BRIEF

Anti-corruption

May 10, 2016

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The World Bank Group considers corruption a major challenge to its institutional goals of ending extreme poverty by 2030 and boosting shared prosperity for the poorest 40 percent in developing countries. In addition, reducing corruption stands at the heart of the recently established Sustainable Development Goals and achieving the ambitious targets set for Financing for Development. It is a priority for the institution and many of its partners.

About $1 trillion is paid each year in bribes around the world, and the total economic loss from corruption is estimated to be many times that number. This figure dwarfs the value of all development assistance. The harm that corruption causes to development is, in fact, a multiple of the estimated volume, given the negative impact of corruption on the poor and on economic growth.

Empirical studies have consistently demonstrated that the poor pay the highest percentage of their income in bribes. For example, in Paraguay, the poor pay 12.6 percent of their income to bribes while high-income households pay 6.4 percent. The comparable numbers in Sierra Leona are 13 percent and 3.8 percent. Every stolen dollar, euro, peso, yuan, rupee, or ruble robs the poor of an equal opportunity in life.

In addition, corruption discourages poor people from accessing health services and negatively impacts health outcomes, such as infant mortality. It contributes to higher-order crimes: when money is lost through illicit flows, it often finds its way across borders to fund drug and human trafficking. Its presence works to erode the social contract between citizens and the state.

Economic activity is similarly harmed by corruption – with corruption operating as a strong disincentive to foreign investment. Countries capable of controlling corruption are able to use their human and financial resources more efficiently, attract more foreign and domestic investment, and grow more rapidly. Recent research suggests that there is a 300 percent dividend for improving governance from weak to strong.

The Bank Group recognizes that corruption comes in different forms. It might impact service delivery, such as when police officers ask for bribes to perform routine services. It might unfairly determine the winners of government contracts, with awards favoring friends or relatives of government officials. Or it might affect more fundamental issues of how the institutions work, a form of corruption that is often the most costly in terms of overall economic impact. Each of these forms is important, and tackling them all is fundamental to achieving progress and sustainable change.

Successful anti-corruption efforts are often led by a 'coalition of concerned'– by politicians and senior government officials, the private sector, and by citizens, communities, and CSOs. Increasingly, addressing corruption will require the concerted attention of governments and businesses in the developed world.

Much of the world's highest-value corruption could not happen without institutions in wealthy nations: the firms that give large bribes, the financial institutions that accept laundered money, and the lawyers and accountants who facilitate corrupt transactions. Data on international financial flows shows that money is moving from poor to wealthy countries in ways that fundamentally undermine development. Corruption is a global problem that requires global solutions.

The Bank Group is committed to fighting corruption in Bank-financed projects through the work of its Integrity Vice Presidency. Last year, investigations of alleged fraud and corruption prevented about $138 million from being awarded to companies that had attempted to engage in misconduct.

STRATEGY

The Bank Group works at the country, regional and global level to build capable, transparent, and accountable institutions and design and implement anticorruption programs. Our work revolves around changing outcomes by helping both state and non-state actors establish the competencies needed to implement policies and practices that improve results and build public integrity.

Selected country examples include:

Nigeria — The country was the first African government to implement the Extractive Industries Transparency Initiative (EITI), and one of the first steps it took was a comprehensive audit of the oil sector value chain to verify that all payments were correct and settled. The audit revealed $9.8 billion in outstanding recoverable revenues from 1999 to 2008, including an estimated $4.7 billion owed by the state-owned Nigerian National Petroleum Corporation (NNPC). As a result of the audit, at least $2.4 billion of the lost revenue was recovered.

India — Some of the country's largest social welfare programs suffered because of ineligible beneficiaries receiving payments and officials taking a cut of or delaying payments meant for the poor. Now the government has distributed smartcards based on the country's biometric identification system to 19 million villagers in connection with the $5.5 billion National Rural Employment Guarantee Scheme. This reduces the chances for misconduct and gets money faster to the people who need it most.

Dominican Republic — Public officials, civil society, private sector leaders, and other committed citizens formed the Participatory Anti-Corruption Initiative, a forum that gives thought-leaders a unique opportunity to tackle corruption and take on powerful interest groups in many areas, including medicine and procurement. By 2014, reforms in this area had lowered drug prices, improved medication quality and reduced public spending by 64%.

Regional and Global initiatives:

Leadership in creating international transparency standards (Global Initiative on Financial Transparency, Open Contracting Standard, Asset Disclosure Standards) and support for the implementation of open government (through support for the Open Government Partnership).

Active assistance in the implementation of transparency and accountability efforts such as EITI, Publish What You Pay, Fisheries Transparency, Anti-Money Laundering rules.

Engagement and active support for international alliances and regional anti-corruption forums, such as the International Corruption Hunters Alliance and LAC Regional Parliamentary Network.

Engagement in international forums on anti-corruption including the G20 Anti-Corruption Working Group, the Financial Accountability Task Force, the OECD Anti-Corruption Task Team.

Fighting corruption within World Bank-financed projects:

The Bank Group's approach to fighting corruption combines a proactive policy of anticipating and avoiding risks in its own projects with a commitment to helping clients and stakeholders identify and combat corruption at national and international levels. The Bank Group subjects all potential projects to rigorous scrutiny and works with clients to reduce possible corruption risks that have been identified. Public complaint mechanisms built into projects encourage and empower oversight, and projects are actively supervised during implementation.

The World Bank has a zero-tolerance policy toward corruption in its projects. When allegations of fraud and corruption are substantiated, companies involved in misconduct are debarred from engaging in any new Bank-Group-financed activity. Concerned governments receive the findings of Bank Group investigations. In the past 7 years, the World Bank Group has debarred 368 firms and individuals.

Last Updated: May 10, 2016




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