USAID Anticorruption StrategyUSAID STRATEGY                 Washington, D.C.                 January 2005                 ...
USAID Anticorruption StrategyWashington, D.C.January 2005
ContentsForeword    vExecutive Summary     1USAID Anticorruption Strategy        5     1. Corruption and Development      ...
ForewordWhen I began my career in international development, corruption was a fact of life. Because of themagnitude of the...
Executive Summary                                         No problem does more to alienate citizensU          SAID is a le...
experience in institutional development and                 improve strategies to curtail lower-level, admin-        throu...
to expand anticorruption knowledge.   Evaluating program effectiveness and impact   will better enable the Agency to measu...
USAID Anticorruption Strategy                                                                               Similarly, the...
democracies. It undermines democratic values of                              medium-sized enterprises are disproportionate...
opportunities and capacities to control corruption.But the reverse is equally true.Corruption must be addressed in tandem ...
global threats such as terrorism and international                      reflects the understanding that corruption may be ...
understanding of the general trends represented by                   USAID is cooperating with a broadthese two manifestat...
in selected pilot countries. USAID works with U.S.      USAID models anticorruption         Treasury advisers around the w...
Most USAID missions understand                                             ■	   Fifty-seven percent indicated thatthe link...
has eliminated under-the-table payments by                  consuming distractions and ultimately may not              est...
Figure 1. Perceptions of Control of Corruption over Time, 2002      Latin America and Caribbean      Middle East and North...
Furthermore, civil society and public education                           take the place of direct payoffs in exchange for...
Figure 2. Corruption Dynamics and Access Points for Response           Political                                          ...
objective improvements in administrative cor­                        Furthermore, the impact of efforts to control        ...
(see Box 1). Specific opportunities also might arise                  well. Support for civil society and media participa­...
■          ■	  Develop innovative interventions to address                           nature of grand corruption, and thus ...
Box 2. Programmatic Responses to Grand CorruptionA         lthough grand corruption is often intertwined with             ...
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Anticorruption

  1. 1. USAID Anticorruption StrategyUSAID STRATEGY Washington, D.C. January 2005 PD-ACA-557
  2. 2. USAID Anticorruption StrategyWashington, D.C.January 2005
  3. 3. ContentsForeword vExecutive Summary 1USAID Anticorruption Strategy 5 1. Corruption and Development 5 2. Corruption and U.S. National Security 7 3. Defining Corruption 8 4. USAID’s Role in U.S. Anticorruption Efforts 9 5. The Current Context for USAID Anticorruption Work: 10 6. An Expanded Understanding of Corruption Dynamics 12 7. USAID’s New Anticorruption Strategy 16 8. Conclusion 27Annex I. Modeling Best Practices within USAID 28Annex 2. A Description of USAID Anticorruption Programs 29Tables and Figures Figure 1. Perceptions of Control of Corruption over Time 13 Figure 2. Corruption Dynamics and Access Points for Response 15 Box 1: Anticorruption Agencies: Key Conditions for Effectiveness 17 Box 2. Programmatic Responses to Grand Corruption 19 Box 3. Programmatic Responses to Administrative Corruption 20 Box 4. Sectoral Approaches to Corruption 24 Table 1. USAID Anticorruption Programs by Type and Focus 30 Figure 3. Anticorruption Program Funding by Typology, FY 2002 33 USAID Anticorruption Strategy iii
  4. 4. ForewordWhen I began my career in international development, corruption was a fact of life. Because of themagnitude of the problem and its political sensitivity, development professionals usually attempted tocontain it, limit it, or work around it, but not confront it. Today, corruption is no longer a taboo subject.And more importantly, we can’t ignore it because development cannot thrive in a corrupt environment.An international consensus has now emerged that corruption and poor governance fuel state failure, deterforeign investment, and cripple economic growth and development. But recognition of the problem stillhas left the development community with the daunting challenge of finding ways to combat corruptionmore effectively across the globe.USAID’s Anticorruption Strategy outlines our new approach. We will do more to spotlight the dynamics ofgrand corruption and introduce new programs to deal with it. We will do more to identify the ways inwhich corruption affects all development sectors and design approaches to counter it. We will supportreformers with rapid response assistance, and we will support diplomatic initiatives that raise anticorruptionissues to the highest level.We won’t do it alone. Our programs work best when complemented by high-level diplomacy and localownership. USAID’s work both supports and is enhanced by U.S. and global law enforcement effortsthat target international crime—money laundering, organized crime, trafficking in persons—that thrives incorrupt environments. These efforts help to strengthen the combined effectiveness of our programs, thoseof other donors and, most importantly, the work of committed reformers throughout the developing world.With the approval of this strategy, it is my expectation that all members of the USAID communitywill join me in implementing the steps necessary for the Agency to play a leading role in advancingthe fight against corruption and building good governance to achieve a more stable, prosperous, anddemocratic world.Andrew S. NatsiosAdministratorU.S. Agency for International Development USAID Anticorruption Strategy v
  5. 5. Executive Summary No problem does more to alienate citizensU SAID is a leader in fighting corruption. from their political leaders and The Agency’s work reduces opportunities institutions, and to undermine political and incentives for corruption; supportsstronger and more independent judiciaries, legisla­ stability and economic development, thantures, and oversight bodies; and promotes inde­ endemic corruption among thependent media, civil society, and public education. government, political party leaders, judges,Yet corruption—the abuse of entrusted authority and bureaucrats.for private gain—remains a tremendous obstacle topolitical, social, and economic development, andefforts to reduce it need to be more fully integrat­ USAID, Foreign Aid in the National Interest, 2002ed into USAID programs across all sectors.Anticorruption efforts have tended to focus onwhat is sometimes the most immediately visible investment, skewing public investment, encourag­dimension of the problem: administrative corrup- ing firms to operate in the informal sector, distort­tion—mostly smaller transactions involving mid- ing the terms of trade, and weakening the rule ofand low-level government officials. Anticorruption law and protection of property rights. In doing allefforts need to be expanded to better encompass this, corruption fundamentally weakens the legiti­grand corruption—exchanges of resources, access macy and effectiveness of new democracies.to rents, or other competitive advantages for privi­leged firms and high-level officials in the executive, In addition, the current U.S. National Securityjudiciary, or legislature, or in political parties. New Strategy underscores that poverty, weak institutions,analytical approaches help illuminate a broader and corruption can make states vulnerable torange of assistance strategies and tactics—many terrorist networks and drug cartels, and arguesalready in USAID’s portfolio—that can help that efforts to address these challenges in develop­target the critical problem of corruption in all ing countries can contribute directly to U.S.its manifestations. national security.Fighting corruption is emerging as an important USAID’s Role in U.S.U.S. foreign policy objective, and USAID anti­ Anticorruption Effortscorruption programs are expanding. This USAID USAID is cooperating with a broad range of U.S.strategy builds on the Agency’s experience Government agencies (including the departmentsand provides an opportunity to further advance of State, Treasury, Commerce, and Justice), bilateralits leadership. donors, international organizations, and NGOs to address corruption globally. Diplomacy, interna­Corruption, Development, and tional law enforcement efforts, and developmentU.S. National Security assistance are complementary and mutually rein­There is an emerging global consensus that fighting forcing dimensions of a global U.S. Governmentcorruption and building good governance are essen­ anticorruption effort.tial for the development of people, markets, andnations. Corruption undermines social cohesion USAID works to reduce opportunities and incen­and broad participation in economic and political tives for corruption through public sector reformlife by distorting the allocation of resources and the and deregulation, support for oversight and watch­delivery of public services, usually in ways that par­ dog activities, and education of citizens about theirticularly damage the poor. It also damages prospects roles in preventing corruption. USAID bringsfor economic growth by reducing foreign direct about sustainable change by building on its USAID Anticorruption Strategy 1
  6. 6. experience in institutional development and improve strategies to curtail lower-level, admin- through its engagement with national and local istrative corruption; and develop sectoral and governments. The Agency has a special comparative cross-sectoral strategies to reduce corruption advantage in its experience working outside of and improve governance. government with the private sector, political par­ ties, trade unions, NGOs, universities, professional ■ Deploy Agency resources strategically to fight cor- associations, and others. ruption. The Agency must deploy its resources strategically and must allocate a greater propor- The Current Context for USAID tion of available resources to reducing corrup- Anticorruption Work tion. Missions and bureaus can leverage The Agency has invested significant resources— resources by incorporating anticorruption com- $184 million in FY 2001 and $222 million in FY ponents into all sectoral programs affected by 2002, according to a 2003 survey, in programs corruption (including agriculture, education, specifically targeting corruption, as well as those energy, and health, in addition to democracy broadly aimed at “governance” but with a signifi­ and governance and economic growth); focus- cant anticorruption dimension. The same survey ing democracy and governance and economic showed that more than two-thirds of all USAID growth resources more explicitly on anticorrup­ missions have some programs related to corruption tion; and increasing the share of funds dedicat­ and that most missions are interested in expanding ed to specific anticorruption initiatives. The these programs. Agency will develop rapid response capabilities to enable USAID to augment anticorruption Strategic Directions for USAID efforts quickly when key opportunities arise. Anticorruption Efforts The Agency also will explore and respond to The following broad actions will assist USAID to requirements presented by the Millennium better address the development challenges posed Challenge Account. by corruption: ■ Incorporate anticorruption goals and activities ■ Confront the dual challenges of grand and admin- across Agency work. USAID must pay attention istrative corruption. In the past, many USAID to organizational incentives and structures that anticorruption programs have successfully tar- support or resist a broadened approach to geted low-level, or administrative, corruption Agency anticorruption efforts. A comprehensive through bureaucratic and regulatory reform and implementation plan will develop next steps to public education and monitoring. In those establish a budget code to track resources countries where corruption is systemic and devoted to anticorruption; incorporate specific driven from the highest levels, however, efforts anticorruption goals into mission and bureau to address administrative corruption must be strategies and results frameworks; build collabo­ complemented by efforts to address high-level, ration by establishing integrated interagency or grand, corruption. USAID is developing a and donor coordination mechanisms; include new assessment methodology that will provide anticorruption in Agency training, communica­ a more comprehensive framework to analyze tion, and planning vehicles; and continue and the locations, dynamics, and scale of corruption expand Agency leadership on fighting corrup­ and the balance between grand and administra­ tion. tive corruption. The objective is to ensure that USAID interventions address the varying pat- ■ Build USAID’s anticorruption knowledge. terns of corruption; develop innovative strate- Anticorruption assistance is a relatively new gies to address grand corruption; expand and area of practice; thus, the Agency should strive2 USAID Anticorruption Strategy
  7. 7. to expand anticorruption knowledge. Evaluating program effectiveness and impact will better enable the Agency to measure and improve the effectiveness of its programs. Establishing an Agency-wide “community of practice” will encourage the collection and dissemination of anticorruption learning. Engaging the Agency in a dialogue on gender and corruption will illuminate important and challenging issues.ConclusionFighting the scourge of corruption is fundamentalto advancing U.S. foreign policy interests.Corruption is now seen unequivocally as a majorbarrier to development, and reducing it a toppriority. USAID has made important advances butmust expand its approaches to fighting corruption,especially grand corruption; build new knowledgeto design better interventions; support countriesmaking real efforts to improve; and be quickto respond to emerging opportunities.Implementation of the actions in this strategywill help USAID make a significant contributionto the fight against corruption. USAID Anticorruption Strategy 3
  8. 8. USAID Anticorruption Strategy Similarly, the U.S. Government’s MillenniumAs we enter the 21st Century, people Challenge Account (MCA) seeks to matchthroughout the world are rejecting the resources to good policy environments but singlesnotion that corruption is inevitable. Success out control of corruption as a key hurdle that must be cleared before any other dimensions of perform­[in fighting corruption] depends on ance are considered. Finally, the UN Generalimpartial democratic institutions, open Assembly has approved, and almost 100 nationselections, and unfettered access to have signed, the UN Global Convention Againstinformation. Success also requires leadership Corruption.by the private sector and active participation Both the State Department and USAID have beenby citizens. Promoting integrity in working for many years to address corruption, butgovernment and the marketplace improves have elevated this issue to a higher priority in thethe global governance climate, nurtures past year. The FY 2004–2009 Department of State and USAID Strategic Plan confirmed that “[State]long-term growth, and extends the benefits Department and USAID policy regarding assistanceof prosperity to all people. will support and encourage governments that fight Secretary of State Colin Powell May 20011 corruption and safeguard the rule of law, pluralism, and good governance.”1. Corruption and Corruption undermines social, political, and economicDevelopment development. Corruption undermines service delivery, particularlyA consensus exists on the critical for the poor. Corruption skews public investmentimportance of fighting corruption. choices away from service delivery toward more lucrative areas, such as large construction and infra­A strong global consensus has emerged that structure projects. Weak procurement systems andaddressing corruption and building good gover­ poor financial management yield both fraud andnance is essential for the development of people, unaccounted-for leakages in public budget alloca­markets, and nations. This opinion has been tions. The general environment of scarcity in publicexpressed clearly in several key development fora services creates incentives for providers to demandand policy documents. Over 50 heads of state at payments for services that should be free or lowthe 2002 Financing for Development meeting cost to the poor. By improving the productivity ofcommitted themselves to the Monterrey public expenditures, tracking and reducing leakage,Consensus, which called for increased foreign aid and enhancing citizen oversight, anticorruptionresources in response to enhanced governance.2 efforts can support the achievement of goals in1. U.S. Department of State, Fighting Global Corruption: Business Risk health, education, social safety net programs,Management, 2001–2003. <http://www.state.gov/g/inl/rls/rpt/fgcrpt and infrastructure./2001/>2. “Fighting corruption at all levels is a priority. Corruption is a seriousbarrier to effective resource mobilization and allocation and diverts Corruption cripples democracy. Perceptions of ram­resources away from activities that are vital for poverty eradication pant corruption contribute to public disillusion­and economic and sustainable development.” Monterrey Consensusof the International Conference on Financing for Development, ment with democracy. Corruption undermines18–22 March 2002. both the legitimacy and effectiveness of new USAID Anticorruption Strategy 5
  9. 9. democracies. It undermines democratic values of medium-sized enterprises are disproportionately citizenship, accountability, justice, and fairness. It affected. Farmers are subjected to demands for pay­ undermines free speech and public accountability, ments along transportation routes that reduce the particularly when it reaches into the media sector gains from bringing products to markets. In some and limits freedom of information. It violates the countries, powerful firms can effectively “capture” social contract between citizens and their elected the state, purchasing laws and regulations that representatives, and elevates the interests of the few shield them from competition and blocking over the many. By diverting public resources to reforms that would benefit the majority of firms.3 finance reelection campaigns, corrupt parties can Massive unaccounted-for losses in the energy sector effectively bar new entrants from competing for undermine the quality and sustainability of electric­ political office and choke efforts to consolidate ity. Crony lending and weak supervision misallo­ weak democracies. Nepotism and cronyism can cate credit and may lead to banking sector collapse. generate deep grievances that contribute to conflict and state failure, particularly if these cleavages fol­ The failure to address endemic low preexisting fault lines in society such as eco­ corruption ultimately undermines nomic, religious, or ethnic divisions. all development efforts. Political, economic, and social reforms all can help Corruption impedes economic growth. Corruption create a more constructive climate for combating undermines economic growth by distorting public corruption. Open economies, liberal democracies, investment in infrastructure and other key public and improved human development contribute to goods, deterring foreign direct investment, encour­ 3. See World Bank, Anticorruption in Transition: A Contribution to the aging firms to operate in the informal sector, auc­ Policy Debate (Washington D.C., 2000). For one case study, see tioning off property rights, distorting the terms of Bernard S. Black and Anna S. Tassarova, “Institutional Reform in Transition: A Case Study of Russia” (Stanford Law School, Working trade, and weakening the rule of law. Small- and Paper 238, 2002). By improving the productivity of public expenditures, tracking and reducing leakage, and enhancing citizen oversight, anticorruption efforts can support the achievement of goals in health, education, social safety net programs, and infrastructure.6 USAID Anticorruption Strategy
  10. 10. opportunities and capacities to control corruption.But the reverse is equally true.Corruption must be addressed in tandem withpolitical, economic, and social reforms to advancethe success of each. In the political arena, forexample, democracies vary dramatically in theirperformance. Many young, partial democracieshave not shown themselves to be significantly lesscorrupt than the authoritarian regimes that preced­ed them.4 Nor can economies simply “grow” theirway out of corruption. Research finds that gover­nance appears to have a strong causal effect on percapita incomes, but per capita incomes have only aweak or even negative effect on the quality of gov­ernance, in part because many of the economic Small and medium-sized enterprises are disproportionately affected.gains may be captured by corrupt elites.5 In the Farmers are subjected to demands for payments along transportation routes that reduce the gains from bringing products to markets.same way, commitments to allocate greater publicspending to poverty reduction will not be success­ful unless governments come to terms with corrup-tion.6 The Asian Development Bank estimates thatone-third of public investment in many countries Poverty does not make poor people intowithin the region is being squandered on corrup- terrorists… Yet poverty, weak institutionstion.7 Corruption also has more indirect effects ondevelopment. The 2003 Arab Human Development and corruption can make weak statesReport, focusing on the need for building a knowl­ vulnerable to terrorist networks and drugedge society, points out how free flows of knowl- cartels within their borders.edge—critical for building societal resources for President George W. Bushdevelopment—require the elimination of corrup­ National Security Strategy of thetion, “which diverts knowledge, ideas and informa­ United States of Americation in order to serve the personal interests of a September 20029few and hinders their movement for the good ofsociety.”8 2. Corruption and U.S. National Security4. Philip Keefer, “Clientelism, Credibility, and Democracy”(Washington, D.C.: World Bank, 2002). USAID efforts to address Daniel Kaufmann and Art Kraay, “Growth without Governance.”5. corruption in developing countriesEconomia 3:1 (Fall 2002). enhance U.S. national security.6. World Bank, World Development Report 2004, Making ServicesWork for Poor People (Washington, D.C., 2004). Tanzi and Davoodi, The U.S. National Security Strategy (NSS) linksin “Corruption, Public Investment, and Growth” (IMF Working Paper development directly to U.S. national security.97/139, Washington, D.C.: International Monetary Fund, 1997), con-cluded that corruption is associated with higher rates of public invest- USAID, and its anticorruption efforts in particular,ment and lower productivity of public investment. have a valuable role to play. The document articu­7. AP news story, December 3, 2003. Speech by Asian Development lates the need to fight corruption in order to addressBank President Geert Van Der Linden.8. United Nations Development Programme, Arab HumanDevelopment Report 2003: Building a Knowledge Society (New York: National Security Strategy of the United States (2003). 9.UNDP, 2003): 143 <http://www.whitehouse.gov/nsc/nss.html> USAID Anticorruption Strategy 7
  11. 11. global threats such as terrorism and international reflects the understanding that corruption may be organized crime. Corruption is truly a global phe­ undertaken not only for immediate, personal gain nomenon, and its costs are borne by all countries. but also for any “private gain,” including that of Four weeks after the September 11 attacks, the head family or political contacts, long-term rather than of Interpol addressed an international anticorrup­ immediate payoffs, and the siphoning of public tion conference and stated, “the most sophisticated funds to finance an incumbent’s reelection cam­ security systems, best structures, or trained and paign. Under this intentionally broad definition, dedicated security personnel are useless if they are not all illegal activities are corruption, and not all undermined from the inside by a simple act of forms of corruption are illegal. corruption.”10 While all forms of corruption undermine both development and democracy, USAID has tended, 3. Defining Corruption and is expected to continue, to focus mainly on cor­ ruption in the public sector and where the public Corruption is defined as the abuse and private sectors interact. Strictly “private-to-pri- of entrusted authority for private vate” corruption—such as kickbacks on contracts gain. between private companies—receives some attention This definition recognizes that, while corruption in through corporate governance or other related pro­ the public sector has particularly devastating grams, but USAID, as an international bilateral impacts, it cannot realistically be addressed in isola­ donor, mainly concerns itself with the appropriate tion from corruption in political parties, the private use of public resources and authority. This is due business sector, associations, NGOs, and society at not only to the fact that USAID and its partner large. Corruption involves not just abuse of public governments and nongovernmental organizations office but other offices as well. In addition, it have relatively fewer points of leverage to affect pri­ vate corporate behavior, but also because working to change the way the public sector manages public resources and interacts with the private economy expands the impact of USAID programs to entire sectors and economies. The above definition encompasses both grand, or elite, corruption and lower-level, administrative corruption. Grand corruption typically involves exchanges of resources, access to rents, or other advantages for high-level officials, privileged firms, and their networks of elite operatives and support­ ers. The size of transactions is usually significant. Administrative corruption usually refers to smaller transactions and mid- and low-level government officials. Perhaps the most important distinction is that administrative corruption usually reflects specific weaknesses within systems, while grand Corruption skews public investment choices away from service corruption can involve the distortion and manipu­ delivery—particularly for the poor—toward more lucrative areas, such as large construction and infrastructure projects. lation of entire systems to serve private interests. It is not possible to draw stark lines between these Ronald Noble, Address to 10th International Anticorruption 10. two phenomena. Administrative corruption is facil­ Conference (IACC), Prague, October 2001. itated by and often linked to grand corruption. An8 USAID Anticorruption Strategy
  12. 12. understanding of the general trends represented by USAID is cooperating with a broadthese two manifestations of corruption, however, is range of U.S. Government agenciescritical for developing appropriate responses and to address corruption globally.expectations of success. USAID cannot and does not address corruption on its own. Diplomacy, law enforcement efforts (such as international conventions and mutual legal4. USAID’s Role in U.S. assistance treaties), and development assistanceAnticorruption Efforts focused on prevention are complementary and mutually reinforcing dimensions of a global U.S.USAID’s approach focuses on Government anticorruption effort. In order topreventing corruption and on civil project substantial U.S. commitment, USAID andaspects of enforcement. other U.S. Government agencies, particularly theCorruption programs can be broadly divided Department of State, must cooperate closely.into “prevention” and “enforcement.” USAIDgenerally concentrates on prevention and on the Complementary Roles. High-level diplomacy,administrative, audit, oversight, and civil aspects of including aid and trade conditionalities, visaenforcement, by providing technical assistance to policies, denial of safe havens, implementation ofcountries to address the causes of corruption and global and regional conventions, and public andmodify behaviors and incentives in the future. private policy messages can create powerful incen­Here USAID can build on its development experi­ tives for reform. They also can address the globalence across all sectors and draw on extensive expe­ dimensions of corruption that extend far beyondrience in institutional development, education, and developing countries themselves. Law enforcementawareness-building, including engagement not efforts by the departments of State, Justice, andonly with national and local governments but also Treasury also help to break the prevailing culturewith the private sector, political parties, trade of impunity in many countries by criminalizingunions, NGOs, universities, professional associa­ corruption and providing international legaltions, and other actors. cooperation and training on corruption-related investigations, anti-money laundering, andAlthough USAID’s rule of law programs sometimes asset recovery.involve strengthening prosecutorial and investiga­tive functions, legislative prohibitions generally Coordination. Most USAID coordination is withrestrict USAID’s ability to engage with law enforce­ the Department of State. USAID works with sever­ment agencies to bolster the criminal aspects of al bureaus on formulating U.S. positions on inter­anticorruption enforcement. While other U.S. national conventions, such as the UN Globalagencies are able to fill some of this need (see Convention Against Corruption; participating inbelow), this limitation poses a challenge for effec­ international conferences, such as the Globaltive anticorruption programming, because it pre­ Forums Against Corruption; incorporating goodvents USAID from implementing comprehensive governance into regional initiatives, such as theprevention strategies that include the institutions, Middle East Partnership Initiative; and buildingsuch as police forces and prosecutorial services, that anticorruption measures into emergency responseare often the most corrupt but must play critical activities, such as the U.S. response to Hurricaneroles in the fight against corruption.11 Mitch. In addition, USAID contributes to the for­ mulation and implementation of National Security Council-led initiatives such as the Group of Eight11 For examples, see “U.S. Anticorruption Programs in Sub-Saharan (G8) Comprehensive Transparency Initiative,Africa Will Require Time and Commitment,” Government AccountingOffice Report to the Subcommittee on African Affairs, Committee on which will provide diplomatic support and techni­Foreign Relations, U.S. Senate, April 2004. cal assistance to a range of transparency initiatives USAID Anticorruption Strategy 9
  13. 13. in selected pilot countries. USAID works with U.S. USAID models anticorruption Treasury advisers around the world to strengthen best practices within its own budget, tax, and customs reform and coordinate operations. approaches bilaterally and in international financial To be seen as a credible provider of anticorruption institutions. USAID coordinates with the U.S. assistance, representatives of the Agency strive to Trade Representative on trade-related issues, includ­ model best practices in all USAID operations. ing World Trade Organization efforts to promote These include implementing assistance in ways transparency in procurement. USAID collaborates that assure transparency and accountability, e.g., with the Department of Justice on enhancing the project-based assistance and oversight of contrac­ prosecution function and hopes to work more tors and grantees, and by extending generalized closely with both State and Justice on efforts to budget support only to those countries that clearly address police corruption. With the Department of demonstrate the capacity and commitment to Commerce, USAID collaborates on corporate gov­ manage funds for their intended purposes (funds ernance, commercial law reform, and related areas. subject to USAID audit). This also includes conforming to U.S. Government and USAID USAID collaborates with numerous policies and regulations in all regards, behaving other international actors. according to the highest ethical standards, and USAID interacts, either directly or in partnership exemplifying the values of public service that with other U.S. Government actors, with a wide underpin these standards. variety of international organizations. The Agency participates actively in the Organisation for Modeling best practices might include specific Economic Co-operation and Development’s transparency and reporting requirements; fraud (OECD) Development Assistance Committee, a awareness training for implementers; oversight forum for sharing best practices and experiences opportunities for civil society, host country govern­ among bilateral donors, and contributes regularly ment, and the media; and requirements for interim to the OECD’s Governance Network. USAID and concurrent audits. USAID also aims to make collaborates with U.S. Government agencies in explicit these efforts by communicating these stan­ planning and running the biennial Global Forum dards and controls and demonstrating transparency against Corruption, and convenes the Donor in its operations to all external stakeholders. USAID Consultative Group for Latin America and the standards and practices are described more fully in Caribbean through the Americas’ Accountability/ Annex 1. Anticorruption Project, funded by the Bureau for Latin America and the Caribbean. The Agency advises the State Department in the work of the 5. The Current Context for committee of experts for the implementation mech­ USAID Anticorruption anism of the Inter-American Convention Against Corruption by involving USAID missions and civil Work society in the review process. USAID maintains A n inventory of FY 2001 and FY 2002 collegial relations with various bilateral donors, programs (Annex 2) and a 2003 Field most notably the UK Department for International Perspectives Survey shed light on current 12 Development, with which it undertakes joint USAID programming trends and lessons learned. training, research, and assessment projects. Finally, Some highlights follow: USAID has partnered with key international NGOs, an example of which is its multiyear support for Transparency International and recent See <http://www.usaid.gov/our_work/democracy_and_gover- 12. contribution to establish its endowment fund. nance/publications/ac/field_perspectives.pdf>.10 USAID Anticorruption Strategy
  14. 14. Most USAID missions understand ■ Fifty-seven percent indicated thatthe link between corruption and insufficient donor coordination limiteddevelopment, and more than two- program effectiveness.thirds have programs to address it.■ The Agency invested significant resources in this Missions identified a range of effort: $184 million in FY 2001 and $222 mil­ approaches that were yielding lion in FY 2002.13 These figures include not only results. programs primarily focused on fighting corrup­ Many of these projects benefited from three factors: tion, but also broader “governance” programs good policy environments, committed local part­ with a significant anticorruption dimension. ners, and strong U.S. policy leadership.■ Approximately 87 percent of current USAID Some examples of recent successes include the anticorruption and good governance programs following: are concentrated in two strategic objective (SO) sectors: democracy and governance and eco­ ■ Rule of law. USAID/Guatemala helped to estab­ nomic growth. The energy, environment, and lish, in October 1998, a Clerk of Courts Office health sectors each report a number of pro­ in Guatemala City. By 2003, the impact on grams to address corruption, accounting for reducing corruption and increasing transparency approximately 10 percent. Agriculture, basic was clear. First, the court system now maintains education, urban programs, conflict, and the a credible inventory of its caseloads. From other transition programs also report a small October 1997 to September 1998, the court sys­ number of programs, accounting for the tem lost 1,061 cases in Guatemala City alone. remaining 3 percent. Under the new system, only four cases were lost between October 1998 and January 2003.USAID missions face several Second, a new computerized system assigns casesconstraints in tackling corruption. in an objective, tamper-proof fashion, eliminat­■ Ninety percent of missions indicated the long- ing judge shopping and reducing congestion. term, embedded nature of corruption represent­ Third, the system establishes and tracks time ed a key constraint and necessitated large-scale limits for processes. Fourth, there is a reliable shifts in public attitudes and practices. system for generating statistics and reports.■ Seventy-eight percent of USAID field offices ■ Environment. USAID/Madagascar has recently indicated they would expand anticorruption supported the new Ministry of Environment’s programming if they had additional staff and cleanup campaign to regularize all logging per­ resources. mits. A coalition composed of the National Forest Service, National Forest Observatory (a■ Sixty-nine percent indicated that insufficient watchdog organization), and conservation political commitment on the part of national organizations surveyed the different types of counterparts was a constraint. permits and canceled all that were irregular, or any that had not paid the required fees. This resulted in the revocation of approximately 30013. These figures were collected through a special field survey in 2003. permits, out of a total of 380. The program isOfficial budget figures do not adequately capture Agency anticorrup-tion efforts. Only one sector, Democracy and Governance, has creat- being expanded nationwide.ed a budget code of “transparent and accountable government.” Thiscode accounted for $23.6 million in FY2001 but does not capturework in other sectors and does not include programs that have a ■ Health. USAID/Armenia supports thebroader focus but contain important anticorruption elements. Armenian-American Wellness Center, which USAID Anticorruption Strategy 11
  15. 15. has eliminated under-the-table payments by consuming distractions and ultimately may not establishing and publicizing clear fees for servic­ be executable. Often developed with donor es, and enforcing procedures to ensure that the technical assistance and including every con­ fee policy is followed. For example, patients are ceivable reform, these plans can easily become required to check their bags prior to beginning large and unwieldy wish-lists that far outstrip an examination, preventing them from bringing implementation capacities. extra money that doctors used to demand in return for preferential service. 6. An Expanded ■ Fiscal reform. USAID/Bosnia, under a multiyear activity, is helping to automate government Understanding of treasury systems at the national and subnational Corruption Dynamics M levels. To date, this activity has saved substantial uch progress has been made in the battle public funds by rejecting payment orders against corruption. There is powerful inconsistent with parliamentary-approved evidence of significantly increased atten­ budgets. In one jurisdiction alone, $17 million tion to the problem, beginning with the informa­ in payment orders were rejected as “unautho­ tion from the USAID survey cited above. The rized” in the first eight months of FY 2002. increasing number of international conventions and domestic laws against corruption, as well as the Missions identified several evolution of Transparency International from a approaches that were less effective. small NGO to a global movement with over 100 ■ Several missions note that public awareness chapters around the world, further confirms this campaigns are ineffective when not linked to trend. Diplomatic, donor, and private sector specific reforms, and, similarly, that reform engagement also has increased. efforts are only successful when they incorporate elements of public education However, there is also evidence—again starting and engagement. with the experience of USAID missions outlined above—that corruption remains a serious problem ■ Public sector reforms in environments of low and a serious impediment to development. Most political will appear to have limited chances “measures” of corruption are actually measures of of success. perceptions of corruption, so it is difficult to assess what real progress has been made, but even this ■ Failure to take a long-term, sustained approach unsatisfactory gauge, especially in the context of to the problem of corruption means that the broad experience, provides a window on the scope approach is unlikely to succeed. of the problem, as suggested in Figure 1. With some minor variations, perceptions of how well ■ Anticorruption commissions have become a countries have controlled corruption have changed popular strategy used by governments to spear­ little over time.14 It is clear that, while initial efforts head and publicize their efforts, but these com­ have had important impact, an expanded approach missions often lack the resources and authority is necessary. to be effective and are often manipulated for 14. It should be noted that the time frame for these metrics is very political purposes (see Box 1 on p. 17). short, and attempts to reduce corruption are, necessarily, long-term undertakings. Also, the indicators available are based on perceptions. Changes in perception may as easily be driven by increased aware- ■ Though clear planning is needed to avoid the ness and publicity about corruption as by corruption itself. Therefore, problem of proliferation of agencies without interpretation of perceptions data is ambiguous. And finally, these data are for the country level and cannot be disaggregated by sector clear definitions of roles and responsibilities, or region. They therefore may not recognize important gains made at “national anticorruption plans” can be time- subnational or sectoral levels.12 USAID Anticorruption Strategy
  16. 16. Figure 1. Perceptions of Control of Corruption over Time, 2002 Latin America and Caribbean Middle East and North Africa Eastern Europe 2002 2000 1998 East Asia 1996 South Asia Sub-Saharan Africa Former Soviet Union –2.5 –1.25 0.0 1.25 2.5Note: Comparison between 2002, 2000, 1998, and 1996. Point estimate ranges from –2.5 to +2.5.Source: D. Kaufman, A. Kraay, and M. Mastruzzi, Government Matters III: Governance Indicators for 1996–2002. (Washington, D.C.: WorldBank). <www.worldbank.org/wbi/governance/pubs/govmatters3.html>The 1999 USAID Handbook on Fighting would shift public attitudes and increase demandCorruption was based on the analytic understanding for accountability in the use of public resources.17that “corruption arises from institutional attributesof the state and societal attitudes toward formal The problem with a principal-agent model of cor­political processes.”15 The essential argument was ruption, at least as it was originally conceived, isthat institutional (bureaucratic and regulatory) that it offers little guidance when the principalsreforms would help to address principal-agent fail­ themselves do not act in the public interest.18 Yetures linked to corruption,16 while support for civil this is too often the case. In an environment ofsociety, media, and other public education efforts endemic corruption, anticorruption efforts must eventually confront grand corruption, or they risk rearranging corruption rather than reducing it. Center for Democracy and Governance (Washington, D.C.: USAID,15.1999, PN-ACE-070 or PN-ACR-212), 8. The Handbook drew from Pursuing technical bureaucratic or regulatoryRobert Klitgaard’s “stylized equation” of corruption (CORRUP- reforms in these negative environments may alsoTION=MONOPOLY+DISCRETION-ACCOUNTABILITY) and his poli-cy recommendations in five areas: selecting agents, changing rewards put the effort at risk of being politically manipulat­and penalties, gathering information, restructuring the principal- ed by corrupt elites or used as window dressing.agent-client relationship, and changing attitudes about corruption.See Robert Klitgaard, Controlling Corruption (Berkeley: University ofCalifornia Press, 1988). While the Handbook did include consideration of broader political 17.16. In this context, “principal-agent failure” refers to the fact that those and economic dynamics (recommending, for example, that electionsin authority (“principals”) cannot always guarantee that their employ- be seen as a means for altering the incentives for corruption),ees or representatives (“agents”) will act in the way the principals USAID’s implementation still focused mainly on lower-level bureau-intend. Because direct supervision of every action is not possible, cratic and regulatory issues. In the survey cited in section 5, forprincipals try to devise procedures and incentives (both positive and example, only two USAID missions included elections programs innegative) to encourage behavior that fulfills their objectives. When their inventory of anticorruption activities.applied to corruption, the principal-agent problem was initially for- 18. This situation could be formulated as the failure of a different prin-mulated to illustrate the fact that noncorrupt officials (principals) cipal-agent relationship: the one that arises when public officials orcannot guarantee that those who work below them (agents) do not political leaders are seen as the agents and the country’s citizens asbehave corruptly. Anticorruption programs based on this analysis, the principals. This formulation helps underscore the need for a dif-therefore, sought to reduce opportunities for corruption as well as ferent set of incentives based on public rather than institutional sanc-increase incentives for noncorrupt behavior (including punishment for tions, the highest—if least direct—level of which is removal fromcorrupt behavior). office through elections. USAID Anticorruption Strategy 13
  17. 17. Furthermore, civil society and public education take the place of direct payoffs in exchange for may not constitute sufficient levers for altering cor­ advantageous outcomes.21 Alternatively, where rupt elites’ incentive structures. In this context, the political opportunities are relatively more plentiful lack of political will—always a challenge for sup­ than economic prospects, elites may pursue wealth porters of reform—may become even more difficult through power. In these circumstances, state power to overcome. becomes a tool for extracting financial benefit from whatever economic resources are available in the Thus, the first-generation USAID approach to anti- country—in its extreme form, this pattern is some­ corruption programming remains a critical element, times called “state predation.” but needs to be complemented by a more comprehen- sive, systemic approach that puts increased emphasis on Both of these patterns demonstrate how corrup­ grand corruption, underlines the larger political and tion, particularly grand corruption, results from economic dynamics that animate corruption, and (and thus can be affected by) political and econom­ extends our understanding of the nature and impact of ic structures and processes beyond the bureaucratic political will. and regulatory issues typically considered in anti­ corruption programming. Networks of corruption Broader perspective on the systemic nature of cor­ restrict access to political and economic opportuni­ ruption helps to highlight expanded opportunities ties and protect elites’ privileged positions. Reforms for anticorruption programmatic responses. An that increase competition in these spheres are there­ expanded model of corruption examines not only fore critical elements in a comprehensive strategy to institutional endowments and social attitudes and reduce corruption. mobilization, but also imbalances between political and economic attributes of developing societies. The model represented in Figure 2 captures this Distinct “corruption syndromes” flow from the broadened understanding of the variety of factors interaction of relative levels of economic and politi­ that contribute to corruption and that can be used cal opportunity, on the one hand, and institutional as entry points to fight it. Institutional (i.e., and social characteristics, on the other.19 bureaucratic and regulatory) endowments and societal attitudes remain important both in ana­ In settings of low institutional capacity (which lyzing the extent and location of corruption and describe, to varying degrees, most of the countries in developing responses, but at the same time, in which USAID works), two syndromes emerge. the larger dynamics of economic and political Where economic opportunities are opening up competition help clarify other critical influences more rapidly than political ones, ambitious people on the corruption problem. The center circle will pursue power through wealth,20 using their eco­ indicates that corruption includes a range of nomic influence to shape laws and regulations to manifestations, from lower-level, administrative suit their interests—often excluding competitors corruption to a variety of activities that constitute from the same access and benefits. “State capture” elite or grand corruption, including state capture is a particular form of this phenomenon, in which and predatory states. political processes, such as campaign finance, may The degree of exclusion, along with the degree of transparency and 21. This model was developed by Michael Johnston, “Comparing 19. legal regulation—or lack thereof—that governs these processes, Corruption: Participation, Institutions, and Development,” forthcom- would constitute the difference between the standard processes of ing in John J. Kleinig and William Heffernan, eds., Corruption: Private political lobbying and a corrupt, or captured, state. “State capture is and Public (Lanham, MD: Rowman and Littlefield, 2002.) rooted in the extent of competition, participation, and transparency The “wealth through power/power through wealth” formulation 20. in the state’s policymaking and legislative processes. It thrives where was first proposed by Samuel Huntington in his analysis of patterns economic power is highly concentrated, forms of collective interest of elite competition in developing societies. Political Order in representation beyond the firm remain underdeveloped, and the mar- Changing Societies (New Haven: Yale University Press, 1968). It ket for political influence is thus monopolized by dominant firms.” should also be noted that, at some point, these two dynamics may Cheryl Gray, Joel Hellman and Randi Ryterman, Anticorruption in converge if a small elite is able to complete this process of consoli- Transition 2: Corruption in Enterprise-State Interactions in Europe and dating political power and economic wealth. Central Asia 1999–2002 (Washington, D.C.: World Bank, 2004), 11.14 USAID Anticorruption Strategy
  18. 18. Figure 2. Corruption Dynamics and Access Points for Response Political Economic Competition Competition Grand Corruption Administrative Bureaucratic Social Attitudes and Regulatory and Behavior EnvironmentAn expanded approach to fighting corruption, same time, the impact of political will (or lackbased on the model in Figure 2, offers several thereof ) at the highest levels must be taken intoadvantages: account in order to evaluate realistically possi­ bilities for program effectiveness at any level.■ A more comprehensive model of the dynamics of corruption highlights how bureaucratic and ■ USAID’s work on fragile, failed, and failing elite factors shape administrative and grand cor- states emphasizes the importance of govern­ ruption. This has important programming ment effectiveness and government legitimacy implications. Bureaucratic and regulatory for state stability. Corruption undermines both approaches must be complemented by addi­ of these critical factors, and this strategic tional attention to political and economic com­ approach provides a more comprehensive petition to address grand corruption. framework for disaggregating the problem and then specifying critical elements of anticorrup­■ The multilevel analysis highlighted by this tion interventions. For example, in addressing model casts light on the complex nature and administrative corruption, the legitimacy role of political will in anticorruption efforts. imperative underlines the need for changes to Anticorruption programs work best where they be highly visible, while improving effectiveness support existing, locally-initiated processes (evi­ requires a comprehensive approach. A careful dence of political will). However, as with cor- analysis of grand corruption can reveal not ruption, political will needs to be disaggregated. only its more subtle, but powerful, impacts on Programmers need to look for political will at effectiveness, but also the potentially devastat­ the same levels and in the same institutional ing impact perceptions of elite corruption can arenas where programs are targeted. At the have on legitimacy, even in the context of USAID Anticorruption Strategy 15
  19. 19. objective improvements in administrative cor­ Furthermore, the impact of efforts to control ruption. administrative corruption is ultimately circum­ scribed by corruption at the highest levels. USAID ■ This analysis focuses USAID on a multisectoral can build on its extensive experience in political and multidisciplinary approach to combating and economic reform to explore the terrain of corruption that incorporates political competi­ grand corruption and develop more effective and tion, economic competition, social factors, and comprehensive ways of addressing it. institutional and organizational performance across all sectors. Corruption touches every area ■ ■ Ensure that USAID strategies reflect varying of development, and USAID analysis and patterns of corruption. response must be equally broad. Identifying dominant patterns of corruption, espe­ cially the relative impact of grand and administra­ tive corruption, is essential because it has direct 7. USAID’s New implications for USAID anticorruption program­ Anticorruption Strategy ming. Of course, these categories are not exclusive. Instances in which one type of corruption is wholly T he following four broad actions constitute a absent are rare, so combinations of approaches may strategy to assist USAID to better address be appropriate. Furthermore, within a given coun­ development challenges posed by corrup­ try, the problem definition could differ between tion, and to make a reality of the Agency’s rhetori­ social or economic sectors, between political or cal commitment to doing so: institutional arenas, across levels of government, or X Confront the dual challenges of grand and over time. Nonetheless, an analysis of predominant administrative corruption patterns of corruption allows the suggestion of appropriately different anticorruption strategies. X Deploy Agency resources to fight corruption in strategic ways A strategy of high-level diplomatic pressure, com­ X Incorporate anticorruption goals and activities bined with investments to increase political and across Agency work economic competition, will be most appropriate in countries with high levels of grand corruption and X Build the Agency’s anticorruption knowledge limited evidence of political will for reform. USAID programs should target the political and Confront the dual challenges economic conditions that facilitate grand corrup­ of grand and administrative tion and should build constituencies for reform corruption. through civic education and advocacy and support The majority of USAID’s experience in fighting for independent media. Kenya offers an example corruption has focused on attempts to reduce where 10 years of consistent USAID assistance and lower-level, administrative corruption, rather than a concerted multidonor message about corruption corruption among political and economic elites.22 supported a political transition and opened up new The analysis in chapter 6 indicates why and how opportunities for more direct assistance to the pub­ USAID must expand this approach. Grand corrup­ lic sector itself. In this challenging political setting, tion may be less immediately visible than adminis­ there also may be opportunities for addressing cor­ trative corruption, but it is often more devastating ruption in specific sectors, such as health or educa­ to development, harnessing state institutions as well tion, especially if significant donor resources are as financial and natural resources for private and being directed to those sectors. However, USAID elite interests rather than public goals. should be very cautious in financing extensive bureaucratic reforms or new anticorruption agen­ 22. This refers to anticorruption programs targeting government, rather than those involving civil society. Awareness raising and advocacy are cies in countries with pervasive levels of corruption often not specific to either grand or administrative corruption. among high-level officials and members of the elite16 USAID Anticorruption Strategy
  20. 20. (see Box 1). Specific opportunities also might arise well. Support for civil society and media participa­to promote transparency in particular industries, tion and oversight in anticorruption efforts is also aespecially if international businesses and public critical reinforcing element of anticorruption effortsopinion are creating pressure for change (for in this context.instance, conflict diamonds). USAID should continue to support efforts to con­Strategies that focus on improving the capacity of solidate good governance that have already shownregulatory and control institutions are most appro­ positive results in countries where patterns of cor­priate in countries that have demonstrated substan­ ruption persist, but not at levels that actively inhib­tial commitment to reform and have begun to it the viability of other development efforts. Inaddress grand corruption. In these countries, these countries, USAID should ensure that individ­USAID will be in a better position to expect results ual programs across all sectors incorporate strategiesfrom bureaucratic and regulatory reforms to to control corruption, promote transparent andimprove procedures that control lower-level, accountable governance, and target specific vulnera­administrative corruption—such as procurement bilities as they are identified.reform, financial management, and audit prac-tices—and strengthen the public sector’s capacity to This approach suggests that USAID’s largest anti­carry out these mandates. Activities to strengthen corruption programs may not be in the countries orhorizontal accountability (improving legislative sectors with the highest levels of corruption overall.oversight and establishing supreme audit institu­ The largest investment in specific anticorruptiontions and judicial reform) also may be particularly activities may typically be found in countries withappropriate in these settings, though some oppor­ higher levels of administrative corruption and rela­tunities may exist in grand corruption contexts as tively lower levels of grand corruption. Box 1. Anticorruption Agencies: Key Conditions for Effectiveness T he success of specialized anticorruption agencies in Without these conditions, specialized agencies are vulnera­ Hong Kong and Singapore has led to growing pop­ ble to failures ranging from being manipulated to pursue ularity of these institutions among donor agencies political enemies, to serving as window dressing for donors and partner countries alike. Specialized agencies—or sub­ and other international observers by otherwise uncommit­ units of other agencies—can make important contributions ted leaders, or to simply distracting energy from more to a country’s fight against corruption, but as more is important, long-term reforms necessary to address the real understood about necessary supporting conditions, these scope of corruption. institutions are being viewed with increasing skepticism by In sum, specialized anticorruption agencies appear most practitioners and researchers. effective for attacking specific areas of corruption within Necessary internal characteristics include genuine political an overall environment of stability and effective gover- independence; freedom to pursue inquiries without limita­ nance. Their ability to substitute for such an environment tions or “no-go” areas; adequate staffing, training, and is not established. At minimum, support for these institu­ remuneration; accountability to all branches of government tions should be conditional on some basic measures of and the public; and effective internal integrity reviews.* independence and transparency in their operations, and donors should be ready and willing to end assistance if At the same time, several exogenous conditions also appear these conditions are not maintained. necessary for success: political stability, basic elements of the rule of law, evidence that anticorruption success results in ** Patrick Meagher, “Anticorruption Agencies: Making Sense of political gain rather than political loss, and a basic frame­ Rhetoric and Reality,” Center for Institutional Reform and the work of sound governance and democratic accountability.** Informal Sector (Lanham: University of Maryland, 2004). See also Michael Johnston, “Independent Anticorruption Commissions: Success Stories and Cautionary Tales,” presentation to Global Forum * See Transparency International, Sourcebook (2000). II (revised September 2001). USAID Anticorruption Strategy 17
  21. 21. ■ ■ Develop innovative interventions to address nature of grand corruption, and thus the necessity grand corruption. for anticorruption efforts to reach well beyond the USAID missions and their local partners are well executive branch of government. In its ability and aware of the devastating impacts of grand corrup­ experience working with oversight bodies, political tion. But these elite processes are often so opaque, parties, the private sector, and civil society, USAID and the entry points for USAID programs so has a unique comparative advantage vis-à-vis multi­ unclear, that addressing grand corruption is quite lateral agencies. At the same time, however, USAID daunting, and many believe it is best left to U.S. needs to continue discussions with multilateral diplomacy. In fact, the most effective approach is agencies about the leverage they can exercise based for U.S. diplomacy and U.S. development pro­ on the scale of resources they bring. It is also possi­ grams to work together (see Box 2 on page 19). ble that the unique relationships they have with host But dramatic results should only be expected over country governments may allow them some ability time, because this is arguably one of the most diffi­ to raise challenging problems of corruption more cult issues to tackle. effectively than can be done bilaterally. Bilateral donors, rather than multilateral banks, may ■ ■ Expand and improve strategies to address need to lead in this area given the highly political lower-level, administrative corruption. USAID has built a strong record of accomplishment in assisting countries to curb and control adminis­ Gender and Anticorruption trative corruption, and the Agency has learned much about what works and what does not (see Programming Box 3 on page 20). USAID programs have demon­ Though much remains to be learned about the strated considerable progress in “unbundling cor­ different impacts of corruption on women and ruption” and targeting specific dimensions. In doing men—and their differential roles in fighting so, the measurement issues become more manage­ corruption (see discussion on page 26 on able, and multifaceted efforts to target a specific anticorruption and gender)—many of the form of corruption become more manageable. programming options described in this paper may lend themselves to giving special attention ■ ■ Develop an assessment methodology to to how they can facilitate women’s participation address both grand and administrative and improve women’s access to resources, corruption. public services, and the political and economic USAID will update its assessment framework to processes of a country. Examples of possible explicitly incorporate a disaggregated analysis of opportunities include the following: locations, severity, and key political and economic drivers of administrative corruption and grand ■ Build on women’s roles in family health and corruption. The assessment framework will help education to increase their participation in to identify, in a given country, the relative pres­ oversight of local resources ence and impact of these two general types of cor­ ■ Include rights-based and gender budgeting ruption, as well as other important characteristics issues in budget transparency work* of the problem. The framework also will help identify key institutional arenas where anticorrup­ ■ Apply an anticorruption lens to programs tion programs may be most needed or most likely supporting women’s political participation to succeed. A comprehensive assessment of politi­ cal will and constituencies for reform also will be * See International Budget Project and IDASA internet sites at critical elements of the analysis. USAID’s Bureau <http://www.internationalbudget.org/themes/ESC/index.htm> and <http://www.idasa.org.za/index.asp?page=programme for Europe and Eurasia is already developing an _details.asp?RID+29> respectively. analytic tool that may help inform these efforts. The World Bank has made important intellectual18 USAID Anticorruption Strategy
  22. 22. Box 2. Programmatic Responses to Grand CorruptionA lthough grand corruption is often intertwined with ties can be designed to target the linkages between lower-level administrative corruption, analysis of party finance and corruption, and the need to develop the problem of grand corruption highlights its roots alternatives to patronage-based electoral competition.in the failure of public leaders to act in the public interest. ■ Safeguard natural resources. Empower communities toAddressing it, therefore, involves going beyond traditional monitor and control the use and abuse of naturalpublic sector reforms to focus on ways to shift the incen­ resources to avoid exploitation that leads to unsustain­tives underlying political and economic competition and able practices.political will. This is relatively unexplored terrain, but someways that USAID can help countries to chip away at this ■ Shed light on the abuse of parliamentary (and other)problem might include the following: immunity. Blanket immunities enjoyed by many parlia­ mentarians and other government officials create incen­■ Focus on diplomatic approaches and donor coordina- tives for individuals to “buy” their way onto party slates tion to consolidate external pressure for reform. and into parliamentary seats to enjoy broad, and some­ Harness external sources of pressure for reform through times lifetime, immunity. strategies such as donor consultative groups and intera­ gency efforts. Coordinated diplomatic efforts can serve ■ Promote ad hoc independent monitoring of large pro- as the “stick” while donor agreements act as a “carrot.” curements or concession awards. Transparencia por International initiatives like the UN Convention Colombia, for example, has monitored every stage of Against Corruption can also provide opportunities for numerous large government procurements in order to diplomatic efforts. improve transparency and safeguard the integrity of the entire process.*** There may be special opportunities to■ Foster industry-specific transparency initiatives that use this approach when a specific contract is attracting help reduce the risks of the “resource curse”* and level wide international attention, and it may be a useful tac­ the playing field for economic competition. Several ini­ tic where there is will among political leaders, but not tiatives have emerged in recent years that combine inter­ among the bureaucratic rank and file. national and diplomatic pressure, civil society oversight, and technical assistance to establish basic transparency ■ Generate credible information. For example, fund standards and procedures, especially in the lucrative diagnostics (such as forensic audits and expenditure industries involved in extracting natural resources. Some tracking surveys covering the most vulnerable or strate­ examples include the Kimberly Process for diamonds, gic sectors) and support independent media, and the the Congo Basin Forestry Initiative, the Wolfsberg creation of anonymous complaint mechanisms and Principles on money laundering, and the Extractives NGO watchdogs. These efforts can shed light on spe­ Industry Transparency Initiative.** cific modalities of grand corruption, even when formal institutions of oversight and accountability are weak.■ Assist countries in developing strategies to address political corruption. USAID has recently published a ■ Improve civilian oversight of military budgets. In Handbook on Money in Politics, and a small number of many countries, militaries consume significant public missions are supporting innovative programs to intro­ resources with little or no public accountability. In duce disclosure systems for political party finance. weak states, governments fund only a fraction of mili­ tary spending through the state budget, turning mili­■ Build on existing efforts to promote open political taries into private entrepreneurs and protection rackets. competition. Electoral reforms to allow independent candidates or single-member districts can help crack ■ Address state capture by building on existing strate- open ossified party networks, while strengthened elec­ gies for economic diversification. Traditional toral management and oversight can reduce electoral approaches to encouraging economic competition fraud. Activities to promote healthy and responsive par­ (including privatization, strengthening small and medi- um-sized enterprises, and promoting business associa­ tions and appropriate oversight authorities) can limit or* This is the widely-observed phenomenon that many of the alter the environment in which corruption thrives, butnations with the richest stores of natural resources (especially min-eral, though not always) are the poorest and most corrupt. For a the benefits of these approaches may not be realizedreview, see Michael L. Ross, “The Political Economy of the without explicit treatment of anticorruption objectivesResource Curse,” World Politics 51:2 (1999). in program design and implementation.** “Know your customer” standards in the banking industry andthe “Publish What You Pay” campaign are other examples. One ofthe widely-noted shortcomings of these types of initiatives is that *** For more information on “Integrity Pacts,” see the Transparencythey are voluntary, but strong international pressure is making it International website: <http://www.transparency.org/integrity_pactharder for companies and countries to ignore them. /preventing/integ_pacts.html>. USAID Anticorruption Strategy 19

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