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436210News0box0327375b01 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized or the past ten years, the World Bank has acknowledged corruption as a major impedi- WII1RIWTHMI S. ASYM EWNOMtCTtMEs W m,NEW WI.ImtA 1 F ment to economic development. More recently, it has played an increasingly active role in supporting WIC:!aLELCDilEW NEW -1 fflWRSi7Y, N@W WIRK. USA anti-corruption efforts and good governance by broad- PAUL CklLUEk ening its research agenda and by disseminating results. MEWWBD86RR. UWEHINNUW. W, USA This issue of Development Outreach is part of a communi- lOHN GAQe cations campaign to raise awareness of these issues in SUN -8. PIUO Rt.,ULIFORW# US the world community. It is being released to coincide luww K. uW4IU.M with the International Monetary Fund~WorldBank m WORLD mu. GENE+% WtTTLRMD Annual Meetings in Singapore in September 2006, KWE)URIMJH SCI1OBLOFJDUIEIWI~mCOMMUNICATWIIS, which will include good governance and anti-corruption FWE U~~IPIUF OHllllA LEW4, BHIM(A as major themes. YIM HAHWsKA The Annual Meetings will be an important forum for I~U~ONMCEMER FOR POLICYSNMEG, KIEV. uncektrz discussion of the World Bank's long-term strategy to rZP1 mm promote good governance. A strategy paper has been 019110UC UPIIVUffm: UhIh mu prepared at the request of the Bank's Board of J. Rm.LIT S. IWCM&B Governors Development Committee, which lays out the ToR5TM. mRDNTD. CANADA main issues and proposed actions. The paper presents a WAEL i#nOfEL SOSTMAW I IOmUaRm TECH mmm smEM, hwnmam, WmrW policy framework and discusses the operational impli- cations for the World Bank and its client countries, &DIEtE SIMlOnS CHICIIGO METROWUS, CWCllsa iL. UW including an increased level of support for country VlQJE#nh WEE efforts to strengthen governance and reduce corrup- cwt~~FOR m~, GE~ANO MVELOPMENT, ctwme tion. The strategy paper, which will soon be made pub- DaralppmntO ~ispublishldthtartimlga byhW lic, has been prepared with input from other multilater- WI~*,"$~MIWIkOmthe&W'smPI al development banks and relevant stakeholders from a w rolicited.~~er a lwg3 2# wtbW~I& ryld riel wt wide range of countries. d Bmkw LevlswlPd itsmnt. The World Bank Institute (WBI) plays an important role in these efforts by providingparticipatory action-ori- ented learning for policymakers and national and local government leaders, and by developing tools for gather- ing, assessing, and disseminating data on governance in- country and worldwide. As part of the program of semi- nars at the Annual Meetings, WBI and the International ?Hem- Finance Corporation have organized a plenary session on t&w:&p&Ir lmgest 3t 6mf s4Wd-s F-e m-y Partnerships to Combat Corruption: Rising to the Chalknge. ~~akk4fFiAlirJFart~Plp12:~~:- 13: MsaPnr Bor-i Plrsa 14: 3 Among the panelists will be some of the authors of this hge 15: Wi L-i M 1% It Call ?kitas$plsles; laMthrs lwsmms; FmP4: CII&mkrrPPP: special report. The Institute has also developed a Web P0ge28~Pnc~Photc8s:~ Portal on Partnerships to Combat Corruption: Pa&e 3s: Pat11 J. RkWMBi +%#s43: Hk (http://de~~elopmentandbusiness.org/A-C/webportal)to provide information on country-specific and regional training opportunities to strengthen governance. This issue of Development Outreach aims to take the anti-corruption message beyond the meeting room to our broad readership of government officials and citizens- the suppliers and the consumers of good governance. ' Sunetra Puri EXECUTIVE EDITOR VOLUME EIGHT, NUMBER TWO r& SEPTEMBER 2006 SPECIAL REPORT 25 Private Sector Response to the Emerging FIGHTING CORRUPTION: BUSINESS AS Anti-Corruption Movement A PARTNER WORTH D. MACMURRAV Controlling for corruption in the private sector is becoming a 2 Can Private Sector Action Tackle priority for companies concerned about recent governmental Corruption? regulations and international financial institutions sanctions. Guest Editol-lal 28 The Challenge of Ethical Leadership in FRANNIE L~AuTIER. DJORDJIJA PETKOSKI. AND Africa MICHAEL JARVIS DELE OLOJEDE A general view of why corruption is an impediment to growth To broaden reforms and improve conditions, the Africans must set and poverty reduction. minimum standards for leadership, as well as maximum tenures. 8 Anti-Corruption and Corporate Citizenship 31 Fighting Corruption the Celtel Way: GEORG KELL Lessons from the front line The buslness community has a major stake in finding winning strategies against corruption. The case of UN Global Compact. MOHAMED IBRAHIM The African company Celtel 1s a successful story in terms of 12 Civil Society and the Private Sector: creating growth and decreasing corruption. Fighting corruption is good business 34 Dealing with Corruption in Ethiopia HUGUETTE LABELLE KEBOUR GHENNA The pursuit of financial accountability and transparency Initiative Africa promotes public-private partnership against requires a cross-sectoral effort that civil society and the business community are helping to facilitate. corruption in Ethiopia to monitor political leaders and insure transparency. 15 The Power of Joining Forces: The case for collective action in fighting corruption 37 Measuring Corruption: Myths and realities PETER BREW DANIEL KAUFMANN, AART KRAAY, AND MASSIMO MASTRUZZI Companies act~ngtogether will be more effective in fighting Corruption can be measured through a wide variety of corruption, and in the application of codes, polic~esand innovative approaches in order to diagnose problems and processes that may improve their operations. monitor results. 18 The Importance of Cynicism and VOICES FROM THE FIELD Humility: Anti-corruption partnerships 42 Research on Corruption and Its Control: with the private sector The state of the art WILLIAMS S. LAUFER MOANA M. ERICKSON Our legitimacy and moral suasion to affect corrupt business Summary of a workshop that highlighted recent research on practices elsewhere in the world would be enhanced by corruption and identified needed areas of investigation. recognition of our own problems. 45 Seeking Clarity in a World of Murky 22 Business as a Partner in Fighting Transactions: E-Discussion Corruption? MICHAEL JARVIS AND AMINA EL-SHARKAWV RODERICK HILLS Summary of a global e-discussion to share knowledge on what In the fight against corruption it is the "Rule of Law" that works and what does not in fighting corruption by the private should inspire and guide the actions of the business sector. community. 48 BOOKSHELF 50 KNOWLEDGE RESOURCES 51 CALENDAR OF EVENTS Can PRIVATE SECTOR ACTION tackle Guest ~Atorial BY FRANNIE LEAUTIER, DJORDJIJA PETKOSKI, L t INTRODUCTION research--to seek ways to combat corruption. To this end we do and T must work together with other international organizations, govern- CORRUPTIOH IS AM IMPEOIMEHT TO GROWTH and p0veItY reduction. ments, civil society groups, and the private sector. As noted by World As the authors in this issue of Development Outreachwell document, Bank President Paul Wolfowb, the private sector worldwide is one corruption limits opportunities, creates inefficiencies and forms of the most important partners in this process and, without the active additional barriers to the smooth delivery of services. Crucially, from engagement of business, progress will be limited.' Business action 1, the perspective of the World Bank Group, corruption cumulatively is already showing the potential for sustainable results in limiting L undermines progress towards achieving development objectives, not opportunities for corruption, but a core theme of this publication is least as its impact is most adversely felt by the world's poor. The that such potential is best realized by being integrated with the World Bank has taken a clear public stance-based on exhaustive efforts of other stakeholders in the form of collective action.. why should business care? A lot is at stake for the private sector. It is becoming increasing- "Corruption not only andennines the ability of I ly obvious that the private sector has a critical role to play, along- governments to function properly, 1also stifles side more traditional government and c~lsociety actors, in the growth of the private sector. We barit from fighting corruption. But why should business care? Continuing to participate in, or turning a blind eye to, corrupt activities can investors, domestic and foreign, investors who I worry that when corruption is rampant, contracts have significant negative consequences for the private sector in are unenforceable, cornpaition is skewed, and the ) tern of competitiveness, the ease of dai"~business and the sustainability of development efforts. As Peter Brew notes in his costs of doing business becomes stifling. When article in this issue on "The Power of Joining Forces," corruption investors see that, they taka their money is estimated to add 10 percent or more to the cook of doing mmeWAere else." business in many parts of the world. Corruption also renders gov- - Ptwi WoHorrib, World Bank Presidan& ernment policies less effecthe, which in turn produces negative lakatia, lndon#b, April 11.2UlI6 knock-on impact on the business environment Corruption affects everyone and exists all over the too real negative consequences in terms of lost business. world-in developed and developing country contexts-and Some large companies may have the resources to absorb this can greatly hinder firm, national and regional-level competi- loss or find ingenious, but typically more expensive, ways to tiveness, as well as significantly affect the attractiveness of supply the promised goods and service,
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