Monitoring Governance in Eastern Europe and Central Asia Cheryl Gray World Bank Two questions that active monitoring can help to answer: How to improve governance? (explanatory.
Download ReportTranscript Monitoring Governance in Eastern Europe and Central Asia Cheryl Gray World Bank Two questions that active monitoring can help to answer: How to improve governance? (explanatory.
Monitoring Governance in Eastern Europe and Central Asia Cheryl Gray World Bank Two questions that active monitoring can help to answer: How to improve governance? (explanatory variables: inputs, outputs, and/or intermediate outcomes) What has been achieved to date? (outcomes; results) What has monitoring in ECA shown? ECA has seen a lot of progress (more than most regions), but more is still needed. Many indicators are useful. “Business Environment and Enterprise Performance Survey” (BEEPS) Joint initiative with EBRD 20,000 firms in 3 rounds (1999, 2002, 2005) 26 transition countries 6 European comparators in ‘05: Ireland, Germany, Greece, Portugal, Spain, Turkey (+ Korea and Vietnam) Life in Transition survey Economic and poverty data CPIA Actionable indicators (DB, PEFA, others) Explanatory variables Improving governance requires a multi-pronged approach (and each variable has its own monitoring tools). Structure of government: •Legislative oversight • Independent and effective judiciary •Independent prosecution, enforcement •Sub-national government • Multilateral rules for trade, investment, aid Civil society voice and participation: • Freedom of information • Public hearings on draft laws •Free and competent media/NGOs Political accountability: • Political competition, credible political parties • Transparency in party financing • Disclosure of parliamentary votes • Asset declaration, conflict of interest rules Governance Competitive private sector: • Economic policy reform • Competitive restructuring of monopolies • Privatization • Transparency in corporate governance Public sector management: • Meritocratic civil service with monetized, adequate pay • Budget management (coverage, treasury, procurement, audit) • Tax and customs • Sectoral service delivery (health, education, energy) • Decentralization with accountability Changing the role of the state and reforming economic policies are key early steps. Macroeconomic stabilization Price and trade liberalization Privatization Property rights and law reform (commercial, civil, etc) Adoption of modern tax structures Promotion of business entry and FDI Banking reform World Bank programs in the 1990s supported this transition to private market economies. The business climate has improved. Eastern Europe and Central Asia OECD high-income Sub-Saharan Africa Middle East & North Africa Latin America and Caribbean East Asia & Pacific South Asia 0 25 50 75 100 Percent of Countries that Made at Least One Reform in 2005 Source: Doing Business in 2007 But the ease of doing business still varies widely among countries. Singapore 1 Lithuania 16 Estonia 17 rest of the world transition countries Bulgaria 54 Uzbekistan 147 D.R. Congo 175 rank for ease of doing business 1=best Source: Doing Business in 2007 175=worst Many ECA countries are gradually improving transparency and accountability. Immunity Financial Audit and Control Political Party Finance 1995 2003 Freedom of Information Public Procurement Asset Monitoring Conflict of Interest 0 1 2 3 4 5 6 7 8 9 10 index of quality of institutions Source: Monica Dorhoi, 2005. "Anti-Corruption Strategies and Fighting Corruption in Central and Eastern Europe". PhD Dissertation. Michigan State University Businesses use courts quite heavily in ECA… Slovenia Serbia Lithuania Poland Germany Slovak Rep. Bulgaria Romania Czech Rep. Portugal Estonia Greece Spain Hungary Latvia Turkey Ireland 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentage of firms that have taken a case to court in past 3 years 100% But many firms see the judiciary as an obstacle to business. Ireland Estonia Germany Greece Latvia Hungary Spain Slovak Rep. Turkey Lithuania Slovenia Bulgaria Poland Portugal Romania Czech Rep. Serbia 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of firms that see courts as obstacle 90% 100% Courts are not seen as independent. Germany Ireland Portugal Estonia Slovenia Greece Turkey Hungary Czech Rep. Latvia Spain Slovak Rep. Poland Lithuania Romania Bulgaria SAM No (heavily1 influenced) 2 3 4 5 6 Yes (entirely 7 independent) Most firms do not see courts as honest… Germany Greece Ireland Estonia Spain Turkey Slovenia Hungary Romania Latvia Portugal Bulgaria Slovak Rep. Poland Czech Rep. Lithuania Serbia 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentage of firms that see courts as honest and uncorrupted 100% …or affordable. Estonia Latvia Turkey Poland Bulgaria Germany Greece Romania Lithuania Hungary Spain Slovenia Slovak Rep. Serbia Czech Rep. Portugal Ireland 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of firms that see courts as affordable 90% 100% Few firms think courts are quick… Turkey Germany Hungary Greece Romania Lithuania Estonia Spain Ireland Poland Latvia Bulgaria Slovak Rep. Serbia Czech Rep. Portugal Slovenia 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of firms that see courts as quick 90% 100% …or can enforce decisions. Greece Turkey Germany Estonia Spain Slovenia Bulgaria Ireland Slovak Rep. Hungary Romania Lithuania Latvia Poland Serbia Portugal Czech Rep. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentage of firms that see courts as able to enforce decisions 100% Results to date Growth in ECA has been rapid in recent years after the initial collapse. Annual real GDP growth, in % 15 Low income CIS EU3 Baltics SE Europe 10 5 0 EU5 Central Europe -5 Serbia Middle income CIS -10 -15 -20 Note: 2000-02 data for Serbia and Montenegro, from 2003 onwards – Serbia. 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 -25 Poverty and vulnerability have fallen. Source: **Bank staff estimates based upon ECA Household Data Revised numbers for 2002-3 period based on a new countries coverage Corruption is falling for the region as a whole index of bribe frequency 1=never 6=always (though not yet to W. Europe levels)… 6 Transition Countries Comparator Countries 5 4 3 2.7 2.6 2.4 1.8 2 1 1999 2002 2005 Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? 100% … but not in all countries … percent "frequent" Bribe Frequency by country, 2002-2005 75% 50% 25% 0% Geo Slk Bul Rom SAM Alb Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? Kyr … and not in all sectors. Bribe Frequency by sector, 2002-2005 20% transition countries 2002-2005 percent "frequent" 15% 10% comparator countries 2005 5% 0% Fire and Blg Insp. Courts Customs Bus. Licenses Taxes Gov. Contracts Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? European countries vary significantly. (% firms viewing corruption as a problem for business) 100% 2002 2005 75% 50% 25% Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? Por Tur Gre Esp Ger Ire Mac Cze Rom Bul Pol Lit Cro Hun Lat Slk Est Sln 0% New private firms continue to pay the most bribes. transition countries 2002 transition countries 2005 comparators countries 2005 Percent of firms saying that bribery is frequent 35% 30% 25% 20% 15% 10% 5% 0% small, new private, domestic, firms in the city larger,older, state or foreign, firms outside of the city Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? percent saying an obstacle to business Some broader aspects of rule of law are also improving. 100% EU8-2005 ECA-2002 ECA-2005 75% 50% 25% 0% Tax Customs and Uncertainty Functioning of Corruption administration trade about the judiciary regulations regulatory policies Street crime, Organised theft and crime/mafia disorder Anticompetitive practices of others Source: Anticorruption in Transition 3 – Who is Succeeding … and Why? Contract violations Some explanations? 3 Corruption is lower where courts are easier to deal with … 2.5 Alb BiH SAM 2 Kyr Bul Arm Ukr Lit 1.5 Mac Por Lat Cze Hun Gre Tur Mol Rus Kaz Geo Rom Cro Aze Bel Slk Pol Uzb Sln 1 Est Ger Ire Esp 0 50 100 overall ease of enforcing contracts (DB) Source: BEEPS 2005/4; Doing Business 2005 150 4 … and where taxes are simpler … Kyr 3 Alb Aze Uzb BiH Rus Kaz Gre SAM Arm 2 Por Ukr Mol Mac Lit Bul Geo Hun Slk Tur Ger Lat Cro Pol Bel Rom Sln 1 IreEsp Est Cze 0 50 100 overall ease of paying taxes rank (DB) Source: BEEPS 2005/4; Doing Business 2005 150 3 … where business licensing is streamlined … Alb 2.5 Kyr Rus Aze SAM 2 Por Gre Lit Mol Arm Mac Slk BiH KazBul Bel Rom Ukr Cze 1.5 Pol Est Ger Sln Lat Esp Geo Tur Cro Hun 1 Ire 0 50 100 overall ease of dealing with licenses rank (DB) Source: BEEPS 2005/4; Doing Business 2005 150 3.5 … and where international trade is painless ... 2.5 3 Alb Kyr BiH SAM Aze 2 Mol Bul 1.5 Por Lit Cze Hun Pol EstIre Esp RomUkr Rus Lat SlkGre Bel Sln Kaz Geo Mac Tur Cro Uzb 1 Ger Arm 0 50 100 overall rank for trading across borders (DB) Source: BEEPS 2005/4; Doing Business 2005 150 In sum: A variety of specific indicators are helpful in tracking governance influences and outcomes at the country level. • “Actionable” policy and institutional indicators • Economic and political indicators • “Unbundled” corruption indicators Indicators point to impressive progress in some ECA countries, driven by market reforms and prospects for EU accession –but more is needed. For details on corruption trends see Anticorruption in Transition 3 – Who is Succeeding … And Why? www.worldbank.org/eca/act3 For a broader look at governance and economic reform in ECA see www.worldbank.org/eca/econ The time required to enforce a contract is longer in Serbia than most other European countries… 700 635 551 600 549 Days 500 432 400 275 300 200 100 0 Serbia Bulgaria & Romania EU-8 Western Europe 5 Top 3 (Latvia, Finland, Norway) But countries vary in ease of doing business }in top 20 worldwide Lithuania Estonia Latvia Slovak Republic Czech Republic Armenia Hungary Poland Bulgaria Slovenia Romania Russian Federation M acedonia, FYR M oldova Kyrgyz Republic Kazakhstan Bosnia and Herzegovina Serbia and M ontenegro Turkey Azerbaijan Georgia Belarus Source: DB 2006 Albania Croatia Ukraine Uzbekistan 0 20 40 60 80 100 120 140 160