ul><li>Countries with poor governance have:</li></ul>Less investment, other things equal<br />Less benefit from each dollar of investment.<br />Who loses the most? The poor.<br />“When no one is corrupt, no one will be poor.”<br />
  6. 6. Policy “Value Chain”<br />Measures of corruption and good government.<br />But what specifically improves those measures?<br />Missing links from measures back to specific initiatives…<br />Once we have a list of initiatives, we need a strategy.<br />Diagnosis  Initiatives Strategy<br />
  7. 7. Overview<br />The Costs of Corruption<br />Diagnosing Indonesia<br />Initiatives<br />Strategy<br />
  8. 8. Progress in Governance<br />Global Competitiveness Report 2010-2011<br />Some good news about the Indonesia<br />Compared with 139 countries of the world<br />
  9. 9. Overall Competitiveness<br />2010-11: 44<br />2009-10: 54<br />2008-9: 55<br />2005: 69<br />
  10. 10. Capacity for Innovation<br />Indonesia<br />30 <br />in world<br />Equal to<br />Ireland<br />Better than<br />Spain, Hong Kong<br />
  11. 11. Pay and Productivity<br />Indonesia<br />20 <br />in world<br />Equal to<br />Czech Republic<br />Better than<br />Denmark, Germany<br />
  12. 12. Control of International Distribution<br />Indonesia<br />33 <br />in world<br />Equal to<br />Belgium<br />Better than<br />China, Italy<br />
  13. 13. Buyer Sophistication<br />Indonesia<br />35 <br />in world<br />Equal to<br />Czech Republic<br />Better than<br />India, Brazil, Spain<br />
  14. 14. Breadth of Value Chain<br />Indonesia<br />26 <br />in world<br />Equal to<br />Spain<br />Better than<br />Norway, Canada, India, China<br />
  15. 15. Favoritism in Decisions by Public Officials<br />Indonesia<br />28 <br />in world<br />Equal to<br />Belgium<br />Better than<br />France, Taiwan, Israel<br />
  16. 16. Wastefulness of Gov’t Spending<br />Indonesia<br />30 <br />in world<br />Equal to<br />Austria<br />Better than<br />Germany, Canada<br />
  17. 17. Burden of Gov’t Regulation<br />Indonesia<br />36 <br />in world<br />Equal to<br />Taiwan<br />Better than<br />Chile, Austria, USA<br />
  18. 18. Equal to or Better than…<br />Norway, Spain, Austria, France, Canada, Iceland, Singapore, Italy, Belgium, Hong Kong, Ireland, Czech Republic, Denmark, Germany, USA … <br />Not to mention China, Brazil, India, Korea …<br />VIVA INDONESIA!!<br />
  19. 19. Equal to or Better than:<br />
  20. 20. Per Capita GDP of Indonesia?<br />?<br />
  21. 21. Per Capita GDP of Indonesia?<br />$2329<br />Rank # 100 in world (Paraguay, Sri Lanka)<br />
  22. 22. Why $2329 and Not $32,329?<br />
  23. 23. Not Macroeconomics<br />Indonesia (44th) posts an impressive gain of 10 places, mainly driven by a healthier macroeconomic environment... Indonesia managed to maintain a relatively healthy macroeconomic environment (35th, up 17) throughout the crisis. While most other countries saw their budget deficits surge, Indonesia kept its deficit under control. Public debt remains low at 31 percent of GDP, and savings rose to 33 percent of GDP. In addition, inflation in 2009 slowed down to 4.8 percent, half the rate of 2008.<br />—Global Competitiveness Report 2010-11<br />
  24. 24. One Hypothesis: Institutions<br />Global Competitiveness Report 2010-2011<br />Some bad news about the Indonesia<br />Compared with 139 countries around the world<br />
  25. 25. Irregular Payments and Bribes<br />Indonesia<br />95<br />in world<br />Equal to<br />Lesotho<br />Worse than<br />Senegal, Bulgaria, Mozambique<br />
  26. 26. Transparency of Gov’t Policymaking<br />Indonesia<br />91<br />in world<br />Equal to<br />Mauritania, Guyana<br />Worse than<br />Honduras, Mali<br />
  27. 27. Burden of Customs Procedures<br />Indonesia<br />89<br />in world<br />Equal to<br />Malawi<br />Worse than<br />Albania, Zambia<br />
  28. 28. Legal Rights ProtectingBorrowers and Lenders<br />Indonesia<br />103<br />in world<br />Equal to<br />Egypt, Senegal<br />Worse than<br />Angola, Nepal, Zimbabwe<br />
  29. 29. Time to Start a Business<br />Indonesia<br />121<br />in world<br />Equal to<br />Bosnia<br />Worse than<br />Bangladesh, Bolivia, Nigeria<br />
  30. 30. Organized Crime<br />Indonesia<br />98<br />in world<br />Equal to<br />Uganda<br />Worse than<br />Cambodia, Albania, Cameroon<br />
  31. 31. Reliability of Police<br />Indonesia<br />80<br />in world<br />Equal to<br />Egypt<br />Worse than<br />Zambia, Ghana<br />
  32. 32. Ethical Behavior of Firms<br />Indonesia<br />99<br />in world<br />Equal to<br />Benin<br />Worse than<br />Cambodia, Syria, Guatemala<br />
  33. 33. Equal to or Worse than…<br />Cambodia, Senegal, Guatemala, Syria, Mongolia, Zambia, Senegal, Nigeria, Bangladesh, Bolivia, Burkina Faso, Uganda, Zimbabwe, El Salvador, Benin, Bulgaria … <br />OH NO INDONESIA!!<br />
  34. 34. Per Capita GDP of Indonesia<br />$2320<br />Median of these other countries: < $1000.<br />
  35. 35. Other Evidence (1)<br />What Indonesianssay:<br /><ul><li>What is Indonesia’s main challenge as a nation?</li></ul> # 1 is corruption (39%) (Kompas, 2010).<br /><ul><li>Indonesian university students rate corruption the # 1 problem (forthcoming report from Indonesia Setara).</li></li></ul><li>Other Evidence (2)<br />World Bank/IFC “Ease of Doing Business” Report, 2011.<br />183countries: Indonesia ranks 121 overall.<br />155 in ease of starting a business.<br />154 in enforcing a contract.<br />
  36. 36. Other Evidence (3)<br />In 1997, corruption cost Indonesia <br />63% of GDP<br />Axel Dreheret al., “Corruption Around the World: Evidence from a Structural Model,” Journal of Comparative Economics, 2007<br />
  37. 37. Overview<br />The Costs of Corruption<br />Diagnosing Indonesia<br />Initiatives<br />Strategy<br />
  38. 38. From Diagnosis to Initiatives<br />The analogy from health<br />Diagnostic information does not lead automatically to prescriptions<br />Corruption prevalence is not corruption seriousness.<br />The benefits and costs of reform initiatives need to be calculated.<br />
  39. 39. Example: Systems Diagnosis<br /><ul><li>Consider the stages of a procurement system</li></ul>Prequalification<br />Terms of the tender<br />Award<br />Renegotiation and change orders<br />Payments<br /><ul><li>Confidential, one-on-one interviews with businesses lead to a diagnosis of how the corrupt system works.
  40. 40. Then problem-solving meetings with business and gov’t.</li></li></ul><li>Initiatives in Indonesia<br />
  41. 41. World Class<br />KPK<br />Honesty shops<br />
  42. 42. Initiatives Look Excellent<br />Laws: INPRES 5/2004, UNCAC 7/2006<br />National action plan on corruption (RAN/PK)<br />Initiatives include: <br />KPK, wealth declaration, performance targets, quality of public services, procurement reforms, simplicity, corruption prevention studies, GCG, anti-corruption education (including “honesty shops”), e-government, islands of integrity, one-stop service, and more.<br />
  43. 43. KPK Report<br />“Officials still behave in a corrupt manner.”<br />“Initiatives for giving of incentives also come from users.”<br />Level of freedom of information about services still low.<br />Too little transparency about time and costs of services.<br />Channels for complaints are not properly administered.<br />“No serious corruption prevention efforts detected.”<br />
  44. 44. Regional Variation, 2008<br />13 cities and regencies have all indicators above average:<br />Ex.: Yogyakarta, Banda Aceh, Padang, Gorontalo…<br />Ex.: Jepara, Magelang, Barito Kuala and Barito Utara…<br />12 have all indicators below average:<br />Ex.: Bandung, Pontianek, Tanjung Pinang…<br />Ex.: Sumenep, Sambas, Bandung…<br />
  45. 45. Institutional Variation, 2007<br />Top 9 agencies include:<br />BKN (State Employees Board), Home Affairs, PT Pertani, Cooperatives and SMEs, National Education<br />Bottom 9 agencies include:<br />Ex.: Supreme Court, Religious Affairs, Transportation, Manpower and Transmigration, Police, BPN (National Land Agency), Law and Human Rights<br />Worst 5 organizations on “experience integrity score”:<br />Customs, Penitentiary, No. Jakarta court, W. Jakarta court, KPPN (Treasury)<br />
  46. 46. Learn from Success<br />Whyand how are some agencies, some cities and some businesses doing better?<br />From generalities to checklists.<br />An example from Peru.<br />Scorecards.<br />Awards.<br />Case studies and checklists.<br />Training and technical assistance.<br />
  47. 47. Overview<br />The Costs of Corruption<br />Diagnosing Indonesia<br />Initiatives<br />Strategy<br />
  48. 48. 4. Strategy<br />Beyond a list of initiatives: Colombia 2011.<br />Fit with other policies, threats, sources of support.<br />Sequence and priority.<br />Who does what.<br />What should President focus upon?<br />Public-private-citizen collaboration.<br />
  49. 49. Strategic Ideas<br />Structures, leadership, and incentives<br />A whole-government approach<br />Involving business and the people<br /><ul><li>Prevention 1.0
  50. 50. Prevention 2.0</li></ul>Subverting corruption<br />The role of morality<br />
  51. 51. a) Structures, Leadership, and Incentives<br />Corruption is an economic crime.<br />A crime of calculation: risks and rewards<br />Corruption = Monopoly + Discretion - Accountability<br />C = M + D – A<br />
  52. 52. Thus, Structural Changes Must… <br /><ul><li>Change the risk-reward calculations for those giving and receiving bribes.</li></ul>Raise the probabilities that bad behavior (and good behavior) are discovered<br />Increase the rewards for good behavior<br />Raise the penalties for bad behavior<br />Reduce monopoly power, limit discretion, and increase accountability<br />
  53. 53. a) Structure, Leadership, and Incentives<br />The principle of the <br />big fish<br />We need leaders who are <br />brilliant in prevention, <br />ruthless in prosecution, and <br />exemplary in morality.<br />
  54. 54. a) Structures, Leadership, and Incentives<br />“Incentive myopia”<br />If we pay peanuts, we get monkeys.<br />Public sector pay levels  80% of private sector<br />Beyond levels, incentives linked to good performance (and penalties linked to bad performance)<br />
  55. 55. The Ingredients of Success<br />Structures, leadership, and incentives<br />A whole-government approach<br />Involving business and the people<br /><ul><li>Prevention 1.0
  56. 56. Prevention 2.0</li></ul>Subverting corruption<br />The role of morality<br />
  57. 57. b) A Whole-Government Approach<br />Not just one agency. Many government departments must collaborate in the fight against corruption.<br />Leadership meansenabling creative collaboration.<br />
  58. 58. The Ingredients of Success<br />Structures, leadership, and incentives<br />A whole-government approach<br />Involving business and the people<br /><ul><li>Prevention 1.0
  59. 59. Prevention 2.0</li></ul>Subverting corruption<br />The role of morality<br />
  60. 60. c) Involving Business and People<br />Not just government’s problem—and the solutions are not just from government.<br /><ul><li>Prevention 1.0</li></ul>Goal: make government systems stronger to resist corruption. C = M + D - A<br />Risk assessments, for example.<br />
  61. 61. 3. Involving Business and People<br />Not just government’s problem—and the solutions are not just from government.<br /><ul><li>Prevention 1.0</li></ul>Goal: make government systems stronger to resist corruption. C = M + D - A<br />Risk assessments, for example.<br /><ul><li>Prevention 2.0</li></ul>Integrity pacts<br />Systems diagnosis<br />
  62. 62. The Ingredients of Success<br />Structures, leadership, and incentives<br />A whole-government approach<br />Involving business and the people<br /><ul><li>Prevention 1.0
  63. 63. Prevention 2.0</li></ul>Subverting corruption<br />The role of morality<br />
  64. 64. d) Subverting Corruption<br />The analogy from disease: prevention vs. cure<br />If we have the disease of systemic corruption, prevention is not enough.<br />We need to subvert corruption, using ideas from the war on organized crime. <br />An example: road building in Colombia<br />New technologies will help, especially social networking and information sharing<br />
  65. 65. The Ingredients of Success<br />Structures, leadership, and incentives<br />A whole-government approach<br />Involving business and the people<br /><ul><li>Prevention 1.0
  66. 66. Prevention 2.0</li></ul>Subverting corruption<br />The role of morality<br />
  67. 67. John T. Noonan’s Prediction<br />“As slavery was once a way of life <br />and now has become <br />obsolete and incomprehensible, <br />so the practice of <br />bribery…will become obsolete.”<br />Bribes, New York: Macmillan, 1985<br />
  68. 68. Why?<br />Noonan argues that bribery will continue to be morally condemned:<br />Bribery is shameful everywhere in the world.<br />Bribery is a sell out to the rich.<br />Bribery is a betrayal of trust…which is a precious necessity of every social enterprise.<br />Bribery violates a divine paradigm.<br />
  69. 69. e) The Role of Morality<br />In addition to <br />structure, leadership, and incentives; whole-government reforms; involving business and citizens; and subverting corruption<br />We must declare that corruption is immoral and we’re not going to allow it any more<br />
  70. 70. Indonesia’s Successful Future<br />Technological revolutions<br />The rise of the South<br />The design economy<br />To succeed, Indonesia needs even more progress against corruption. Better diagnoses linked with practical initiatives, embedded in a strategy that includes politics and public-private-citizen collaboration<br />

×