[Figure 1-1] Flowchart of How Corruption Reports are Processed ...... 060 [Figure 1-2] Organizational Structure of ODSC, 2016 ...... 063 [Figure 1-3] Standard Procedure of Opening Public Data ...... 064 [Figure 1-4] Korean Open Data Portal, 2017 ...... 065 [Figure 1-5] Overview of e-Government Development of Seoul Metropolitan City ...... 066
[Figure 2-1] Government Integrated Computing Center Phase Change Process ...... 131 [Figure 2-2] e-Government System Integrated Operation Service Concept Diagram ...... 134 [Figure 2-3] National Information Network Concept Map ...... 135 [Figure 2-4] Data Center Operation Concept Diagram ...... 136 [Figure 2-5] Integrated Security Management System Concept Diagram ...... 137 [Figure 2-6] ICT Integrated Resource Management Concept ...... 138 [Figure 2-7] Business Continuity Assurance Service Concept Diagram ...... 139 [Figure 2-8] Big Data Common Infrastructure Platform ...... 140 [Figure 2-9] Common Base Utilization Model ...... 140 [Figure 2-10] Mobile Support Concept ...... 141 [Figure 2-11] G-Cloud Resource Pool Operating Environment ...... 142 [Figure 2-12] GIDC Target Model Phase ...... 147 [Figure 2A-1] Procedures for Using the National Tax Service ...... 163
[Figure 3-1] Loan by Economic Sectors ...... 179 [Figure 3-2] Loan and GDP Distribution by Economic Sector ...... 180 [Figure 3-3] Major Statistics on Investment and Savings ...... 182 [Figure 3-4] Financial Accessibility of Guatemala ...... 183 [Figure 3-5] Numbers of Office of MG Community Credit Cooperatives ...... 203 [Figure 3-6] Numbers of Members of MG Credit Cooperatives in Korea ...... 203 [Figure 3-7] Numbers of Office of Credit Unions ...... 204 [Figure 3-8] Numbers of Members of Credit Unions in Korea ...... 204 2016/17 KSP with Guatemala
Nayun Kang (Project Officer, Korea Development Institute) Ji Yun Park (Project Officer, Korea Development Institute)
Inefficiency and corruption in the public sector have been singled out as a major impediment to national development. To solve this problem, the Government of Guatemala has been working to improve transparency of the public sector. In particular, a series of large-scale corruption scandals involving bribery of incumbent president and the vice president in 2014 increased public awareness in addressing corruption more than ever. As part of efforts to enhance transparency in the public sector, the utilization of e-government has recently begun to be highlighted.
At the same time, the growth of small and medium-sized enterprises (SMEs) has become a critical factor for the nation’s economic development. Despite the fact that they account for a large portion of the economy in Guatemala, there is no national policy to support their productivity and competitiveness.
In this context, the Guatemalan government has expressed its willingness to participate in the 2016/17 Knowledge Sharing Program (KSP) in order to cope
012 • 2016/17 Knowledge Sharing Program with Guatemala with the policy challenges which Guatemala is facing today, through timely policy consultation.
The KSP with Guatemala was launched in 2014 under a Memorandum of Understanding (MoU) signed between the Ministry of Strategy and Finance (MOSF) in Korea and the National Secretariat of Science and Technology of Guatemala (SENACYT). In its third year, both governments agreed to conduct policy consultation, mainly focusing on transparency in the public sector, government integrated data center and microfinance for SMEs.
In the first stage of the project, the delegation of Korean experts headed by Dr. Sung-Ok Lee, the former president of the Institute for Information Technology Advancement (IITA), visited Guatemala from August 28th to September 4th, 2016 to conduct the High-level Demand Survey and Pilot Study. By visiting relevant organizations, the Korean delegation conducted successful in-depth studies and as a result, specific consultation topics and research teams were finalized as follows:
Policy Consultation for Development of Guatemala: Focusing on Transparency in Public Sector, Government Integrated Data Center and Microfinance for SMEs Topic Korean Researcher Guatemalan Consultant Dania Iveth Cardona Carrera Increasing Transparency and (Consultant, INAP) Sung Gul Hong Open Government: Lessons Fredy Donis (Professor, Kookmin University) from Korea (Consultant, Global Business Political Innovation) Luz Angelica Pirir Avila Guatemala e-Government Kyoung Yul Bae (Consultant, SENACYT) Development: Focusing on (Professor, Sangmyung Jorge David Pineda Tejeda Establishment of GIDC University) (Consultant, Vice President’s Office) Enhancing Financial Edgar Laureano Juarez Choong Lyol Lee Accessibility of SMEs through Sepulveda (Professor, Korea University) Microfinance Institute (Consultant, Grupo Analitica) Senior Adviser: Sung-Ok Lee, Former President of Institute for Information Technology Advancement Project Manager: Song Chang Hong, Director of Planning and Evaluation, CID, KDI Project Officer: Nayun Kang, Senior Research Associate, CID, KDI Ji Yun Park, Research Associate, CID, KDI
2016/17 KSP with Guatemala • 013 From October to November of 2016, Korean experts conducted Additional Pilot Studies in Guatemala. During the visits, the Korean delegation held meetings with relevant ministries and organizations to examine the local context in detail and gain a better understanding on the topic. In addition, two special seminars successfully took place in Guatemala to share Korea’s experience on each research topic.
The Guatemalan delegation headed by H.E. Ezrra Orozco, the Vice-Minister for the Ministry of Economy, visited Korea to participate in the Interim Reporting and Policy Practitioners’ Workshop from January 8th to 14th, 2017. Throughout a week, the delegation visited various institutions related to the three topic areas, including Korea’s National Center for Integrated Computing (NCIS), Daejeon U-City, the Credit Union Federation, and many others to gain first-hand experience of the Korean development experience. In addition, during the Interim Reporting Workshop on Jan. 9th, both parties engaged in fruitful discussion on the interim research outcome.
As a last stage of the project, Final Reporting Workshop and the Senior Policy Dialogue were held in February of 2017 in Guatemala. Korean researchers and their Guatemalan counterparts presented final research findings and policy recommendation in presence of high levels including the Vice Minister of MINECO, Secretary of SENACYT, Manager of INAP and around 80 government officials and experts. A series of policy dialogue with high level officials including the Vice President of Guatemala were also held. The presentations of the research team were met with great enthusiasm from the audience, followed by a great number of questions and comments. The Guatemalan government showed high interest in continuing with the next program and the research teams’ findings.
2016/17 Guatemala KSP was another chance to prove how local cooperation and interest has an impact on the performance of the project. High level officials from three partner organizations actively participated in every stage of the project and contributed valuable opinions about the research. From the perspective of policy makers, their analysis and diagnosis of the situation in Guatemala has helped Korean researchers to develop policy alternatives that can be applied locally. They also arranged a follow-up measures base on the research outcomes and shared them with important decision-makers. In addition, policy practitioners were sincerely supportive of the research throughout the project. The difficulty with the field investigation, due to the undocumented data and language barriers, was overcome by the dedication of the local practitioners.
This interest is the result of a deeper understanding and trust accumulated through three years worth of projects, along with another possibility of expanding to various fields of cooperation in the future. Through the KSP, Korea and Guatemala are expected to further their cooperation towards mutual prosperity.
Guatemala has the largest economy in Central America, with a USD 63.9 billion Gross Domestic Product (GDP) and an estimated 4.1 percent growth rate in 2015. Remittances, mostly from the United States, increased by 13.4 percent in 2015 and were equivalent to 9.8 percent of the GDP. It is important to mention that despite positive steps to improve Guatemala’s investment climate, international companies choosing to invest in Guatemala face significant challenges, such as complex and confusing laws and regulations, inconsistent judicial decisions, bureaucratic impediments and corruption, all of which create practical barriers to investment. Since 2006, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) has undertaken numerous high-profile official corruption investigations and led to significant indictments. One such case revealed a customs corruption scheme that lead to the resignations of the president and vice president.
As this is the 3rd year of KSP projects, the government of Guatemala has requested three specific topics for the 2016/17 period. First, increasing transparency and open government has been proposed by National Institute of Public Administration (INAP); this will help reduce corruption while increasing transparency by sharing their actual understanding of the current situation and the Korean experiences of anti-corruption policies in both legal/institutional areas and technical solutions such and e-Government and open data policies. Second, diagnosing the current status of e-Government and determining how to build a Government Integrated Data Center (GIDC) was proposed
Executive Summary • 015 by National Secretariat of Science and Technology (SENACYT). This is a logical extension of the KSP advisory project from last year. In the final report on the topic of ICT and e-Government development in Guatemala, several detailed projects were recommended. A GIDC was one of them, and SENACYT would like a detailed plan to establish GIDC in Guatemala. Third, the Ministry of Economy has proposed a study on enhancing the accessibility of investment capital for small and medium enterprises (SMEs) by activating microfinancing institutions. This is also an important precondition for the economic development of Guatemala because of its low savings and investment rates and very limited access to financial services for low income families.
1. Increasing Transparency and Open Government: Lessons from Korea
Guatemala is well known for its high level of corruption, though the government of Guatemala has been working hard to reduce it since the beginning of 21st century. However, the former President and Vice-president were both imprisoned due to a corruption scandal in the former Perez government. The Jimmy Morales government came into power by winning in the 2015 election in the midst of a long-lasting anti- corruption demonstration. The government of Guatemala emphasizes decreasing corruption by adopting a technical solution called the open government policy. INAP has offered consultation on the topic of transparency and open government, but a technical approach may not be enough to achieve this goal. Thus, INAP and the KSP researcher have agreed to evaluate the perceived level of corruption, personal and organizational ethics, and attitude towards policy alternative development to increase transparency in Guatemala. In addition, Korea’s experience in anti-corruption and open government would be analyzed in order to create lessons and formulate policy alternatives.
Historically, several governments in Guatemala have stated that eradicating corruption was their top policy priority, but no major progress has been made despite these vows to do so. The primary reasons for this seem to be that most policies are declaratory in nature, meaning that actual implementation has not been followed. Unlike South Korea, where policies are basically implemented and evaluated, no responsible organizations were designated and no reward/punishment systems were specified in Guatemala. This, in turn, resulted in a lack of implementation and therefore, no major progress has been made.
South Korea has also been notorious for its historically deep-rooted corruption. Its colonial experience and authoritarian rule after independence have, in part, been used to justify corruption in the public sector. Close ties between the government and
016 • 2016/17 Knowledge Sharing Program with Guatemala big business have been the main sources of huge corruption scandals in Korean society throughout its not-so-long history of democratic elections. The low wages of public employees made it seem inevitable that people would always have to pay certain types of illegal service fees to get public services. But as the economy developed and the democracy matured, governments began to enact various laws and regulations to eradicate corruption, and the gradual increase of ICT application in the government began to change the situation. Although there is still a long way to go, South Korea has achieved quite an impressive level of transparency in a relatively short period of time. The biggest lessons from the Korean experience are as follows: 1) making continued, systematic efforts to eradicate corruption in the public sector, 2) creating an independent, permanent organization that is responsible for anti-corruption and the enactment of key laws which have been actually implemented, 3) sharing the importance of public sector integrity and transparency with the general public, 4) effective monitoring and detecting system of those who violate the laws and regulations, and 5) strong protection for whistle-blowers. In addition, open data policies have been actively promoted since 2014, which has added transparency to the public sector as well.
The online survey reveals that an overall ethical mindset must be promoted among public officials. They should commonly develop the impression that they will be monitored and certainly punished if they violate the ethical charters or codes of conduct, or behave in a corrupt manner. It is necessary to strengthen the legal and institutional mechanisms to control corruption effectively. Another important implication is the necessity of creating an independent, permanent organization that is in charge of corruption and/or administrative ethics. The survey also suggested that a merit-based career civil service system has to be established for personnel managers. Lack of a merit-based career civil service system was pointed out to be one of the main causes of corruption.
As for policy alternatives, the author proposed both short and long-term policies. In the short term, immediate policy actions for actual implementation have been emphasized. In particular, those of who violate codes of conduct and/or rules and regulations on corruption should be guaranteed punishment. In order to implement this, the monitoring system and the annual evaluation on the level of corruption should be strengthened.
For a long-term perspective, a new law to increase transparency should be enacted. Within the law, setting up a permanent, independent organization such as Anti- Corruption and Civil Rights Commission (ACRC) in Korea is necessary. Merging INAP and National Office of the Civil Service (ONSEC) and strengthening its legal function by benchmarking ACRC may be an alternative. A career civil service system based upon the merit system should be established, and the wage level of public employees must also be increased to reflect actual living expenses. The systematic implementation of e-Government and open data policies is another important technical solution. As a
Executive Summary • 017 fundamental policy alternative, primary and secondary education on public ethics and transparency should be strengthened.
2. Guatemala e-Government Development: Focusing on Establishment of GIDC
Guatemala is currently at the second level of the United Nations e-Government development stage. Given the insufficient technical capacity of the Guatemalan Government to operate e-Government-related equipment and systems, and because most senior officials are replaced along with the regime change, it is essential to take measures to establish governance to maintain e-Government law and policy consistency by establishing a mid- and long-term master plan. The e-Government priorities that are applicable to Guatemala can be viewed as establishing a master plan and the GIDC, including an e-Government legal system and governance.
The GIDC will provide a comprehensive solution by integrating information systems spread across each government agency, and strong infrastructure will improve the fundamentals of system operation. GIDC and infrastructure will play a crucial role in expediting the growth of Guatemala’s e-Government.
Given the experience and operational performance of the Korean government's integrated data center construction process, it is desirable to establish Korea's National Computing and Information Service (NCIS) as the target model for the GIDC in Guatemala. By establishing GIDC and infrastructure in Guatemala, it is expected for Guatemala to serve as a leading IT country in Central America.
The GIDC in Guatemala will integrate and manage all of the central administrative organizations’ information systems and make e-Government systems work around the clock 24 hours a day, 365 days a year. It should be the heart and engine of all e-Government systems and online public services in all public sectors in Guatemala. A GIDC in Guatemala may be composed of two or more centers in consideration of regional characteristics, and mutual backups should be made between centers in case of emergency. A Guatemalan GIDC will have concrete service content based on Korea's experience and Guatemala’s characteristics.
The Guatemalan GIDC must have a realistic and concrete goal to achieve in the target year compared to the base year. Therefore, based on the experience of Korea’s NCIS, we will set specific GIDC core performance targets in accordance with the characteristics of Guatemala and the available budget.
Given the IT level and economic resources of Guatemala, a phased construction is more desirable than achieving a goal at a specific time. Step-by-step construction should
018 • 2016/17 Knowledge Sharing Program with Guatemala be done in the order of location integration, HW integration, cloud conversion, and finally a service integration and big data analysis system.
As shown in each country, e-Government services are designed to both tailor the GIDC system at each use and establish security grades such as an internal security work field and business private cloud field; a shared data public cloud is required when sharing with the private sector. GIDC construction should be promoted using mid- to long-term strategies and policies since it involves a detailed work process for improvement and, in some cases, a modification of laws and regulations.
Given Korea’s experience with NCIS implementation, the GIDC in Guatemala cannot achieve the expected outcomes by simply establishing an ICT center utilizing short-term strategies. It should be considered as a mid-term strategy for five years or longer with service development over the next five years. A comprehensive and systematic approach is needed, including the establishment of a master plan that takes cloud and disaster recovery of e-Government services into consideration, and includes reviews from diverse BPR experts, step-by-step, long-term improvement of laws and systems, data sharing, and business improvement.
As such, getting help from Korean NCIS experts will be beneficial for shortening the time and decreasing the budget necessary for this project. Specifically, it is recommended that Korean NCIS experts should be contracted by the Guatemalan and Korean governments to train and maintain personnel over the next five years and support the construction and management of GIDC and its related infrastructure. This contract must be extended on annual basis and would also examine the possibility of linking subsequent research and project form other agencies (EDCF, KOTRA, international organizations, etc.) to produce more in-depth and efficient results.
3. Enhancing Financial Accessibility Through Microfinance Institutions
Since the late 20th century, microfinance has been a possible solution to provide financial service to low income families in developing countries. With the pioneering work done by Grameen Bank of Bangladesh initiated by Mr. Muhammad Yunus, many countries have now introduced microfinance services.
Guatemala is not an exception in this sense. Its low savings and investment ratios have constrained its economic development. At the same time, the limited access to financial services for low income families prevents them from escaping poverty. In particular, people in the countryside have had extreme difficulty reaching conventional financial institutions. It may be argued that it is required for low income families to get financial access in order to reduce the poverty of Guatemala. They may take a small new business loan or get the necessary financial assistance when farming in rural areas.
Executive Summary • 019 The government of Guatemala has recognized this fact and selected the theme of development of Microfinance or Financing of SMEs as one of the 2016 KSP subjects. To accomplish the 2016 KSP goals with Guatemala, the KSP team plans to take the following four steps. The first step is to describe the basic theory of financial accessibility for SMEs and economic development. The second step is to analyze the current market conditions and legal framework for Microfinance in Guatemala. In this step, we will establish what should be done in Guatemala based upon economic theory and research on Guatemala. The third step is to examine Korean cases of Microfinance and financial accessibility development. The fourth step is to provide practical policy suggestions to the Government of Guatemala. This paper has six sections. The first one is an introduction, and the rest are the steps above followed by the conclusion of this paper.
The microfinance sector has been affected by various problems in recent years such as globalization, over-indebtedness, financial exclusion, lack of funding, corruption, and fraud. As a result, their activities may shrink, and some microfinance institutions may even be bankrupted. To improve efficiency and maintain sustainability, the following recommendations are suggested regarding MFIs.
First, several measures and tools to evaluate credit risk should be employed. Microfinance institutions should have the institutional commitment to hire a bureau to conduct credit references, deliver and receive up-to-date information from clients, and to use this information to reference and investigate the level of indebtedness and at any time avoid over-repayment according to their lending policies. Microfinance institutions may periodically review their credit policies and employ the characteristics of customers such as ethnicity, schooling, age, client's family responsibilities, family vulnerability, savings and remittances. A review is also necessary in terms of product design for credit maturity, since the client has a vulnerability of one-year terms. It is also recommended that credit assessment policies include the client's payment morale, or ‘willingness to pay,’ an assessment which has been shown to have been relaxed by credit officers, supervisors and even the institutions themselves. In many cases, the loans are too generous to fit within the modern economic context that clients live in today.
Second, institutions should be able to use modern techniques. There is affordable, sophisticated and user-friendly software that facilitates the work of microfinance institutions, such as Precredit-pro, which is available through the debt overhang campaign. In addition, institutions should provide more diversified products to their clients. For years, the credit program has been the same while a large number of innovative credit products have been made. The usage of a predictor model is also proposed to determine the level of over-indebtedness; this should be integrated into the information management system of the institution or into an Excel sheet for ease of use.
020 • 2016/17 Knowledge Sharing Program with Guatemala Third, microfinance institutions have neglected the issue of financial education, both for their internal and external clients. It is vital to resume this education and utilize the strategic alliances that are necessary to train their staff and clients in issues that are binding in regards to microfinance and other activities because this helps with the client’s integral development, since it was verified in the previous study that clients do not know what interest rate that they pay on their credits to the institutions that provide these services.
Fourth, non-profit microfinance institutes (NMFIs) are not financed by deposits or borrowing, but by the contribution of foreign and domestic NGOs and other institutions. As a result, their microfinance activities may be restrained by the contributions from outside donors. There should be systematic ways to use this domestic and foreign contribution. For example, regular meetings should occur between NMFIS and major contributors, and brochures or financial activity reports should be distributed to the contributors.
The government or supervisory agency has to prepare to address the high indebtedness of the microfinance industry.
First, it is a priority that microfinance institutions, government entities, funding institutions and any other relevant players in the sector should be aware of the high level of over-indebtedness that the country is experiencing and should prepare for mitigation and contingent programs and plans. These actions should be prioritized according to the percentages of over-indebtedness that each region presents and be congruent with the food and vital needs that each family requires.
Second, it is advisable for microfinance institutions to prioritize the factors that determine the over-indebtedness of a client and construct their forms, evaluation sheets and methodologies appropriately. It is recommended to include and use the prediction model suggested by the study in microfinance institutions' information management system software due to their simplicity, agility, efficiency and ease of interpretation.
Based on the present study, research on active product methodologies, socio- economic evaluation processes and credit models with different types of assistance or training should be provided. In addition, other organizations, researchers and even microfinance institutions are encouraged to deepen their research and expand their scope. Maintaining the health of institutional portfolios and preventing client over- indebtedness should be the target of this research.
To implement the above strategies, a national institutional framework should be developed. This would be used to analyze and evaluate the environment of local microfinance market and system and design policy and strategies for them.
Executive Summary • 021 Their main assignments are as follows. The central office guides, advises, supervises, and inspects the financial activities of the local ones and it should take charge of education and training activities for participants at local offices. It may build up local financial infrastructure relay inter-lending activity between credit unions or cooperatives. It should make its own development plan and initiate its implementation. Finally, it should help establish its credibility as a financial institution. It should design the provision of funds to restore confidence in individual offices and local branches.
At first, it may be not easy to establish such an institution all at once. As a result, several steps are required. First, a simple alliance among the nearby regions should be made between local microfinance institutions. They may share experiences with each other and obtain the same necessary training together. Second, a more formal regional institution should be established in each region. Its size will be larger and more activities may occur there. At the final stage, a national association based upon the law should be created.
At the same time, alliances between NMFI and other MAFs such as Savings and Loan Microfinance Institutes are recommended so that they may share their information and experiences. Currently, MAFs such as Savings and Loan Microfinance Institutes have a better system and more experience in financial business, so NMFI may share lessons and knowledge with MAFs through this alliance.
As has been explained, this report has three themes that the government of Guatemala has requested to the KSP team. The first two themes are, in fact, inter-related with each other. Because corruption issues have a long history and are deeply embedded in Guatemalan society, increasing transparency through technical solutions is not enough to create the expected outcomes. This is why the KSP team has strongly recommended the scope of study in theme 1 be expanded to include overall anti-corruption issues. After all, by examining and suggesting anti-corruption policies and open government policies, we hope that the government of Guatemala will be able to reduce its corruption level significantly in the near future. The second theme, construction of GIDC, which is a precondition for providing integrated and efficient e-Government services that have appropriate cyber security measures, would also contribute to reducing corruption and would provide harmonious online public services in balance from all government agencies in Guatemala.
The third theme is enhancing the accessibility of microfinance for both low income families and small and medium enterprises, which is also essential for reducing the gap between the haves and the have-nots. Together, all three themes dealt with in this final report are valuable for sustainable economic development in Guatemala.
Since this is the 3rd year of KSP, we hope that more concrete outcomes will be realized with our policy recommendations. In all three themes, we have proposed many policy alternatives that are easy for the government of Guatemala to implement. Some of them may require amendments to related laws and changes in regulations, while others may be implemented immediately if high-ranking public officials are willing to push these policies ahead. Still other policy recommendations may need a much longer period of time to come to fruition, such as changing the whole personnel administrative system, which may bring about stakeholders’ resistance.
A project such as creating a GIDC is something that can be implemented once the government of Guatemala decides to undertake it. This is a proven way of making governments efficient, transparent, and effective at serving their people better. We expect that this report will provide better opportunities to the government of Guatemala, and may serve to better the mutual relationship between Guatemala and Korea.
2016/17 Knowledge Sharing Program with Guatemala: Policy Consultation for Development of Guatemala: Focusing on Transparency in Public Sector, Government Chapter 1 Integrated Data Center and Microfinance for SMEs
1. Introduction 2. Policies on Transparency and Open Government in Guatemala 3. Korean Experiences with Transparency and Open Government 4. Results of Online Survey on Corruption in Guatemala 5. Conclusions and Policy Recommendations ■ Chapter 01
Guatemala is well known for its high corruption level, despite vigorous government efforts to reduce it since the beginning of the 21st century. However, the former president and vice president were both imprisoned due to a corruption scandal in the former Perez government. The Jimmy Morales government gained power by winning the 2015 election in the midst of a long-lasting anti-corruption demonstration. The government of Guatemala puts much emphasis on decreasing corruption by adopting a technical solution called the open government policy. National Institute of Public Administration (INAP) has proposed to provide consultation on the topic of “transparency and open government,” but this technical approach may not be enough to achieve the goal. Thus, the INAP and the Knowledge Sharing Program (KSP) researchers have agreed to diagnose the corruption perception level, personal and organizational ethics, as well as attitude in order to develop policy alternatives to increase transparency in Guatemala. In addition, Korea’s experience of anti-corruption and open government was to be analyzed in order to draw out lessons to formulate policy alternatives.
Historically several governments in Guatemala have announced eradicating corruption as a top policy priority; however, no major progress has been achieved. Major reasons for this seem that most policies are declaratory in nature, meaning that actual implementation has not taken place. Unlike South Korea, where policies are basically implemented and evaluated, no responsible organizations were
026 • 2016/17 Knowledge Sharing Program with Guatemala designated and no reward/punishment systems were specified in Guatemala. This, in turn, resulted in a lack of implementation, and therefore, no major progress has been made.
South Korea had also been notorious for its historically deep-rooted corruption. Its colonial experience and the authoritarian rule after independence in part have normalized corruption in the public sector. Close ties between government and big business have been the main source of huge corruption scandals in Korean society throughout its not-so-long history of democratic elections. Low wages of public employees meant it was taken for granted that people always had to pay certain types of illegal service fees to get public services. However, as the economy developed and democracy matured, governments began to enact various laws and regulations to eradicate corruption, and the gradual increase of ICT application in the government began to change the situation. Although much remains to be done, South Korea achieved quite an impressive level of transparency in a relatively short period of time. The biggest recommendations to be drawn from the Korean experience are as follows: 1) continuing systematic efforts to eradicate corruption in the public sector, 2) creating an independent, permanent organization that is responsible for anti-corruption, and enactment of key laws that have been actually implemented, 3) sharing the importance of public sector integrity and transparency with the general public, 4) an effective system for detecting and monitoring those who violate the laws and regulations, and 5) strong protection of whistleblowers. In addition, open data policies have been actively promoted since 2014, which has added transparency in the public sector as well.
An online survey that I have conducted for this research revealed that the overall level of ethical conduct among public officials have to be increased. Public officials should develop a common belief that they would definitely be monitored and punished if they committed violation of ethical charters or codes of conduct, not to mention those behaviors considered types of corruption. It is necessary to strengthen legal and institutional mechanisms to control corruption effectively. Another important implication is the necessity of creating an independent, permanent organization in charge of corruption and/or administrative ethics. The survey also suggested that a civil service career system along with a merit system in personnel management has to be established. Lack of a merit-based civil service career system was pointed out as one of the main causes of corruption.
As to policy alternatives, the author proposed both short and long-term policies. In the short term, immediate policy actions for actual implementation were emphasized. In particular, those who violate codes of conduct and/or rules and regulations on corruption should be assiduously pursued and punished. In order to implement these policies, a monitoring system and annual evaluation of the level of corruption should be strengthened.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 027 From a long-term perspective, a new law to increase transparency should be enacted. Within the law, setting up a permanent, independent organization such as the Anti-Corruption and Civil Rights Commission (ACRC) in Korea is necessary. Merging INAP and the National Office of the Civil Service (ONSEC) and strengthening the resulting organization’s legal function by benchmarking the ACRC may be an alternative. A career-based civil service system along with the merit system should be established, and the wage level of public employees must also be increased to reflect actual living expenses. Systematic implementation of e-Government and open data policies is important as a technical solution as well. As a fundamental policy alternative, primary and secondary education about public ethics and transparency should be strengthened.
1. Introduction 1.1. Demand Identification
Guatemala has the largest economy in Central America, with a USD 63.9 billion Gross Domestic Product (GDP) in 2015, and an estimated 4.1% growth rate in 2015. Remittances, mostly from the United States, increased by 13.4% in 2015 and were equivalent to 9.8% of GDP. It is important to mention that in spite of positive efforts made by the Guatemalan government to improve investment climate, foreign companies to invest in Guatemala may face significant challenges. The following are examples: Complex and confusing laws and regulations, inconsistent judicial decisions, bureaucratic impediments, and corruption in particular, continue to be practical barriers to investment. Since 2006, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) undertook numerous investigations on corruption scandals that some high-ranking public officials were involved, which led to significant indictments. One such case revealed a customs corruption scheme, which led to the resignations of the president and vice president.
Guatemala held national elections in 2015 amid 19 weeks of anti-corruption protests that culminated in the establishment of an interim government in September through January 13, 2016. President Jimmy Morales (National Convergence Front, FCN) took office in January 14, 2016, along with a new Congress of mostly freshman members and locally elected officials. These newly elected officials entered a changed geopolitical landscape in Guatemala, with a lower tolerance for corruption and lingering citizen demands for widespread government reform and improved efficiency.
With these recent changes, INAP has proposed how to improve transparency through open government as a topic for the 2016/17 KSP with KDI. However, as open
028 • 2016/17 Knowledge Sharing Program with Guatemala government is only a technical method to increase transparency, it may not be as effective as other approaches to decrease corruption in policy processes. After the first visit to INAP, we have agreed to the necessity of diagnosing the current status of transparency and anti-corruption levels in public organizations.
Based on the meeting with the officials in INAP, we have agreed the following purposes of this chapter: 1) Analyze and evaluate past experiences of Guatemala to improve transparency, 2) Examine public employees using online survey on corruption and how to fight against it in Guatemala, 3) Benchmark the Korean experiences of anti-corruption and open data policies, and finally 4) Propose policy suggestions to reduce the corruption level in Guatemala by focusing on decreasing corruption and/ or increasing transparency. This focuses special attention on changing attitudes and perceptions held by public employees through appropriate training and education.
Guatemala has long been well known for its high corruption level. The Corruption Perceptions Index (CPI) measures perceived levels of public sector corruption worldwide by gathering the results of 12 institutions’ corruption surveys and calculating averages and normalizing them on a scale of 0–100. According to the 2015 CPI, South Korea ranked 37th with a score of 56, while Guatemala ranked 123rd with a score of 28. The table below demonstrates changes in CPI over time along with other Central American countries.
Changes in Scores CPIRank Country 2012 2013 2014 2015 2016 (2016) 52 Korea, Rep. 56 55 55 56 53 58 Costa Rica 54 53 54 55 41 60 Cuba 48 46 46 47 47 95 El Salvador 38 38 39 39 36 87 Panama 38 35 37 39 38 123 Mexico 34 34 35 35 30 120 Dominican R. 32 29 32 33 31 123 Honduras 28 26 29 31 30 136 Guatemala 33 29 32 28 28 145 Nicaragua 29 28 28 27 26
Source: TI, CPI, selected years.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 029 As shown in the table, Guatemala was evaluated much lower in terms of CPI, even compared to other countries in Central America. Costa Rica, for instance, has achieved a similar level to Korea in most of the years. This indicates that much progress can be made in Guatemala regarding corruption. This chapter is designed to identify the current status of corruption and/or transparency in Guatemala, diagnose the causes and/or factors that affect them, and then identify appropriate policy alternatives.
1.2. Research Design and Methodologies
This study adopts several methodologies to achieve its goals, such as literature review, in-depth interviews, and online survey. Through the literature review, we investigate the current status of corruption and open government issues in the two countries. In-depth interviews were undertaken to diagnose the current status of anti-corruption and open data policies as well as in pilot testing the survey questions.
Questions for the online survey were developed based upon previous studies. For example, the corruption perception survey in East Timor, the Latin American Public Opinion Project (LAPOP) by Vanderbilt University funded by United States Agency for International Development (USAID), and the survey questions of the ACRC for annual integrity test are the main sources of literature to develop questions for our online survey.
We used SurveyMonkey (https://ko.surveymonkey.com/) for this online survey. The survey links are distributed to government officials, citizen groups, the academic community, think tanks, and business people through the mailing lists of INAP. Those I met with during my interviews and in the pilot test for the questionnaire were also invited to participate in the survey. The link was open between November 15 and December 31, 2016, and a total of 651 people answered. Among them 405 were public officials from various government agencies including municipalities and local governments. Survey data were analyzed by using SPSS. Several statistical analyses were used, such as frequency analysis, analysis of variance, and regression analysis.
1.3. Previous Studies on Corruption and Transparency in Latin America1)
Two major problems are usually identified in studying corruption. One is the concept of corruption itself being too complex to be defined due mainly to its historical diversities. The other is the difficulty in measuring and operationalizing the concept of corruption in order to analyze and develop policy alternatives.
1) Several works has been used to review previous studies on corruption, especially on Latin America, such as Lee and Kim (2002), Kim (2007), Lee (2016), and Park et al. (2016).
030 • 2016/17 Knowledge Sharing Program with Guatemala Accordingly, discussions on corruption have been centered on “what would be defined as corruption” and “which kinds of behavior are classified as corruption.”
Regarding the problem of definition, Lancaster and Montinola (1997: 188-191) summarized six different definitions in studying corruption. They are as follows: 1) the definition of corruption as deviated behavior from public interests such as any destructive behavior affecting public or civic order; 2) the public-office-centered definition, which views corruption as abuse of public power and/or status for private interests; 3) the norm-based definition of corruption, that include not only illegal behavior but any violation of ethical and/or moral norms; 4) the definition of corruption focusing on political and cultural aspects of developing countries; 5) the market-centered definition, that focusing on inefficiency occurred by corruption; and 6) the definition of corruption focusing on principal-agent relations, as violation of contract between principal and agent. A common factor found in these different definitions is that corruption is related to the abuse and/or misuse of public power and authority for private interests.
Regarding measurement issues, corruption level is very difficult to demonstrate because most corruption occurs clandestinely among related parties and is not readily identifiable. Although big corruption scandals are reported from time to time, they are in fact incidental, and real-world corruption levels cannot be measured using those scandals. Thus most empirical studies use questions developed through various empirical studies in measuring actual corruption levels. Thus, what is measured is the perceived level of corruption. Most empirical studies use such measures to see the effects of corruption on economic growth, investments, legal and institutional efficiency, political accountability, and democracy.
There are diverse types of corruption depending upon the characteristics, causes, and degree of corruption. For example, Doig and Theobald (2000: 13) differentiate grand versus petty corruption, while Robinson (1998: 3) identifies incidental, institutional, and systematic corruption depending on the degree to which corruption has been embedded in society. Yet Alemann (2004: 26) provides a multi- dimensional typology of corruption, such as corruption as social decline, corruption as deviant behavior, corruption as logic of exchange, corruption as a system of measurable perceptions, and corruption as shadow politics.
Corruption in Latin American countries is quite rampant, as shown in the Transparency International (TI) index. In fact, except Chile, Uruguay, and to a lesser extent Costa Rica and Cuba, all countries in Latin America have ranked below 70th, among about 200 countries. The TI index is produced by asking questions to people who are engaging in economic activities, resident employees by foreign companies, and/or foreign public employees on the perceived level of corruption in their resident
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 031 countries. Thus, Uruguay and Costa Rica may be exceptional because they do not have much foreign direct investment, and Cuba is relatively highly ranked because it is a socialist country.
Overall, the high levels of corruption in Latin American countries have been explained by several factors. First, political democratization has been viewed as a cause of corruption (Weyland, 1998: 108-121). Democracy requires more people to agree on policy processes, due to which more people may be involved in bribery and other deviant behavior. Populism in Latin America is in part a response to corruption and political processes in most Latin American countries. Another cause of corruption is economic instability. Uneven economic growth may increase income the gap between the haves and have-nots, which in turn may stimulate briberies and big political scandal, depending on context (Lee, 2007: 121-122). However, several cultural factors, such as distance from political and economic power (concentration of power in a small number of people), mixed social attitude of individualism and collectivism (applying different rules to those who are inside and outside of involved given group), and avoiding behavior (different attitudes in keeping official rules depending upon situations), are pointed out as important cause of corruption in Latin America (Husted, 2002: 415-418). According to S. Lee’s study on the Community of Portuguese Language Countries (CPLC), democracy and economic growth rate are negatively related to corruption level, while per capita GDP is positively related to corruption level (Lee, 2016: 53).
One of the recent phenomena in corruption studies is the effectiveness of technology in fighting against corruption. e-Government and widespread use of internet in society, for example, have been emphasized to be effective tools to reduce corruption level. Especially, e-Government systems may play important roles in increasing transparency, efficiency, responsiveness, and accountability in government (Bhatnagar, 2003; OECD, 2005; UNDP, 2006 & 2008).
For example, there is plenty of evidence that internet diffusion may be positively related to reducing corruption. Kock and Gaskins (2014) examined the relationship among internet diffusion, voice and accountability, and government corruption among 24 Latin American and 23 sub-Saharan African countries from 2006 to 2010. According to the study, greater levels of internet diffusion are associated with greater levels of voice and accountability, which in turn are associated with lower levels of government corruption.
However, there is at best mixed empirical evidence in supporting the effects of e-Government in reducing corruption. Kim et al. (2009) and Chawla and Bhatnagar (2004) demonstrate positive effects of e-Government upon reducing corruption by using case study methods. In contrast, Anderson (2009) finds that e-Government is
032 • 2016/17 Knowledge Sharing Program with Guatemala a useful tool in reducing corruption, but that internet use is more important than e-Government. He also argues that the effect of e-Government on corruption may be mitigated because it may allow migration of corruption to other areas. At the same time, internet may increase corruption perception by disseminating information about corruption cases and scandals much faster and wider. Yet Choi and Jung (2014) argue that the effects of e-Government on government transparency are not linear but U-shaped in their analysis of 119 countries. Thus, the effects of reducing corruption by e-Government are not automatic but diverse depending upon how e-Government systems are managed and utilized.
All these studies have contributed to understanding corruption in Latin American countries and recent results of empirical studies on the effects of e-Government and internet usage upon reducing corruption. While many of these studies try to discern causes of corruption, none of them explains details of corruption perception of actual government organizations and/or services and the relationship between corruption perception and individual attitude to corruption.
Based on these findings, this study undertakes an actual online survey to identify the detailed corruption perception in the Guatemalan government and society at micro level. It specifically asks not only the main causes of government corruption but also people’s perception of the most corrupt government organizations and services. It also analyzes the relationship between corruption perception and individual ethical level. In addition, this study places much emphasis on open government issues to identify causes of corruption and the effects of e-Government and open government initiatives on reducing corruption. That is, while previous studies mostly focused on political, economic, and cultural causes of corruption, this study emphasizes institutional and technical tools for fighting corruption.
1.4. Organization of the Chapter
This chapter has five sections. Following the introduction, transparency and open government policies in Guatemala are reviewed. Two local consultants provided excellent contributions for this section, Dania Cardona and Fredy Donis. Especially, the interim report by Fredy Donis became the main body of this section.
Section 3 is about the Korean experiences of anti-corruption policies along with e-Government and open data policies. Regarding anti-corruption policies, a brief history of Korean policies and outcomes is provided followed by the current major policies by the ACRC against corruption. Since e-Government is the topic of Chapter 2 of this final report, e-Government policies are not explained in detail. Instead, open data policies are explained along with its primary organizations.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 033 Section 4 presents the results of the online survey on the corruption perception and individual ethics. The details of the questionnaire used in the survey are included in Appendix 1.
2. Policies on Transparency and Open Government in Guatemala 2.1. Background
Guatemala’s efforts against corruption have been undertaken in earnest since the beginning of the 21st century. This began in the early 2000s, when Guatemala faced escalating problems of governability and violence, particularly an increase in threats and violent attacks against certain sectors of civil society and their leaders. According to different studies and investigations, hidden powers in post-conflict Guatemala had been responsible for the majority of these violent acts by members of illegal armed groups, also known as clandestine groups, which acted at their behest.
The studies revealed how these groups, acting in informal and amorphous networks, used their positions and connections in private and public spheres to enrich themselves with illicit activities, sometimes related to state resources (corrupting customs officials, corruption in lucrative public contracts, and bribery). At the same time, the report described how these groups sought to manipulate and co-opt the private sector, tax institution, justice, and security systems to control them and guarantee their impunity.
This was when a diverse group of actors from civil society and the international community exhorted the Guatemalan government and the international community to support the creation of an international commission to investigate the clandestine groups. Guatemala’s congress ratified the CICIG`s agreement in August 2007, and it went into effect in September 2007.
The second stage began on November 15, 2006. During the inauguration of the 12th International Anti-Corruption Conference, the presidents of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama; the vice-prime minister of Belize; and on behalf of his government the Dominican Republic’s ambassador subscribed to the Guatemala Declaration for a Region Free of Corruption. These goals were related to the need for national anti-corruption plans: access to information; the need to promote accountability in public sector regularly and institutionalize it; strengthening the specialized anti-corruption entities; implementing procurement regulations; preventing corruption in management of public programs and social funds; emphasizing promoting ethical behavior when conducting public affairs;
034 • 2016/17 Knowledge Sharing Program with Guatemala strengthening complaint systems and adopting witness protection laws; allocating resources and implementing programs to educate, raise awareness, and create values that favor transparency and accountability; promoting the implementation of regulating and adopting procedures to prevent transnational corruption; promoting the strengthening of supreme audit institutions; promoting transparency in electoral and political finance; reform of the civil service; and monitoring and compliance of the Declaration.
It has to be said that the Declaration was another important advance in the fight against corruption not just in Guatemala but also the Central American and Caribbean region. Since then, Guatemala has been creating not just institutional agreements among Central American institutions and counterparts, knowing that corruption represents a major obstacle for businesses operating or planning to invest in Guatemala. In Guatemalan society, knowing that businesses must contend with high risks in almost all sectors, the government generally implements the relevant laws effectively. However, government officials engage in corruption with impunity, and recent years have witnessed several corruption cases, the biggest of which ended in the impeachment and imprisonment of former President Otto Pérez Molina and former Vice-president Roxana Baldetti.
The third stage began in 2011, with emphasis on the technical approach. Guatemala has joined efforts to improve levels of transparency through the implementation of international initiatives, creating permanent spaces for the participation of all sectors of the citizenry, improving effective communication, with the aim of promoting democracy that is healthier and more transparent. As part of a national policy of Open Government, the authorities are committed to the implementation of a fifteenth ministry in the executive branch. The idea was raised in the Open Government Alliance (OGA) and was included in the 21 proposals of the Technological Innovation axis. This entity has the representation of civil society, parliament, and the executive. The concept of Open Government is based on three areas: Transparency, Collaboration, and Participation. To understand the meaning of each of these concepts, we can refer to the definitions found in the Memorandum on Transparency and Open Government that President Barack Obama promulgated on January 21, 2009: "Transparency: A Government [that is] transparent encourages and promotes the accountability of the Administration to the public and provides information on what it is doing and on its plans of action.” The government (and any other administration) should allow access to public information in a simple and clear way, thus allowing citizens to control government action, as well as create economic or social value from the public data freely offered by the administration.
A collaborative government implies and commits the citizens and other agents in the work of the administration itself. Collaboration involves cooperation not
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 035 only with the citizens but also with companies, associations, and other agents and allows joint work within the administration itself between its employees and other administrations.
A participatory government favors the right of citizens to participate actively in shaping public policies and encourages the administration to benefit from the knowledge and experiences of citizens. Therefore, it promotes and guides actions that increase the protagonist and involvement of the citizens in public affairs and engages the political forces more intensely with their fellow citizens. As part of the implementation of the Open Government, the present government has achieved the creation of technical tables in various topics such as public information, civil society, the academic sector, inter-institutional, health, and the business sector, through which participation in public management is encouraged through the involvement of all sectors of society in government decision-making in areas that are of interest to each sector and of benefit to citizens in general. Although the official language of Guatemala is Spanish, it is not understood by the entire indigenous population, which is why the Law on Access to Public Information was translated into all the Mayan languages practiced in Guatemala. This is necessary to keep the entire population aware of the content mentioned as well as the rights that the law provides.
For the first time in a government of Guatemala, as part of the transparency and combat of corruption, published the finiquitos of the officials who occupy public positions. This public information is available to all citizens on a website,2) which demonstrates transparency in the public positions that are occupied by people without having problems pending with the state.
In compliance with the recommendations made by the Mechanism for Follow- up on the Implementation of the Inter-American Convention (MESICIC) against Corruption, the Convention against Corruption was held with the General Comptroller of Accounts, the Public Ministry, the Judicial Branch, the Office of the Attorney General of the Nation, and the Executive Body. Its purpose was to establish general cooperation mechanisms, coordination channels, and an inter-agency action plan to combat corruption, in compliance with the international commitment of the Republic of Guatemala to promote transparency within the public administration.
2) See www.transparencia.gob.gt.
036 • 2016/17 Knowledge Sharing Program with Guatemala 2.2. Brief History of Anti-Corruption Policies and Main Outcomes
2.2.1. Anti-Corruption Policies
From the 1960s to 1996, a state of perpetual civil war eviscerated Guatemala’s ability to govern competently and safeguard fundamental human rights. During the war, leftist guerillas, right-wing death squads, and government forces caused the death of 200,000 people. The war pitted the government military dictatorship against leftist revolutionaries who demanded a “new social, political, and economic order.” State repression replaced functioning governance as public spaces were closed, government-endorsed racism ran rampant, and most Guatemalans were excluded from the political process. The war’s most violent period was between 1981 and 1983, during which approximately half of the 200,000 deaths occurred.
During the 1960s and 1970s, the Guatemalan Army dominated the executive branch of government. Throughout the 1980s, the military’s hegemony allowed it to dominate the state apparatus. Toward the end of the war, the military maintained control over government decision-making through less transparent back channels and informal connections.
In 1996, the war’s conclusion revealed that, after 36 years of fighting, Guatemala’s young men had little formal education and few professional talents, except shooting guns. Because of the perpetual state of conflict, large supplies of weapons remained readily accessible across Guatemala, while the military enjoyed immeasurable resources and influence over the government.
Because government corruption weakened the Guatemalan government, the inter-American drug trade thrived in Guatemala. During the 1980s, Guatemala, a long-time poppy cultivator, grew in importance in the cocaine trade. Guatemala’s weak state institutions, largely uncontrolled borders, and vast expanses of rural terrain made it an ideal superhighway for transporting drugs for distribution throughout the Americas.
Drug trade connections with the government run deeper than bribing or intimidating local political figures into ignoring trafficking activity, as the Guatemalan government has recently instituted measures meant to combat corruption of high-level government officials aligned with the drug cartel.
Three groups are identifiable as significant contributors to impunity in Guatemala. These groups influence Guatemala’s governing institutions through bribery, threats of violence, and murder. While the groups discussed should not be considered the
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 037 only contributors to impunity in Guatemala, they represent the worst and most easily recognized offenders that the Guatemalan government must confront.
The first major contributors to impunity are international drug cartels moving their product through Guatemala for distribution in the United States and Mexico. Estimates project that $1 billion in bribes goes to Guatemalan public officials annually.
The “Hidden Powers,” are a second significant source of impunity within the state. The hidden powers are organized crime networks of powerful individuals that use their influence and contacts to enrich themselves through illicit activity while simultaneously remaining protected from prosecution.
Members of the hidden powers may include powerful businessmen, military officials, politicians, civil servants, and law enforcement officials. Organized crime in Guatemala takes many forms, including narcotics trafficking, money laundering, car theft, human trafficking, extortion, and natural resource exploitation.
Gangs are a third major group contributing to corruption in Guatemala. Gang affiliation in Guatemala is rampant. Guatemalan gang membership numbers vary depending on the source consulted. The number of gang members could fall anywhere between an estimated 14,000 to 165,000 members in the country.
A popular target of Guatemalan gang activity is the public buses in Guatemala City. One Guatemalan bus official estimates that bus extortions generate $10,000 a day, making them lucrative targets for gang crime.
2.2.2. Causes and Stages of Government Corruption
The Guatemalan government’s agreements/cooperation among international institutions such as the CICIG, TI, and Open Government Partnership (OGP) signifies a positive step in Guatemala’s anti-corruption battle. However, if the CICIG is to fulfill its mandate and make actual gains against state corruption, the Guatemalan government must be willing to sincerely address the corruption problem. While it may be true that corruption exists in most governments in varying degrees, Guatemala’s leaders must actively implement long-term anti-corruption practices to vindicate international efforts.
A major contributor to Guatemalan corruption is the drug money that makes it possible to buy off public officials and politicians. Guatemala’s geographic position, sharing its northern border with Mexico, makes the country a superhighway of drug- trafficking activity. Clearly, the government cannot combat corruption and allow
038 • 2016/17 Knowledge Sharing Program with Guatemala the drug trade to continue. This means that if anti-corruption efforts in Guatemala are to have any staying power, anti-corruption national and international strategies objectives must become permanently institutionalized within the Guatemalan state, especially if the Guatemalan government is to confront the inter-American drug cartels.
According to a 2008 poll, 62.8% of Guatemalans consider corruption in the government very common, while 20% consider corruption somewhat common. In a 2010 report covering perceptions of corruption in both the public and private sector, Guatemala was tied for 91st, out of a total 178 countries ranked, receiving a score of 3.2 out of a possible 10. Regardless of where the opinion is drawn, one thing remains clear: Guatemala has a corruption perception problem.
Corruption has consumed the political system and stands in the way of economic prosperity. Out of 179 ranked countries, Guatemala’s GDP ranks 78th. As of 2015, 51% of the Guatemalan population lives below the poverty line. No one is likely to mistake Guatemala for a Tiger of the twenty-first century, at least not at its current rate of economic growth. Moreover, Guatemala does not fall under the category of a state where anti-corruption regulation risks retarding economic growth.
The popular will, demonstrated by the Guatemalan legislature’s willingness to approve of the international support mandate, indicates that the government is willing to do what is necessary to attack corruption head-on. Inviting the UN Commission to combat corruption is a positive step toward attacking the norms that have established themselves within the state.
In addition, while changing of norms within a political system is a long-term undertaking, the establishment of a supranational branch enhances Guatemala’s ability to battle corruption and establish new norms based on transparent and accountable governance. The supranational institution will not operate indefinitely, but the precedent the UN-Commission provides offers a new way forward beyond the tradition of ineffective and corrupt practices that have come to characterize the political, economic, and social environment in post-civil war Guatemala.
2.3. Major Organizations, Laws, and Institutions
2.3.1. Domestic Efforts
Judicial System
Businesses dealing with the judiciary face a high corruption risk. Bribes and irregular payments are often exchanged to obtain favorable decisions, and the courts
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 039 suffer from political interference. Furthermore, judicial corruption and ineffectiveness have contributed to the institution's inefficiency and to long delays in the handling of cases. Business executives perceive the courts to be inefficient in settling disputes and in challenging regulations, and judicial decisions are inconsistent (GCR 2015- 2016; ICS 2016). Foreign companies do not face any discrimination when dealing with the judicial system (ICS 2016). Enforcing contracts, taking 1,400 days on average, is significantly more time-consuming in Guatemala compared to the regional average.
In a 2015 corruption case, the Supreme Court lifted the immunity of Magistrate Marta Sierra de Stalling to later arrest her for taking bribes from attorneys of six members of an alleged tax fraud scheme in return for their release on bail. Guatemala is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Police
Businesses dealing with the security apparatus face a high corruption risk. The police are corrupt and lack the resources to operate effectively (ICS 2016; HRR 2015). Impunity is reportedly high, and the government lacks the mechanisms to investigate corruption. Recent years have seen several reports of police extortion and other abuses (Freedom House, 2015a). Guatemala is hobbled by weak rule of law and high crime rates, and businesses do not perceive the police to be reliable in protecting them from crime or in enforcing order.
The military is sometimes used by the government to maintain internal security and policing, and in recent times a pattern of military personnel exploiting their networks for corrupt and illegal purposes has emerged (HRR 2015; BTI 2016). In one case in 2014, the UN-backed CICIG accused retired military Captain Byron Lima Oliva of building a multimillion-dollar empire from controlling the Guatemalan jail system and taking bribes in return for prison transfers (Yahoo News, Sept. 2014). The Public Prosecutor’s Office initiated 12 investigations into Lima, yet none reached the courts. CICIG investigations revealed a far-reaching corrupt network including congressmen and public officials, and Lima reportedly often bragged about his close relationship with President Otto Perez Molina (Yahoo News, Sept. 2014)
Public Services
The public services sector carries a low risk of corruption. Bribes and irregular payments are not widespread in the process of obtaining public utilities (GCR 2015-2016). However, public service access highly depends on power relations, and corruption hinders the functioning of administrations (BTI 2016). Moreover, regulatory systems are opaque and confusing (ICS 2016).
040 • 2016/17 Knowledge Sharing Program with Guatemala Businesses complain of burdensome administrative procedures (ICS 2016). Obtaining permits and licenses includes lengthy processes and bureaucratic hurdles (ICS 2016). However, starting a business is less time-consuming and less costly than the regional averages (DB 2016). Even though foreign companies are in principle not discriminated against, inconsistencies and bureaucratic hurdles give local companies more familiar with these challenges an advantage (ICS 2016). The government has developed a website (Asisehace.gt) to help with business registration procedures (ICS 2016).
Land Administration
Property rights are well defined; nonetheless, poor rule of law has negatively affected property rights in practice (BTI 2016). Guatemala lacks a land registration system, creating an obstacle to landowners and paving the way for abuses, fraud, and illegalities (BTI 2016). However, registering property is less time-consuming and less costly compared to regional averages (DB 2016).
Tax Administration
The tax administration carries a moderate-to-high corruption risk. Companies sometimes give bribes when meeting with tax officials (GCR 2015-2016). Despite this, paying taxes in Guatemala is less time-consuming and less costly than the regional average (DB 2016).
Customs Administration
The customs administration carries a very high risk of corruption. Companies complain of high levels of corruption in customs transactions, even more so in ports and borders outside the capital (ICS 2016). Corruption is much more pervasive in importing than activities than exporting activities (GETR 2014). More generally, import licensing requirements are an obstacle to investment (BTI 2016).
In early 2015, a corruption case involving former president Otto Perez Molina, former vice-president Roxana Baldetti, and a number of other politicians led to countrywide demonstrations and the impeachment of the president. Investigations into what became known as the Linea (telephone line) corruption case revealed that Molina had set up a customs corruption ring with the help of high-ranking officials from the customs and tax administrations (The New Yorker, Sept. 2015). A phone conversation between Molina and Baldetti was released in which Molina was contacting the Tax Administration Superintendence director and asking the HR department to accommodate the smuggling network (Telesur, Sept. 2015). Between May 2014 and February 2015, the corruption ring, which controlled several customs
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 041 offices and the central customs administration, benefitted from substantial bribes in exchange for the lowering of customs duties on a minimum of 500 containers, charging between GTQ 20,000 and 100,000 and embezzling more than GTQ 2 million in bribes per week. Molina and Baldetti have both been in pre-trial custody since May 2015 (Latin America Herald Tribune, 25 Apr. 2016; ICS 2015).
Public Procurement
The public procurement sector carries a high corruption risk. Bribes and irregular payments are often exchanged in the procurement process (GCR 2015-2016). Furthermore, companies believe that funds are often diverted to companies and individuals due to corruption (GCR 2015-2016). There have been complaints from businesses about public procuring entities structuring requirements of tenders to favor particular foreign companies over others (ICS 2016).
All procurement contracts exceeding USD 117,570 must be submitted for public competitive bidding (ICS 2016). Nonetheless, companies have complained that government entities have been applying special-purpose mechanisms to large procurement contracts, allowing the procuring entity to avoid competitive bidding through the public tender process and make direct purchases from a pre-selected supplier (ICS 2016).
In mid-2015, a high-level corruption case involving Guatemala’s Social Security Institute was brought under the spotlight by the CICIG and the chief prosecutor. Investigations led to the arrest of 17 individuals, including the Institute’s president, Juan de Dios Rodriguez (International Justice Monitor, May 2015). Reportedly, the Institute had fraudulently awarded a USD 15 million public contract to the pharmaceutical company Pisa to deliver renal dialysis to social security patients in return for more than 15% commission and bribes to the board members (International Justice Monitor, May 2015). Pisa did not comply with the minimum requirements of the contract and lacked the required resources and capacity. All board members were jailed (International Justice Monitor, May 2015).
Natural Resources
Guatemala is a compliant country to the Extractive Industries Transparency Initiative (EITI). Recent years have witnessed several conflicts over land titles related to mining and hydropower exploration (BTI 2016).
042 • 2016/17 Knowledge Sharing Program with Guatemala Legislation
Guatemala has a legal anti-corruption framework in place, and the government generally implements the law effectively (HRR 2015). Guatemala's Penal Code criminalizes active and passive bribery, fraud, extortion, the use of public resources for private gain, and bribery of foreign officials. Criminal penalties for those who commit corruption while in public office (e.g., by charging commissions, influence peddling, illegal appointments, and passive or active bribery) include sentences ranging from five-to-ten years' imprisonment and fines (Latin Lawyer, May 2015). Money laundering is criminalized by the Anti-Money Laundering Law. Public officials receiving salaries above USD 1,040 per month are subject to financial disclosure laws, and non-compliance can incur administrative and criminal sanctions (HRR 2015). Financial declarations are available to the public upon request (HRR 2015). The Asset Recovery Law allows the Guatemalan courts to seize goods and assets derived from illicit activities (including corruption, embezzlement, misappropriation of public funds, extortion, trafficking, and money laundering).
In 2015, several public officials in Guatemala engaged in corruption: The Public Ministry reported the arrest of approximately 602 public officials during the year for their involvement in corruption and abuse of office (HRR 2015). Guatemala has ratified the UN Convention Against Corruption, OAS Inter-American Convention Against Corruption, and the UN Convention Against Transnational Organized Crime.
Civil Society
Freedoms of speech and press are protected by law, but increasing violations of these freedoms have raised concerns among international organizations (Freedom House, 2015b). Libel and defamation are criminal offenses, and authorities and other prominent persons sometimes use these laws to silence the press (Freedom House, 2015b). The newspaper El Periodico is struggling with more than 70 legal complaints and has faced 15 cyberattacks, mainly as a consequence of investigations into government corruption (Freedom House, 2015a). In 2015, two journalists were killed, allegedly for their work on corruption and organized crime in several municipalities in Mazatenango (HRR 2015). The bribery of journalists is also a problem in Guatemala (Freedom House, 2015b). The law provides for public access to government information; however, in practice it remains difficult to obtain information, particularly for journalists reporting on corruption outside the capital (Freedom House, 2015b). Journalists and reporters have encountered several attacks from public officials, who face no consequences (Freedom House, 2015b). The government does not restrict internet access or censor content; however, reports suggest authorities monitor private online chats (HRR 2015). This environment has led to widespread self-censorship among journalists; accordingly, Guatemalan media is considered “partly free” (Freedom House, 2015b).
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 043 Overall, civil society traditions are weak in Guatemala (BTI 2016). There is little cooperation between the government and civil society organizations (BTI 2016). Several activists have been victims of threats, attacks, and intimidation (HRR 2015). The law provides for freedom of assembly, and the government generally respects this right in practice (HRR 2015).
2.3.2. International Commission against Impunity in Guatemala (CICIG)
The end of civil war in Guatemala included the negotiation and implementation of several agreements to establish and maintain peace. The agreements culminated with the Guatemala Peace Accords of 1996 and the signing of the Agreement on a Firm and Lasting Peace. Recognizing that impunity was entrenched within the state, Guatemala expressed that it would battle corruption to ensure that the state could function in a transparent manner. Guatemala stated its intention to create a commission to battle impunity in order to achieve its goals.
On December 12, 2006, the government of Guatemala and the United Nations signed the Agreement on the Establishment of an International Commission against Impunity in Guatemala. On August 1, 2007, the Guatemalan Congress ratified the agreement, and it went into effect September 4, 2007. The General Assembly noted, “pursuant to Articles 55 and 56 of the UN Charter, member-states pledge themselves to take action in cooperation and support of human rights and fundamental freedoms for all.” As of 2009, the General Assembly requested that “the Secretary- General take necessary steps to enhance the UN’s role in the CICIG while addressing the operational challenges that the Commission faces.”
The Agreement establishing the Commission enumerates the fundamental objectives of the international effort against impunity. As an independent non- UN organ, the CICIG exists with the consent of the Guatemalan government and with the government’s promise to implement the mandate created by Guatemalan and UN negotiators. The CICIG depends on voluntary contributions of capital and personnel from UN member-states to carry out its mandate.
Powers of the Commission
The Agreement provides that the CICIG will “support, strengthen, and assist institutions of the State of Guatemala responsible for investigating and prosecuting crimes allegedly committed in connection with the activities of illegal security forces and clandestine security organizations, and any other criminal conduct related to these entities operating in the country.” The CICIG commits itself to “identifying their structures, activities, modes of operation and sources of financing and promoting
044 • 2016/17 Knowledge Sharing Program with Guatemala the dismantling of these organizations and the prosecution of individuals involved in their activities.”
The powers of the Commission reflect the scope of the CICIG’s anti-corruption mission within the state. The CICIG has the power to “collect, evaluate, and classify information provided by any person, official or private entity, non-governmental organization, international organization and the authorities of other states.” Furthermore, the Commission has the power to “promote criminal prosecutions by filing criminal complaints.” The CICIG enjoys “access to Guatemalan courts in accordance with the Agreement and the Guatemalan Code of Criminal Procedure.” It has the power to “join a criminal proceeding as a private prosecutor with respect to all cases within its jurisdiction.” This grant of access to the courts is important because it provides the CICIG the requisite standing to combat impunity in Guatemala.
Cooperation between the Commission and the Guatemalan government make the CICIG a unique anti-corruption mechanism. The Agreement singles out the Guatemalan Public Prosecutor, National Civilian Police, and the executive branch for cooperation with the Commission and the Guatemalan legislature. The Guatemalan Public Prosecutor is required to appoint special prosecutors that must rely on the professional staff subject to the Agreement, carry out relevant criminal investigations and prosecutions, receive support and assistance from the CICIG, and maintain coordination with the CICIG, specifically facilitating the role of private prosecutor. The National Civilian Police Force is required to form special police units to support the CICIG investigations. Guatemala’s executive branch is called to submit to the Guatemalan Congress in the areas of legislative reform of criminal investigations and judicial prosecution. Reforms are developed collaboratively between Guatemalan institutions and the UN with the goal of bringing the legal regime on a par with international human rights standards.
Legislative Reforms
The Agreement assigns the CICIG the competency to present the Guatemalan legislature with proposed reforms that strengthen the rule of law and aim to reduce overall corruption in government. The CICIG has exercised this power twice, in 2008 and in 2009, presenting the Guatemalan legislature with lists of suggested legislative reforms.
In October 2008, the CICIG submitted its first package of legislative reform proposals to the president of the Guatemalan Congress. The package addressed a wide variety of reforms covering 12 areas including immunities, criminal procedure, audio-visual testimony in criminal proceedings, witness protection and relocation, benefits of collaborators against organized crime, and arms and ammunition. The
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 045 Guatemalan legislature incorporated many of the CICIG’s recommendations in recent legislation entitled “Law to Strengthen Criminal Prosecutions.” The legislation includes many initiatives meant to strengthen state anti-corruption capabilities and the rule of law. Some of the initiatives contained in the legislation benefit members of criminal organizations that give information about their leaders. Two examples are the right of certain witnesses to give testimony through videoconference and increased severity of penalties for kidnapping and extortion.
In 2009, the CICIG submitted a second package of legislative reform proposals to the Guatemalan legislature. These proposals expanded the scope of the first package. The proposed laws contained in the second package focused on human trafficking, irregular adoptions, smuggling of migrants, sex trafficking, anti-corruption, international judicial cooperation, and disciplinary measures within the Public Prosecutors Office, National Civilian Police, and the Guatemalan Judiciary. Concerning enhancing cooperation in judicial and prosecutorial cooperation, the legislative reforms presumably look to build upon the base of cooperation established under the Inter-American Convention on Letters Rogatory and its accompanying protocol.
Much like its efforts as a prosecutor, the CICIG’s efforts promoting legislative reform may be characterized as positive efforts toward the reduction of state corruption. The CICIG’s role as legislative reformer will continue to be legitimized should Guatemala continue to adopt most of its proposed reforms, assuming that the reforms are enforced and succeed in reducing corruption and improving judicial competency. Ultimately, legislative reform will only succeed through the continued efforts of judges, prosecutors, and law enforcement officers, which can give the new laws potency against Guatemala’s corrupt and criminal elements.
Technical Assistance
A final significant area of CICIG collaboration with the Guatemala government is provision of technical advice and assistance to state institutions. Relevant advice and assistance includes anything necessary to supplement and enhance state entities involved in the prosecution and investigation of crimes involving impunity. Currently, the CICIG is involved in various assistance programs in the areas of witness protection, wiretapping, judicial reform, and security and justice.
Witness protection is critical if high-profile witnesses are to testify against the corrupt groups and individuals that infiltrate and exert influence over the Guatemalan government. A weakness of the Commission is that it lacks a specialized witness protection police force. In comparison, one of the strengths of the federal investigative and prosecutorial system of the United States is its specialized witness protection program. Thus, in an effort to build a specialized witness protection
046 • 2016/17 Knowledge Sharing Program with Guatemala police force, the CICIG trains selected National Civilian Police Academy graduates. The Guatemalan witness protection program is working to provide informants and witnesses with reassurances about their personal safety in the face of potential threats, combined with laws that encourage prosecutors to grant protection and relocation to potential witnesses.
Joint CICIG/EU involvement in Guatemala indicates that the battle against state corruption has aroused international interest and commitment. The cooperation is an encouraging sign that there are those outside the domestic realm willing to help Guatemala confront its corruption XIII problem head-on. Perhaps the only way that Guatemala can overcome its corruption problem is through collaborative efforts like the ones between the government, the Commission, and the EU program.
2.4. Open Government Policies and Outcomes
Guatemala joined the OGP on July 27, 2011 and ratified its membership in 2012. The Guatemalan government has implemented two biannual Open Government Action Plans to date, and drafted a third for the 2016-2018 period.
The OGP currently has 70 participating countries that have adhered to the Declaration of Open Government at the highest level. This process involved sending Letters of Interest to participate, and Guatemala was subject to a review before it was deemed eligible by the OGP. Two biannual national action plans have since been created by the government, civil society, and interested stakeholders. The third plan, however, will be the first National Open Government Action Plan that follows every OGP standard, from the methodology for consultation to the drafting of commitments using the SMART Method, approved by the Open Government Technical Roundtable.
The National Open Government Action Plan for 2016-2018 was drafted to unify wills and efforts of all public institutions and civil society organizations that take part in the Open Government Technical Roundtable.
The year 2015 was marked by a political and institutional crisis triggered by the criminal proceedings taken against a network of high-level state and non-state plaintiffs accused of corruption and fiscal evasion. Public mobilization demanded the resignation of the then vice president and president of Guatemala, both linked to the proceedings due to accusations of customs fraud, bribery, and crimes of conspiracy, and both currently in prison.
In this political and institutional framework, amid the social outcry and the far-reaching demands for a profound reform to the Guatemalan political system,
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 047 the Open Government initiative becomes a key mechanism for the prevention of corruption and the transformation of the public service. Representatives of public institutions and civil society came together to discuss and adhere to the 22 essential commitments that form the National Open Government Action Plan for 2016–2018 and its five core initiatives: a) Increase access to public information; b) Increase access to new technologies; c) Increase citizen participation; d) Increase public integrity and accountability; and e) Increase fiscal accountability.
The following action plan is the result of the collaboration and participation of various stakeholders that represent the public sector, including the president and vice president of the Republic, the point of contact with the OGP, state institutions, autonomous and semi-autonomous public entities, as well as members of civil society organizations and citizens through public forums and consultations.
2.4.1. First and Second National Open Government Action Plans
On April 9, 2012, the Guatemalan Government presented its first National Open Government Action Plan (2012-2014) to increase public integrity through two key commitments divided into eight actions, all aimed at the executive branch of the government. Regarding public integrity, the plan emphasized: a) Expediting administrative processes; b) Progressive eradication of secrecy in the awarding of goods, services, and public works; and c) Disclosure of results through results-based management methodologies. In terms of increasing effectiveness in the execution of public spending, the plan emphasized: a) Regulation to eradicate waste; b) Regulation for the hiring of permanent, advisory, and consulting personnel; c) Regulation of an effective, timely acquisitions plan; d) Regulation of superfluous expenses; and e) Effective use of loans and donations.
The Presidential Commission for Transparency and Electronic Government (COPRET), responsible for monitoring the action plan, reported the following actions taken:
a) Action 1: Creation of the Presidential Secretariat for Control and Transparency. It was established by means of Government Decree 37-2012 with four lines of work: anti- corruption transparency, public information, and electronic government; b) Action 2: Presentation of Transparency Law and initiatives. The Presidency sent Congress two initiatives: a) Initiative 4461 “Law of strengthening institutions for transparency and quality of public spending” and b) Initiative 4462 “Law of strengthening transparency and public spending”; c) Action 3: Implementation of results-based management methodologies; d) Action 4: Development and improvement of electronic government and access to public information.
048 • 2016/17 Knowledge Sharing Program with Guatemala Two important steps that were omitted during the creation and implementation of the First National Open Government Action Plan were the invitation to civil society organizations and other stakeholders to participate in the consultation process, and the consultation to multiple stakeholders during implementation of the plan.
The Second National Open Government Action Plan (2014-2016) was presented in June of 2014 by the executive branch of the government through the institution in charge of preparing the plan, the COPRET, as well as representatives of the civil society sector.
Drafting of this second plan was initiated one month prior to the deadline for submitting the document. A public call for participants in its creation was published in the written media, and four meetings were held with public entities and civil society organizations before the plan was presented to the OGP. The government proposed 22 commitments and the civil society sector proposed 26, for a total of 48 initiatives put forward in the action plan.
The Open Government Technical Roundtable was formed and consolidated with representatives of entities responsible for commitments, the three organizations representing the civil society sector (ICEFI, Transparent Congress, and Guatecívica), and the Independent Revision Mechanism, and met once a month.
The OGP point of contact held roundtables with the civil society sector and the MRI to analyze level of completion for each initiative and to choose which commitments would be discussed during meetings of the Open Government Technical Roundtable.
Five basic actions that encompass the 48 commitments put forward by government and civil society were identified in the National Open Government Action Plan for 2014–2016 as follows:
a) Increase in public resources; b) Transparency and citizen participation; c) Increase in public integrity and accountability; d) Improvement in public resources; e) Natural resources governance.
In the Mid Term Self-Assessment Report, the institution in charge of monitoring completion stated that 28 of the 48 commitments made in the Second National Open Government Action Plan for 2014–2016 were completed, while 14 were substantially advanced and six had limited progress. The following initiatives put forth in the Second National Open Government Action Plan were completed:
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 049 a) Establishment of the Open Government Technical Roundtable creation of national catalog of online public services; b) Implementation of systems to make tax exemptions and exonerations more transparent; c) Day-long dialogues for citizen participation; d) Advances in transparency for processes regarding loans and donations; Translation of the Access to Public Information Law into 20 Mayan languages; and Creation of technical working groups with representatives of different sectors; e) Publication of clearance certificates of public officials extended by the General Comptroller’s Office; f) Creation of a Manual for Standardization of executive branch web portals, and Implementation of the Transparency School; g) Implementation of the guide for the evaluation of Public Information Units for ministries, secretariats, and other public institutions in the executive branch implementation and follow-up of the Construction Sector Transparency Initiative (COST) and the Extractive Industries Transparency Initiative (EITI); h) Implementation of Open Budget on web portals of the executive branch; and advances in the institutionalization of the first level of health assistance; i) Advances in compliance with the new Fiscal Transparency Code and Manual of the International Monetary Fund; j) Design and implementation of manuals, guidelines, and technical provisions for accountability; k) Improvement of Public Information Systems; l) Publication of budget-related documents and mechanisms for citizen participation in open budgeting; m) Publication of expenditures and resources earmarked for repairing damage caused by natural disasters; n) Creation of technical roundtables in different areas such as civil society, inter-agency relations, academic sector, business sector, health, electronic government, and public information.
2.4.2. Third National Open Government Action Plan (2016-2018)
The Open Government Technical Roundtable constitutes a permanent space for dialogue between public entities and the representatives of the civil society sector that participate in the initiative. It has also become a mechanism for accountability, verification, and monitoring of compliance to Action Plans that evidences the joint efforts toward its drafting and fulfillment.
The consultation and drafting period for the Third National Open Government Action Plan was postponed when the institution in charge of Open Government
050 • 2016/17 Knowledge Sharing Program with Guatemala in Guatemala was not assigned a budget for 2016. This made it impossible for the COPRET to continue upholding the 48 Open Government commitments contained in the plan and brought about a three-month delay in the drafting of the third biannual plan.
On March 31 of 2016, President Jimmy Morales appointed Zaira Mejía as the new point of contact with the OGP. She was presented publicly to the Alliance for Transparency (Alianza por la Transparencia) on April 4 as the person responsible for Open Government initiatives in the country, charged with reactivating the Open Government initiative together with César Cabrera, the Open Government contact before the OAS, the completion and follow-up of the Second National Open Government Action Plan 2014-2016, and the drafting of the Third National Open Government Action Plan 2016-2018.
The OGP point of contact immediately began the calls for participation in drafting the plan. This began first among members of an inter-agency working group that had previously participated in Open Government and then among different institutions of the executive branch that had already participated, along with other public entities and civil society organizations that expressed an interest in voluntarily participating in the drafting of the new plan.
The contact with OGP also received the support of the OAS through Ambassador Milagro Martínez, in the initial phase through which awareness was raised in different social sectors. The various visits and meetings held in this preliminary phase later became part of the diagnostic paper “Situation and challenges to Open Government in Guatemala,” commissioned by President Jimmy Morales to Luis Almagro, Secretary General of the OAS.
New participants were invited during this process, along with those who had already participated in the Open Government initiative in Guatemala: 11 civil society organizations, ministries and secretariats of the executive branch, the Congress of the Republic, the General Comptroller’s Office, San Carlos University of Guatemala, the Superintendence of Tax Administration (SAT), the INAP, the SENACYT, the Vice Ministry of Technology of the Ministry of Governance (Ministry of the Interior), the National Institute for Municipal Development, and the National Association of Municipalities (ANAM), among other institutions that have joined the Open Government Technical Roundtable.
The support of the OAS was extremely important in this stage, and initial meetings of the Open Government Technical Roundtable were held in its central offices.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 051 The methodology for the consultation process and the drafting of the plan was based on OGP directions and good practices, as well as internal country needs identified through the open call to participation and proactive participation of citizens in the process, together with a lack of financial resources of the OGP.
The Third National Action Plan includes some goals from the Second Open Government Action Plan 2014-2016, which were included specifically to provide continuity to the plan. An in-depth revision of commitments acquired by the country in the second document, together with results from the Independent Review Mechanism (MRI), allowed for a clear definition of the most relevant initiatives and the importance of their continuity. The objectives included twice in the second plan were consolidated, correcting these errors.
The methodology to be used for drafting the Third National Open Government Action Plan 2016-2018 was approved on May 12, by the Open Government Technical Roundtable. Before setting the dates for the methodology and activity schedule, the contact consulted plan deadlines with the OGP Support Team, to ensure that the country would comply even though the consultation process began four months behind schedule. The OGP Support Team responded that although the June 30 deadline could not be altered, Guatemala could submit their plan to the OGP on August 31 at the latest without a report of non-compliance. The methodology and activity schedule was thus designed to allow for a submittal on that date. All information related to the methodology, activities, and consultation process was published on the website gobiernoabierto.transparencia.gob.gt.
The methodology for the Third National Open Government Action Plan 2016- 2018 was designed to draw from five central themes:
a) Access to Public Information and Institutional Archives b) Technological Innovation c) Citizen Participation d) Accountability e) Fiscal Transparency
On May 17, 2016, President of Guatemala Jimmy Morales made a public call for a consultation to inform the Third National Open Government Action Plan 2016- 2018, during a press conference with Vice President Jafet Cabrera, the Secretariat for Hemispheric Affairs for OAS James Lambert, the Minister of Public Finances Julio Héctor Estrada, the OGP Point of Contact for to OAS César Cabrera, and the OGP Point of Contact to Guatemala, Zaira Mejía.
052 • 2016/17 Knowledge Sharing Program with Guatemala During the press conference, Guatemalan President Jimmy Morales called for public institutions, state organizations, decentralized and autonomous entities, and civil society organizations to participate in drafting the National Open Government Action Plan 2016-2018.
On May 19, 2016, the OAS and the Guatemalan government organized the forum “Tools for Open Government,” attended by the president and vice president of the Republic, high-ranking government officials, OGP points of contact, civil society organizations, the diplomatic community, and interested stakeholders. President Jimmy Morales reiterated his call for all sectors of society to participate in drafting the Third Open Government Action Plan 2016-2018 and requested support and active involvement from the different institutions of the executive branch of government as well as representatives of the civil society.
On May 25, 2016, the institutions that then formed the Open Government Technical Roundtable were convened to discuss the methodology and activity schedule for Guatemala, Quetzaltenango, and Alta Verapaz: civil society organizations, the executive branch, the Congress of the Republic, the General Comptroller’s Office, San Carlos University of Guatemala, the National Registry of Persons (RENAP) and the SAT.
The interest and collaboration shown by all public institutions and civil society organizations toward achieving the best results possible was at that time very valuable, especially given the limitations and time constraints of all. It is important to recognize the support of San Carlos University of Guatemala, which donated facilities, helped with logistics, and provided local facilitators for the three regional forums. It is also important to recognize the collaboration and support received during the open consultation forums, thematic roundtables, and technical open government meetings from USAID through Counterpart International, an organization that executes projects for the strengthening of civil society organizations.
An open call for hiring of facilitators was necessary for regional forums. Ten facilitators were selected and divided by the five central work themes. Each topic also had a government facilitator and a representative of the civil society sector, trained on June 6, 2016, and was certified by the INAP. Facilitators were later in charge of holding discussions with citizens and collecting input and citizen opinions for drafting of commitments during thematic roundtables.
Guatemala has joined efforts to improve levels of transparency through the implementation of international initiatives such as COST, EITI, and STAR, creating permanent spaces for the participation of all sectors of the citizenry, improving
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 053 effective communication, with the aim of promoting democracy that is healthier and more transparent.
Another breakthrough has been the unification of criteria through portals – that is, improving the presentation of the services in the web pages of each institution –, which has facilitated the search of the services by the users. The State of Guatemala, through the COPRET, has implemented a telephone call center in order to address all types of non-conformities in terms of the provision of the services of state institutions, generating interaction between citizens and officials.
A transparency guide is also being drafted, which includes a citizen budget explained in a simple and clear way so that all citizens can understand it, thereby complying with one of the documents required to be published by the International Budget Partnership (IBP), which will be published on all websites.
2.5. Conclusion
The Guatemalan Congress approved the Law on Access to Public Information in 2008, but there is evidence that not all the institutions related to all public administration sectors are complying with the important articles of this Law. Findings indicate that the public does not have access to sufficient relevant information, and there is no way of it being analyzed if the institutions are not delivering the information requested by the public in the framework of the Law.
As we have seen, the Guatemalan government has put much effort into increasing transparency through laws, institution-buildings, as well as technical means such as OGP and e-Government, but little progress has been made. Why? This is a fundamental question that must be answered. We can get some ideas of the answers from other countries’ experiences, but a fundamental difference between South Korea and Guatemala lies in whether policies are actually implemented or not. Although South Korea is not a perfect example of a transparent country, it has experienced transition from a country of huge corruption to a country of relative transparency. Let us look at the long journey of South Korea, which is still trying to eradicate corruption and to build a transparent country.
054 • 2016/17 Knowledge Sharing Program with Guatemala 3. Korean Experiences with Transparency and Open Government 3.1. Brief Overviews of Korea’s Efforts for Eradicating Corruption3)
As a country that restored its national independence in 1945, corruption was rampant in the public sector of South Korea. About 40 years of colonial experiences had the strong legacy of the perception that deceiving public officials is not something bad. Bribing was rampant, including express fees for speedy provision of service. Partly due to this legacy and partly due to the extremely low salaries of public employees, corruption was endemic. Citizens took it for granted that anything related to government and public services would require certain kinds of extra money or entertainment, meaning that public services were something that public officials would provide as special services instead of citizens’ rights.
In order to eradicate corruption, the Korean government enacted numerous laws and administrative orders and tried many times to clean up the public sector. However, most of these efforts up to 1960 were implemented sporadically and did not produce the expected results. In 1961, when the military government under Park Chung Hee came into power, it tried to remove those called “illicit fortune makers,” who made lots of money with the help of former corrupt high public officials. Nevertheless, those who were arrested were quickly released because they were the people who ran major businesses, and they were the main sources of political funds after all.
In 1981, a systematic effort was made to increase integrity of public officials. The new military government under President Chun Doo Hwan enacted the Law on Ethics of Public Officials, and the Ethics Charter of Public Officials was promulgated. However, this was undertaken as an effort to justify another military government and was viewed as a gesture to win popularity among the general public. As such, policy efforts for anti-corruption were sporadic, and actual outcomes were short- lived.
Since South Korea had been fully democratized in 1987, major efforts were begun to increase transparency and reduce corruption levels in government. The Law on Ethics of Public Officials underwent full-scale amendment in 1993 and again in 1994. Through these amendments, all public officials of the fourth rank were required to register their properties, including those of their spouses, children,
3) Much of the content of this section came from the National Integrity Commission (2002) and ACRC (2008).
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 055 and parents. In some specific agencies such as tax offices, police departments, and prosecutor’s offices, public officials of the fifth and sixth ranks also had to register all their personal properties. All officials from the third rank and up and all political appointees were required to make available all registered property information through an official gazette. Moreover, this property registration is done every year, meaning that anyone who makes illegal fortunes is easily identified publicly. Local media always report who has what and how much and whose assets have increased and/or reduced.
A big difference between Guatemala and South Korea is found in this system. In Korea, the person and/or organization accountable for this property registration system is clearly identified in the law, and the punishments are also clearly identified against those who violate this article.
Another big step for anti-corruption was the adoption of the “real-name financial system” in 1993. In Korea, huge financial scandals have occurred from time to time. One such case was the Lee Chul-hee and Chang Young-ja Scandal in 1982. Since then, adoption of the real-name financial system has been discussed but not actually adopted because people were afraid of the potential negative impacts of the system. In fact, politicians were afraid of collecting political funds, and business people were afraid of providing them in return for big favors from the government. Thus, it was a matter of deprivation of vested interests of those with political power. President Kim Young Sam, a long-term leader of the democratic movement, abruptly took action to adopt the real-name financial system within six months of his inauguration.
In order to increase openness of administrative processes, two additional enactments were made in 1996. The Law on Opening Public Information and the Law on Administrative Process were enacted to increase transparency in all public administration. Again, both include articles to guarantee the actual implementation.
An important groundbreaking enactment was made in 2001. The Kim Dae Jung government enacted the Anti-corruption Law and The Law on Prohibiting Money Laundering in the same year. The Anti-corruption Law was a basic law to eradicate corruption. It created the Anti-corruption Commission directly under the president. The Commission began to play a major role in controlling corruption in the public sector. Citizens can report any corrupt behaviors they have experienced. The Commission could make any recommendations for institutional reform, policy recommendation, evaluation, and collaborating with other public organizations for reducing corruption. The Money Laundering Act was a powerful policing function for all illegal money transfers to the Financial Supervisory Commission at that time.
In 2004, Roh Moo Hyun’s government added electronic means in opening public
056 • 2016/17 Knowledge Sharing Program with Guatemala information, which made a standardized format for opening information and allowed easy access to public information. Another important change in the property registration system for public officials was made in 2005 regarding stocks. Anyone who owns stocks over a certain value has to register them and then blank-trust it to another agency. In addition, integrity test and corruption impact evaluation were undertaken, and the results of them were reflected in the performance evaluation of each public organization.
In 2008, the ACRC was established as a main organization responsible for anti- corruption, transparency, as well as civil rights promotion. Before 2008, there were three organizations: Anti-corruption Commission (since 2001), National Ombudsman Office (since 1994), and Administrative Trial Committee (since 1983). The Lee Myung Bak government integrated those three organizations into one in order to make a more streamlined government.
Another important law was enacted in 2011 to protect whistle-blowers. Whistleblowers are those who report any corrupt and/or illegal behavior against the public interest. Since it was first enacted, the law has been amended several times. The most recent was on January 15, 2016, according to which reporting in the public interest is protected and rewarded.
In November 2016, the Improper Solicitation and Graft Act was implemented. This law, which was often called the “Kim Young Ran Act,” named after the former Chairwoman of the ACRC and former Supreme Court Justice who proposed it, covers public officials, teachers, and professors, as well as media people. It prohibits any illegal soliciting and receiving money from citizens. Limits are identified, and all others have to be reported to their own organizations. Anyone can report the violation of this law and will be protected and rewarded by the law on protecting whistleblowers. Although there can be some uneasiness and negative impacts of this law on economic activities, especially for small businesses, it seems that Korea’s corruption level would be decreased dramatically with this law.
3.2. Current Anti-Corruption Policies in Korea4)
3.2.1. Coordinating National Anti-Corruption Policies
As the prime organization responsible for anti-corruption at all government levels, the ACRC tries to coordinate and mobilize government-wide efforts to fight against corruption. Thus, close discussions and coordination with other government agencies are necessary to prevent corruption in both short- and long-term perspectives.
4) Details of current anti-corruption policies are available in ACRC (Dec. 2015), and the official website of the ACRC (http://www.acrc.go.kr).
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 057 First, the ACRC conducts an annual integrity test for public organizations. It evaluates the integrity level of public organizations every year by surveying citizens who have actually experienced with particular public services during the past year. The ACRC also evaluates the anti-corruption programs actually adopted by public organizations on a regular basis. The primary goal of these evaluation is to encourage public organizations to take voluntary actions to fight against corruption.
Second, the ACRC tries to close legal and regulatory loopholes that may produce corruption. It makes policy recommendations to assist government agencies to correct ambiguous, corruption-prone laws and regulations, and regularly checks whether its recommendations are actually implemented or not.
Third, the ACRC also analyzes the potential impacts of corruption embedded laws and regulations. This is referred to as the Corruption Impact Assessment (CIA). The CIA is an analytical tool designed to find out and remove corruption-causing factors in advance in laws and regulations. Under this system, all proposals for new laws and/or amendment of the existing laws is reviewed for any possibilities of incurring corruption practices.
3.2.2. Raising Public Awareness and Public Private Partnership
One of the key success factors of fighting against corruption is collaboration among public organizations as well as increasing public awareness on corruption.
The ACRC carries out many public awareness programs to stimulate cooperation and participation on the part of citizens to increase national integrity. To raise the awareness of potential risks involved in corrupt actions and to build up a sustainable national integrity system, the ACRC put much emphasis on anti-corruption education as well. To undertake this, the Anti-Corruption Training Institute (ACTI) was established directly under the ACRC as a specialized anti-corruption training institute of Korea. It opened in Cheongju City on October 25, 2012. The ACTI’s major goal is to change public officials‘ attitudes as well as to improve their ethical standards. It is true that reactive measures such as detection and punishment are needed to prevent corruption and enhance integrity. However, a more fundamental solution to corruption problems is to make a culture of integrity take root in society so that public officials will refrain from corruption and serve the people more actively. The ACTI’s training programs are systematically designed to help enhance the learners‘ sensitivity to integrity.
The ACTI’s training program has two objectives. One is to teach public officials ethical regulations and how to deal with ethical dilemmas in their actual working circumstances. The other is to increase public officials‘ ethical standards. ACTI
058 • 2016/17 Knowledge Sharing Program with Guatemala provides diverse training programs aimed at raising integrity sensitivity of individuals and improving integrity levels of organizations. In addition, ACTI organizes training programs for students in order to disseminate a culture of integrity throughout society.
ACTI’s training programs are offered in various forms, including discussions focusing on case studies, practical exercises, and group work as well as lectures. Its programs range from a journey to explore the meaning of integrity, drama about the everyday life of a public official, a talk show on integrity, consultation on the way to increase organizational integrity, and meetings with whistleblowers, to self- assessment of individual integrity competence.
ACTI’s most popular program is what is called the "Integrity Concert." It provides a variety of situations that public officials may encountered in their daily lives in order to stimulate their emotions and change their way of thinking corruption. Different sessions are provided in the form of diverse interesting and impressive cultural performances during the concerts, demonstrating the importance of integrity in public organizations.
Promoting public–private partnership to fight corruption is also important success factor. As a government agency, the ACRC cannot monitor corruption that occurs everywhere. Thus, the ACRC supports to the management of the Policy Council for Transparent Society (PCTS), dedicated to promoting public–private partnerships against corruption.
The PCTS helps civil groups operate as local Anti-Corruption Centers. These local centers are conducting corruption prevention activities such as monitoring, training, and integrity-promotion campaigns. The ACRC also helps businesses in matters regarding ethical management and provides recommendations for standard codes of business ethics.
Another effort being made by the ACRC is participating international efforts in fighting against corruption. The ACRC maintains cooperative relations with global anti-corruption entities as well as those of other countries in fighting against corruption. Among others, the UN, OECD, APEC, and TI are important global partners to promote and implement international conventions with such activities as the UN Convention against Corruption and the OECD Anti-Bribery Convention. Recently, the ACRC has been actively responding to calls from the international community to help other countries enhance their anti-corruption capacity.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 059 3.2.3. Monitoring and Detecting Corrupt Practices
As was explained earlier, any person may report an act of corruption, a violation of the public interest, or a violation of the “Improper Solicitation and Graft Act“ to the ACRC. If people report with appropriate evidence, they are protected as whistleblowers.
To enhance ethics in public administration, the Code of Conduct for Public Officials was introduced in February 2003 as an ethical guideline for public officials. It is a generally accepted model code of conduct. Based on this model code, government agencies have introduced their own codes of conduct reflecting uniqueness of individual organizations. The ACRC monitors the compliance with the codes of conduct and investigates violations of these codes by public employees.
The concepts and types of corrupt acts, and/or violation of the public interest, improper solicitation, and graft are provided in various laws concerning anti- corruption and improper solicitation. The processes with which corruption reports are dealt are shown below.
[Figure 1-1] Flowchart of How Corruption Reports are Processed
Informant ACRC ACRC
Reports corruption to Receives reports & Refers the case to ACRC confirms fact investigative authority
ACRC Investigative Authority Investigative Authority
Notifies informant of Notifies ACRC of result Conducts investigation result
Source: http://www.acrc.go.kr/en/board.do?command=searchDetail&method=searchList&menuId=020310
The ACRC may investigate the reports and may directly charge “high-ranking” public officials suspected of corrupt conduct. It may request reinvestigation if it deems the initial investigation inadequate. If an accusation against high-ranking officials is dismissed despite of ACRC’s investigation, the ACRC may request for adjudication with the High Court.
060 • 2016/17 Knowledge Sharing Program with Guatemala 3.2.4. Protecting and Rewarding Whistleblowers
3.2.4.1. Protection for Disclosure of Corruption
Since the ACRC cannot monitor all possible corrupt actions within and outside government, ensuring the proper functioning of the monitoring system is very important. If corrupt actions are difficult to monitor, public employees may think that their corrupt actions would not a low chance of being detected. In order to detect and monitor corrupt actions in public organizations, we need inside informants to report because it would be very difficult to detect corrupt action of public employees from outside. However, if inside informants were not protected properly, there would not be many whistleblowers.
The ACRC maintains several policies to protect whistleblowers. First, it provides an employment guarantee. When whistleblowers have experienced or are expected to suffer from any maltreatment in their employment or in their working conditions due to the whistleblowing, the ACRC can take actions to correct them, including reinstatement to their original position, arrangement of for different posts, and deferment of disciplinary measures against them.
Secondly, the identities of whistleblowers have to be kept secret. The Act on Anti-Corruption and the Establishment and Operation of the ACRC prohibits ions of disclosing or alluding to the identity of whistleblowers without their consent. It is also illegal to disclose their personal information.
Thirdly, physical safety of whistleblowers is guaranteed. The ACRC may ask the head of the competent police authority to take relevant steps to protect whistleblowers, their collaborators, relatives, or cohabitants, should they feel threatened as a consequence of reporting corruption.
Fourthly, financial rewards are provided to whistleblowers. The ACRC will provide whistleblowers with rewards of up to KRW 3 billion (about USD 3 million) if their report has contributed directly to recovering or increasing revenues or reducing expenditures for public agencies. In addition, the ACRC may grant or recommend awards if the whistleblowing has served the public interest.
3.2.4.2. Protection of Public Interest Whistleblowers
The ACRC provides special protection mechanisms to protect whistleblowers, especially when in the public interest. “Violation of the public interest” means an act that infringes on the health and safety of the public, the environment, consumer interests and fair competition, etc. and is subject to 1) any penal provisions defined
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 061 in the laws listed in an attached table of the “Act on the Protection of Public Interest Whistleblowers,” or 2) an administrative action such as the cancellation or suspension of a permit or license.5)
First, whistleblower confidentiality is kept. According to the Act on the Protection of Public Interest Whistleblowers, it is banned “to disclose to or publicize to any third party personal information concerning the public interest whistleblower, etc., or other facts that imply the identity of the whistleblower.”
Second, protection of personal safety is also provided. The ACRC may “request the police to take protective measures for a public interest whistleblower (and his/ her relatives) when they have faced or are likely to face serious danger to their lives” as prescribed by the law.
Third, another protection is the prohibition of disadvantageous measures. A public interest whistleblower may request the ACRC to take necessary measures to recover his/her original status when he or she has been dismissed, lost positions, or disadvantaged because of the whistleblowing itself.
Fourth, rewards and relief money are provided. When a public interest whistleblowing directly results in the recovery of or increase in revenue, the ACRC provides the whistleblower with a reward of up to KRW 2 billion (about USD 2 million). In addition, when the whistleblowing itself causes damages or expenses such as medical treatment, residential relocation, litigation, wage loss, or other causes, the ACRC provides relief funds as well.
With these measures, the ACRC expects that inside informants are encouraged to report any corrupt conduct that may harm the public interest as defined earlier.
3.3. e-Government and Open Data Policies in Korea
3.3.1. e-Government and Open Data Policies in General
Korea has been well known for its e-Government policies. For example, Korea ranked 15th in 2002 UN e-Government Development Index (EGDI), but it ranked first starting in 2010 for three consecutive evaluations. Although it dropped to third position in 2016, the government of Korea has been widely regarded as the front-runner in the area of e-Government services. With e-Government services and infrastructure, Korea has been able to increase transparency in public services
5) The term “public interests” has been appeared in many laws such as the Special Act on the Safety Control of Public Structures, Food Sanitation Act, Natural Environment Conservation Act, Medical Service Act and other 177 laws.
062 • 2016/17 Knowledge Sharing Program with Guatemala as well. Since the overall processes and the current status of e-Government policies have been covered by my previous KSP project on Guatemala as well as by one of the module reports published by KDI, only recent developments focusing on open data policies will be introduced here.6)
Korea began a major ICT take-off in the mid-1980s, and invested heavily in constructing broadband infrastructure in that period. e-Government policies began in 1987 when five backbone networks including the public administration network started to be constructed. However, major systems development for services was undertaken during the Kim Dae Jung and Roh Moo Hyun governments (2001- 2008). Since most infrastructure and platforms for services had been introduced by 2008, subsequent governments have paid much attention to increasing the actual utilization of e-Government services and to providing what is called Government 3.0, or personalized government services to citizens and businesses. Visions of Government 3.0 include service-oriented, transparent, and competent governance.
While e-Government has received attention in Korea for a relatively long period of time, the open data policy is rather a recent effort made by Park Keun Hye’s government. To pursue systematic policies for opening public data, the Korean
[Figure 1-2] Organizational Structure of ODSC, 2016
Open Data Strategy Council (a deliberating body)
Open Data Strategy Working Committee
Open Data Strategy Specialist Committee
Officer in Charge of Providing Public Data (general management of related affairs Ministry of The Interior for public organizations)
Open Data Mediation Committee (mediating disputes over refusal or termination of data provision)
Open Data Forum Korea Open Data Center (channel and forum (policy and technical support) for public-private cooperation)
Source: http://www.odsc.go.kr/user/nd87929.do
6) For the details of e-Government policies of Korea, please refer to the following: Hong (2015), Lee (2012), and Chapter 2 of this report.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 063 government has created an independent council co-chaired by the prime minister and a private specialist, which is named the Open Data Strategy Council (ODSC). The ODSC is an organization that deliberates, coordinates, monitors, and evaluates the government’s policies to open data and related plans and their implementation. Public data refers to all databases, electronic files, etc., that government and public sector organizations have electronically created or acquired and are managing. The structure of the ODSC is shown below. As shown in the figure, ODSC is supported by working committees and specialist committees, and the Ministry of Interior is serving as the main supporting organization.
Whether certain data are going to be open to the public would be decided by the head of each public organization even though opening data is highly encouraged by ODSC. The procedure for opening public data is shown in the figure below. Once opened, data should be registered on the Open Data Portal (www.data.go.kr). As shown below, the Open Data Portal has three types of data: file data, open API, and standard data. Since its creation in 2014, the ODSC has met eight times, and created two basic plans and numerous reports guiding, monitoring, and evaluating open data policies. The primary purpose of its activities is to maximize the potential benefits of ICT and e-Government by opening up public data and to make people use them as much as possible. It also stimulates start-ups and ventures to use big data in the public sector, or combining them with those of the private sector. As of September 2016, 16,933 files, 2,038 APIs, and 17 standardized data are opened to the public, and widely used.
[Figure 1-3] Standard Procedure of Opening Public Data
Public Organizations Open Data Strategy Council Ministry of The Interior
1. Deciding whether to provide data 2. Deliberation and decision 3. Public Notice
Decision lies with the head of each public Decision lies with the head of each public Decision lies with the head of each public organization, (Legal basis: the scope of public data organization, (Legal basis: the scope of public data organization, (Legal basis: the scope of public data to be provided in accordance with Art. 17 of Act on to be provided in accordance with Art. 17 of Act on to be provided in accordance with Art. 17 of Act on Promotion of the Provision and Use of Public Data) Promotion of the Provision and Use of Public Data) Promotion of the Provision and Use of Public Data)
4. Announcement on the homepage 5. Registering data on Open Data portal (data.go.kr).
Source: http://www.odsc.go.kr/user/nd87929.do
064 • 2016/17 Knowledge Sharing Program with Guatemala [Figure 1-4] Korean Open Data Portal, 2017
Source: http://data.go.kr/main.do;jsessionid=pqmckt3ef7PbDHAZxCkCP0Vi.node20?lang=en
3.3.2. Specific Applications for Anti-Corruption
Essentially, e-Government systems are all designed to contribute transparency in public administration because all actions and decisions made through e-Government systems are saved in the server. This indicates that government actions are all recorded when they occur. However, we can point out two specific applications to promote transparency and/or anti-corruption: one at the local government level and the other at the central government level.
3.3.2.1. OPEN System in Seoul Metropolitan City
The Online Procedures Enhancement for Civil Applications (OPEN) system was first introduced in 1999 in Seoul Metropolitan Government (SMG). The system was developed to increase transparency in public services. Citizens can use public services online without visiting public offices. Once applied, applicants can access the city government online and actually check whether their applications are processed. If
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 065 it takes longer than usual, applicants also can contact the office directly online and find out why the applications have not been processed. OPEN system allow all these activities through online, and people can access it online 24/7/365.
According to a study by Choi (2007), who analyses the effects of the OPEN system on reducing corruption, the actual corruption that occurred in the SMG demonstrated significant decline after the introduction of the OPEN system. However, other local governments also showed similar reductions in corruption, meaning that overall Korean society has shown a significant decline in corruption in the early 21st century. Nevertheless, we have to note that the Korean government adopted e-Government systems heavily at that time, and we thus cannot deny that the reduction of corruption is a direct outcome of e-Government. Although we cannot conclude the reduction of corruption in Seoul is the direct outcome of the OPEN system itself, it is fair to say that e-Government has positive effects on reducing corruption.
In addition to the OPEN system, SMG has continued to develop various e-Government systems, as shown in the figure below, and has actively promoted internet applications. For example, SMG’s e-Government systems such as the Online Discussion Forum and 10 Million Citizens’ Imagination Oasis have received UN Public Service Awards in 2008 and 2009, respectively.
Seoul ranked first in the UN e-Government survey for five consecutive years starting in 2003. In addition, Seoul has been elected as the president city of WeGo
[Figure 1-5] Overview of e-Government Development of Seoul Metropolitan City
Seoul is HERE
Simple Ubiquitous Information Smart Phone Sharing Shift toParadigm Smart Integration and Online Coordination Stage 4 Participation SNS, Safety Smart Stage 3 Stage 2 Networked Stage 1 Online Computerized Mobile-based public service Web-based public sevice Online participation IT resource integration Database & Website Development
1990 1999 2007 2011 2015
Source: http://workspace.unpan.org/sites/Internet/Documents/UNPAN090186.pdf
066 • 2016/17 Knowledge Sharing Program with Guatemala (World e-Governments Organization of Cities and Local Governments), which was officially launched in September 2010. SMG has established more than 1,500 free Wi-Fi zones to allow free access to the internet. These efforts are contributing to reducing corruption by increasing transparency, though it is difficult to measure the exact number of reduction rates.
3.3.2.2. e-People System (http://www.epeople.go.kr)
Another application directly related to corruption is the e-People system. Its Korean name is “Kookmin Sinmungo.” Kookmin means people, and a Sinmungo is a big drum that was installed near the gate of the main palace during the Joseon Dynasty. Its purpose was to allow people to make their complaints known directly to the king. Borrowing this lofty idea, e-People is a complete online system that integrates all communication channels of administrative organization to the people into one to upgrade the whole function of administrative judgment and corruption reporting as well as petition, proposal, and policy discussion services. People can make their voices heard anywhere in the world anytime.
It is operated by the ACRC, and it received a UN Public Service Award in 2011. It provides integrated services of 47 organizations in central government, 244 local governments, 144 diplomatic offices, 195 school districts, offices of the judicial branch, and numerous public institutions. Even foreigners can make their voices heard.
4. Results of Online Survey on Corruption in Guatemala 4.1. Summary of the Online Survey
In this study, we have conducted an online survey to diagnose the corruption perception level and determine how it was related to individual behavior, and to identify the main causes of corruption and effective policy tools to fight against corruption in Guatemala. Questions were prepared by the researcher collaborating with local consultants and referring to other questionnaires conducted by the UN in measuring corruption perception in East Timor.
4.1.1. Contents of Survey
The survey consisted of three parts.7) The first part has 15 questions about
7) The actual survey questions were included in Appendix 1.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 067 background information of respondents including gender, ethnic group, age, religion, marital status, size of household, public employee or citizen, and so on. For public employees, questions on the years of serving in government, position within the organization, contract types, education level, and areas of institutions are asked. For citizens, several questions are asked to discern their experiences with public organizations and/or services.
The second part is about corruption. It has seven big questions, and many sub-questions under each big question. It specifically asks about the corruption perception level in general, corruption perception of public organizations/services, top two most corrupt organizations/services, seriousness of corruption, types of corruption, and methods of fighting against corruption.
The third part is about the perception about individual and organizational behavior. It has four big questions under which there are many sub-questions that ask how people perceive the ethical behavior of individuals and organizations, as well as in interpersonal relations within their own organizations.
4.1.2. Online Survey Process
The online survey was conducted from November 15 to December 31, 2016, using SurveyMonkey. Before distributing the survey link to actual respondents, we conducted a pilot test to several public employees, representatives from civil society, businessmen, and researchers from a think tank in Guatemala. They have provided valuable advice to improve the questions.
During the pilot test, we measured the average time to answer the questions. If it took too long to answer, people would not concentrate on the questions, thus lowering the quality of answers. After many trials, we tried to design the questionnaire to be answered within 15 minutes.
The survey questionnaire was translated into Spanish by local consultants and put on line on November 10, and several pilot tests were undertaken to make sure the online survey would be conducted as planned. After all these preparations, the survey link was passed around to public employees, citizen groups, and all the contacts we have developed through conducting the KSP project. The INAP passed the survey link to public employees by using its mailing list.
In total, 651 people answered the online survey, of whom 405 were public employees. Although it does not reflect the population systematically, the results of this online survey provide important points of reference to understand the corruption perception in Guatemala.
068 • 2016/17 Knowledge Sharing Program with Guatemala 4.2. Summary of Findings
4.2.1. Background Information
The table below summarizes the characteristics of all respondents. A total of 651 participated the online survey, among whom 405 (62.2%) were public employees and 237 (36.4%) were citizens. While gender distribution is quite balanced, ethnic background is highly concentrated into Mestizo, with 509 (78.2%). Age groups seem to have close-to-normal distribution, but religious groups are highly concentrated into Catholic and, to a lesser extent, Protestant.
An interesting fact is found in the years of experience data among public employees, where 223 people or 55.1% report up to 10 years of experience, while about 45% of respondents report having served more. This is quite interesting given the fact that many public officials leave the government every four years. We can deduce from this that the people who participated in this survey are working in the public sector longer than the average. This is indirectly verified by the fact that more than 62% of the respondents have permanent contracts (contract types 011 or 018). That is, many people have permanent contracts, meaning they have served longer periods of time in government.
Summary of Background InformationMale Female No Answer Total
Gender 338 301 12 651 (51.9%) (46.2%) (1.8%) (100%) No Maya Garifuna Xinxa Mestizo Others Total Ethnic Answer Group 52 4 4 509 66 16 651 (8.0%) (0.6%) (0.6%) (78.2%) (10.1%) (2.5%) (100%)
Under 30 31-40 41-60 Over 61 No Answer Total
Age Group 128 211 255 40 17 651 (19%) (32%) (39%) (6%) (4%) (100%)
Catholic Protestant Others None No Answer Total Religious Group 370 107 79 81 14 651 (56.8%) (16.4%) (12.1%) (12.4%) (2.2%) (100%)
Public Employees Citizens No Answer Total Current Jobs 405 237 9 651 (62.2%) (36.4%) (1.4%) (100%)
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 069
ContinuedPublic Employees Citizens No Answer Total Current Jobs 405 237 9 651 (62.2%) (36.4%) (1.4%) (100%)
Years of 0-10 years 11-20 years 21-30 years 31 years or more Total Experience 223 118 46 18 405 (PE) (55.1%) (29.0%) (11.3%) (4.6%) (100%) Institutional Operating Administrative Director Others Total Position Authority Level (PE) 61 225 65 12 47 405 (14.9%) (54.9%) (15.6%) (2.9%) (11.5%) (100%) 011(%) 022(%) 029(%) 018(%) Others (%) Total Contract 1) 245 60 9 26 405 Types (PE) 65 (16.0%) (60.3%) (14.7%) (2.2%) (6.8%) (100%)
Note: 1) There are basically two types of contracts for public employees in Guatemala. Contract type 01 is for a permanent position while contract type 02 is temporary. Contract 011 is for permanent staff whose positions are detailed in various analytical salary budgets. Contract 018 is for permanent staff abroad whose salaries are converted into foreign currencies based upon exchange rates. Contract 022 is for personnel by contract, and contracts must be renewed for the next financial year. Contract 029 is for temporary staff with other remuneration, such as technical and professional services not exceeding one fiscal year.
The table below shows the institutional backgrounds of respondents. In order to invite frank responses, we have categorized government organizations into 16 based upon main policy areas. People from policy areas such as public administration, education/culture, or municipality/local governments tended to participate in this survey more than others.
Institutional BackgroundsCategories Response President/Vice-president office 7.16% 29 Public administration 17.53% 71 Finance/Economy 5.43% 22 Tax/Tariff 0.74% 3 Labor/Welfare/Environment 4.44% 18 Transportation/Construction 1.48% 6 Agriculture/Fishery/Mines 2.47% 10 Education/Culture 12.84% 52 Science/Technology/Industry 3.70% 15
070 • 2016/17 Knowledge Sharing Program with Guatemala
ContinuedCategories Response National security/Military 4.44% 18 Foreign Affairs 0.49% 2 Police/Law enforcement 0.74% 3 Municipality/Local government 13.09% 53 Court 0.99% 4 Legislature 1.48% 6 Others 22.96% 93 Total 100% 405
4.2.2. Findings in Frequency Analysis
To the question asking the causes of corruption, respondents strongly agree that the following are important causes of corruption in Guatemala: lack of ethical standards, wish to be rich as soon as possible, lack of effective monitoring system for corruption, too much discretionary power of public officials, and lack of the merit system in personnel administration. In addition, respondents also agree that lack of punishment and effective e-government are also important factors (see the table A-1 in Appendix 2).
Regarding the question on the seriousness of corruption, respondents strongly agree that corruption in the public sector is a main cause of underdevelopment in Guatemala. However, they also strongly agree that corruption can be eradicated and that public officials can be initiator for eradicating corruption. It is also strongly agreed that anti-corruption organization should be a permanent and independent organization by law and that ONSEC should be reformed to make a career civil service system. On the other hand, respondents do not agree that most public officials are corrupt and that the current level of corruption had deteriorated compared to the previous year. They also do not agree that public officials in Guatemala are more corrupt than those in other Central American countries. They also think that the public sector is not particularly more corrupt than the private sector. This implies that although respondents agree that the corruption in Guatemala is a serious problem, it is not particularly bad compared to other countries nearby and/or to the private sector. In addition, public officials should be initiators to change this, and institutional reform has to be made to eradicate corruption (see
in Appendix 2).Regarding the questions on the top three most corrupt organizations and public services, the Congress, Municipalities, and Social Security Institutes were ranked first
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 071 among organizations, and; healthcare, political parties, and hiring human resources were first among services (see
in Appendix 2). For the question on the seriousness of corruption depending upon types, almost all respondents very strongly agree that all types of corruption are serious in Guatemala including abuse of discretion, cronyism, clientelism, smuggling, tax fraud, favoritism, money laundering, nepotism, and bribing (see
in Appendix 2).Next, we asked about the effective methods to fight against corruption. Alternatives were provided based upon Korean experiences as well as other means recommended by those who participated in the pilot test. Policy tools such as strong punishment, protection of whistleblowers, e-government, opening public data, enactment of anti-corruption law, and examining corruption level annually are pointed out as very effective. The most strongly agreed tool is strengthening primary and secondary education on anti-corruption. This indicates that respondents all believe that early education on anti-corruption is the most important method to fight corruption, although it would take longer to bear fruit (see
in Appendix 2). 4.2.3. Findings in Regression Analyses
In order to analyze the factors that affect the seriousness of corruption and the factors that affect individual recognition on unethical behavior, we preformed two multiple regression analyses. Before the analysis, we tested Pearson’s correlation coefficients and drew out Cronbach’s alpha values in order to see the reliability of the regression models. Several independent variables are grouped via factor analysis as well (see
, , and in the Appendix 2).8) 4.2.3.1. Regression Model 1: Seriousness of Corruption
According to the regression analysis, females think corruption is more serious than males do. Corruption is perceived more seriously a) when people think corruption has occurred due to lack of ethical attitude; b) when people think that legal and institutional mechanisms to control corruption are insufficient; c) by those who have experienced corruption from police; and d) by those who have experienced corruption from the military, though this accounted for only a few cases (see
).8) Acronyms for variable names are listed in
.072 • 2016/17 Knowledge Sharing Program with Guatemala
Regression on Seriousness of Corruption: All RespondentsCoefficienta Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B SE Beta Tolerance VIF (Constant) .032 .510 .063 .949 Gender .155 .088 .082 1.755 .080 .904 1.106 PubEmp .136 .096 .071 1.419 .157 .794 1.259 rel_catholic .055 .107 .029 .518 .605 .626 1.598 rel_protestant .025 .133 .010 .187 .852 .649 1.541 Edu_Univ -.078 .126 -.029 -.617 .537 .891 1.122 Age -.003 .004 -.034 -.740 .460 .921 1.085 OrgCom .053 .035 .076 1.529 .127 .805 1.242 OrgPun .027 .034 .039 .782 .435 .808 1.237 IndCom -.025 .063 -.021 -.389 .698 .696 1.436 IndRec -.067 .076 -.047 -.880 .379 .706 1.417 IndEth -.015 .053 -.013 -.276 .783 .834 1.199 Rel .057 .043 .065 1.345 .180 .842 1.187 Liv .043 .036 .059 1.194 .233 .815 1.227 Eth .405 .064 .331 6.337 .000 .728 1.374 Inst .136 .039 .176 3.470 .001 .769 1.300 Reform .002 .047 .002 .034 .973 .866 1.155 ReformLegal .095 .059 .077 1.612 .108 .870 1.150 Police_CrEx .334 .105 .158 3.173 .002 .797 1.254 Gov_CrEx -.124 .118 -.055 -1.057 .291 .745 1.343 Mil_CrEx .411 .244 .084 1.686 .093 .808 1.238 Model Summary Model R R Square Adjusted R Square Std. Error of the Estimates 1 .556b .309 .270 .80347
Note: a. Dependent Variable: Seriousness Note: b. Predictors: (Constant), Mil_CrEx, Reform, Inst, Age, Edu_Univ, rel_protestant, Gender, IndCom, ReformLegal, IndEth, PubEmp, Police_CrEx, Rel, OrgPun, Liv, OrgCom, Gov_CrEx, Eth, IndRec, rel_catholic
Among public employees, corruption is perceived more seriously; all findings are statistically meaningful except those who experienced corruption from the military.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 073
Regression on Seriousness of Corruption: Public EmployeesCoefficienta, b Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF (constant) .694 .602 1.152 .251 Gender .218 .111 .117 1.973 .050 .877 1.141 rel_catholic -.118 .140 -.063 -.841 .401 .553 1.807 rel_protestant -.179 .161 -.080 -1.111 .268 .604 1.657 Edu_Univ .039 .143 .016 .271 .787 .851 1.176 Position_admin -.091 .110 -.049 -.826 .410 .882 1.133 cont_011 -.028 .128 -.015 -.222 .824 .667 1.498 cont_022 -.142 .170 -.056 -.835 .405 .682 1.467 Age -.002 .005 -.018 -.295 .769 .880 1.136 OrgCom .059 .049 .078 1.204 .230 .739 1.353 OrgPun .002 .044 .003 .050 .960 .753 1.327 IndCom -.055 .078 -.048 -.703 .483 .678 1.474 IndRec -.047 .094 -.033 -.500 .617 .713 1.402 IndEth -.077 .071 -.069 -1.075 .284 .762 1.312 Rel .029 .052 .034 .556 .579 .809 1.236 Liv .076 .048 .102 1.594 .113 .760 1.317 Eth .303 .074 .264 4.108 .000 .751 1.331 Inst .214 .050 .291 4.313 .000 .680 1.470 Reform -.038 .060 -.039 -.631 .529 .805 1.242 ReformLegal .066 .072 .055 .915 .361 .846 1.182 Police_CrEx .450 .132 .213 3.406 .001 .796 1.256 Gov_CrEx -.146 .156 -.060 -.934 .352 .748 1.338 Mil_CrEx .477 .383 .076 1.246 .214 .832 1.201 Model Summary
R Adjusted R Std. Error of the Model R Square PubEmp Square Estimates 1 .615c .379 .310 .77273
Note: a. Dependent variable: Seriousness Note: b. Public employees only Note: c. Predictors: (Constant), Mil_CrEx, Age, cont_011, ReformLegal, IndCom, Gender, Edu_Univ, rel_protestant, Liv, Reform, Position_admin, Gov_CrEx, Rel, Eth, IndEth, Police_CrEx, OrgPun, OrgCom, IndRec, cont_022, Inst, rel_catholic
074 • 2016/17 Knowledge Sharing Program with Guatemala Among citizens, government corruption is perceived more seriously a) by those who have more personal relations with ethically sensitive people; b) by those who think the cause of corruption is lack of ethical attitude; c) by those who believe corruption can be reduced by legal/institutional mechanisms; and d) by those who are in business and industry.
Regression on Seriousness of Corruption: CitizensCoefficienta, b Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF (constant) -1.026 .963 -1.066 .288 Gender .026 .154 .013 .168 .867 .838 1.193 rel_catholic .172 .174 .090 .990 .324 .648 1.543 rel_protestant .052 .257 .019 .202 .840 .597 1.676 Occ_Research -.321 .280 -.090 -1.147 .254 .853 1.172 Occ_biz -.003 .006 -.047 -.595 .553 .863 1.158 Edu_Univ .012 .182 .006 .064 .949 .635 1.574 Age .451 .188 .226 2.401 .018 .598 1.674 OrgCom .028 .055 .044 .513 .609 .735 1.360 OrgPun .087 .062 .123 1.396 .165 .688 1.454 IndCom .021 .113 .017 .183 .855 .598 1.672 IndRec -.042 .133 -.030 -.316 .753 .585 1.708 IndEth .058 .088 .056 .656 .513 .736 1.359 Rel .178 .078 .193 2.272 .025 .734 1.362 Liv -.006 .059 -.008 -.097 .923 .747 1.339 Eth .594 .130 .412 4.578 .000 .655 1.527 Inst .023 .069 .028 .341 .734 .806 1.240 Reform .081 .083 .082 .974 .332 .746 1.340 ReformLegal .183 .110 .143 1.662 .099 .715 1.398 Police_CrEx .144 .188 .070 .767 .445 .644 1.553 Gov_CrEx -.020 .188 -.010 -.109 .913 .664 1.506 Mil_CrEx .244 .337 .063 .724 .471 .710 1.408 Model Summary R Adjusted R Std. Error of the Model R Square Citizens Square Estimates 1 .585c .342 .231 .82452
Note: a. Dependent variable: Seriousness Note: b. Citizens Note: c. Predictors: (Constant), Mil_CrEx, Occ_biz, Edu_Univ, Gender, rel_catholic, Liv, Eth, Age, OrgCom, Rel, Reform, Inst, OrgPun, Gov_CrEx, Eth, ReformLegal, IndRec, Police_CrEx, Occ_Research, IndCom, rel_protestant
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 075 In sum, lack of ethical attitude and insufficient legal and institutional mechanisms are important causes of high corruption levels. In addition, people who have close relations with those who are ethically sensitive may perceive corruption to be more serious. This indicates that policies to change organizational environments toward higher ethical standards would reduce corruption levels significantly. As shown in
to , our model does not have multicollinearity problems because the VIF index is under 10 and tolerance is over 0.4.2.3.2. Regression Model 2: Individual Recognition on Unethical Behavior
The regression analyses on individual ethics and their recognition on ethical behavior for all respondents show that the following points are statistically meaningful. Like the results on model 1 above, female respondents are more ethical than males. In addition, four-year college graduates are more ethical. People tend to be less ethical a) when people think their superior shows unethical behavior or that the ethical level of their organization is low; b) when people think the level of punishment for unethical behavior is not strong enough; c) when they have fewer friends with highly ethical attitudes; d) when they think the main cause of government corruption is lack of living expenses; e) when people think that government corruption would be difficult to eradicate; f) and when people think that legal and institutional methods cannot eradicate corruption. However, personal experiences of bribing were not related with individual ethical level.
Regression on Individual Ethics: All Respondents Coefficientsa Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF (constant) 2.300 .282 8.151 .000 Gender -.111 .053 -.103 -2.079 .038 .917 1.091 rel_catholic -.069 .064 -.063 -1.064 .288 .641 1.560 rel_protestant -.045 .081 -.033 -.559 .577 .655 1.527 Edu_Univ -.210 .076 -.137 -2.756 .006 .916 1.092 PubEmp .084 .059 .076 1.433 .153 .795 1.259 Age -.003 .002 -.058 -1.175 .241 .924 1.083 OrgCom .096 .020 .239 4.715 .000 .877 1.140 OrgPun .044 .020 .112 2.134 .034 .827 1.209 IndCom -.059 .026 -.117 -2.299 .022 .875 1.143
076 • 2016/17 Knowledge Sharing Program with Guatemala
ContinuedCoefficientsa Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF IndRec .049 .022 .117 2.226 .027 .824 1.214 IndEth -.039 .041 -.056 -.960 .338 .664 1.506 Rel .027 .024 .060 1.099 .272 .753 1.328 Reform -.084 .028 -.150 -2.978 .003 .894 1.118 ReformLegal -.050 .036 -.071 -1.391 .165 .872 1.147 Police_CrEx .084 .065 .069 1.289 .198 .784 1.276 Gov_CrEx -.090 .071 -.069 -1.265 .207 .759 1.318 Mil_CrEx -.165 .149 -.059 -1.108 .269 .808 1.238 Seriousness -.039 .033 -.068 -1.189 .235 .698 1.432 Model Summary Model R R Square Adjusted R Square Std. Error of the Estimates 1 .455b .207 .166 .49139
Note: a. Dependent variable: Individual Ethics Note: b. Predictors: (Constant), Seriousness, Age, OrgPun, Edu_Univ, Reform, rel_protestant, Gender, Liv, Mil_ CrEx, ReformLegal, Rel, OrgCom, Police_CrEx, PubEmp, Inst, Gov_CrEx, Eth, rel_catholic
According to the regression analysis on public employees, four-year college graduates are more ethical than others. In addition, those at the administrative level are less ethical than other ranks. In terms of the contract types, those with contact type 022 are less ethical than those with other types. In addition, people tend to be less ethical a) when they think government corruption can be eradicated or b) they do not have personal experience of corruption.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 077
Regression on Individual Ethics: Public EmployeesCoefficientsa,b Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF (constant) 1.677 .356 4.715 .000 Gender -.045 .070 -.042 -.637 .525 .874 1.144 rel_catholic -.032 .087 -.030 -.367 .714 .573 1.745 rel_protestant -.059 .101 -.047 -.589 .557 .614 1.629 Edu_Univ -.191 .089 -.142 -2.139 .034 .881 1.135 Age -2.175E-5 .003 .000 -.006 .995 .891 1.123 Position_admin .117 .069 .111 1.684 .094 .899 1.113 cont_011 .010 .081 .009 .119 .905 .668 1.496 cont_022 .199 .107 .139 1.864 .064 .700 1.428 OrgCom .106 .030 .249 3.576 .000 .801 1.248 OrgPun .025 .027 .066 .924 .357 .762 1.312 IndCom -.053 .033 -.110 -1.620 .107 .837 1.195 IndRec .006 .030 .014 .194 .847 .756 1.322 IndEth .041 .049 .063 .846 .398 .700 1.429 Rel .043 .033 .103 1.315 .190 .631 1.584 Reform -.065 .038 -.118 -1.711 .089 .816 1.225 ReformLegal -.012 .046 -.018 -.259 .796 .846 1.183 Police_CrEx .063 .086 .052 .728 .467 .757 1.321 Gov_CrEx -.162 .098 -.118 -1.659 .099 .762 1.312 Mil_CrEx -.175 .242 -.049 -.721 .472 .836 1.195 Seriousness -.070 .045 -.123 -1.568 .118 .629 1.589 Model Summary
R Adjusted R Std. Error of the Model 1 R Square PubEmp = 1 Square Estimates 1 .467c .218 .140 .48969
Note: a. Dependent variable: Individual Ethics Note: b. PubEmp only Note: c. Predictors: (Constant), Seriousness, Position_admin, Age, cont_022, OrgPun, Edu_Univ, rel_protestant, Gender, ReformLegal, Rel, Mil_CrEx, Reform, Police_CrEx, Liv, OrgCom, Gov_CrEx, Eth, cont_011, Inst, rel_ catholic
078 • 2016/17 Knowledge Sharing Program with Guatemala As for citizens, females are also statistically significantly more ethical than male. Those who are in the business sector tend to be less ethical. Those who think their superior is unethical or those who think that the ethical level of their organizations is low are less ethical. Those who think government corruption can be eradicated are also less ethical.
Regression on Individual Ethics: CitizensCoefficientsa,b Unstandardized Standardized Multicollinearity Model Coefficient Coefficient t Sig. B Std. Error Beta Tolerance VIF (constant) 3.185 .456 6.980 .000 Gender -.168 .084 -.147 -1.987 .049 .869 1.150 rel_catholic -.131 .095 -.116 -1.377 .171 .678 1.475 rel_protestant -.073 .140 -.045 -.520 .604 .631 1.584 Edu_Univ -.198 .155 -.094 -1.278 .204 .879 1.137 Age -.002 .003 -.057 -.767 .445 .877 1.140 Occ_Research -.083 .101 -.071 -.823 .412 .649 1.540 Occ_biz .207 .105 .176 1.968 .051 .596 1.677 OrgCom .090 .029 .235 3.072 .003 .818 1.223 OrgPun .088 .034 .211 2.623 .010 .738 1.355 IndCom -.059 .043 -.109 -1.363 .175 .753 1.329 IndRec .102 .032 .245 3.212 .002 .818 1.222 IndEth -.194 .075 -.227 -2.582 .011 .618 1.618 Rel -.002 .038 -.005 -.065 .948 .827 1.208 Reform -.146 .045 -.249 -3.267 .001 .822 1.217 ReformLegal -.066 .060 -.088 -1.093 .277 .743 1.346 Police_CrEx .125 .104 .102 1.197 .234 .655 1.526 Gov_CrEx -.100 .102 -.081 -.978 .330 .704 1.420 Mil_CrEx -.154 .188 -.067 -.820 .414 .716 1.396 Seriousness .013 .050 .022 .256 .799 .664 1.505 Model Summary
R Adjusted R Std. Error of the Model 1 R Square Citizens Square Estimates 1 .628c .394 .303 .46320
Note: a. Dependent variable: Individual Ethics Note: b. Citizens only Note: c. Predictors: (Constant), Seriousness, OrgPun, Age, Inst, OrgCom, Gender, Reform, Occ_Research, Gov_CrEx, rel_catholic, Edu_Univ, Rel, Liv, ReformLegal, Mil_CrEx, Police_CrEx, rel_protestant, Eth, Occ_biz
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 079 In conclusion, individual recognition about the ethical level of organizations and interpersonal relationships with those of high ethical standards are important for reducing corruption. Like understanding the seriousness of corruption, strengthening punishment on corruption is important to eradicate corruption. Lack of living expenses may justify individual corruption, meaning that provision of suitable salaries is important to reduce corruption. If we were to select some target groups to increase ethical level, they are males, those who did not have four–year college level of education, and those with contract type 022 would be first choices. As shown in
to , our model does not have multicollinearity problems because the VIF index is under 10 and tolerance is over 0.5. Conclusions and Policy Recommendations 5.1. Lessons from the Korean Experience
As is generally admitted, corruption has a variety of deep-rooted causes, sometimes including complex combinations of behavioral, institutional, structural, and/or cultural factors. However, as shown in the Korean experience, the level of corruption in the public sector can be reduced significantly over time depending upon whether the government has undertaken appropriate policies as well as legal, institutional, and organizational reforms. Consistent and systematic policies have to be implemented to monitor corruption and/or unethical behavior, and severe punishments have to be administered when behavior is identified as corrupt.
The Korean government has established an independent, permanent organization to be devoted to anti-corruption activities named the Anti-Corruption Commission in 2001, which is now named the ACRC. The ACRC had played significant roles by making necessary laws and regulations including ethical charters and codes of conduct as well as the basic law to prevent corruption. It has also implemented various policy initiatives to prevent corruption such as annual integrity tests for all central government agencies and measuring the level of corruption by examining the actual experiences of corruption among those who have received public services during the past year.
Additional efforts have been made by several legal and institutional mechanisms to prevent and/or monitor violations of administrative ethics and/or corruption. For example, the annual property registration system of high public officials and the opening of the registered property information to the public certainly discourage public officials from committing any unethical behavior to increase their properties. Protecting the whistleblower and rewarding those who have reported illegal and/ or unethical behavior of public officials clearly reduce corruption in the public sector.
080 • 2016/17 Knowledge Sharing Program with Guatemala Recent enactment of the so-called Kim Young Ran law in 2016 is certainly expected to reduce the corruption level in Korea significantly.
Another important factor can be found in the development of ICT and its wide application to government and society such as information society development, e-Government, as well as open data (or government) policies. As explained earlier, the Korean government has put much emphasis on ICT development in society since late 1980s. Earlier efforts to develop broadband ICT infrastructure and e-Government were viewed as a key development strategy after Korea’s rapid industrialization. The information revolution had been viewed as Korea’s destiny because its economic achievements could not be sustained without aggressive adoption of ICT and e-Government.
A natural consequence of developing ICT infrastructure and e-Government was improvement to efficiency, transparency, responsiveness, and accountability of government. Although previous studies have produced mixed outcomes about the impacts of e-Government upon transparency, the wide application of ICT in society has clearly increased the social atmosphere of transparency, and thus increased anti- corruption efforts.
All of these efforts collectively have gradually reduced the level of corruption in Korea. The most decisive factor of the anti-corruption policies is the strong commitment of political leadership, especially by the presidents. Although presidents and other political leaders in the National Assembly might not voluntarily cooperate to strengthen administrative ethics, they have to pass various laws to control corruption mainly because of the increasing concern about anti-corruption by civil society and media. The ICT development and its application to government and provision of public services gradually increase the possibility of detecting violation of administrative ethics. Widespread use of SNS among citizens is critical to increase the overall transparency in Korean society. People, both in private and public sectors, began to realize that there would be high possibility of detecting corruption as a result. Sharing such a view seems very important for public officials to raise their own level of ethical attitude, which has also contributed to increasing the level of transparency in Korea.
To summarize the lessons from the Korean experiences, the following points seem to be significant.
First, continuous and consistent efforts to increase the level of administrative ethics through successive governments are critical preconditions. Thus, high political authority should pay clear attention and send a clear message that violating administrative ethics will be detected and punished, while those who demonstrate higher ethical levels will be rewarded.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 081 Second, proper legal and institutional infrastructure to fight against corruption effectively has to be established. Numerous laws and regulations have to be put in place along with an independent and permanent organization that would be responsible for major policy initiatives against corruption, such as the ACRC in Korea. However, the ACRC alone cannot achieve the goal effectively. Close organizational collaboration has to take place among related public agencies, such as police departments, prosecutors’ offices, and public personnel administrations.
Third, several important policies to fight against corruption have to be adopted immediately. For example, diagnosing the potential risks of corruption, annual integrity tests for all government agencies, protecting whistleblowers, and strengthening ethical charters and codes of conduct for public officials with clear punishment to those who violate them have to be pursued as soon as possible. Actual policies that can be adopted may vary according to the political, economic, and social contexts. However, important lessons are that these policies should be implemented and provide clear signs to public officials that those who violate the rules will be severely punished.
5.2. Implications from the Online Survey
As shown in Section 4 of this chapter, we have conducted an online survey to diagnose the current situations of corruption and to discern strategic directions and policy alternatives to fight against corruption in Guatemala. Our survey had 651 respondents, both from the government and civil society. Although the details of the findings of the online survey were already explained in Section 4, several important implications of the survey can be summarized as follows.
First, lack of institutional mechanism as well as psychological and attitudinal factors were identified as main causes of corruption. As institutional factors, lack of ethical standards in government, no effective monitoring system to detect corruption, too much discretionary power of public officials, lack of merit system in personnel management, and not so effective e-Government systems were identified. As for psychological and attitudinal factors, people’s strong wish to be rich as soon as possible and little fear of being punished were identified.
Second, regarding the seriousness of corruption, respondents strongly agreed that corruption is the main problem that hinders Guatemala from being developed. However, they agreed that corruption can be eradicated and that public officials can be initiators for eradicating corruption. As for institutional reform, respondents agreed that the anti-corruption institution should be a permanent organization, and that the civil service system has to be reformed.
082 • 2016/17 Knowledge Sharing Program with Guatemala Respondents were asked to point out the three most corrupt organizations and public services. The Congress, municipalities, and the social security institute were identified as top three most corrupt organizations, while healthcare, political parties, and public personnel management were identified as the top three most corrupt public services. This indicates that organizations or services with high public awareness and/or frequent contacts with citizens seem to be the main targets for eradicating corruption.
Respondents strongly agreed that all types of corruption that were given as examples are very serious in Guatemala. Those nine types of corruption are abuse of power, cronyism, clientelism, smuggling, tax fraud, favoritism, money laundering, nepotism, and bribing.
Policymakers strongly agreed to adopt and implement various policy alternatives to reduce the corruption level. Strengthening punishment and protecting whistleblowers as well as enacting anti-corruption laws are institutional alternatives, while improving e-Government and opening public data are technical solutions. Measuring corruption level and impact evaluation annually are also good alternatives. From a long-term perspective, strengthening primary and secondary education regarding corruption is also strongly highlighted by respondents.
In addition to the above fact-finding type of analysis, we performed two regression analyses. One has the seriousness of corruption as a dependent variable, and the other the individual perception of organizational ethics. The detailed results of regression analyses were provided in Section 4 of this chapter. However, regarding the implications to policy alternatives, the following points are important.
It should be emphasized that overall level of ethical attitudes among public officials must be increased. Ethical attitudes of colleagues and/or superiors are important to induce ethical behavior or to prevent unethical behavior. Public officials should develop a common belief that they would be monitored and punished if they committed violation of ethical charters or codes of conduct, not to mention those behaviors considered types of corruption.
Therefore, it is necessary to strengthen legal and institutional mechanisms to control corruption effectively. For example, laws and regulations to monitor ethical level or violations should be enacted, especially with a strong punishment clause, such as a one-strike out system (i.e., where those who seriously violated ethical codes or committing corruption would be expelled from the government forever).
Another important implication is the necessity of creating an independent, permanent organization that would be in charge of corruption and/or administrative
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 083 ethics. The COPRET, as a special task force type of organization created by the Presidential Decree, cannot serve as an independent organization because its official status would be in danger whenever a new president assumed power.
The survey also suggests that a civil service career system along with the merit system in personnel management has to be established. Lack of a merit-based civil service career system was pointed out as one of the main causes of corruption, and it should be reformed to promote higher ethical levels in the public sector.
INAP and other responsible government organizations should consider the results of this study regarding priorities in preparing policies for transparency and anti-corruption. INAP, for instance, may consider them in preparing courses for the training and education of public employees regarding anti-corruption.
One last reservation remains. This study is based upon an online survey, which may inevitably involve random sampling errors. Since statistical control has not been achieved, it should be interpreted as a wide gathering of information and opinions from those who have special concerns about corruption issues in Guatemala.
5.3. Policy Recommendations
Considering the historical developments of transparency policies in Guatemala (Section 2), the Korean experiences of anti-corruption and e-Government as well as open government (Section 3), and the findings from the online survey we have conducted (Section 4), the following policy recommendations can be made.
5.3.1. Short-term Alternatives
In the short-term perspective, a renewed concern for anti-corruption is required on the part of the top political leadership, perhaps the president or vice-president. As of now, the COPRET is actively playing its role as a special commission for increasing transparency and open government. As Vice-president Japhet explained in the meeting with our KSP team on February 13, 2017, the government of Guatemala began its active role for increasing transparency in the public sector through a special group of people from the COPRET, several advisors of the vice-president, civil society members, as well as some experts from the government. It also actively involved in the UN initiative for increasing transparency.
However, the key problem here is not the existence of the COPRET or a special group of people themselves. The COPRET has existed for more than 13 years (since 2004) without achieving any significant progress at the level of transparency or anti- corruption in Guatemala. Even the ex-president and ex vice president were found
084 • 2016/17 Knowledge Sharing Program with Guatemala guilty and imprisoned, even though they had emphasized the need to improve transparency and to eradicate corruption. As it is, the COPRET would not play a major role in changing Guatemala regarding transparency. It is time to have a whole new organization to assume policy leadership for anti-corruption in Guatemala.
However, creating another organization like the COPRET is not a solution. The new organization should have its political legitimacy based upon a specific law instead of a presidential decree or an executive order. Unlike the existing institutional setting focusing on the COPRET, the new organization should have strong implementation functions in promoting transparency and anti-corruption policies. These should be provided by necessary enactment through the Congress. As such, it should be considered as a long-term policy alternative, which will be discussed later in this section.
In the meantime, however, the COPRET should play a major role to fight against corruption. First, the COPRET needs to address more specific action plans instead of declaratory rhetoric.
Some of the action plans can be identified as follows. First, strengthened ethical charters and codes of conducts should be reconfirmed along with stronger punishments applicable to potential violators. To identify violators, effective monitoring systems should be established as well. An effective monitoring method might be a cash-reward system for those who report corrupt behavior with concrete evidence. In that case, a certain percentage of the saved budgets can be awarded to those who report them, with limits on maximum rewards.
An annual measurement system on the ethical level of government organizations has to be established with incentives and disincentives. Best practices should be rewarded and widely announced, while the worst agencies have to be punished in terms of cutting their own budgets and/or additional ethical training and education required for those who are working there. The head of such organizations may be kicked out of office so that each government organization does its best to increase its ethical level. Integrity tests for transparency can be implemented randomly, which would make public officials be more transparent.
New training programs for administrative ethics and integrity in public administration should be prepared by the INAP. The new programs should consist of leadership courses and administrative-level courses. The main content of the program would emphasize action learning instead of traditional lecture programs. The actual cases should be shared and discussed, and cultural and psychological programs offered. In short, new advanced pedagogical methods have to be adopted to train and educate public officials for higher ethical standards.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 085 Action plans should also include technical solutions. Public services such as government for citizens (G4C), government-to-government (G2G), and government to business (G2B) would be more transparent if such services were provided anytime, anywhere, and to anyone online. e-Government infrastructure needs to be upgraded to make 24/7 public services available to those who need them. By sharing and using public data and information more widely, not only within and among the government agencies but also with civil societies and ordinary citizens, possibilities of corruption would be decreased gradually. In this sense, open government data policies should be pursued in an integrated manner by creating the government- wide broadband public administration network and the government data center.
Once a new system for administrative ethics is ready, pilot tests may be in order. Those organizations or services that were perceived as the top three most corrupt in our online survey would be good candidates for pilot tests. By doing so, we can expect multiple benefits from one action. One the one hand, we can test the usefulness of the newly designed transparency system (e.g., measuring ethical levels annually, random integrity tests, reward and punishment for well or poorly performing organizations, etc.). On the other hand, the worst performing agencies can have better opportunities to increase their own transparency levels. In addition, citizens who may have bad experiences with those organizations can enjoy better public services.
5.3.2. Long-term Alternatives
From a long-term perspective, enacting a specific law on anti-corruption as a basic law to promote administrative ethics has to be a first step toward a more transparent government. As pointed out earlier, a new independent and permanent organization shall be created. Otherwise, any effort to promote transparency would be futile in the long run simply because no actual implementation would be followed, as has been the case in Guatemala so far.
As described earlier, once a new independent, permanent organization is set up, the next step is to prepare a basic plan to increase transparency and to eradicate corruption in the public sector. Again, the COPRET already made and announced a so-called master plan to achieve this purpose with five strategies as shown in Section 2. However, the announced plan does not have the necessary components to be implemented. That is, it does not have yearly targets, necessary policy tools, time schedules, and above all, there is ambiguity about which organization is fully responsible for certain actions. In other words, it does not have any concrete roadmaps to be actually implemented by appropriate agencies. This is why various plans and policies to increase transparency in the past remained in the form of pure
086 • 2016/17 Knowledge Sharing Program with Guatemala rhetoric, falling short of actual implementation.
The new organization, like the ACRC in Korea, should prepare a basic plan for increasing transparency in the government and society of Guatemala with specific roadmaps. It should identify visions and goals (both long- and short-term), policies to achieve such visions and goals, responsible organizations, and necessary coordinating mechanisms to ensure actual implementation, and periodic monitoring systems to examine the outcomes of policy implementation. Having an appropriate monitoring system is particularly important for determining whether the policies in the plan are actually being implemented and the direct and indirect outcomes being produced. The basic plan should also include annual targets in measurable numerical terms with specific time schedules for implementation. That is, performance indicators and evaluation methods should be prepared for each policy and/or program. Within the basic plan, a proper personnel and budget mobilization plan should also be included. Without such detailed organizational empowerment, the newly created organization would not play such roles and functions that we expect.
In fact, the biggest problem in Guatemala is the lack of the career civil service system. As was pointed out in the result of the online survey, lack of the merit system is one of the important causes of corruption in Guatemala. To be frank, lack of the civil service career system is a widespread phenomenon in all Latin American countries. The fact that public officials do not think of their jobs as lifetime jobs is perhaps single most important factor of rampant corruption in the public sector. Without having a civil service career system based upon the merit system, any policies to eradicate corruption would have only limited effects. Since establishing the civil service career system itself is a huge path-breaking issue, a detailed study has to be undertaken as an additional topic. In this chapter, we would like to highlight the importance of the civil service career system in anti-corruption policy in Guatemala.
Another fundamental issue to be resolved in the long run is the wage level of public employees. As shown in the Korean experience, the wage level of government officials is a very important determinant of public employee corruption. In the past, many public employees justified their corruption based upon the low wage level. That is, public employees are also people who need sufficient living expenses. Consequently, much of the policy pursued to reduce corruption achieved no major progress. It was after the 1980s and 1990s when the wage level of public employees in Korea rose fast enough to catch up with that of the private sector. This was called the normalization of wage level of public employees. Thus, along with other policy alternatives, wage level of public employees should be reconsidered in order to reduce the corruption in Guatemala. Like the issue of the career civil service system, normalizing the wage level of the public sector itself is a huge issue, and has to be treated as a separate topic.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 087 Another long-term alternative is strengthening education on anti-corruption at primary and secondary schools. This has been specifically pointed out by most of the respondents in our online survey. Although it would take much longer time and may require close cooperation among concerned parties, such as the Ministry of Education, schools, teachers, and parents, education on anti-corruption and its negative effects on society in general would be an important approach in reducing corruption in Guatemala.
Next, the ONSEC and INAP can be merged into one organization that is in charge of all public personnel management in the government of Guatemala. As of now, the ONSEC is in charge of recruiting public employees, and the INAP is in charge of training them. However, many public officials are recruited politically after the presidential election. In order to avoid this, the ONSEC and INAP should be strengthened to act as a major organization for public personnel management. Currently, the government of Guatemala plans to open the Civil Service Center in 2018 by locating the INAP and ONSEC on the same campus. We suggest that merging ONSEC and INAP will result in a powerful organization in charge of all personnel issues including recruitment, training, career development, and retirement of public employees. By doing so, the civil service career system based upon the merit system may be much easier to develop. In addition, the new Civil Service Center may play the role of an independent and permanent organization in charge of transparency and anti-corruption, as described earlier.
From a technical perspective, e-Government and opening public data should be systematically developed, and their effects on reducing corruption should be monitored. To systematically pursue the related policies, the government of Guatemala may create a specialized think tank outside of the government, something like a combined agency of NIA and KISDI in Korea. The think tank may support the Civil Service Center, SENACYT, as well as the Ministry of Government to develop technical as well as policy-level solutions to fight against corruption via science and technological means.
5.3.3. Considering Preconditions for Implementing Policy Alternatives
Various experiences of Korea in reducing corruption were not always successful. Some were repeatedly tried but achieved little progress. There have been many trials and errors, and still corruption is found here and there. In fact, corruption seems to increase in sophistication as anti-corruption policies are introduced. Then, more detailed policies are introduced to stop corruption, and the cycle continues.
088 • 2016/17 Knowledge Sharing Program with Guatemala According to the Korean experiences, policy efforts have to be led by high political leaders and should be institutionalized through necessary enactments. Anti- corruption policies should be implemented in long-term perspectives rather than just one-time policy efforts. Long term, repeated policy efforts may create general supports by the media, and this could develop wide consensus among the general public.
Thus, gradual, consistent, systematic, and long-term efforts should be continued with strong political leadership to progress various anti-corruption policies. Depending upon specific policies, a plurality of organizations may be involved. Thus, a coordinating function should be established. In addition, a balanced approach between rewards and punishments should be institutionalized. This study is only a beginning of such long-term efforts, and it is down to the willingness of the government and people of Guatemala to make their country transparent and growing economically.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 089 References
ACRC. (Dec. 2015). Introduction to Major Anti-Corruption Policies of Korea. Sejong: ACRC. ACRC. (2008). White Paper on Anti-Corruption. Sejong: ACRC. Alemann, U. (2004). “The Unknown Depths of Political Theory: The Case for Multidimensional Concept of Corruption,” Crime, Law & Social Change, 42(1): 25–34. Andersen, T. (2009). “e-Government as an Anti-corruption Strategy.” Information Economics and Policy 21(3): 201-210. Bertelsmann Foundation. (2016). Transformation Index: Guatemala. Bhatnagar, S. (2003). e-Government and Access to Information (pp.24-32). UN, Global Corruption Report 2003. Available from http://unpan1.un.org/intradoc/groups/public/ documents/apcity/unpan008435.pdf. (Viewed on May 1, 2017). Chawla, R., & Bhatnagar, S. (2004). Online Delivery of Land Titles to Rural Farmers in Karnataka, India. The International Bank for Reconstruction and Development, the World Bank. Choi, J. “Effects of the Seoul Metropolitan Government’s OPEN System on Corruption,” Journal of Governmental Studies 13(1): 215-240. Choi, S. and K. Jung. (2014). “Empirical Study on e-Government and Corruption: Transparency as a Key Moderator.” Journal of Korean Association for Regional Information Society 17(2): 29-59. Doig, A. and R. Theobald, eds. (2000). Corruption and Democratization. London: Frank Cass. El Pais. (2015). “How the Linea Corruption Scandal Toppled Guatemala’s Government,” September 4. Freedom House. (2015a). Freedom in the World: Guatemala. Freedom House. (2015b). Freedom of the Press: Guatemala. Hong, S. (2015). “Transform Guatemala Using ICT and e-Government,” Chapter 3 of 2015 KSP Report. Sejong: KDI. International Commission against Impunity in Guatemala. (2015). A Wide Report on the CICIG Experience. June. International Justice Monitor. (2015). “New Corruption Scandal Plunges Guatemala’s Government Further into Crisis,” May 26. Kim, S., Kim, H. J., & Lee, H. (2009). “An Institutional Analysis of an e-Government System for Anti-corruption: The Case of OPEN.” Government Information Quarterly, 26(1): 42- 50. Kim, Y. (2007). A Study on the Creation and Strategies of International Anti-Corruption Regimes: Critical Assessment of Institutionalization of Neo-liberal Hegemony. Unpublished Ph.D. Diss., Hankuk University of Foreign Affairs.
090 • 2016/17 Knowledge Sharing Program with Guatemala Lancaster, T. and G. Montinola. (1997). “Toward a Methodology for the Comparative Study of Political Corruption,” Crime, Law, & Social Change, 27(3-4): 185-206. Latin Lawyer. (2016). Anti-Corruption: Guatemala. Lee, S. (2016). “Current Situations of Corruption in CPLC (Community of Portuguese Language Countries) and Solutions,” Journal of Portugal-Brazil Studies 13(1): 31–59. Lee, S. (2007). “Understanding Anti-Corruption in International Society,” Review of 21st Political Science, 17(3). Lee, S. and Y. Kim. (2002). “Limits and Overcoming Them in Empirical Comparative Area Studies,” in Area Studies: Topics, Scopes, and Strategies. Seoul: Hyungseol Press. Lee. Y. (2012). The Introduction of e-Government in Korea. 2011 Modularization of Korea’s Development Experience. Sejong: KDI. National Integrity Commission, (2002). White Paper on Anti-Corruption. OECD. (2005). “Good practice paper on ICTs for economic growth and poverty reduction.” The DAC Journal 6(3): 27-95. Park et al. (2016). Current Situations of Corruption in Latin American Countries and Policy Implications, Strategic Area Study Series 16-08, Korea Institute of International Economic Policy. Robinson, M. (1998). “Corruption and Development: An Introduction,” The European Journal of Development Research 10(1): 1-14. The New Yorker. (2015). “From President to Prison: Otto Perez Molina and a Day for Hope in Guatemala,” September 4. Telesur. (2015). “Timeline: The Downfall of Guatemalan President Perez Molina,” September 3. UNDP. (2006). Fighting corruption with e-Government applications. APDIP e-Note 8. UNDP. (2008). Tackling corruption, transforming lives: Accelerating human development in Asia and the Pacific. New Delhi, India: Macmillan Publishers. US Department of State. (2015). Human Rights Practices Reports: Guatemala. US Department of State. (2015). Investment Climate Statement: Guatemala. Weyland, K. (1998). “The Politics of Corruption in Latin America.” Journal of Democracy 9(2): 108-121. World Bank. (2016). Doing Business 2016. World Economic Forum. (2016). Global Competitiveness Report 2015-2016. World Economic Forum. (2014). Global Enabling Trade Report 2014.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 091 Appendices
Appendix 1: Questionnaire for Online Survey
Dear respondents,
Thank you for your participation on this corruption perception survey in Guatemala.
This survey is prepared by Sung Gul Hong, professor at Kookmin University in Seoul, Korea, as a part of KSP (Knowledge Sharing Program) project for Guatemala in 2016.
KSP is a policy consultation program for developing countries provided by the government of Korea to help them to develop themselves. Lessons from the Korean development experiences and policies are the main sources of policy alternatives, which would reflect the conditions and priorities of developing countries.
The purpose of this survey is to diagnose the current situations of corruption and/ or transparency in the government of Guatemala as perceived by public employees and well as citizens in general. There is no right or wrong answers. Please answer the following questions as quickly as possible without serious considerations. In other words, this survey intends to know prompt and honest responses rather than serious consideration. Your answers will be very important to improve transparency in Guatemala
The information from this survey will be used for statistical purpose only, and anonymity will be completely guaranteed.
Sung Gul Hong, Professor of Public Policy at Kookmin University On Behalf of KSP team of the Korea Development Institute
Background Information: Please check where appropriate
Q1. Gender: Male ( ) Female ( )
Q2. Ethnic Groups: Maya ( ) Garifuna ( ) Xinca ( ) Mixed- race ( ) Others ( )
Q3. In what year you were born ( )
Q4. What is your religion? Catholic ( ) Protestant ( ) Others ( ) None ( )
092 • 2016/17 Knowledge Sharing Program with Guatemala Q5. Marital status: Single ( ) Married ( ) Living together ( ) Divorced ( ) Others( )
Q6. How many people are in your household? ( ) persons
Q7. Are you? A) Public employees ( ), then goes to questions 7.1 B) Citizens ( ), then goes to questions 7.2
For public employees only,
Q8. How many years have you been employed in government? ( ) years
Q9. What is your position in your Organization / institution? Operational level ( ) Chief (head of team) level ( ) Administrative level ( ) Director level ( ) Ministerial level ( ) others ( )
Q10. What is your contract type? 011( ) 022 ( ) 029 ( ) 018 ( ) Others ( )
Q11. What is your institution category?
President / vice-president office ( ) Public administration ( ) Finance/Economy ( ) Tax/Tariff ( ) Labor/Welfare/Environment ( ) Transportation/Construction ( ) Agriculture/Fishery/Mines ( ) Education/Culture ( ) Science/Technology/Industry ( ) National security/Military ( ) Foreign Affairs ( ) Police/Law enforcement ( ) Municipality/Local government ( ) Court ( ) Legislature ( ) Others ( )
For citizens only,
Q12. Have you been in government before? Yes ( ) No ( ).
Q12-1. If yes, how many years have you been in government? ( ) years.
Q13. How often do you use any kind of public services during the last 12 months? ( ) times
Q14. What kind of job are you currently performed? Research/Education ( ) Business/Industry ( ) Finance ( ) Agriculture/Fishery/Mines ( ) Others ( )
Q15. What is your education level? Elementary ( ) High School ( ) College ( ) University ( )
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 093 I. Questions on Corruption
Q16. The following statements are considered as potential causes of corruption among public officials in Guatemala. Please check where you think most appropriate.
1 5 Statements Strongly 2 3 4 Strongly Disagree Agree
1. We need more money to make living, that is, salaries are lower than living expenses
2. People do not have proper ethical standards required for their jobs
3. People want to be rich as quickly as possible
4. Traditionally, people take it for granted that public officials can enjoy illegal/extra money from citizens
5. There is not much fear of being punished by corruption.
6. There is not effective monitoring system on corruption
7. Corruption is not a serious crime.
8. Public officials have too much discretionary power
9. There is no effective punishment enough to prevent corruption
10. There is no or unclear procedure of providing public services
11. Procedure of providing public services is not open to the public
12. I think wide implementation of e-Government can enhance transparency
13. Lack of job security makes public officials more corrupt
14. Lack of the merit system in public personnel administration invite more corruption
094 • 2016/17 Knowledge Sharing Program with Guatemala Q17. What is your opinion about the following statement?
1 5 Statements Strongly 2 3 4 Strongly Disagree Agree
1. Most public officials are corrupted
2. Public officials in Guatemala is more corrupted than other countries in Central and Latin America
3. Public sector is more corrupted than private sector
4. Level of corruption at present is better than that of 12 months ago
5. Corruption in public sector is a main problem that hinders Guatemala from developing itself
6. Corruption in Guatemala can be eradicated
7. Public officials can be the initiator of eradicating corruption in Guatemala
8. Anti-corruption organization should be a permanent independent organization by law
9. Should be reformed to make a career civil system. ONSEC
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 095 Q18. Please indicate your opinion about the level of corruption of the following institutions:
1 5 Name of Ministry, Agency, Offices, etc. Least 2 3 4 Most Corrupt Corrupt 1. Central Bank of Guatemala 2. National Congress of Guatemala 3. Constitutional Court 4. Supreme Court 5. Municipalities 6. Guatemalan Social Security Institute 7. National Statistics Institute (INE) 8. Ministry of Agriculture, Livestock and Food 9. Ministry of Environment and Natural Resources 10. Ministry of Communications Infrastructure and Housing 11. Ministry of Social Development 12. Ministry of Economy 13. Ministry of Education 14. Ministry of Energy and Mines 15. Ministry of Finance 16. Ministry of National Defense 17. Ministry of Culture and Sports 18. Ministry of Interior 19. Ministry of Foreign Affairs 20. Ministry of Health 21. Ministry of Labor 22. Public Ministry 23. Procurator General’s Office. 24. National Registry of People 25. Presidency Office 26. Superintendence of Tributes (SAT) 27. Superintendence of Banks (SIB) 28. Supreme Electoral Tribunal 29. Precidency of the Republic 30. Vice-Presidency Office 31. Business Sector
096 • 2016/17 Knowledge Sharing Program with Guatemala Q19. Please indicate your opinion about the level of corruption of the following public services:
1 5 Public Services Least 2 3 4 Most Corrupt Corrupt 1. Healthcare (public hospitals, public health clinic and government pharmacies, etc) 2. Education (elementary, High school, college, university) 3. Commercial register office (registration of companies, NGOs, etc) 4. Passport / visas issuance services. 5. Lower courts 6. Military services 7. Customs service 8. Received taxes 9. Guatecompras (platform that all public institutions has to utilize to purchase goods and services) 10. National Office of the Civil Service 11. Electoral system process 12. Legal service 13. Social security, welfare pensions and emergency services, etc.) 14. Hiring human resources public process 15. Comptroller Generals of Account (budget control) 16. Land-use permit 17. Mass media (TV, radio and newspapers, etc.) 18. Political parties 19. NGOs 20. Religious groups (church, mosque, etc.) 21. Community councils
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 097 Q20. Among the sectors and services, I just mentioned, please name the three most corrupt sectors or services, and rank them.
Organizations Public Services
1st most corrupt org/service
2nd most corrupt org/service
3rd most corrupt org/service
Don’t know
Q21. According to your opinion, how serious are the following types of corruption in Guatemala?
1 5 Types of Corruption Least 2 3 4 Most Serious Serious
1. Abuse of discretion
2. Cronyism
3. Clientelism
4. Smuggling
5. Tax fraud
6. Favoritism
7. Laundering
8. Nepotism
9. Bribing
098 • 2016/17 Knowledge Sharing Program with Guatemala Q22. How effective are the following methods to reduce corruption?
1 5 Tools to Fight Against Corruption Least 2 3 4 Most Effective Effective 1. Strong punishment: Increase levels of punishment. A stick for anti-corruption. 2. Real-name financial system: All financial transactions have to be processed in real names. 3. Protect whistle-blower: Whistle-blower is an inside informant for public interests to report corruption or illegal/unethical behavior within organizations to outside law enforcement authorities 4. Annual property registration system of public officials: Public officials at certain level or up should register all their properties (cash, bank account, stocks, real states). Properties include those of family members. 5. Reward for reporting illegal behavior: A so-called Paparazzi system. Anyone can report corrupted, illegal, unethical behavior with concrete evidence will be rewarded after investigation when it turns out to be true. 6. Increase salaries: As a precondition for less corruption, pay level for public officials should be met the living expenses for maintaining relatively decent lives. A carrot for anti-corruption. 7. Provide periodic education: Public officials may be required to receive regular education about anti-corruption. 8. e-Government systems: Constructing government-wide e-Government systems and provide public services through online. 9. Open public data: Open as much public data as possible including processes of dealing with civil complaints and/or petition. 10. Enact anti-corruption law and make ethics charter: A comprehensive law on anti-corruption including the formation of a permanent organization for anti-corruption. 11. Impact evaluation on corruption/integrity level of all public organization annually 12. Strengthen primary and secondary education on anti- corruption: Like environment protection and stop-smoking, educating children on the badness of corruption should be institutionalized. 13. Examine corruption perception level annually: Survey on the level of corruption perception on all public organizations and link the results with budget allocation or performance evaluation of each ministry/agency.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 099 II. Questions on Ethical/Unethical Behavior
Q23. Please rate your organizations/ institutions ethics level.
1 5 Ethics Level Strongly 2 3 4 Strongly Disagree Agree
1. Managers in my agency often engage in behaviors that I consider to be unethical.
2. In order to succeed in my agency, it is often necessary to compromise one's ethics
3. Top management in my agency has let it be known clearly that unethical behaviors will not be tolerated.
4. If a manager in my agency is discovered to have engaged in unethical behavior that results primarily in personal gain (rather than corporate gain), he or she will be promptly reprimanded.
100 • 2016/17 Knowledge Sharing Program with Guatemala Q24. Please indicate the degree of ethical behavior of yours and other organizational members at your work.
1 5 Ethical Behavior Strongly 2 3 4 Strongly Disagree Agree 1. In my job I sometimes compromise my beliefs to do my job the way the agency wants me to do it. 2. Sometimes I report only part of the truth to my boss. 3. Sometimes I have to alter things (documents, time cards, etc.) in order to please the company. 4. Sometimes I have to break company policy to do what is necessary. 5. Sometimes I say one thing even though I know I must do something else. 6. Sometimes I claim to have done something I have not. 7. Ethics is something I rarely even think about. 8. I would feel a loss if I were forced to follow the law against corruption. 9. I really do not have any clear feelings about ethics at work. 10. For me, being ethical means more than just being an ethical person. 11. Ethics is an important part of who I am. 12. Other organizational members in this agency think that ethical behavior at work is important to me. 13. It is important to my close friends and relatives that I continue as an ethical public servant. 14. It really would not matter to most organizational members I know if I decided to commit unethical behavior. 15. Many of organizational members I know expect me to continue to be an ethical public servant. 16. No one would really be surprised if I just committed an unethical behavior. 17. Many people would probably be disappointed in me if I just committed unethical behavior. 18. Others would probably make me feel guilty if I committed unethical behavior.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 101 Q25. Please answer the following questions that ask about your interpersonal relationships at work.
More 1~5 6~10 11~15 Interpersonal Relationships than 15 N/A persons persons persons persons
1. Of all the people you know through your work, how many are important to you, i.e., you would really miss if you did not see them?
2. Think of those people that are important to you. About how many would you lose contact with if you committed corruption?
3. How many people do you know on a first name basis through your work?
4. Of the people you know through your work, how many are close friends?
5. Of the people you know through your work, how many participate in other activities with you (e.g., work, recreation, visiting)?
Q26. Please check in the proper place according to you/your family members have experienced. Has a police officer asked you or your family members for a bribe in the last twelve months? Did not try or did not have contact ( ) No ( ) Yes ( ) Don’t Know ( ) Don’t Answer ( ) In the last twelve months, did any government employee ask you or your family members for a bribe? Did not try or did not have contact ( ) No ( ) Yes ( ) Don’t Know ( ) Don’t Answer ( ) In the last twelve months, did any soldier or military officers ask you or your family members for a bribe? Did not try or did not have contact ( ) No ( ) Yes ( ) Don’t Know ( ) Don’t Answer ( )
102 • 2016/17 Knowledge Sharing Program with Guatemala Appendix 2: Tables for Frequency Analysis
Perceived Causes of Corruption1 5 Statements Strongly 2 3 4 Strongly Average* Disagree Agree Need more living expenses 167 58 110 77 172 3.05 Lack of ethical standards 26 41 78 95 344 4.18 Want to be rich asap 36 25 65 94 356 4.23 Natural for public officials enjoying 54 72 143 137 178 3.54 illegal/extra money from people Not much fear of being punished 47 32 112 131 259 3.90 by corruption No effective monitoring system for 36 31 52 63 396 4.30 corruption Corruption is not serious crime 378 23 32 40 109 2.10 No effective punishment to prevent 49 47 110 132 243 3.81 corruption Too much discretionary power of 65 26 56 71 362 4.10 public officials No or unclear procedure of 68 52 144 132 181 3.53 providing public service Procedures are not open to public 75 65 133 140 165 3.44 e-Government can enhance 34 43 98 145 262 3.96 transparency Lack of job security 124 66 95 118 178 3.28 Lack of the merit system in public 47 32 94 106 303 4.01 personnel administration
Note: Average score ranged from 1 to 5.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 103
Seriousness of the Perceived Level of Corruption1 5 Statements Strongly 2 3 4 Strongly Average* Disagree Agree Most public officials are corrupted 138 92 154 93 94 2.85 Public officials in Guatemala is more corrupted than other countries in 119 104 176 92 78 2.83 Central and Latin America Public sector is more corrupted than 120 65 147 102 136 3.12 private sector Level of corruption at present is better 210 87 135 80 58 2.45 than that of 12 months ago Corruption in public sector is a main problem that hinders Guatemala from 38 31 73 90 340 4.17 developing itself Corruption in Guatemala can be 20 31 72 102 343 4.26 eradicated Public officials can be the initiator of 42 28 80 105 312 4.09 eradicating corruption in Guatemala Anti-corruption organization should be a permanent independent organization 16 17 52 83 400 4.47 by law National Office of the Civil Service, should be reformed to make a career 14 12 46 65 433 4.56 civil system
Note: Average score ranged from 1 to 5.
Most Corrupted Organizations and ServicesOrganizations Services 1st most corrupt National Congress Healthcare sectors (answer: 268) (answer: 95) 2nd most corrupt Municipalities Political Parties sectors (answer: 78) (answer: 55) Hiring Human Resources Public 3rd most corrupt Guatemalan Social Security Institute Process sectors (answer: 43) (answer: 47)
104 • 2016/17 Knowledge Sharing Program with Guatemala
Seriousness of Corruption: Types1 5 Type of Corruption Least 2 3 4 Most Average* Serious Serious Abuse of discretion 6 11 43 101 346 4.52 Cronyism 8 10 61 130 296 4.38 Clientelism 6 12 61 112 312 4.42 Smuggling 6 10 47 99 344 4.51 Tax fraud 3 5 26 79 394 4.69 Favoritism 3 13 49 142 298 4.42 Money Laundering 4 12 31 86 371 4.60 Nepotism 4 15 42 117 328 4.48 Bribing 1 7 28 74 393 4.69
Note: Average score ranged from 1 to 5.
Methods to Fight against Corruption1 5 Tools to fight against corruption Least 2 3 4 Most Average* Effective Effective Strong punishment 30 19 64 97 277 4.17 Real-name financial system 35 40 96 85 229 3.89 Protect whistle-blower 29 29 76 97 254 4.07 Annual property registration system of 49 44 85 88 217 3.79 public officials Reward for reporting illegal behavior 50 49 116 101 168 3.60 Increase salaries 55 38 95 109 186 3.69 Provide periodic education 37 37 106 113 192 3.80 e-Government systems 18 29 72 109 257 4.15 Open public data 24 31 57 109 265 4.15 Enact anti-corruption law and make 22 28 54 95 287 4.23 ethics charter Impact evaluation on corruption 17 25 78 99 265 4.18 Strengthen primary and secondary 11 9 46 92 328 4.48 education on anti-corruption Examine corruption perception level 16 20 63 109 276 4.26 annually
Note: Average score ranged from 1 to 5.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 105
Pearson’s CorrelationSerious- Reform- OrgCom OrgPun IndCom IndRec IndEth Rel Liv Eth Inst Reform ness Legal OrgCom 1 .126** .367** .204** .079 -.039 .215** .137** .159** .164** .003 .081
OrgPun .126** 1 .094* -.030 .205** -.172** .005 .015 .030 .000 -.105* -.105*
IndCom .367** .094* 1 .468** .112* -.067 .157** .032 .074 .021 -.060 -.035
IndRec .204** -.030 .468** 1 .043 .028 .102* .072 .064 -.006 -.103* -.039
IndEth .079 .205** .112* .043 1 -.211** .065 -.030 .081 -.012 -.137** -.088
Rel -.039 -.172** -.067 .028 -.211** 1 .078 -.136** -.116* -.047 .141** .032
Liv .215** .005 .157** .102* .065 .078 1 .125** .235** .193** .077 .160**
Eth .137** .015 .032 .072 -.030 -.136** .125** 1 .388** .432** -.066 .220**
Inst .159** .030 .074 .064 .081 -.116* .235** .388** 1 .322** -.044 .098*
Seriousness .164** .000 .021 -.006 -.012 -.047 .193** .432** .322** 1 .023 .252**
Reform .003 -.105* -.060 -.103* -.137** .141** .077 -.066 -.044 .023 1 .143**
ReformLegal .081 -.105* -.035 -.039 -.088 .032 .160** .220** .098* .252** .143** 1
• OrgCom: Compromise on corruption within org, average value of answers of 1) and 2) of Q. 23 • OrgPun: Degree of punishment on corruption, average value of answers of 3) and 4) of Q. 23 • IndCom: Degree of compromise in doing unethical behavior, average value of answer 1-5 of Q. 24 • IndRec: Degree of individual ethical recognition, average value of answer 6-9 of Q. 24 • IndEth: Level of individual ethical identity, average value of answers 11-13 and 15 of Q.24 • Rel: Individual relations within org, average value of Q. 25 • Liv: Cause of corruption as living expenses • Eth: Cause of corruption as lack of ethical standard • Inst: Cause of corruption as legal and institutional problem • Reform: Perceived level of possibility of getting better regarding government corruption • ReformLegal: Necessity of legal improvement • Police_CrEx: Personal experience of demanding bribes by police • Gov_CrEx: Personal experience of demanding bribes by public employees • Mil_CrEx: Personal experience of demanding bribes by military • Seriousness: Perceived level of seriousness in the degree of government corruption
106 • 2016/17 Knowledge Sharing Program with Guatemala
Cronbach’s AlphaVariable Number of Items Cronbach’s Alpha Q16. Causes of Corruption Liv 2 0.524 Eth 7 0.768 Inst 2 0.745 Q17. Seriousness of Corruption 4 0.666 Q22. Strategies to Fight Against Corruption Reform 2 0.62 ReformLegal 2 0.541 Q23. Ethical Level in Your Institution OrgCom 2 0.551 OrgPun 2 0.722 Q24. Individual Ethical Behavior Compromise 5 0.77 Ethical awareness 4 0.561 Ethical identity 4 0.81 Q25. Interpersonal Relations 4 0.741
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 107
Factor Analysis on Individual Ethical BehaviorTotal Variance Explained Extraction Sums of Squared Initial Eigenvalues Rotation Sums of Squared Loadings Loadings Factor % of Cummulative % of Cummulative % of Cummulative Total Total Total variance % variance % variance % 1 3.909 21.716 21.716 3.909 21.716 21.716 2.817 15.649 15.649 2 3.181 17.670 39.386 3.181 17.670 39.386 2.786 15.479 31.128 3 1.380 7.664 47.050 1.380 7.664 47.050 1.896 10.534 41.662 4 1.085 6.030 53.080 1.085 6.030 53.080 1.711 9.503 51.166 5 1.039 5.774 58.854 1.039 5.774 58.854 1.384 7.688 58.854 6 .854 4.746 63.600 7 .830 4.614 68.213 8 .769 4.270 72.484 9 .682 3.791 76.274 10 .647 3.595 79.869 11 .610 3.388 83.257 12 .567 3.149 86.407 13 .527 2.926 89.333 14 .481 2.673 92.005 15 .449 2.496 94.502 16 .356 1.979 96.481 17 .342 1.902 98.382 18 .291 1.618 100.000 Extraction Method: Principal Axis Factoring.
108 • 2016/17 Knowledge Sharing Program with Guatemala
ContinuedRotated Factor Matrixa Factor 1 2 3 4 5 CollEthics01 .050 .595 .249 -.064 .036 CollEthics02 -.054 .628 .343 -.131 -.055 CollEthics03 -.085 .663 .177 -.060 .205 CollEthics04 -.079 .826 -.056 .114 .040 CollEthics05 -.031 .797 .137 .082 .019 CollEthics06 -.044 .415 .574 -.015 .068 CollEthics07 -.040 .056 .674 .051 .082 CollEthics08 .027 .164 .516 .207 .074 CollEthics09 -.013 .203 .675 -.146 .118 CollEthics10 .423 .027 -.055 .448 .349 CollEthics11 .763 -.046 -.052 .274 .241 CollEthics12 .795 -.054 -.076 .173 -.014 CollEthics13 .851 -.072 -.035 .064 -.043 CollEthics14 .036 .096 .092 .023 .786 CollEthics15 .741 -.020 .093 .097 -.242 CollEthics16 -.149 .081 .316 -.193 .651 CollEthics17 .267 .058 -.049 .789 -.032 CollEthics18 .175 -.087 .161 .788 -.147 Extraction Method: Principal Axis Factoring. Rotation Method: Varimax with Kaiser Normalization.a a. Rotation converged in 6 iterations.
Notes: Sub-question 10 was removed as a result of factor analysis. Sub-questions 17 and 18 were removed because there is no significant theoretical relations.
Chapter 1 _ Increasing Transparency and Open Government: Lessons from Korea • 109
2016/17 Knowledge Sharing Program with Guatemala: Policy Consultation for Development of Guatemala: Focusing on Transparency in Public Sector, Government Chapter 2 Integrated Data Center and Microfinance for SMEs
Guatemala e-Government Development: Focusing on Establishment of GIDC
1. Introduction 2. Current Situation in Guatemala 3. Data Integration in Advanced Countries 4. e-Government and GIDC of Korea 5. Suggestions for Promoting the Guatemalan GIDC ■ Chapter 02
Guatemala e-Government Development: Focusing on Establishment of GIDC
Kyoung Yul Bae (Sangmyung University)
Summary
Guatemala is seeking to improve its e-Government status with assistance from Korea, which has a competitive advantage in e-Government over other countries in terms of technology and marketability. Given the lack of sufficient technical capacity within the Guatemalan Government to operate e-Government-related equipment and systems and because most senior officials are replaced each time the regime is changed in Guatemala, it is essential to take measures to establish governance to maintain e-Government law and policy consistency in establishing a mid- and long- term master plan. The e-Government priorities applicable to Guatemala can be seen as the establishment of the master plan and the Government Integrated Data Center (GIDC), including the e-Government legal system and governance.
The GIDC will provide a comprehensive solution by integrating information systems spread across each government agency, and strong infrastructure will serve the fundamentals of system operation. The GIDC and infrastructure will play a crucial role in expediting the growth of Guatemala’s e-Government.
Given the experience and operational performance of the Korean government's integrated data center construction process, it is desirable to establish Korea's NCIS as the target model of the GIDC in Guatemala. By establishing the GIDC and required infrastructure, Guatemala can serve as a leading country in e-Government policies and practices in Central American countries.
112 • 2016/17 Knowledge Sharing Program with Guatemala The GIDC in Guatemala will professionally integrate and manage all the information systems of all the central administrative agencies, such as the Vice- Presidential Office, Science and Technology Agency, and the Public Officials Training Institute, with the best operating environment and technology and move to a 24/7/365 e-Government system. It should be the heart of, and engine that drives, Guatemala’s information systems. The GIDC in Guatemala can be composed of two or more centers in consideration of regional characteristics, and mutual backups should be made between centers in case of emergency. The Guatemalan GIDC will set concrete service content based on Korea's experience adapted to Guatemala’s characteristics.
Nevertheless, the Guatemalan GIDC must have a realistic and concrete goal to achieve in the target year compared to the base year. Therefore, based on the experience of Korea’s National Computing and Information Service (NCIS), we will refer to the core achievements of Korea’s NCIS and set specific GIDC core performance targets in accordance with the characteristics of Guatemala in consideration of the available budget.
Given the Information and Technology (IT) level and economic power of Guatemala, a phased construction is desirable, rather than achieving the goal in a single step. Step-by-step construction should be done in the order of 1) location integration, 2) hardware integration, 3) cloud conversion, and 4) service integration and the big data analysis system.
As shown in the cases of each country, e-Government services are designed not only to design the GIDC system per use and security grade, such as the internal security work field, business private cloud field, and shared data public cloud when sharing with the private sector is required. Rather, Guatemala’s GIDC construction should be promoted with mid-to-long-term strategies and policies as it involves detailed work process improvement and, in some cases, the modification of laws and regulations.
There are three proposals for location integration. The first proposal is to expand and utilize the existing data center by department; the second proposal is to collaborate with a company that already has its own data center built and used; the third proposal is to determine the new location.
In the case of the first proposal, it is necessary to investigate whether the data centers of each department have room for expansion and to negotiate the conflicts of opinions between the ministries. In the second proposal, the time required for location integration is relatively short, but the government's use of the data center can be limited by the company’s decision, because the company may charge higher
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 113 prices for using the data and may interfere with the use of the data. In the third proposal, the government can use the data center at will, ensuring confidentiality, purity, and efficiency, but a critical problem is that it takes much time to establish and is expensive.
For the Guatemalan GIDC, steps 2 through 4 should be followed, and the Guatemalan government can refer to the “Guatemala GIDC Key Performance Goals” presented in the previous table. Converting to the cloud is good for convenience, but there is a security issue. The Guatemalan GIDC should ultimately transfer to the cloud, but once the center is established, the security must come together and discuss the cloud. Step 4, service integration, is also the same.
Based on the experience of Korea's NCIS implementation, the GIDC in Guatemala cannot achieve the desired effect by simply establishing an ICT center approaching the short-term technology side, considering the mid-term strategy of 5 years or more and service development over the next 5 years. A macro and systematic approach is needed, including the establishment of a master plan that takes the cloud and disaster recovery of e-Government services into consideration, as well as the reviews of diverse BPR experts, including the step-by-step and long-term improvement of laws and systems, data sharing, and business improvement.
Based on Korea's experience in constructing the GIDC in Guatemala, it will be beneficial to shorten the time and budget to obtain help from Korean NCIS experts. Specifically, it is recommended that Korean NCIS experts (contracted by the Guatemalan government and the Korean government for the training and maintenance of personnel for the next five years) should support the construction and management of the GIDC and infrastructure in Guatemala. The contract must be extended annually. It will also examine the possibility of linking subsequent research and projects performed by other agencies such as Economic Development Cooperation Fund (EDCF), Korea Trade-Investment Promotion Agency (KOTRA), international organizations, etc., to produce more in-depth and efficient results.
1. Introduction 1.1. Background
For the current regime of Guatemala, not only is the large volume of data subject to inefficient operation, but also the communication in each government department is difficult. In this sense, to achieve efficient government operation, the construction of a GIDC is necessary.
114 • 2016/17 Knowledge Sharing Program with Guatemala According to the UN e-Government Survey in 2014, Korea’s e-Government won the first prize for three consecutive years, establishing its preeminence. In the short term, having become a powerful nation with Information and Communication Technology (ICT), Korea has a great interest in the establishment of Guatemala’s e-Government. In addition, cordial relations between Korea and Guatemala have been maintained since October 1962, and the Korean government is expected to keep up such friendly cooperation through advancing Guatemala’s development of its e-Government.
Having already requested a strategy for ICT and e-Government from the National Secretariat of Science and Technology (SENACYT), its processes have been conducted by the KSP (Knowledge Sharing Program); therefore, the Guatemalan government decided to cooperate on strategy for ICT and e-Government based on the KSP of the Korean government. This report follows the research of the KSP; for the sake of setting the appropriate target model for the construction of Guatemala’s GIDC, we propose the NCIS as the target model. In consideration of the experience and operation performances of Korea, KCIS seems to be a profitable model. On the basis of this suggestion, the ultimate purposes of the report are to become a leading nation of e-Government as well as the successful construction of Guatemala’s GIDC.
1.2. Research Range
To advance ICT and e-Government strategy for the Guatemalan government, the critical e-Government fields Guatemala has requested are e-Planning, e-Education, e-Development, and e-Service.
• e-Planning: integrated operation of both various economic and socio- infrastructures through the Geographic Information System (GIS) • e-Education: information education by constructing a digital center in the nation • e-Development: development of ICT technology and propagation in the industry field through the construction of an ICT technology cluster • e-Service: Conduction of public service via the internet
The Korean government has received a significant number of assignments on the construction of Guatemala’s e-Government.
Considering the request from Guatemala, e-Government should consist of an optimized operation environment in which all information systems of the central administrative agency are integrated and managed professionally. Moreover, the e-Government system should be operated steadily without any breakdowns.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 115 In consideration of these requirements and the research period, the policy for the construction of a data center for the GIDC should be the basis of this project. In addition, in order to extract objective and meaningful results, various reliable and related data are used. In addition, through the review and in-depth interview from experts, we adapted the research methods to extract efficient conclusions.
1.3. Construction of Research
For the successful construction of the GIDC data center, in Section 2, we discuss the current infrastructure status necessary to extend the infrastructure. In particular, the e-Government propelling organization, ICT, and the status of e-Government policy and the information network will be explained.
In Section 3, the GIDC’s examples of advanced and international e-Government and necessity of the construction of a GIDC data center will be explained.
In Section 4, as the targeting model of construction for the GIDC in Guatemala, we will check for examples of the GIDC and Korean e-Government: progress direction of the e-Government, laws and ordinances system, export support, and government integration computer center, including the history, distributed human power, supporting service, and core performances. Through the Korean case, we will suggest policy proposals for the Guatemalan case.
In Section 5, to establish the successful construction of the GIDC for Guatemala, based on experiences and operation in Korea’s GIDE, we suggest a strategy for the GIDC construction.
2. Current Situation in Guatemala 2.1. Socio-Economic Aspect
Guatemala has been maintaining steady economic growth, but its growth rate has been negligible over the past two decades. Since 1990, real GDP growth has been somewhat weak. On the other hand, Guatemala is less affected by the recent global economic crisis than other Central and South American countries, which is considered a result of adopting prudent macroeconomic policies and balanced fiscal policies.
Guatemala is rated as a non-investment grade by the ratings of Ba1, S&P, and Pitch from Moody’s, but maintains a good credit rating relative to other Central American countries. Having Central America’s lowest public debt (24.7%) and a low portion of external debt (47.5% of total liabilities) could be regarded as reasons
116 • 2016/17 Knowledge Sharing Program with Guatemala why it has maintained a relatively good credit rating. The macroeconomic stability, including the fiscal deficit, external deficits and price stability, increased exports, and the stable growth of the economy, which are maintained within a manageable range, are positive factors for the credit rating.
On the other hand, there are some bottlenecks against the nation’s development. One of the biggest challenges that the Guatemalan government has been facing is low domestic revenue. According to a World Bank report in 2015, the revenue shortage has been a recurrent constraint to Guatemala’s development by limiting the government’s ability to use public spending as a policy tool. Guatemala’s tax revenues as a percentage of GDP are far below the regional average, partly because of the small size of its formal economy and partly because of the fragmented social contract. Moreover, the report pointed out that the effectiveness of public spending is hampered by the weakness of institutions. Against this background, the Guatemalan government recently announced that it will spend 83 billion Quetzal, equivalent to 1.1 billion U.S. dollars, in 2018, while it expects 63 billion Quetzal in revenue, which means a revenue deficit is unavoidable. Therefore, it is necessary to make more efficient use of existing resources to mitigate the revenue shortfalls.
Another challenge is security. Guatemala has a very high homicide rate, much higher than other parts of the world, with 34 deaths per 100,000 people in 2013. Each government considers security one of the top priorities in the national agenda and has introduced various countermeasures. However, the number of victims in 2013 increased compared to 2012, and public perception of safety has not improved. In 2016, the Guatemala National Security Advisory Committee Secretariat analyzed crime statistics recorded by the National Police Agency in 2015 and found that the number of municipalities exceeding the national average (29.54) per 100,000 people in 2015 was 112. The municipalities that recorded more than 50 people numbered 17 out of 335. To deal with the security issues, the Guatemalan government utilizes information technology, such as the digitization of fingerprints and ID cards. However, in this developed society, it is essential to share data and information among public security agencies to prevent crimes.
In sum, the shortage of fiscal revenue and vulnerable security are two main factors that hinder the country’s development efforts and economic growth. There has been discussion on how to accomplish efficient government spending and effective data and information sharing for the nation, and e-Government and an integrated data center have emerged as the main tools for achieving the desired breakthrough.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 117 2.2. e-Government in Guatemala
2.2.1. Key Stakeholders of ICT and e-Government of Guatemala
COPRE (Presidential Commission for Reform, Modernization and Strengthening of the State, renamed COPRET in 2012) has played a key role in promoting the e-Government agenda in Guatemala. COPRE was founded in 2001 to help lead a drive toward more government transparency at all levels. Since 2008, the organization has designated four main objectives: increasing ICT literacy within the government, empowering digital capacity, raising transparency, and increasing civic participation. However, other than the previously mentioned presidential order, Guatemala has no law dealing directly with e-Government, and this has significantly weakened the capacity of COPRE. In 2006, COPRE presented the document "Progress and Prospects of e-Government in Guatemala,” which describes the global context at that time, past achievements, and future agenda. In 2014, COPRET organized a high- level meeting for e-Government issues, inviting SENACYT, INAP (National Institute of Public Administration), and GUATEL (Guatemala Telecommunications). Those institutions, major ministries and public agencies of ICT, drafted another strategic document, titled “Digital Agenda for Guatemala.”
SENACYT is the implementing body of CONCYT (National Council of Science and Technology), which is responsible for the promotion and coordination of scientific and technological activities. The members of CONCYT are from the public, private, and academic sectors. SENACYT produced “the National Policy of Science, Technology and Innovation” and “National Plan for Science, Technology and Innovation 2015– 2032” with the collaboration of relevant agencies.
INAP is the core technical institution in the Guatemalan government. It investigates the problems that affect the organization and functioning of the public administration to support appropriate solutions, provides the technical assistance required by the institutions and public agencies, and disseminates scientific and technological advances in public administration matters. When it comes to e-Government, INAP introduces the new technology to public administration at the operational level by training public officers.
Since the launch of the new government in 2016, the Office of the Vice President has been actively working with other related ministries and agencies to promote e-Government.
2.2.2. Current Status of Public Data & ICT Resource Management
Executive branch organizations have their own websites and provide online public
118 • 2016/17 Knowledge Sharing Program with Guatemala services to the citizens. COPRET developed an Online Catalogue of Public Services (CANSE), a collection of all government services, which shows that various public data are being delivered through these websites.
shows the current status of online public services and open data. The amount of data and number of services has increased dramatically in recent years. Online Public Service Available in Guatemala, 2004–20152004-11 2012-15 Ministry Open Open Services Services Data Data Agriculture 52 - 286 268
Environment & Natural Resources 1 - 20 4
Public Health and Welfare 4 - 44 103
Foreign Affairs 3 - 66 9
Energy & Mines 1 - 10 1
Public Finance 10 - 55 317
Government (Interior) 7 - 42 7
National Defense 1 - 28 4
Communications 12 - 25 17
Culture & Sports 1 - 52 3
Social Development 0 - 13 3
Economy 1 - 63 2
Education 16 - 91 2
Labor and Social Welfare 3 - 16 4
Total 112 0 811 743
Source: Organized by local consultants.
While the government has been producing more online information and data, the mechanisms for the adequate management of ICT resources or e-Government services have not yet been developed. When it comes to ICT resources, there is no specific guideline or authority for the management of ICT equipment and systems and, in turn, no specific data about ICT resources management in the government. Therefore, with the support from the Ministry of Government, the research team collected information on the 1) number of servers running, 2) number of desktops, 3) number of laptops, and 4) network provider and speed, and the results are shown in
.Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 119
ICT Hardware in 14 Ministries1 SERV- 2 SERV- 1 2 MINISTRY SERVERS DESKTOP LAPTOPS PRINTERS SPEED SPEED PROVIDER PROVIDER Agriculture 20 1,385 878 581 20MB 10MB TIGO CLARO Environment & 9 751 50 50 10MB 5MB CLARO CLARO Natural Resources Communications 5 148 8 34 20MB 10MB CLARO TIGO Culture & Sports 4 882 108 243 10MB - CLARO - Social Development 4 438 125 386 10MB 10MB CLARO COLUMBUS Economy 12 354 161 147 20MB 10MB TIGO COLUMBUS Education 10 3,585 12 1,334 20MB 10MB CLARO COLUMBUS Energy & Mines 2 379 42 228 10MB 5MB TIGO TIGO Public Finance 39 1,165 139 401 30MB 20MB TIGO COLUMBUS Government 20 797 121 109 30MB 20MB TIGO CLARO (Interior) National Defense 31 2,396 284 1,116 20MB 5MB TIGO TELEFONICA Foreign Affairs 18 390 44 128 10MB 5MB CLARO TIGO Public Health and 20 804 281 182 20MB 10MB CLARO TIGO Welfare Labor and Social 8 200 10 23 15MB 5MB TELEFONICA CLARO Welfare Total 202 13,674 2,263 4,962 17.5MB 8.9MB - -
Source: Organized by local consultants.
The table shows one of the fundamental problems is clearly that all ministries use networks provided by private companies, such as TIGO and CLARO. GUATEL installed networks for public use, but due to the high cost and low management thereof, the government is not willing to use the networks. If the utilization rate is reduced, private companies will not invest in the networks; this leads to a decline in network utilization and a vicious cycle. Since each ministry contracts with a different provider, the quality of online service, such as network speed, is not consistent.
The location of the server is also not designated; hence, some ministries place their servers in government buildings, while others keep them in private areas owned by the network provider. In addition, even if the servers are located in the government complex, most of them are exposed to vulnerable conditions and lack sufficient supplies and systems for data storage and management, such as power supply, fire-fighting facilities, and back-up and security systems.
120 • 2016/17 Knowledge Sharing Program with Guatemala 2.2.3. Key Constraints of e-Government
Several key constraints and problems of the Guatemalan ICT and e-Government policies have been identified by the 2016 KSP on Transform Guatemala Using ICT and e-Government (Hong, 2016). In spite of several initiatives of the federal government, the readiness of the ICT infrastructure and environments of the country in general measured by a couple of global comparative indexes has not shown any significant progress. In the Network Readiness Index (NRI), composed of political and regulatory environment, business and innovation environment, infrastructure, affordability, and economic and social impact, its ranking dropped to 107th out of 143 countries in 2015 from 101st in the previous year (World Economic Forum, 2015).
The development index of the e-Government in Central and South America, which was compiled by the ITU in 2015 and the United Nations in 2014, shows that the development index of Guatemala’s e-Government is far behind those of neighboring countries, as shown in
. Central American e-Government Development IndexRanking Country e-Government Development Index 1 Uruguay 0.7420 2 Chile 0.7122 3 Argentina 0.6306 4 Colombia 0.6173 5 Costa Rica 0.6061 6 Brazil 0.6008 7 Mexico 0.5733 8 Venezuela 0.5564 9 Peru 0.5435 10 Panama 0.5242 11 Ecuador 0.5053 12 El Salvador 0.4989 13 Bolivia 0.4562 14 Honduras 0.4083 15 Suriname 0.4045 16 Belize 0.3774 17 Paraguay 0.3740 18 Guyana 0.3695 19 Guatemala 0.3160 20 Nicaragua 0.2759
Source: UN e-Government Survey (2014).
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 121 In particular, difficulty accessing the government websites implies the ineffective operation or management of e-Government and inactive involvement of various civil and social services.
The faltering status of e-Government in the country could be partly explained by the weak governance structure in this ICT policy arena. Several government ministries and agencies have initiated and operated their own policies without any proper coordination mechanism, which should be backed by top political leadership and proper budget control. Uncoordinated policies consequently caused inefficient investment and reluctance to exchange information and data among related ministries and agencies.
An interview with a high-ranking official in the National Civil Police (PNC) illustrated this situation well enough to buttress the swift adoption of the GIDC. According to him, the country, whose number of police officers is 18 thousand, has several databases managing such safety-related information as the fingerprints and faces of criminals, closed-circuit television networks, and narcotics and crime prevention activities. Nevertheless, even within the PNC, the information is not shared or interchanged due to imperfect means of data exchange or the lack of an integrated information system (Hong, 2016).
The Ministry of Government has been facing a similar problem and needs a solution to enhance the efficiency of e-Government. The ministry has developed and provided various e-Government services, including the Citizen Registration System with all fingerprints (CRS), e-Signature, a Business Process Management System (BPMS), an intranet with proper groupware, a reporting system for stolen vehicles, CERT for cyber security, and a Citizen Response Management System (CRMS), but these systems were not architected with a coherent framework. A high-level official of the ministry regarded the lack of consensus and support from political leaders, along with insufficient budget, as constraints on solving these problems (Hong, 2016).
In sum, Guatemala's e-Government appears to be in the early adoption stage, in which each ministry adopts its own ICT technology for its own budget, but the degree of development is different for each institution due to the absence of an integrated strategy or incompatibility of the system. Thus, the need to establish a GIDC continues to be confirmed.
However, there is considerable variation in the level of e-Government development of each country, and the gap is likely to widen as time goes by. In addition, it is difficult for the late starters to narrow the gap independently. Therefore, it is advisable for Guatemala to refer to the cases from the leading
122 • 2016/17 Knowledge Sharing Program with Guatemala countries to pursue broader and more balanced e-Government development. Accordingly, Section 3 will show the e-Government and data integration status in some advanced countries, followed by the elaboration of the Korean case and how it overcame difficulties and achieved an integrated system.
3. Data Integration in Advanced Countries
In this section, we will examine the trend of technology of the GIDC applied to rapidly changing e-Government and the trend of e-Government in major developed countries, discerning implications therefrom for Guatemala.
3.1. Standards of Data Centers and Clouding
e-Government is a concept that combines the government system with ICT to eliminate the inefficiency of business processing among different ministries and agencies. To adopt an interchangeable data flow system, data centers are a key element of the system.
The Telecommunications Industry Association (TIA), a data center standardization organization and an ANSI-accredited organization, has been leading the trend on behalf of the ICT industry. The TIA has 600 members, comprising businesses of telecommunications, broadband, mobile, information technology, network, cable, satellite, unified communications, emergency communications, and green technology. According to the TIA, data centers can be categorized into four levels according to data process speed and other technical facilities. In the TIA standard, TIA-942, data center ratings are classified as Tier 1 to Tier 4 as a standard for reliability of data center availability. Tier 1 guarantees 99.671% availability (downtime 22.7 to 28.8 hours/year). Tier 2 guarantees availability of 99.741% (downtime 1.6 to 22.7 hours/year). Tier 3 guarantees availability of 99.982% (downtime 0.4 to 1.6 hours/year), real-time maintenance and inspection of information systems, and no scheduled downtime. Tier 4 guarantees availability of 99.995% (<0.4 hours/year of downtime/year) and is an ideal grade that is not affected by unplanned equipment failures or planned work. To construct the GIDC, Tier 3 is recommended at minimum.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 123
Criteria and Goals by Data Center LevelTier Qualification Remarks • Redundant no component (N) • Availability: 99.671% (Failure time 22.7 - 22.8 hours/year) Tier 1 • Very easily affected by planned or temporary disability • In case of infrastructure equipment failure, computer system failure and direct connection
• Redundant component (restrictive N+1) • Availability: 99.741% (Failure time 1.6 - 22.7 hours/year) Tier 2 • Real-time maintenance of computerized infrastructure • No impact on planned maintenance
• Concurrent maintenance environment (N+1) GIDC • Availability: 99.982% (Failure time 0.4%–1.6 hours/year) Tier 3 Recommended • Real-time maintenance of computerized infrastructure Grade • No impact on planned maintenance
• Fault-Tolerant (2N+1) • Availability: 99.995% (Failure time within 0.4 hours/year) Reliability is a non- Tier 4 • Planned maintenance, no impact on unplanned facility failure destructive priority • Minimization of computer equipment failure
Source: www.tia-942.org/content/162/289/About _DataCenters.
Recently, clouding or cloud computing has affected the environment of GIDC. While major developed countries have established and operated government data centers, or GIDC, to streamline their administrative operations, they are aware of the effects of cloud computing and are pursuing government-wide activation policies. The Cloud First strategy in the US and the G-Cloud plan in the UK are examples. Cloud computing means that users can borrow ICT resources by using various terminals, such as PC, PDA, and mobile, regardless of time or place. In other words, ICT resources, such as servers, storage, and software, are not purchased and used; rather, they are used as a service through the internet when required. Besides, services such as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) can also enhance efficiency. Cloud computing is divided into deployment models based on the location and operational standards of the cloud infrastructure and service models based on the types of users who can access cloud computing services.
124 • 2016/17 Knowledge Sharing Program with Guatemala
Features of Cloud Services by ModelTypes Key Features This is a service that is implemented for use by anyone and is provided to general users or large companies in the form of Public Cloud charging according to the usage amount. The infrastructure is a service. This is a service that is implemented in a closed environment by providing a cloud-computing environment inside a specific Private Cloud organization. The infrastructure can be managed by the relevant Deployment organization or a third party. Access can be given depending on Model whether the user is included in the organization. This is a mix of public and private clouds, where critical data is kept in a private cloud, partially in the form of a public cloud, Hybrid Cloud combined with standard technologies that enable the movement of applications and data. The infrastructure is consolidated. This is a service created for common use by institutions and Community organizations in similar environments, sharing shared relationships Cloud (purpose, policy, security requirements, conventions, etc.). These are services that make infrastructure, such as servers, IaaS processors, networks, and storage, virtualized and infrastructure resources available as needed. This is a service that provides users with an integrated platform to develop, and ability to test and build applications, develop new applications through PaaS, provide other SaaS services, and Service Model PaaS access cloud infrastructure, network, servers, etc. The user does not have management and control over the operating system and storage, but can configure and manage the applications and the hosted application system environment This is a service that provides various software programs, such as SaaS schedule management, address book, CRM, and office programs to be leased through the web and used.
Source: Samjung KPMG (2016).
Government agencies are often unable to use the public cloud due to security policies, so the government cloud (G-Cloud) is being built in the form of a private cloud in the UK. The UK is promoting the G-Cloud as simplifying the government's data security classification system to grade three, as seen in
. Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 125
Principles of Cloud Prioritization Based on the Importance of Information ResourcesInformation Resource Importance Target organization High Mid Low Central administrative G-Cloud G-Cloud G-Cloud first agency Own cloud Own cloud Municipality Own cloud Private cloud review Private cloud review G-Cloud Public institutions Private cloud review Private cloud first Own cloud
Source: Samjung KPMG (2016).
3.2. GDIC and Clouding Practices of Major Countries
The US emphasized the implementation of “Open Government” at an unprecedented level in history during the Obama Administration. Through e-Government, the nation's access to information and quality of information has improved. The strategy of open government is aiming to operate a new government driven by the development of new technology based on the existing e-Government policy and actively participating in the decision-making process through accurate information collection and access.
The 25-point Implementation Plan to Reform Federal Information Technology Management, announced in December 2010, indicated the latest e-Government strategy of the US. The plan was designed to improve ICT program management and promote operational efficiency to reduce federal agency ICT procurement costs. One of the key policies aimed to activate the cloud market by preemptively introducing cloud services focused on public institutions. The US Department of the Treasury was the first central agency to transfer major websites to Amazon's cloud services in 2013. The CIA has also signed a 10-year $600 million cloud deployment deal with Amazon Web Services (AWS).
In 2014, IBM began building a private cloud of computing, storage, networking, and disaster recovery (DR) through its “CalCLOUD” IaaS deployment with an agreement with the US State of California. Contracting with Google, IBM, and Microsoft, many federal and state governments of the US are currently using private clouds for various purposes.
Japan has established a new information and communication technology strategy. After the regime change in September 2009, the new information and communication technology strategy, and its road-map (June 22, 2010), the
126 • 2016/17 Knowledge Sharing Program with Guatemala Commission conducted a study on the use of ICT in the administrative field and a review of related tasks and systems. According to the plan, by improving the level of information and communication infrastructure and technology, the Japanese government aimed to improve the environment in which ICT skills and functions contribute to administrative affairs. This includes the introduction of the national ID system; improving the convenience of administrative services and efficiently operating administration; and realizing the world's highest level of electronic administrative state compared to other countries.
To accomplish these goals, the Japanese government adopted the following directions of e-Government:
• User perspective: To fully understand the purpose of electronic administration promotion and promote from the user’s point of view. • Cost-effectiveness perspective: To clarify the effectiveness of electronification, review from the perspective of cost-effectiveness, and pay attention to ensuring overall optimization of ICT, including the public sector. • Reexamination of the system and the work itself: To review the work process and the system itself without having to worry about the existing roles and business processes based on non-electronic processing, while having a comprehensive viewpoint that combines administrative methods other than electronification. • Collaboration between the central government and the local government: For the electronic administration service from the user’s perspective to be realized efficiently, the central government and local public organizations should consult with each other to respect the independence of local public entities. • Cooperation with the private sector: Promote the linkage with private companies in the utilization of private services, etc., and ensure information security when promoting the utilization of private services. • Promotion of PDCA (Plan, Do, Check, Act): To thoroughly grasp the prior setting and progress of business promotion and ICT investment and perform post-evaluation.
The Japanese government also announced the launch of the cloud policy in the i-Japan Strategy 2015 in July 2009. Specifically, they referred to “cloud technology” to promote “Kasumigaseki cloud” and “municipality cloud” for the efficiency of the information system and cost reduction. Kasumigaseki cloud is to utilize cloud technology to promote efficiency and low cost in integrating and consolidating inter-departmental or municipal information systems and building and operating information systems. The municipality cloud is installed in three municipalities (Hokkaido, Kyoto, Saga) nationwide, and the experiment is conducted mainly for resident cloud service demonstration experiments.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 127 The UK government raised the need for cloud services for public institutions to streamline the cost of ICT infrastructure. In 2011, G-Cloud, a public cloud strategy, was introduced to promote cloud use. In February 2012, as part of the “G-Cloud,” a cloud service shopping portal, “Cloud Store,” was opened to allow public agencies to trade cloud services for private companies. To expand cloud computing cost savings to all public agencies in the UK government, they announced the “Cloud First Policy” (May 2013) and made it mandatory to consider adopting cloud services when building public ICT infrastructure. The UK Cabinet Office streamlined the data security classification system, which was previously categorized into six levels, into three steps (April 2014) to support the public sector's adoption of the cloud. All information excluding top secrets is treated as public data, making it possible to use cloud services (Samjung KPMG, 2016).
In summary, governments, including developed countries, are improving administrative inefficiency through e-Government. In particular, countries are currently pursuing government data integration using cloud services.
Guatemala, a latecomer country, also needs to establish a government cloud center to build a successful e-Government that enhances the efficiency and transparency of administration. Guatemala should examine and prepare examples of developed countries in order to prepare appropriate measures for itself.
In the case of the developed countries, the e-Government has succeeded with high-level technology and infrastructure. On the other hand, Korea is the most developed country in terms e-Government, driven by the process of becoming a developing country in its recent history. In addition, since e-Government is a service concept for the people, it is necessary to closely examine the case of Korea, which is more similar to Guatemala’s population compared to other developed countries. Therefore, Section 4 introduces the Korean GIDC as an advanced case of GIDC and draws out the application method for Guatemala.
4. e-Government and GIDC of Korea
In this section, we will introduce the case of e-Government in Korea and the case of the GIDC and its implications, which will be useful for designing the e-Government of Guatemala and adopting a GIDC.
128 • 2016/17 Knowledge Sharing Program with Guatemala 4.1. Korea’s e-Government
The basic framework of the e-Government of Korea is stipulated in e-Government law and subsequent presidential acts. The e-Government, as defined by the e-Government Act, is a system in which the functions of administrative agencies and public agencies (hereinafter referred to as “administrative agencies”) are made electronic by utilizing information technology. The principle of e-Government is to promote the electronification of public services and the promotion of national benefits, innovation of administrative affairs, improvement of productivity and efficiency, maintenance of information system security and reliability, protection of personal information and privacy, expansion, prevention of duplicate investments, and enhancement of interoperability.
The purpose of the e-Government Act is to improve the quality of life of the people by effectively implementing e-Government by defining the basic principles, procedures, and methods for the electronic processing of administrative affairs and enhancing administrative productivity, transparency, and democracy.
4.2. National Computing and Information Service (NCIS)
4.2.1. Overview
The establishment of NCIS,1) the Korean version of the GIDC, is a project to build a joint utilization system through the integration of information resources, such as computing and information facilities and resources that have been established and operated by each government ministry and agency. Korea has implemented the e-Government policy on a full-fledged scale since the 1990s and has accomplished remarkable advances as a result. However, there was also a negative evaluation, such as duplicate investment, lack of expertise, poor computing and information environment, and security vulnerability. Therefore, it was decided to introduce the NCIS.
Through the introduction of the NCIS, the government aimed to realize economy of scale, promote joint information utilization among public administrative agencies, enhance operating systems, and improve the professionalism of operation personnel. The project actually propelled information resources management innovation that can realize e-Government by establishing a safe management system through an effective information protection system.
1) In July of 2017, NCIS changed its name to the NIRS (National Information Resources Service). However, in this report, we refer to it as the NCIS.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 129 As discussed above, e-Government has been included in tasks of national interest or in the core agenda of presidential projects in Korea for a long time. Each government has selected and implemented e-Government’s core-tasks to be carried out within each president’s period. The service was included in “the e-Government’s 11 major tasks (2001–2002)” implemented in the Kim Dae-jung government as the step-by-step construction of the pan-government computing and information environment. Through the tasks, Business Process Reengineering (BPR) for the efficient operation of the pan-government system was established.
As the pan-government computing and information environment establishment and operation was included in the Roh Moo-hyun government’s e-Government road map and 31 major tasks, an NCIS project was initiated in earnest. The ISP project for the establishment of the NCIS was completed in 2004, and specific projects were implemented for efficient operation by gathering each government ministry’s computing and information resources in one place.
The implementation stages can be divided into the 1) location integration of computing and information resources, 2) joint use of hardware, 3) joint use of software, and 4) integration of data and service. The two NCISs were built in Daejeon and Gwangju in order to realize the location integration of computing and information resources through e-Government communication network unification under the leadership of the Ministry of Information and Communication (currently the Ministry of Science and ICT). In the NCIS of the Government Complex, Daejeon, built through the first phase project between 2004 and 2006, the computing and information resources of 24 agencies, such as the Ministry of Information and Communication (MIC), Ministry of Government Administration and Home Affairs (MOGAHA), and Korea Ministry of Government Legislation, were relocated. Through the second-phase project from 2007, 24 agencies, including the Ministry of Transportation, National Tax Service, and National Police Agency, were moved to the Gwangju NCIS.
In this process, “the e-Government communications network” and “the e-Government integrated network” operated by the MIC and the MOGAHA (currently the Ministry of the Interior and Safety), respectively, were integrated and reorganized into a national information communication network. The MOGAHA was designated to manage the service in February 2008. The NCIS has constantly been transformed to enhance the e-Government’s integrity and offer services in line with recent technology trends. In 2011, e-ANSIS (electronic Advanced National Security) was built, it was converted into a clouding computer center in 2013, and analyzed data based on big data has been offered since 2014. As of 2017, the NCIS manages and operates some 25,000 information system computers and servers of 44 central administrative agencies. The name “NCIS” was recently altered to the National
130 • 2016/17 Knowledge Sharing Program with Guatemala Information Resources Service as an effort to promote it to the “Intelligent Cloud Computing Center,” which can manage cloud, AI, and cyber threats in the era of the fourth industrial revolution (Please refer to Appendix 3 for a detailed chronicle).
[Figure 2-1] Government Integrated Computing Center Phase Change Process
2005~2007 2009~2012 2013~2017 2014~2017
Location Integration Hardware Integration Change to Cloud Service Integration & Big data analysis system
Contents Contents Contents Contents 43 of department system Integration of 43 department’s Infra resource integration(x86, Structured, unstructured big data • Computer room integration 1,994 of individual servers and virtualization) analysis base • Green IT 315 of servers Platform integrated operation • Customized service to 43 • Infrastructure resource Common administraive task department integration integration sevice • Data security reinforcement • Network, security reinforcement Center Integration HW Integration construct Cloud computing Big data analysis service Multi machine server Computer room Back-up Daejeon Gwangju The 3rd (each department) Center Center Center Center SaaS Common AP/Multi- tenacy Standard framework PaaS structured, Mobile framework unstructured data
Logical resource big data Certification → Virtualization gather, analysis Center IaaS system NCIS X86server Integrated server Physical resource internet internet The public Gov, public instruction
Source: NCIS website.
There were three key stakeholders in the establishment of the NCIS. The Special Committee for e-Government — a core organization selecting and implementing 11 major tasks in the Kim Dae-jung government — was in charge of the planning and coordination of the project. The Committee, consisting of government committee members (the MOGAHA, MIC, and Ministry of Planning and Budget) and experts from the private sector, was renamed the Expert Committee for e-Government in the Roh Moo-hyun Administration. Although the nature and organization slightly changed, the Committee led Korea’s e-Government from 2001 through 2008, including the NCIS project.
The MOGAHA was operating a “Government Computing Center” that could be a primitive model of the NCIS. As the e-Government emphasized early-stage technical aspects, and as job process innovation from the administrative aspect was stressed, some functions related with e-Government implementation were unified with the MOGAHA in 2004. Moreover, as the functions and roles of the Special Committee for e-Government were transformed into advisory functions in 2006, the
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 131 execution authority associated with the e-Government project was transferred to the MOGAHA.
The MIC is a government ministry in charge of national informatization, and it took charge of the nation’s key industry computing and information network projects. In the early stage of the NCIS establishment, the MIC led the project since the integration of computing and communication equipment with a strong technical nature was stressed. However, e-Government from the administrative aspect, rather than the technical aspect, was emphasized, and the organization in charge of the e-Government was transferred to the MOGAHA under the Government Organization Act. Thus, the ministry in charge of the NCIS was also transferred to the MOGAHA.
According to the “NCIS enforcement ordinance” enacted in March 2016, there are 283 public officials working for the NCIS. There is one senior executive officer with a term of office, two senior officers, and one secretary or technical secretary. 58 employees are deputy directors and deputy research directors, and 78 are researchers in the field of administration, communication, and computing, etc. 122 of the remaining workers are scribes and clerks, and there are 21 assistant clerks, who are specialists in administration, computers, facilities, and so on.
4.2.2. NCIS Services
The functions of the NCIS can be categorized into three sectors and ten services, as shown in
. The mission of the NCIS itself is to pursue the convenience, reliability, and efficiency of the administrative services that Korean national and regional governments and their agencies provide. In the section below, ten services are introduced by briefly reviewing the content and features of each. 132 • 2016/17 Knowledge Sharing Program with Guatemala
NCIS Key ServiceCategories Services Remarks National Total Operating Platform Operates e-Government systems in System (nTOPS) integrated manner Convenience National Information Network (K-net) Provides optimal infrastructure & Providing ICT-based environment network service
Comprehensive cyber security Manages cyber security management system (e-ANSIS) Reliability Big data log analysis system Develops & operates development big data log analysis system (nSIMS)
ICT resource management
Business continuity management Integrates information resources and Big data common infrastructure Efficiency co-uses them platform
Mobile government support
G-Cloud Provides G-Cloud service
Source: Reorganized by the author referring to the NCIS website.
(1) National Total Operating Platform System (nTOPS)
To integrate and manage the information systems of 44 central government agencies, the NCIS developed nTOPS, an integrated operation automation system. It manages the entire introduction, operation, and disposal of information systems and provides decision-making information for the operation of information systems and oversees the service. Through the system, the integration centers and individual departments are linked organically and stable operational services are ensured.
The system utilizes and analyzes the information generated in the ICT resource and service management process of the NCIS. Based on the data information of the integrated operation management system, the NCIS can monitor the operational status of the center and make it possible to establish policies and strategies. It also supports the government’s decision-making on the allocation and management of ICT resources based on the information about the current status and forecast of future demands.
nTOPS has various features: 1) best-in-class architecture with high availability and stability in the center cloud environment; 2) building a cost-effective, scalable, and
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 133 stable system through the implementation of open and domestic software-based SW architecture; and 3) providing an optimal infrastructure and communication network.
[Figure 2-2] e-Government System Integrated Operation Service Concept Diagram
Integrated Operating Service Concept Map
Request failure/change/ action/etc NCIS Comprehensive Status Customer Disability Status organization Service Assign Worker Manager Administrator acceptance/ planning/ approval/ Change Status Desk Worker Institutional performance reviewing review Configuration Status users Performance Status Control Center Operational Status / Request Result Customer Agency Real-time display SMS Equipment Server Storage Integrated Operations AP, DB NMS Management Network ESM Security Equipment
nSIMS
Service Level Integrated Measuring Service Level Indicators Management Resource Management Infomation resource lifecycle management
Source: NCIS website.
(2) K-net: National Information Network
The NCIS offers and maintains “K-net,” the national and regional backbone networks jointly used by national institutions for organizing communication networks and distributing information between central government agencies and local governments. The service also includes the hierarchical configuration of an optical transport-based transmission network and IP-based switching network and system-based operation and management environment. In addition, through the service, public agencies can separate their intranet from internet traffic and establish an infrastructure linkage area for broadband communication services, such as the internet, internet telephony (IPT), m-Gov (mobile service), and convergence services.
The network has such features as: 1) ensuring security as a national common communication network with various security configurations; providing scalability that enables prompt responses to various communication environment changes and service demands; 2) providing an environment that can guarantee differentiated
134 • 2016/17 Knowledge Sharing Program with Guatemala quality per the characteristics of users and services; 3) and ensuring stability and reliability through a non-stop service environment with a real-time fault detection and response system.
[Figure 2-3] National Information Network Concept Map
Commercial Mobile National Information and Internet Carrier Communication Service Provider
Internet M-Gov
National Independent Center Office Information Tenant Building Network NCIS (Back Bone) (Daejeon, Gwangju)
Government Complex Tenant Government Metro City/ National Complex Information Province Network (Local) Information distribution among national institutions Municipality National institution network configuration
User Organization User Organization User Organization (Main office) (Provincial office) (Front line agency)
Source: NCIS website.
(3) ICT-friendly Infrastructure Management
The NCIS provides an optimal infrastructure for the stable operation of an e-Government system. The specially designed building for data storage can withstand a Richter 6.0 earthquake and 1,000kg/m2 design load. Spare power equipment, UPS, a battery, and a generator are prepared for emergencies. State-of-the-art monitoring systems, such as a bio-metric system, CCTV, and ID cards, defend the center from external threats around the clock. It is also equipped with a temperature and humidity control system to maintain the optimum environment (25 ± 2°C, 30–50%) for facilities, as well as an automatic fire detection and extinguishment system.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 135 [Figure 2-4] Data Center Operation Concept Diagram
Data Center Infrastructure Operations Conceptual Diagram
State propagation/ Infrastructure Management First reponse Constant temperature Power and humidity Fire fighting
Power, Constant temperature and 24 hours humidity, Fire fighting, External Security Access Control Control Monitoring Location Number Xray Search Vehicle control recognition recognition Real-time remote Card reader Anti-rush Outer fence CCTV monitoring
Source: NCIS website.
(4) e-ANSIS: Comprehensive Security Management System
The NCIS safeguards the national information system from cyber infringement. e-ANSIS, an integrated security system based on the technology and expertise of the integration center, provides a seamless e-Government service without any interruption by preventing any kind of cyber threat, such as hacking. The integrated security system protects information assets in the center through an integrated security management system against external physical and technical threats.
The system is composed of a physical security system and cyber threat defense system. The physical security system is an enhanced access control through the double-wall security of building, CCTV, vehicle control, X-ray detection, 24-hour boundary work, the prohibition of the loading and unloading of dangerous goods and storage media, the setting of an access control zone, ID cards, and biometrics. The cyber threat defense system is the function of a multi-level comprehensive response system through a nine-layer defense system and a five-type analysis system, the detection of external attacks, such as DDoS and hacking, implementation of a blocking environment, inspection and elimination of information system vulnerability, cyber infringement prevention, and post-management performing 24/7/365 security control.
The features of the service can be summarized as follows: 1) the implementation of a comprehensive defense system (e-ANSIS) through physical security, cyber security, and system access control and 2) obtained information security management system certification.
136 • 2016/17 Knowledge Sharing Program with Guatemala [Figure 2-5] Integrated Security Management System Concept Diagram
e-ANSI Integrated Information Security Integrated Protection Collective Total Risk Sharing Management System security Process Management Information Reponse analysis Based on Establishment of international standard various operational procedures for information protection Analysis Harmful Malware Vulnerability Traffic Analysis information protection management of integrated system(ISO/IEC27001) computer center
Cyber Infringement Response System
Network Security System Security Application / DB Security
Tenant Information System
Server Network Storage Security
Source: NCIS website.
(5) nSIMS: Big Data Log Analysis System
The NCIS uses the national Security Information Management System (nSIMS), a big-data-based system that collects and analyzes logs generated from information resources in real time, to prepare for cyber-attacks and prevent failures. It is possible to operate a more secure information system by searching and analyzing all events occurring in the information system through the nSIMS with Advanced Persistent Threat (APT) detection, failure prediction, statistical analysis, etc.
(6) ICT Resource Management
One of the main roles that the NCIS plays is the management of ICT resources in the government. The center established an information resource management system that systematically manages a variety of ICT hardware and software required by the government.
The life-cycle of ICT resources from the purchasing plan to the disposal of the resources can be monitored by the system, which enables the government to evaluate the appropriateness of the introduction of resources and prevent overlapped investment in resources. When it comes to procurement, the NCIS realizes the scale of economy as it purchases items in bulk. The center recently virtualized and automated the ICT resource pool for easy transition to the G-Cloud service.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 137 [Figure 2-6] ICT Integrated Resource Management Concept
Integrated IT resource management concept
Integrated Computing Center Information resource management system Information Infrastructure Link System Management System IT resource management server Procurement Integrated Operations Management Purchase Budget request SMS Management Associate Accounting Integrated security management Associated Disposal Purchase Perconnel Systems Work Network Management Management Flow Associate Operation Install Infrastructure
Information resource comprehensive information
Computer Admin by Manager by Center Admin by Manager by Integrated Operations department department Integrated department Center Information DB Administrator
Source: NCIS website.
(7) Business Continuity Management
The NCIS’s disaster preparedness system ensures Korea’s ICT-based public service can be provided without disruption. The center established Business Continuity Planning (BCP), a detailed guideline for dealing with major disasters, such as fires, earthquakes, blackouts, and terrorism. Major systems, such as servers, storage, the network, and security equipment, are all duplexed in case of any type of failure, as well as data backup and dissemination, and a Disaster Recovery System (DRS) construction is installed. It also runs periodic simulation training in preparation for various disaster situations.
Its disaster recovery system, including an on-line scattering system, integrated backup system, and BCP management system, follows “BS25999,” an international standard in the field of Business Continuity Management (BCM).
138 • 2016/17 Knowledge Sharing Program with Guatemala [Figure 2-7] Business Continuity Assurance Service Concept Diagram
System
Daejoen ↔ Gwangju Resume Disaster Recovery System Service Main System Disaster system normalization damage Main system restore
Data
Backup/ Resume Disaster DB loss DB restore Dissipation Service
Source: NCIS website.
(8) Big Data Processing System
The NCIS established a big data processing system that is jointly used by both central and local government for effective government implementation by establishing a scientific basis for the establishment of policies. The center provides collection and storage services for private and public data for the big data processing and analysis solutions for general users and experts through a big data portal (www.insight.go.kr). There is also technical support for the common infrastructure utilization model and analysis tool training so that government agencies can easily analyze common platforms in big data analysis. Moreover, it provides a specialized analysis environment that can be used only by inputting data by setting the analysis model (location-based, civil affair analysis, etc.).
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 139 [Figure 2-8] Big Data Common Infrastructure Platform
Big Data Common Infrastructure Platform Establish scientific/preemptive policy Link to Collect Store Analysis Service public/private Administrative information information HDFS2 Dept/Municipality R-GUI Analytical ESB task Open API Processing R- Share and utilize FTP/SFTP Data Map Workflow visualization analysis results Distop & Schedule Private GIS Visualization information Enterprise Open API Text- Minig Open Data FTP/SFTP PostgreSQL (RDBMS) Nation Crawling
Private Information
Card/ Transport WEB/ Professional Floating SNS site Card population
Source: NCIS website.
[Figure 2-9] Common Base Utilization Model
Location-based Social Media Hompage Posts Word cloud analysis Regional analysis Posts analysis Trend analysis
Source: NCIS website.
(9) Mobile Government Support
Mobile common base operation includes the operation of common infrastructure, a support center system, and technical support for the common infrastructure utilization of test bed development. It is an essential function for securing service security, such as mobile-integrated authentication and data encryption, using administrative digital signatures, providing a push service that delivers messages to users in real time when a problem occurs.
It also provides a standardized interface to shorten the development period of business mobile services and to provide a stable service to users. In addition, to secure mobile devices that access and use various services of various institutions, terminal
140 • 2016/17 Knowledge Sharing Program with Guatemala management policies are provided in various user groups. This supports the expertise and detailed guidance on the utilization of the common infrastructure and supports the stable development of mobile services after they are deployed through the verification of performance and security.
[Figure 2-10] Mobile Support Concept
Mobile Support Center
Administrative Push Link Security Administrative Work App Official Store A dept. Document MDM Conversion
National Civilian Work Development Verification/ Registration App Nation Support Deployment Management Store B dept.
Source: NCIS website.
(10) G-Cloud
To improve the efficiency of information resources and standardize operation, the NCIS introduced G-Cloud, a government-exclusive cloud, applying high-end information technology to the server, storage, network, security, etc., to provide information resources flexibly according to the workload. This is a technology and service that integrates information resources by gathering the ICT resources of administrative agencies for smart e-Government services, collectively building and using them jointly, and providing them as quickly as necessary. For the service, the NCIS virtualizes servers, storage, and networks and provides infrastructure resource services according to the needs of government agencies in a standardized manner, as well as optimized security for the government cloud service. nTOPS and ICT resource pools can also be managed through G-Cloud.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 141 [Figure 2-11] G-Cloud Resource Pool Operating Environment
G-Cloud resource pool operating envirnment
VM VM VM VM G-CMS WEB VM VM VM VM Integrated Management of Multi-hypervisors
VM VM VM Resource WAS Monitoring VM VM VM management Metering Orchestration Cloud Resource VM VM Assignment Deployment Template DBMS Control management management VM VM Monitoring
Server Virtualization
RHEV VMware Docker IBM HP nTops x86 Server UNIX Server Network Storage Virtualization Center Integrated Virtualization Operations Management
Block File Object Physical NFV Process etc Storage Network/Security
Source: NCIS website.
4.2.3. Key Achievements of NCIS
In sum, the NCIS is recognized as a milestone of Korea’s e-Government system, which has enhanced the convenience, reliability, and efficiency of the nation’s e-Government, and its achievements can be proven with many statistics.
First, through the establishment of a complete computer-based environment and the specialization of operating technology, the overall management level of the e-Government system has been upgraded. It obtained international certification in key areas, such as ICT services (ISO20000), ICT infrastructure (ISO9001), and disaster management (BS25999), and met the Tier 3 level, under the standard for assessing the availability level of global data centers described in Section 3.1.
The NCIS also realized the e-Government service without interruption 24/7/365 with organized system operation and fault management. The breakdown time per task, which had reached 67 minutes per month before the integration center construction, is now 3.2 minutes, greatly improving the stability of the e-Government.
It has built a comprehensive response system that combines access control, real- time monitoring, advanced security solutions, and security experts to safeguard the e-Government from various external threats. e-ANSIS, an integrated security system
142 • 2016/17 Knowledge Sharing Program with Guatemala with the expertise of the integration center, fully defends against any kinds of cyber threats, such as hacking, DDoS, or APT from accessing e-Government systems. It has developed a Big Data Log Analysis System (nSIMS), which collects and analyzes logs generated from information resources in real time. In doing so, more secure information systems have become available by searching and analyzing all events that occur in information systems, such as APT detection, failure prediction, and statistical analysis.
The center also comprehensively manages scattered government ICT resources so that they can be used jointly by the institutions, which in turn reduces costs and improves efficiency. Procurement in bulk makes the center able to utilize the necessary amount of information resources as required by public entities, resulting in a budget reduction of about 30% or more compared to individual purchases. Moreover, with the cloud computing system in place, the number of cloud conversion tasks has been reduced from 466 in 2011 to seven in the first half of 2016, thereby maximizing budget savings.
The NCIS established various e-Government joint platforms to easily develop e-Government services for mobile and cloud environments. For example, the "G-Cloud platform" established by the Integrated Center in 2011 provided a new way of consuming government ICT resources by allowing government departments to easily apply and allocate necessary ICT resources through the internet. The NCIS shared platform consists of a common administrative service, the G-cloud Big Data platform, and the mobile smart work platform.
Lastly, the domestic ICT industry has been developed through the balanced development of SMEs, support for e-Government exports, and cooperation between the government, industry, and academia. All outsourcing business is in charge of domestic SMEs, and cooperation with foreign governments, such as Mongolia, Nepal, Vietnam, and Brunei, helped the Korean government data center model to enter developing countries.
shows the key achievements of the NCIS since its establishment. Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 143
Key Achievements of NCISKey Achievements Details and Items Performance (Year) Information system 99.9908% 99.9996% Information resource utilization rate (2006) (First half of 2016) management Operating system 0 4 professionalism international (2005) (First half of 2016) certification Unit work 1476 units, Unit work 300 units, equipment 26304 Managed systems equipment 4425 units units (2006) Information system (First half of 2016) operational stability 3.2 minutes Integrated Disability time per job 67 minutes Individual operation monthly average operation (2006) (First half of 2016) DDoS Real time +- 10 min Detection / Blocking - (First half of 2016) Information protection time system security 3 hours 3.7 sec IP Search time (2005) (2015) Reduced construction 30% reduction and operating cost - (2015) Information resource (average) integration efficiency Number of cloud 7 tasks 466 tasks conversion tasks (2011) (First half of 2016) 64.0 points 87.6 points Customer satisfaction e-Gov sharing (2006) (2015) convenience 3 platforms NCIS sharing platform (First half of 2016) SMEs 26.8% 100% ICT industry Participation rate (2011) (First half of 2016) development 43 people from 4 3380 people from 131 Foreign visits for promotability countries countries benchmarking (2005) (First half of 2016)
Source: Reorganized by the author referring to the NCIS website and TIA website.
4.3. Policy Reflections from the Korean Case
The Korean government decided to introduce the NCIS to deal with the inefficiency of e-Government. Now, it is considered an unprecedentedly successful GIDC model in the world, providing a variety of G4G services. However, there were many trials and errors in the process of delivery of the project. The implications drawn from the case can be presented as follows:
144 • 2016/17 Knowledge Sharing Program with Guatemala • Importance of a coordination organization that is able to manage conflicts among stakeholders
Given the nature of the NCIS, a project that needs to involve diverse ministries and agencies, conflicts among stakeholders was the most urgent risk that the Korean Government had to cope with. Thus, the Special Committee for e-Government played a key role in coordination. All stakeholders, such as the MIC, MOGAHA, and Ministry of Planning and Budget (the ministry that managed public finance) participated in the committee and thus in decision making. In this way, conflicts could be reduced. In addition, committee members from the private sector that could provide neutral perspectives were also critical to the success of the project. Last but not least, the committee could make influential decisions since it was engaged with the Korean President, the top decision-maker in the country.
• Consistent policy should be in place
The case shows the importance of a consistent policy from two aspects: First, the NCIS establishment could be stably implemented, irrelevant of regime change, since the project agenda was consistently included in the national e-Government development roadmap and major tasks, despite being a large-scale project taking a long period of time. In contrast, problems that may occur when no consistent policy exists were also shown. Conflict between the MGAHA and the MIC occurred as the policy changed, and the ministry in charge changed several times according to the focus of the NCIS’s role and the e-Government’s technical or administrative function. Therefore, consideration is needed for the policy to have consistency and continuity prior to policy adoption.
• To-be model of GIDC needs to be established
The NCIS is a practice in which two goals of e-Government — technical and administrative innovation — were accomplished. The NCIS is meaningful in that it was expanded as an integrated data center that can be used by all ministries in an administrative manner, in addition to the blanket provision of computing and information equipment and the integrated technical development of hardware and software. It took a long time to plan the blueprints of the center, but the process was worthwhile, which made the Korean government prepare a more concrete plan of establishment.
• ICT manpower training is necessary
The development of rapidly changing ICTs and the growing interest of the private sector and the public are driving the active transformation of the NCIS. Increased
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 145 private and public interest in NCIS services and the development of ICTs have transformed the NCIS's initial service from web to app. In addition, the NCIS is actively participating in the change due to smartphone activation. In order to continuously respond to global issues, the NCIS should consider human resources. ICT-related education is required to this end. From a short-term perspective, it is also possible to acquire personnel through ICT and related short-term educational institutions. However, from a long-term point of view, it is desirable to cultivate workers through ICT-related schools.
5. Suggestions for Promoting the Guatemalan GIDC 5.1. Goal Model for the Guatemalan GIDC
Actually, many nations in Latin America have shown interest in the standardization of e-Government and study content related to e-Government by Guatemala’s government agency, such as the Ministry of Economy. Despite consistent goals and visions, the Guatemalan government is struggling to establish an e-Government led by the Vice-President's Office, National Institute of Public Administration, and National Secretariat of Science and Technology. Government officials have pursued Guatemalan public administration and works related to e-Government, and under the control of UN public administration, the roadmap related to e-Government has progressed.
However, Guatemala is not only technically and empirically deficient, but is also in the second stage of the development phase of e-Government, as designated by the United Nations. That is, for the construction of e-Government for Guatemala, help from advanced nations is necessary. Moreover, many problems occur across the nation, thus disturbing its construction.
To succeed in the construction of the GIDC, to begin with, it should be identified what interrupting factors for GIDC construction need to be considered seriously. First, even though the nation credit rate for Guatemala is below concerning levels, financial income is a problem. As a low tax-correcting rate can become one of the restriction factors of national development policy, its financial status is a major consideration. Second, compared to that of private enterprises, the lack of infrastructure of the government is one of the interrupting factors, especially relating to the security problem. Next, due to the lack of investment in human resources, the low labor force level can be an example that influences the GIDC. Finally, traditionally, when transitioning to a new regime, the Guatemalan government changes senior officials and engineers. This means that officials who supervise the
146 • 2016/17 Knowledge Sharing Program with Guatemala GIDC will be replaced with each change of government. Given that it is difficult to execute policy enforcement in a limited time, support and supervision from a targeting model country are required.
Korea is one of the nations in which the circumstances are almost similar to the current circumstances of Guatemala, and it has succeeded in constructing an e-Government. Through the journey from developing nation to developed nation, the Korean government achieved the current e-Government and thus understands the situation of Guatemala. In other words, various experiences from the construction of the GIDC for Korea might provide solutions for obstacles during the GIDC construction for Guatemala.
In addition, for consistent cooperation between policy leaders and the management of human resources for Guatemala, proximity between countries is the most important factor. In terms of proximity, Korea is not only the most eminent nation among advanced nations with an e-Government, but also shows robust interest in the progress of e-Government for Guatemala. Now that the e-Government of Korea is already known to Guatemala as an example of excellence, in Guatemala, Korea’s technology can make a great impression on the Guatemalan market with its competitiveness.
[Figure 2-12] GIDC Target Model Phase
High
GIDC [To-be]
Security MOVE • Provides an integrated security environment • Provides an integrated security Data Center environment by • Establishment of operational Department management [As-iS] system(governance) • 24-7, no-stop service Low
Low Integration Level High
Source: Author’s elaboration.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 147 Considering the encountered problems of Guatemala, the Korean NCIS is a better choice for Guatemala’s target model.
The efficiency that can be obtained by applying “GIDC center construction,” which is one of the Korean NCIS projects, to Guatemala is “integrated data management by department,“ “complementary environment enhancement,” and “establishment of operation management system.” This is illustrated in [Figure 2-12].
5.2. Goal of Guatemalan GIDC through Korean NCIS
We propose the application of “Convenience e-Government,” “Reliability e-Government,” and “Efficiency e-Government” to Guatemala. The details of the application of NCIS's main services to Guatemalan GIDC are as follows.
Guatemalan GIDC Key ServicesService Service Details Operates e-Government systems in Integrated operations integrated manner management system (nTOPS) Convenient e-Government Provides optimal infrastructure & National information network network service Providing ICT-based environment Comprehensive cyber security Manages cyber security Reliable management system (e-ANSIS) e-Government Develops & operates Big data log analysis system big data log analysis system (nSIMS) development ICT resource management Business continuity management Integrates information resources and co-uses them Big data common infrastructure platform Mobile government support Efficient Provides G-Cloud service G-Cloud e-Government e-Planning e-Education e-Development Master plan Security service Other e-Services
Source: Reorganized by the author referring to the NCIS website and “Digital Agenda for Guatemala”.
148 • 2016/17 Knowledge Sharing Program with Guatemala For the construction of the GIDC for Guatemala, effective and detailed purposes should be set to complete processes within the target timeframe. Based on experience and keys for the government integration computer center, such purposes should be focused on the nation’s encountered difficulties and available budget. Through the construction of Guatemala within the targeted timeframe, achievable core performances are as follows.
Guatemalan GIDC Key Performance GoalsPerformance content Main Outcome Outcome Details Content Current Status (Target Year 2022) Information resource Information system - 99.982% (Tier 3 level) management utilization rate professionalism - 4 species Determined after master Managed systems - Information system plan is established operational stability Disability time per job 3.2 minutes Integrated - (monthly average) operation DDoS - Realtime +- 10 min Information protection Detection / blocking time system security IP search time - 3.7 sec
Reduced construction and Individual build Integrated build 30% Information resource operating cost (average) 100% reduction integration efficiency Number of cloud Determined after master - conversion tasks plan is established
e-Gov sharing Customer satisfaction - >80 convenience NCIS sharing platform -
SME - Determined after master ICT industry participation rate development plan is established Foreign benchmarking promotability - visits
Source: Own elaboration referring to the NCIS website.
As shown in
, in order to integrate all of information systems for the central administrative agency and establish the GIDC with high-end technology and an optimized management operating system, the paramount items that should be considered are building a master plan including governance and establishing laws regarding e-Government. Currently, the Guatemalan government has not prepared enough technical capacities to manage or operate the GIDC. For example, Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 149 the organization structure and human power of Korea can become benchmarks for Guatemala. Korea’s NCIS employees can support the GIDC by the education and operation of Guatemala’s engineers.
With the establishment of a master plan, it is required to make a plan about the establishment of governance for a sustainable policy and laws related to e-Government.
5.3. Step-by-Step Implementation Strategy for GIDC Deployment
From now on, we will discuss prerequisites and detailed strategies for the GIDC’s establishment with an optimized management system.
5.3.1. Prerequisites for Establishment of GIDC
As we have seen in the previous section, for establishment of the GIDC, a master plan for the improvement of both the law and policy and a building plan should be established. In addition, as a prerequisite, Business Process Reengineering (BPR) should be done for efficient operation in an integrated computerized environment. To build the GIDC, the project should have a control tower, responsible for assigning organization for the GIDC.
NCIS Roadmap1) Identification and problem analysis • Material resource division of computer environment of • Informatization process division government agencies • Human resource division • Deriving major administrative services 2) Improvement of administrative • Major improvement areas through analysis of major service through information system administrative service related systems • Improvement direction for major improvement areas 3) Developing innovative tasks for • Counterfeit information management innovation task efficient operation of computerized • Crisis ammunition computing environment environment infrastructure innovation task 4) Establishment of innovation plan • Improvement plan of detailed tasks by innovation task for efficient operation of computer • Details by improvement plan amenity environment • Action task objective image 5) Establishing a transition plan for • Law and system improvement plan successful implementation of • Investment Analysis innovation initiatives • Implementation of priorities and change of management
Source: Reorganized by the author referring to bizbrain(www.bizbrain.co.kr).
150 • 2016/17 Knowledge Sharing Program with Guatemala An e-Government service accommodating the GIDC is defined annually, a road map with a phased schedule including a plan for system construction, and the shift of the phased system, data, and service should be established. In Korea’s case, the items regarding the master plan establishment are shown below.
5.3.2. GIDC Construction Plan
Korea is among the countries that have successfully built an e-Government. It is the country among them that was the most similar to the situation in Guatemala during this process. However, the obstacles to Korea' and Guatemala's GIDC projects are subtly different. This means that the process of establishing an e-Government in Korea cannot be applied to the Guatemalan GIDC process. In other words, the case of Korea could be a good example for the establishment of the GIDC center in Guatemala, but it would be difficult to build a successful Guatemalan GIDC without considering the situation in Guatemala. Therefore, here we will look at how to build a GIDC considering the local situation in Guatemala.
5.3.2.1. Cloud-based GIDC Deployment Plan
The first thing to consider for a GIDC building plan is a “cloud-based GIDC.” In the case of advanced e-Government, data integration has shown a trend toward cloud computing. The Guatemalan GIDC can also be thought of as having a cloud- based leapfrogging approach as the ultimate goal. Introducing the cloud as a priority has the advantage of being able to aggregate the ICT resources of administrative agencies in the near future, integrate them into information resources, and provide them in a timely manner.
To build a cloud-based GIDC, we have to consider using a data center owned by a private company or government department. Using private company data centers to build cloud-based GIDCs can be a risk to building a reliable GIDC. A GIDC is a system that provides nationwide service and deals with vast amounts of data related to security and defense. More than anything else, the Guatemalan GIDC should consist of a system that minimizes the likelihood of government data leakage, keeping data protection at the forefront. However, the construction of a GIDC by using a private company data center has the vulnerability that it cannot solve security problems caused by structural problems. In a situation of doubt about security, building a cloud-based Guatemalan GIDC is neither time-efficient nor cost-effective. It is inappropriate to use a private company data center because the construction of the Guatemalan GIDC should be considered a top priority for security.
Another alternative is considering using data centers owned by government departments. The use of data centers owned by government departments cannot be
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 151 easily coordinated because the positions of departments may differ. The use of data centers, which are expected to collide with each other, can be a constraint factor for the GIDC construction project in the future of the country, and it is impossible to actively cope with the rapidly changing environment.
In other words, the cloud-based GIDC deployment scheme would be highly efficient, but inadequate because of security vulnerabilities and confusion between government departments.
5.3.2.2. Step-by-step Integrated GIDC Construction Plan
In order to increase the efficiency of information resources and standardize operations, cloud adoption should be considered under the e-Government initiative. It is desirable to construct the cloud sequentially, rather than leapfrogging, which prioritizes the cloud, to solve security problems or to introduce the cloud when security is enhanced.
This report proposes a stepwise integration plan for building a reliable GIDC. Step-by-step construction is 1) location integration, 2) hardware integration, 3) cloud conversion, and 4) service integration. The reason for setting up the cloud in stage 3 is due to security vulnerabilities. If you convert the system itself using cloud, this is expected to cause unmanageable damage when placed in a state of threat to the cloud system. Therefore, we set up the cloud in three steps to minimize security damage.
For the purpose of the integration from separated servers of government to one GIDC, two processes should be followed:
1. Continuously promote the need for and effectiveness of the GIDC to government stakeholders with servers to be consolidated; 2. Establish a consultative body composed of stakeholders to improve the legal system.
When these two processes are completed, physical servers are transferred to only one place. Moreover, not only do heterogeneous data types combine into a homogeneous data type, but operation and data should also be integrated into a new platform for simultaneous operation on the same server. In addition, different data types stored in one repository should be stored in one format, and tasks and data must be integrated into a new platform so that data can exist even if other workloads are being executed on the same server. In summary, for the integration steps of the GIDC, four steps can be followed, and detailed content about processes is shown in
.152 • 2016/17 Knowledge Sharing Program with Guatemala
Features of GIDC Integration StepsIntegration Stage Definition Characteristic Locally consolidating servers It is mainly used as a way to reduce the Step 1 Centralization distributed across different cost of M&A between companies, server geographies management, and so on. It has the advantage of reducing the number of practical servers, efficient utilization of computing resources, and improving the service level Physical Replacing large numbers of Step 2 through the processing capability of Integration servers with large ones high-performance servers. Physical consolidation is considered for the same architecture, same application, or same DBMS server. Storing different data types Easy to manage data sharing, data Data in the same format in a management, backup and recovery Integration single repository between applications It has the advantage of being capable of rapid business development, reducing Step 3 Migrating tasks and data the burden on application management to a new platform so that and development, and improving service Application different workload types of level. Integration work and data exist in one It is easy to back up and recover and server easy to implement a high-availability system and can reduce software licensing costs. SW, service integration, full application Increase the efficiency of of virtualization and automation, Service services by integrating prevents duplication of software by Integration services that perform similar organization tasks 40% reduction in introduction
Step 4 It effectively blocks new intelligent attacks by using Latest threat persistence monitoring, Big Data visualization prediction, pre-emptively detects new threats, real- Analysis data extraction and time response to new threats, diagnoses System analysis, common platform own vulnerabilities, such as newly (distributed processing), and developed application programs infrastructure (cloud).
When considering the ICT status and economy in Guatemala, GIDC construction is better pursued in a phased approach.
There are four steps for processing the GIDC integrated steps, referring to Korea's NCIS: 1) location integration, 2) hardware integration, 3) cloud conversion, and 4) service integration and the big data analysis system. From 1) to 3), according to the conditions of Guatemala, each step might be flexibly adopted.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 153 As shown in each example of e-Government, the e-Government service entails a detailed business process, according to the security level and such usage as the public cloud field, including the internal security business field, cloud service field, and public service; thus, for rectifying a stipulation and laws, Guatemala’s GIDC construction should proceed following medium- and long-term strategy and policies. When considering the current situation the Guatemalan government faces, it makes the first and second steps a priority. The first is about a coordinated site, and the second step is a strategy for hardware integration: detailed information about these stages is as follows.
• Plan 1. Extension of existing data of each department • Plan 2. Cooperation with data center corporation government already uses • Plan 3. Construction of the GIDC in a new place
To follow Plan 1, the government should investigate enough space to extend the data center and prepare coordinated time. If Plan 1 were adapted, the Office of Science and Technology would be a better place for deploying the GIDC.
In the case of Plan 2, using data center corporation resources in Guatemala, the nation can minimize the construction period; however, in this way, due to the dependence of a corporation, the government has restrictions about data usage and a security problem.
Among these three plans, Plan 3 has the most advantages: 1) direct control by officials in charge, 2) confidentiality, 3) purity, and 4) efficacy.
Despite the many benefits from Plan 3, the construction investment cost is higher and a large amount of time would be spent. In the case of construction investment cost, the government could acquire a sufficient loan from such banks as World Bank and the Central American Bank for Economic Integration (BCIE/CABEI) because of the purpose of the establishment of a data center.
Ultimately, it is even necessary to form a cloud-type GIDC; thus, after establishing the center, a discussion will take place with regard to the progress of the cloud type with security concerns.
Compared to the first and second steps with physical integration, the third step is involved in convenience from cloud conversion, but it gives rise to a security problem. Therefore, after completing steps 1 and 2 successfully, they should start discussing the cloud in terms of security. Step 4, “Service integration,” should be considered in the same way as step 3.
154 • 2016/17 Knowledge Sharing Program with Guatemala In particular, given the experience of Korea’s NCIS implementation, the GIDC in Guatemala cannot achieve its intended purpose by establishing an ICT center approaching the short-term technology side, considering the mid-to-long-term strategy of more than five years and the development of services over the next five years. In addition, a macroscopic and systematic approach is required, including the establishment of a master plan that considers e-Government services clouding and disaster recovery, as well as the reviews of diverse BPR experts, including the step- by-step, long-term improvement of laws and systems, data sharing, and business improvement. In order to achieve these requirements effectively in constructing a GIDC in Guatemala, it would be advantageous in terms of time and budget reduction to be assisted by Korean NCIS experts who have extensive experience.
If a contract is signed with the Korean government, Korea’s NCIS specialists dispatched together with the provisions for the training and maintenance of personnel for the next five years between the government of Guatemala and the Korean government will support the construction and management of the GIDC and infrastructure in Guatemala. If necessary, the contract can be extended on a yearly basis. In addition, the possibility of linking subsequent research and other organizations’ (EDCF, KOTRA, international organizations, etc.) projects should be examined to derive deeper and more efficient results. The main content and considerations of each step presented above are as follows.
Key Guidelines and Considerations for the Guatemalan GIDC Implementation PhaseStep 1 Step 2 Step 3 Step 4 Hardware Location Conversion to Cloud Service Integration Integration Steps Integration (Data Integration & Big data analysis (Physical (Centralized) /Application Integration) system Integration) The center function of the ICT resource sharing Leverage integrated “Co-location” stage and the through data integration data and resources Contents center function of the “H and clandestine services to create new / W integration stage” are through database services and value promoted simultaneously. standards and joint use In order to operate the GIDC effectively and stably, it is necessary to improve the laws and Realize server virtualization regulations and establish systematic processes Considerations function in large-scale server for security management, disaster recovery by grasping institutional usage management, operation management, service level management, and customer service management. Configuration
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 155 5.3.2.3. Step-by-step GIDC Building Phase
By long-term strategy, the construction of the GIDC should put a systematic plan into practice each year. There are four periods: the formative period, developing period, completing period, and expanding period. Each period’s detailed purpose and integration object are given in
. Step-by-step Goals and Integration TargetsDevelopment Completion Formation Period Expansion Period Promotion Period Period Phase Y Y+1 Y+2 Y+3 Physical Pilot Center 1st Center 2nd Center Development Enhancement Prompt acceptance of government of e-Government information Achieving economies tasks and rapid environment by Stable foundation of of scale with physical environment completion of physical environment physical/cloud-based for integration integrated national completion of institutional and regional information resources computerized environment Maximizing user Establishment of a Secure management Obtaining the best satisfaction with high- bridgehead to become know-how operating system quality operation an ICT powerhouse service Promotion of Step-by-Step standardization Establishing a balanced Establishment of test- Goal of information service system of bed for continuous technology physical environments promotion of business and operation (centers) management Strengthening the Minimizing trial and Streamlining efficient competence of ICT error operation procedures professionals Ensuring Strengthening national interoperability information resources foundation safety Concentrating competency in unique Advanced business by integrating interoperability level joint
156 • 2016/17 Knowledge Sharing Program with Guatemala
ContinuedDevelopment Completion Formation Period Expansion Period Promotion Period Period Phase Y Y+1 Y+2 Y+3 Securing national Establishment of information resources collaboration between (disaster recovery) centers e-Government task e-Government task Integration (new system) (new system) Organization Local government target 1) Central government 2) Central government information resources information resources information resources information resources
Source: Kim (2015).
5.3.2.4. Budget Plan for Construction of the GIDC
The research team refers to the “Guatemalan Population” and “Examples of GIDC Promotion in Korea and Similar Countries” to estimate the budget needed for GIDC construction. The “Guatemala GIDC Construction Budget” presented in
can be used as a basis for GIDC budget formulation and for obtaining assistance and cooperation for securing the budget. Step-by-step Guatemalan GIDC Building Budget (unit: USD) Item Details Total Cost Y~Y+1 Y+2 Detailed design, RFP, Bid Purchasing Consulting 483,000 483,000 - management Building construction, Building installation of machinery and 15,774,000 7,887,000 7,887,000 Construction electric devices Network, Router, Switch, Server, 18,624,000 9,312,000 9,312,000 GIDC Server Storage, and SW Construction Operation center, electrical facilities, air conditioning Equipment & facilities, generators, disaster 14,729,000 7,364,500 7,364,500 Interior prevention systems, and physical security Costs considering volume Reserve Money 9,825,400 - 9,825,400 and price fluctuationsTax VAT (10%) 4,912,700 2,504,650 2,408,050
Total 64,348,100 27,551,150 36,796,950
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 157 5.4. Budget Plan for Securing GIDC
In this section, we will discuss a strategy for the security of the budget to build the GIDC for Guatemala. As the plan must adapt to insufficient resources, Official Development Assistance (ODA) can be considered due to the lower financial income of the Guatemalan government.
ODA means that, for the purpose of the improvement of the economy and social development of a developing country, an advanced country donates and loans to a developing country with a concession. As such, assisting the government development, not only the economy and social environment of the sponsoring country, but also the relationship between two countries should be considered comprehensively.
Volume of ODA provided by KOICA for major Latin America Countries (Unit: KRW million) Year Country 2011 2012 2013 2014 2015 2016 Guatemala 4,785 5,154 2,779 3,265 2,792 4,214 Dominican Republic 2,124 2,666 3,156 2,966 2,921 3,595 Bolivia 1,080 5,907 6,414 10,691 9,967 12,668 Costa Rica 104 85 467 698 394 497 Colombia 8,463 3,211 6,452 9,401 10,704 10,736 Panama 302 115 123 374 623 93 Paraguay 5,336 7,948 9,213 9,617 10,280 7,199 Peru 6,744 8,870 7,947 8,250 9,240 9,548Source: KOICA (2017).
As can be seen in
, Guatemala has consistently received continuous support from Korea’s ODA. Under the coordination from Committee for International Development Cooperation in Prime Minister’s Office, the Ministry of Strategy and Finance (MOSF) and the Ministry of Foreign Affairs (MOFA) are the ministries which are in charge of the provisions of concessional loans and grants respectively. The actual procedure of ODA is as follows.158 • 2016/17 Knowledge Sharing Program with Guatemala
Procedure of ODAStep Grant Loan Policy Dialogue Project identification and preliminary study
The recipient country submits an official request for assistance to the Korean Preparation government via diplomatic channel
• Reviewing the request (by the Korea • Reviewing the request (by the Export- International Cooperation Agency, Import Bank of Korea, KEXIM, an KOICA) implementing organization of EDCF Screening and • Dispatching experts group to conduct commissioned by the Ministry of Approval feasibility studies Strategy and Finance) • Screening by the “Project Selection • Evaluation on audit and loan condition Committee” • Submitting the audit report to the • Preliminary selection of the project MOSF
• Discussing project details with the • Informing the recipient country of the recipient country on selected projects support Bilateral • Signing memorandum, memoir or • Discussing about condition of loan Discussion agreement between two parties between two parties (KEXIM and its counterpart in recipient country, mostly ministry of finance)
• Finalizing execution plan • The executing agency of the recipient • Bidding and selecting contractors country concluded a consultant • Monitoring the project selection, employment contract, Project bidding, and purchase contract with Operation and the winner according to the loan Monitoring agreement. • Processing bid approvals, employment contracts, and purchase contract agreements by KEXIM
Project • Conducting interim evaluation, end- • End-up evaluation and ex-post Evaluation and up evaluation, ex-post evaluation evaluation (2 years after project Follow-up completion)
Source: Hwang (2014).
KOICA and EDCF are institutions under the national government and differ in the aid method. KOICA mainly offers gratuitous aid, while EDCF is an organization that lends money to it. KOICA and EDCF have the same procedure for the policy consultation and preparatory stage, but there are differences in the examination, project approval, consultation, project implementation and management, evaluation, and follow-up management procedures.
The ODA implementation plan basically starts with year N, which is the year of the project implementation. In N-2, we will confirm the composition of the demand side of the source country. In N-1, feasibility and effectiveness tests will be conducted, and the project will be implemented in N years.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 159
Procedures for Establishing ODA Implementation PlanYear Content Recipient country’s demand compatibility • Identify, collect, and share preliminary business plans (first N-2 Prevention of redundancy half) year between business and • Grant Aid Preliminary Review Meeting (September) preliminary review of • Free preliminary review meeting (October) linkage plan
• Notification of guidelines for establishing implementation plan for each institution (February, main agency → each department) • Establishment and submission of enforcement plans for each organization (March, each department → the main organization) • Grant Aid Relations Agency Meeting (March – May, Ministry of Foreign Affairs) • National and Foreign Workers Comprehensive Coordination Meeting held (May to June, National Office) • Notification of comprehensive adjustment results (early June, National Defense Office→ departments) • Submission of a budget request reflecting the result of N-1 Screening validity & the adjustment (at the end of June, each department → Year effectiveness department) • Budget preparation and deliberation (government proposal) (July–October, writing section) • Submission of an implementation plan reflecting the results of budgeting (November, each department → the main organization) • Preparing and submitting implementation plan for each field (November, host organization→ national office) • Comprehensive implementation plan draft (from November to December, national building) • Comprehensive implementation plan (draft) deliberation, decision (December, international development cooperation committee)
N Year Business execution, evaluation, feedback
Source: Committee for International Development Cooperation (2014).
If Guatemala’s project proposal passes to the Ministry of Foreign Affairs, the ODA implementing organization will go through preliminary review, implementation plan and budget formulation review in N+1. Once these procedures are completed, the project can be carried out within two years.
Besides Korean government support, Multilateral Development Banks (MDBs) can be considered as a potential donor. The World Bank has been providing various forms of support for the expansion of the Internet service penetration rate in
160 • 2016/17 Knowledge Sharing Program with Guatemala Guatemala including the “Regional Economic Development Project,” a USD 60 million aid project in 2006.
In addition to the World Bank, the International Development Bank (IDB) can also be considered. It has been executing several relevant projects for Latin America Countries. For example, Peru has worked closely with the IDB to implement national development and e-Government. Most of the large-scale e-Government initiatives since 2006 have been supported by the IDB. The bank has provided about USD 3 million in funding for e-Government projects to modernize the country. In the case of Colombia, the IDB continues project and loan assistance for each segment of Colombian society, approximately USD 915 million over last five years.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 161 References
Bizbrain, www.bizbrain.co.kr, accessed in October 2016. Committee for International Development Cooperation et al. (2014), Korea ODA White Paper, Office for Government Policy Coordination. Hong, Sung Gul (2016), Transform Guatemala Using ICT and e-Government, 2015/16 Knowledge Sharing Program with Guatemala. Sejong: Ministry of Strategy and Finance and Korea Development Institute, 2016. Hwang, Sung-Don (2015), A Study on How to Improve the Organizational Structure for e-Government ODA, Korean Association for Regional Information Society Journal, 2015, vol.18, no.2, pp.91-107, Korean Association for Regional Information Society. Kim, Sanhae (2013), Policy Direction for GIDC (Government Integrated Data Center), 2013 Knowledge Sharing Program with Honduras. Seoul: Ministry of Strategy and Finance and Korea Development Institute, 2013. Korea Information Technology Agency et al. (2015), National Informatization White Paper, Korea Information Technology Agency. Korea International Cooperation Agency (2017), 2016 KOICA Annual Statistical Report, KOICA. Samjung KPMG (2016), Issue Report on Introduction National Cloud: Cloud Polices in Major Countries [in Korean], KPMG. Sanches, Susana, Kinnon Scott, J. Humberto Lopez (2015), Guatemala: Closing Gaps to Generate More Inclusive Growth, Systematic Country Diagnostic, World Bank. National Computing and Information Service, www.ncis.or.kr , accessed in December 2016. National Law Information Center, www.law.go.kr, accessed in December 2016.
162 • 2016/17 Knowledge Sharing Program with Guatemala Appendices
Appendix 1. The e-Government System in Korea
The government is promoting the 10 major brands of e-Government to support the export of e-Government with the Ministry of Government Administration and Home Affairs as the general agency. These 10 major brands are e-procurement, electronic customs clearance, patents, an integrated computer center, postal logistics, information, disaster management, immigration, and SOS national security services. In addition, the e-Government overseas export support system (www.egovexport.go.kr) provides useful information about Korea’s e-Government system. Detailed explanation on some featured system is as follows.
Tax Return and Payment: Home-tax
Self-employed persons once had to visit tax offices and financial institutions to report and pay their income tax, value-added tax, and others, but this hassle disappeared when Internet electronic notifications and electronic payments became possible. In addition, by using the comprehensive national tax service (www.hometax.go.kr), 105 kinds of complaints related to the national tax are handled on the internet, including certificate of business registration, proof of tax payment, and proof of closure of business. Service applicants are notified by e-mail or mobile phone text message. One may also get a refund guide.
Six kinds of certified civil complaints commonly used in financial transactions, such as business registration and tax payment proof, may be directly inquired after by financial institutions, so they do not need to be issued as paper documents. Once you can access the comprehensive national tax service and can apply for a civil complaint, you simply need to inform the financial institution of the inquiry password that will be automatically displayed.
[Figure 2A-1] Procedures for Using the National Tax Service
① Service ③ Certification application Certificate Taxpayer Tax office registration agency Authority ② ID / PW
National Tax Service ④ Access to HTS HTS homepage ⑥ Use HTS ⑤ Acceptance of certificate
Source: www.hometax.go.kr.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 163 To use the convenient Internet tax service, one may go to the nearest tax office, apply for a certificate, obtain a certificate, or use an official certificate for Internet banking.
Electronic Procurement System (KONEPS)
The National Comprehensive Electronic Procurement System (www.g2b.go.kr) was opened to make public procurement more convenient and transparent. Procurement companies are now able to easily search the bidding information for all public agencies nationwide from a single web site. For that reason, the procurement gazette will no longer be issued in booklet form.
In addition, companies that are registered for transactions with specific organizations for specific types of business can participate in bidding with all public agencies once they are registered in the G2B system. The complex bidding process also has online support from the G2B system. Since all procurement processes such as procurement requests, company qualification examinations, bidding applications, consultations, selection of contractors, contracts, and warranties are carried out online, there is no need to meet the supplier’s manager and the procurement official in person. After the delivery, payment is issued as a national government check and will be automatically transferred to the registered account. The payment process, which previously took about two weeks, will be completed within a few hours.
Electronic Clearance System (UNI-PASS)
This system electronically processes customs clearance procedures such as goods declarations, customs inspections and tax payments when importing and exporting goods. Therefore, it is only necessary to access the UNI-PASS to confirm and check items that require confirmation of quarantine, such as plants and food. By establishing a network with electronic customs agencies, such as import and export companies, airlines, and bonded carriers, electronic declarations and bills are processed electronically, and users may access all the main functions of this system securely through the Internet.
Airlines and shipping companies may send a traveler list and manifest to the customs office, and customs can electronically manage the export of goods or the shipment of exported goods at the entrance for imported goods. Electronic processing can be used for the import inspection of freight inspection objects, the distribution of declaration reports, import and export statistics, notification of customs clearance for bank receipts and the receipt of customs clearance. Prior to their arrival in Korea, the government is made aware of travelers and cargo in advance to analyze risks and utilize state-of-the-art surveillance equipment to prevent issues in advance.
164 • 2016/17 Knowledge Sharing Program with Guatemala UNI-PASS has been internationally recognized by the Asia-Pacific Electronic Commerce Council (AFACT) and received the ‘e-Asia Award’ in 2007. It has been introduced to many countries, including Guatemala.
Customs Clearance System (UNI-PASS) Export StatusCountry Project Contract Year Contract Price Customs clearance system construction Kazakhstan 2005 USD 420,000 consulting Customs clearance system construction Kyrgyzstan 2008 USD 470,000 consulting e-customs clearance system construction Dominica 2008 USD 28.50 million business e-customs clearance system construction Mongolia 2009 USD 5.54 million business
Guatemala RM & DW build 2009 USD 3 million
e-customs clearance system construction Ecuador 2010 USD 21.63 million business e-customs clearance system construction Nepal 2011 USD 3.83 million business
Tanzania RM & Cargo management construction 2011 USD 2.66 million
Ecuador Single Window Construction Project 2011 USD 15.82 million
Tanzania New Customs system construction business 2012 USD 19.61 million
Total 8 countries (10 cases) worth USD 11.48 million
Source: https://www.odakorea.go.kr/oz.main.ODAMain.do.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 165 Appendix 2. Major Contents of e-Government Act in Korea
Chapter 1. General Provisions
Purpose, definition, responsibility, principle, e-Government basic plan
Chapter 2. Providing and Utilizing e-Government Services
Part 1. Electronic complaint handling: Electronic complaint application, electronic confirmation of required documents, non-visiting complaint handling, identity verification, electronic notice, notification, etc. Part 2. Promotion and use of e-Government services: development and provision of e-Government services, expansion of user participation, utilization of the e-Government portal, etc.
Chapter 3. Electronic Administration
Establishment of electronic documents, effect of electronic documents, transmission and receipt of electronic documents, timing of arrival of deliveries, administrative digital signatures, management of administrative knowledge, identification and access restrictions
Chapter 4. Joint Use of Administrative Information
Administrative information common utilization center, joint use of administrative information, application for joint use, approval, withdrawal of approval, suspension, prior consent of the information subject, request for reading, etc.
Chapter 5. Strengthening e-Government Operation Base
Part 1. Introduction and utilization of information technology architecture: establishment of a basic plan for information technology architecture, introduction and operation by organization, redesign of business, etc. Part 2. Establishment of efficient management infrastructure for information resources: interoperability technology evaluation, standardization, sharing services, information network construction, information worker development plan, information resource integration management, regional information integration center. Part 3. Improvement of the security and reliability of the information system:
166 • 2016/17 Knowledge Sharing Program with Guatemala security measures of the information and communication network, information system supervision, registration of a supervisory corporation, compliance matters of a supervisory corporation, reason of disqualification of supervisory and supervisory corporation, cancellation of supervisory corporation registration.
Chapter 6. Measures for the Implementation of Seminal Government
e-Government projects, entrustment of project management, pilot project, local information project, prior consultation, e-Government international cooperation, etc.
Chapter 7. Penalties
Penalties, penal regulations
Note: For the full document, please refer to National Law Information Center (http://www.law.go.kr/eng/engLsSc.do?menuId =1&query=ncis&x=0&y=0#liBgcolor27).
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 167 Appendix 3. History of NCIS
2002.10 The establishment of BPR (Effective Management Innovation Plan) 2003.08 e-Government Roadmap laid out in 31 Tasks 2004.07 NCIS established an Information Strategy Plan (ISP) 2004.12-2006.05 NCIS conducted 1st stage construction project 2005.06-2006.05 NCIS conducted 2nd stage construction project 2005.10 NCIS moved to the target organization 2005.11 NCIS begun (11.4, 6 teams) 2006.10 NCIS transfer of 24 departments into the information system completed 2006.11-2007.04 Gwangju NCIS conducted 1st stage construction project 2007.05-2008.02 Gwangju NCIS conducted 2nd stage construction project 2007.06 Gwangju NCIS completion of building 2007.07-2007.12 Gwangju NCIS transfer of institutional information system 2007.11 NCIS reorganized and launched NCIS in Gwangju (One branch, 12 teams) 2008.02 Integrated e-Government network into national information network 2008.04 Modification of information protection for the mid-term integration plan 2009.04-2009.11 Conducted the integration project for computerized government support 2010.02-2010.12 Conducted the integration project for computerized government support 2011.01 Government cloud computing pilot center opened 2011.02-2011.12 Integrated government information support project 2011.05 e-Government comprehensive defense system, e-Ansiseong build 2011.11 Korea e-Government public relations center opened 2011.12 Government G-Cloud system built 2011.02-2011.12 Performed the government integrated information support project 2012.02-2012.12 Organized a change in public service for back-up information center site utilization 2012.05 Mobile e-Government support center constructed 2012.10 New Cyber Safety department established (One branch, 12 sections) 2012.10 Moved the information resources of a former organization of Sejong city 2013.03 One branch with 11 sections organization restructured 2015.05 New big data analysis department established (One branch, 12 sections) 2015.09 Changed name NCIA (National Computing & Information Agency) → NCIS (National Computing & Information Service) 2016.03 New establishment of a management agency designated as responsible (facility management type), Cloud team(One branch, 12 sections, one
168 • 2016/17 Knowledge Sharing Program with Guatemala team) 2016.05 Establishment of the Dae-gu NCIS promotion group (Two sections) 2016.10 Established the National Convergence Network Working Group (Three teams)
Source: NCIS Homepage, www.ncis.go.kr, December 2016.
Chapter 2 _ Guatemala e-Government Development: Focusing on Establishment of GIDC • 169
2016/17 Knowledge Sharing Program with Guatemala: Policy Consultation for Development of Guatemala: Focusing on Transparency in Public Sector, Government Chapter 3 Integrated Data Center and Microfinance for SMEs
Enhancing Financial Accessibility of SMEs through Microfinance Institute
1. Introduction 2. Introduction to the Microfinance Market 3. Analysis of the Microfinance Market and System of Guatemala 4. Korea’s Experience of Microfinance and SME Financing through Credit Unions and Cooperatives 5. Concluding Remarks ■ Chapter 03
Enhancing Financial Accessibility of SMEs through Microfinance Institute
Choong Lyol Lee (Korea University)
Summary
This chapter attempts to provide the policy recommendation to improve the financial accessibility of SME through the microfinance institute (MFI) in Guatemala. Like many developing countries, Guatemala has a bank-oriented financial system that small enterprises and local farmers struggle to navigate. To accomplish the objects of the 2016 KSP with Guatemala, the KSP team takes the following four steps: (1) describing basic theory of financial accessibility for SMEs and economic development, (2) analyzing the current market condition and legal framework for microfinance in Guatemala, (3) examining the cases of Korea in terms of development of microfinance and financial accessibility, and finally (4) providing practical policy suggestions to the Government of Guatemala. From these analyses, the following policy recommendations are suggested. First, several measures and tools to evaluate the credit risk of each creditor should be employed. Second, the MFI should be able to use modern management techniques to improve its efficiency. Third, MFI should provide an appropriate education both to their internal and external clients. Fourth, non-profit microfinance institutions (NMFIs) should be able to systematically approach domestic and foreign contributors. Fifth, the government or supervisory agency has to prepare to be cautious regarding the high indebtedness of microfinance industry.
172 • 2016/17 Knowledge Sharing Program with Guatemala 1. Introduction
It is very important for developing countries to secure the financial resource necessary for robust economic growth. The low investment ratio caused by the lack of appropriate financial resources is one of the important reasons for this. Especially, the low-income families in the rural areas of the developing country have very limited access to financial resources. Either formal financial institutions such as commercial banks are not located nearby or they require too many documents and other conditions that they cannot meet.
Since the late 20th century, a new financial service called microfinance became a possible solution to provide the financial service to such low-income families. With the pioneering work done by Grameen Bank of Bangladesh initiated by Mr. Muhammad Yunus, many countries have introduced the microfinance service to the low-income people in rural areas.
Guatemala is not an exception in this sense. The low savings ratio and investment ratio constrained its economic development. At the same time, the limited access of financial service for low-income families prevented them from escaping from the poverty. Especially, people in the countryside had extreme difficulty in reaching conventional financial institutions.
For these reasons, it has been argued that low-income families should be able to get financial access and that the government should be involved in this microfinance business to reduce the poverty of Guatemala. Then, they may thereby start their own small business or get the financial assistance that is often necessary when farming in rural areas.
The government of Guatemala recognized this fact and selected the theme of development of microfinance or financing of SMEs as one of the 2016/17 KSP subjects. To accomplish the objects of the 2016/17 KSP with Guatemala, the KSP team takes the following four steps. The first step is to describe basic theory of financial accessibility of SMEs and economic development; the second step is to analyze the current market condition and legal framework for microfinance in Guatemala. In this step, we clarify what should be done in Guatemala based upon economic theory and research on Guatemala. The third step is to examine the cases of Korean development of microfinance and financial accessibility, and the final fourth step is to provide practical policy suggestions to the Government of Guatemala. This paper has five sections. The first one is the introduction, the second to fourth sections cover each of the above steps, and the final section s the conclusion of the paper.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 173 2. Introduction to the Microfinance Market 2.1. Definition and History of Microfinance
Microfinance is a kind of financial service for small-sized entrepreneurs, businesses, and farmers lacking access to regular banking and related financial services. It differs from the conventional banking activity by removing the need for collateral, providing credit to low-income people. It usually consists of programs to grant small loans to individuals who reach the highest poverty rates, so that they can start small businesses that generate income to improve their standard of living. Accordingly, the goal of microfinance is to give these economic agents opportunities to become self-sufficient by providing a way to save money, borrow money, and get insurance. It is usually done at local and regional levels.
At present, the concept of microcredit has many meanings, but it generally always deals with “small amounts” in terms of the amount disbursed. At the same time, the term “progressive” or “short term” is used to refer to the time of credit granting, and to identify the sector to which it is addressed. The actual definition of microfinance in the context of developing countries is as diverse as the socio-economic problems facing the communities.
Microfinance institutions (MFIs) provide the microfinance service to the public. While main activities of the institution participating in the area of microfinance are associated with lending, some microfinance companies offer additional services, including money transfer or insurance. MFIs range from small non-profit organizations to larger banks. MFIs include both for-profit companies as well as non- profit organizations.
Microfinance serves as a catalyst in the overall development of socio-economic conditions of the unbanked poor, who have been kept outside the banking orbit. As a result, it is considered a tool for socio-economic development, and can be clearly distinguished from charity.1)
The two main mechanisms for the delivery of financial services to such clients are: (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group. In some regions of Southern Africa or Asia, microfinance is used to describe the supply of financial services to low-income employees, which is closer to the retail finance model prevalent in mainstream banking.
1) Families who are destitute, or so poor they are unlikely to be able to generate the cash flow required to repay a loan, should be recipients of charity.
174 • 2016/17 Knowledge Sharing Program with Guatemala The history of microfinancing can be traced back as far as the middle of the 18th century, when the cooperative lending banks supported farmers in rural area of Germany. The Irish Loan Fund system, introduced by Jonathan Swift in the 19th Century to improve conditions for impoverished Irish citizens, was one of the pioneering cases of microlending.
The modern use of the expression “microfinancing” roots in the 1970s when organizations such as Grameen Bank of Bangladesh, with the microfinance pioneer Muhammad Yunus, were starting and shaping the modern industry of microfinancing. Mr. Yunus, an economics professor at Chittagong University at that time, offered small loans to destitute local people. His project was so successful that he was finally able to launch Grameen Bank in 1983 as a way to reach a much wider audience. According the website of Grameen Bank, Grameen Bank has 8.81 million borrowers, 97% of whom are women as of December 2015. With 2,568 branches, it provides services in 81,392 villages, covering more than 97% of the total villages in Bangladesh.
2.2. Types of and Success Conditions for Microfinance
There are several inclusive financial services for low-income families. The first one involves informal moneylenders at low interest rates. Alternatively, state banks owned by central or local governments may provide appropriate financial services to poor people. This can be done either by expanding the number of financial institutions available to them or by strengthening the capacity of those institutions. In recent years, there has also been increasing emphasis on expanding the diversity of institutions, since different institutions may provide different service. As a result, it is not easy to distinguish microfinance from some of these activities.
According to “Access for All: Building Inclusive Financial Systems” by Brigit Helms, there are four general categories of microfinance providers such as (1) informal financial service providers, (2) member-owned organizations, (3) NGOs, and (4) formal financial institutions.
Informal financial service providers include moneylenders, pawnbrokers, savings collectors, or rotating savings and credit associations (ROSCAs), and accumulating savings and credit associations (ASCAs).2) Because they know each other well and live in the same community, they understand each other’s financial circumstances and can
2) A ROSCA is a group of individuals who agree to meet for a defined period in order to save and borrow together, a form of combined peer-to-peer banking and peer-to-peer lending. F.J.A. Bouman described ROSCAs as “the poor man's bank, where money is not idle for long but changes hands rapidly, satisfying both consumption and production needs“. All members regularly save the same fixed amount while some participants borrow from the group. Interest is usually charged on loans. ASCAs require bookkeeping because the members do not all transact in the same way. Some members borrow while others are savers only, and borrowers may borrow different amounts on different dates for different periods. If members pay interest on their loans, the return to savings has to be individually calculated and fairly shared among the group.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 175 offer very flexible, convenient and fast services. On the other hands, these services can be costly and limited in terms of the choice of financial products and period (very short term). Informal services specially involve savings also pose risk; many people lose money.
Member-owned organizations are usually self-help groups, credit unions, and a variety of hybrid organizations like “financial service associations” and self-reliant village savings and credit bank (CVECAs). They are generally small and local to be able to access reliable knowledge about the income and financial circumstances of the participants or member. Usually they are operated by the local people; as a result, their costs of operation are low. However, these providers may have little financial skill and can run into trouble when the economy enters a downturn or their operations become too complex. Unless they are effectively regulated and supervised, they can be “captured” by one or two influential leaders, and the members can lose their money. Grameen Bank, the well-known MFI, is such an organization.
NGOs may operate finance institutions for the local people. Over the world, many NGOs from advanced countries engage in microfinance activity to distribute the financial resources donated from the residents of advanced countries. Actually, these NGOs have spread around the developing world in the past three decades. They have been very successful for providing their innovative, pioneering banking techniques like solidarity lending, village banking and mobile banking that have overcome barriers to serving poor populations. But they have also received several criticisms that their governance structures can be fragile and they can become overly dependent on external donors.
Some formal financial institutions (e.g., commercial banks, agricultural de- velopment banks, rural banks, and non-bank financial institutions) may provide microfinance services to the public. Although they offer a wider range of financial services, and control a branch network across the country and internationally, they used to be reluctant to take social missions, and often fail to deliver appropriate financial services to poor or remote populations.
Since microfinance is an economic and financial activity, it should charge an interest rate on its loans, although the borrowers are very poor. As a result, one of the principal challenges of microfinance is providing small loans at an affordable cost. The global average interest and fee rate for microfinance loans is estimated at 37%, with rates reaching as high as 70% in some markets.3) The reason for the high interest rates is not primarily cost of capital but a high transaction cost caused by the small size of each loan and large number of transactions. Microfinance practitioners have long argued that such high interest rates are simply unavoidable, because the
3) MacFarquhar, Neil. “Banks Making Big Profits from Tiny Loans”. The New York Times, April 13, 2010.
176 • 2016/17 Knowledge Sharing Program with Guatemala cost of making each loan cannot be reduced below a certain level while still allowing the lender to cover costs such as offices and staff salaries.4) To reduce the cost, some MFIs utilize volunteers.
Although more than a century has passed since the introduction of microfinance in the 1970s, much research on microfinance activities has been done only very recently. The Consultative Group to Assist the Poor (CGAP) in 2004 suggests some principles for the MFIs to observe, which was endorsed by the Group of Eight leaders at the G8 Summit on June 10, 2004. They are made of ten principles as explained below.
1) Poor people need not only loans but also savings, insurance, and money transfer services. 2) Microfinance must be useful to poor households: helping them raise income, build up assets, and/or cushion themselves against external shocks. 3) “Microfinance can pay for itself.” Subsidies from donors and government are scarce and uncertain; thus, to reach large numbers of poor people, microfinance must pay for itself. 4) Microfinance means building permanent local institutions. 5) Microfinance also means integrating the financial needs of poor people into a country’s mainstream financial system. 6) The job of government is to enable financial services, not to provide them. 7) Donor funds should complement private capital, not compete with it. 8) The key bottleneck is the shortage of strong institutions and managers. Donors should focus on capacity building. 9) Interest rate ceilings hurt poor people by preventing MFIs from covering their costs, which chokes off the supply of credit. 10) MFIs should measure and disclose their performance—both financially and socially.
It is difficult for any MFI to observe all these principles. Most MFIs are very small and their staffs are not well trained in this field. In some institutions, volunteers are in charge of managing credit risk. In many cases, they are not regular financial institutions supervised by a financial regulatory agency.
Recently, MFIs tried to make a global alliance to improve their efficiency or expand their activities. For example, Microfinance Information Exchange or The Microfinance Gateway supported by CGAP provide many case studies and research results concerning microfinance across the world. Furthermore, the conventional financial institutions in developed countries gave assistance for the improvement of the activity of MFIs in many countries.
4) Ibid.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 177 3. Analysis of the Microfinance Market and System of Guatemala 3.1. Banking and Financial System of Guatemala
3.1.1. Overview
Like many developing countries, Guatemala has a bank-oriented financial system. At the end of 2016, it was made of 17 commercial banks, 14 financial companies, 23 insurance companies, 10 stock companies, and 6 credit card companies, as explained in Appendix 1.
The banks and the savings and credit cooperatives were established as parts of the Guatemalan Banking and Financial System based upon Legislative Decree 19- 2002, on the Law on Banks and Financial Groups.5) Descriptions of the regulated entities and their services have been made by the articles of the law in Appendix 2. The entities subject to the supervision and inspection of La Superintendencia de Bancos de Guatemala (SIB) are presented in Appendix 1.
According to the loan statistics of financial institutions including regulated banks, financial companies, and offshore banks combined at the end of 2015, the total loans amounted to a balance of GTQ 172.9 million with a growth rate of 13.2% in
. also shows the loan portfolio by type of borrowers and financial institutions. The banks take 90.4% of total loans while those of finance companies and foreign ones take only 1.1% and 8.5%, respectively. The largest borrowers of the financial institution are business firms taking 57.9% of total loans and the second largest ones are consumers taking 26.0%. Only 10.6% and 1.5% of total loans are allocated into small business firms and microcredit, respectively. The banks that report the highest percentage of loans for microcredit are Banrural and Banco G&T Continental.5) Some of important articles are in the appendix 2.
178 • 2016/17 Knowledge Sharing Program with Guatemala
Loans by Types of Borrowers and Financial Institutions (Unit: GTQ million) Finance Foreign / Type of Client Banks Total (%) Companies Institutions Total 153.1 1.8 14.4 169.4 100 Business 86.4 0.7 11.0 98.1 57.9 Small Business 15.4 1.0 1.4 17.9 10.6 Consumption 43.7 - 0.3 44.1 26.0 Microcredit 2.6 0.03 0.0 2.6 1.6 Mortgage Housing 8.0 0.1 2.0 10.2 6.0 (-) Estimate for Valuation 3.2 0.1 0.3 3.5 2.1Source: Own elaboration based on information published on the web by the SIB and by financial institutions.
[Figure 3-1] shows the recent trend of total amounts of bank loans since 2010. It has recorded an average growth rate of 14.5% from 2011 to 2015. Considering that average growth rates of GDP and CPI inflation were 3.83% and 4.02% respectively, the loan growth rate was too high. It may be said that too much loans are given to public at this time.
[Figure 3-1] Loan by Economic Sectors
(GTQ million) (%) 150 25
20 100 15
10 50 5
0 0 2010 2011 2012 2013 2014 2015
Source: SIB, Boletin Anual De Estadisticas Del Sistema Financiero, 2015.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 179 [Figure 3-2] shows bank loan and GDP by industry of 2015. A comparison of these two graphs highlights some interesting facts. First, the loan for consumption related one takes 33.5% and those for the commerce, manufacturing industry, and financial industry take 14.9%, 14.4% and 10.5%, respectively. These four industries account for 72.2% of total loans.
[Figure 3-2] Loan and GDP Distribution by Economic Sector
(a) Loan by Industry Agriculture, Livestock, Forestry, Mines and Hunting and Quarries Fishing 0.1% Consumption, 5.8% Manufacturing Transfers and industries Other 13.3% Destinations 33.5%
Electricity, Gas and Water 9.8%
Community, Construction Social and 7.0% Personal Services 3.7% Financial Commerce Establishments, Transportation 14.9% Real Estate and and Services Warehousing 10.5% 1.3%
(b) GDP by Industry Agriculture, Consumption, Livestock, Transfers and Forestry, Other Community, Hunting and Destinations Social and Fishing Mines and 3% Personal Services 11% Quarries 11% 2%
Financial Establishments, Manufacturing Real Estate and industries Services 18% 17%
Electricity, Gas Transportation and Water and Warehousing 2% 8% Construction 4% Commerce 24%
Source: SIB, Boletin Annual De Estadisticas Del Sistema Financiero, 2015.
180 • 2016/17 Knowledge Sharing Program with Guatemala Second, regarding ratios of bank loans by industry three industries, such as consumption; electricity, gas and water; and construction, are substantially higher than those of GDP by industry. The ratios of bank loans by industry of the rests of seven industries in are less than those of GDP by industry. It shows that bank loans are allocated into the relatively large firms or public institutes which need a large amount of fixed investment at a small risk. The construction industry may take large share of loan because they have to finance the project during the construction period. The housing loans are very important to the banks.
shows the weighted average interest rates of loans by recipient in foreign currency, as well as in domestic currency, and their delinquency rates. It shows several interest things. First, the interest rate in domestic currency is higher than that of foreign currency. Second, the interest rate on consumption is the highest and the second one is the rate on microcredit. The interest rate on business is the lowest one. Third, the difference of interest rate of microcredit between domestic currency loan and the foreign currency loan is as large as 7.37% point while those of others are less than 3.5% point. Fourth, the delinquency rates of loans on small business loan and microcredit are the highest as 3.8% and 3.4%, respectively and that that of business is the lowest as 0.4%. In addition, there was an overall reduction in all delinquency rates from December 2010 to December 30, 2015. Loan Interest Rate and Delinquency Rates by Recipient (Unit: %) Small Mortgage Business Consumption Microcredit Business for Housing National Currency 7.44 11.3 23.08 21.08 9.70 Foreign Currency 5.78 7.74 20.59 13.71 7.48 Delinquency Rate 0.4 3.8 2.2 3.4 2.3Source: SIB, Boletin Annual De Estadisticas Del Sistema Financiero, 2015.
3.1.2. Financial Accessibility of Guatemala
Currently, Guatemala has a low saving ratio causing low investment ratio and low growth rate as in [Figure 3-1]. One of the reasons for the low saving ratio and low investment ratio is an under-development of financial industry. The development of financial market is very important to encourage the savings and to promote the investments, which eventually make a sustainable high economic growth.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 181
Financial Access Data of GuatemalaBanking Bank Agent Total Points of Quarter ATM Agencies Establishments Access March 2013 3,296 5,215 2,901 11,412 December 2013 3,396 5,955 3,120 12,471 December 2014 3,474 6,797 3,407 13,678 December 2015 3,564 7,283 3,581 14,428 % Increase 8.1% 39.7% 23.4% 26.4%
Source: Swiss Contact, El sistema de mercado de servicios financieros en Guatemala: Factores que promueven y/o limitan el acceso a personas de bajos recursos, Septiembre 2016, 2016.
[Figure 3-3], [Figure 3-4] and
shows the several statistics representing financial accessibility and efficiency of Guatemala for the past twenty years. It is very promising from that financial accessibility of the Guatemala has improved so much for the past years. Considering the statistics of financial inclusion of the regulated financial system, the evolution of the number of agencies, agents, and ATM banks, comparing bank agencies, agent establishments and ATMs between March 2013 and December 2015, there has been a sustained increase in the number of agencies, agents, and ATMs during the analysis period.On the contrary, it is very surprising that its efficiency is so low. As seen in [Figure 3-3] and [Figure 3-4], the numbers of branches of commercial banks of Guatemala is as high as twice that of Korea, but that of ATM of Guatemala is less than 1/6 of those of Korea. The number of deposit account per 1000 adult and outstanding loan of commercial banks of Guatemala are less than half of those of Korea.
[Figure 3-3] Major Statistics on Investment and Savings
Gross domestic product per Investment Ratio Saving Ratio capita, current prices 45 45 14,000 40 40 12,000 35 35 10,000 30 30 8,000 25 25 20 20 6,000 15 15 4,000 10 10 2,000 5 5 0 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 Guatemala (Since 2000) Guatemala (Since 2000) Guatemala (Since 2000) Korea (Since 1980) Korea (Since 1980) Korea (Since 1980)
Source: IMF, World Economic Outlook.
182 • 2016/17 Knowledge Sharing Program with Guatemala [Figure 3-4] Financial Accessibility of Guatemala
Branches of commercial banks Deposit accounts with cmmercial Automated Teller Machines per 100,000 adults banks per 1,000 adults (ATMs) per 100,000 adults 40 6000 350
5000 300 30 250 4000 200 20 3000 150 2000 100 10 1000 50 0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015
Guatemala Korea Guatemala Korea Guatemala Korea
Outstanding loans with commercia Outstanding loans with commercial banks: o/w households (% of GDP) banks: o/w SMEs (% of GDP) 40 50
40 30 30 20 20 10 10
0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 Guatemala Korea Guatemala Korea
Source: IMF, World Economic Outlook.
3.2. Microfinance System of Guatemala
3.2.1. Introduction of Microfinance in Guatemala
The concepts of savings and credit were reaching the rural areas of Latin America, with the exception of Guatemala, at the beginning of the 20th century. It actually helped to modernize the agricultural sector to turn previous inactive savings into productive assets and increase investment through credits. It also made them combat the feudal oppression that was generated through indebtedness on the local residents. These savings and credit systems were generally offered by banks created in large cities in Latin America, in term of either private banks or public one controlled by government agencies.
With the introduction of modern financial system, the standardization of credit granting and monitoring (collection) made it possible for financial institutions to cut back some of their Administrative expenses and thus could offer a lower interest rate, maintaining their profit margins.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 183 Despite of all these development of financial system, the objective of taking credit to the most vulnerable populations was not achieved. Therefore, those who did not reach the credit had to resort to informal lenders, who made their placements at high interest rates (between 5% and 30% per week). They had to reach a costly credit than to have access to resources, which making the reinvestment of capital difficult and causing their profits to become less and less. At the same time, they were offered very limited payment programs by usurers or Colombians, which even made use of intimidation to achieve collection goals.
By 1970, the phenomenon of migration of the rural population to the big cities was presented for the first time, caused by the excessive supply of unskilled labor, which exceeded the low demand for labor in this market. The difficulty of accessing a formal job forced people to seek new mechanisms of subsistence, which began to generate new activities such as the creation of small businesses, becoming, what we currently know, micro-entrepreneurs. These people were not able to access the formal financial institutions because they could not provide the documents and guarantees necessary to cover their loans. The immediate need for credit against the amount, time, and effort required to complete the application process made it inappropriate for them. Banks had to take care of the credit risk to maintain its sustainability and bank risk minimization/management methods became the variable that made access to credit to the poorer population difficult.
Microcredits in Guatemala are defined as those credit assets granted to a single individual or legal entity, which together are not more than GTQ 160,000, in the case of national currency, or the equivalent of USD 20,800, in the case of foreign currency, to finance the production and marketing of goods and services. In the case of groups of borrowers with joint or joint guarantee, the maximum amount indicated will be applied for each of its members.
The strategic importance of MFIs in Guatemala is based on its specialization in financing the productive enterprises of Micro-, Small, and Medium-sized Enterprises (MSMEs).
In comparison, commercial banks allocate most of their loans to finance consumption (32%). The credit cooperatives allocate the largest percentage of their portfolio to housing (41%); MFIs are specialized in placing their portfolio in loans that finance productive enterprises (50%). While the actors mentioned above offer a range of financial services, this group focuses on microcredit: However, the volume of operations of these MFIs is still small compared to other entities of the financial system.
184 • 2016/17 Knowledge Sharing Program with Guatemala In Guatemala, the official statistics on the nationwide activity on microfinance are not published. For example, the number of people receiving microfinance loans and the exact number of branches of microfinance institutions are not known publically. As a result, it is only possible to examine it by investigating major financial institutions providing financial inclusive service or microfinance service.
In recent years, the microfinance sector has been affected by different problems such as globalization, over-indebtedness, financial exclusion, lack of funding, corruption and fraud, etc. This has repercussions in several aspects and areas of the institutions and the sector in general, but especially in the quality of life of the users of the different credit programs that these offer in the market. The over-supply is linked to the emergence and arrival of new MFIs that sharpen the problem, which in itself is serious and worrisome.
3.2.2. Major Microfinance Providers in Guatemala
1) Grupo Financiero Banrural (Banrural and Aseguradora Rural)
Grupo Financiero Banrural (Banrural Financial Group) is the largest banking group in Guatemala with Banrural (Rural Development Bank), a mixed bank and Rural Insurer, an insurance company etc. Banrural is the bank with the largest number of agencies, agents and ATMs in Guatemala, and has a high presence in the different regions and departments of the country. As shown in
, it is made of 1,228 agencies, and 2,378 agents, covering virtually all 340 municipalities in the country.It was established from the transformation of Banco de Desarrollo Agrícola (Banadesa, Bank of Agriculture Development), a state bank created in 1971, which was liquidated in 1997. Its capital was made with resources from different economic and social sectors of the country such as cooperatives, Mayan organizations, women’s organizations, workers’ groups, non-governmental organizations, and small entrepreneurs.
Banrural has a mission and vision strongly oriented for financial inclusion and deepening of services and diversification. Therefore, Banrural paid special attention to micro-, small-, and medium-sized entrepreneurs, who at that time were not subject of credit in traditional banking.
As a result, Banrural provide some innovative lending and deposit products for low-income populations such as educational credit, retirement fund, and student fund as well as the traditional loan and deposit ones.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 185
Establishments of Banking Agents by Location of the BanruralNorth South South North Metropolis North Central Peten Total East East West West Agencies 317 69 110 108 122 289 149 64 1,228 Banrural Agents 298 163 195 158 269 674 437 184 2,378 Total 615 232 305 266 391 963 586 248 3,606 Total Bank 1,196 512 690 599 845 2,014 915 512 7,283
Source: Swiss Contact, El sistema de mercado de servicios financieros en Guatemala: Factores que promueven y/o limitan el acceso a personas de bajos recursos, Septiembre 2016, 2016.
The total loan of Banrural reached GTQ 33,987,744,600 in 2015 representing 15.3% rate of increase over the year 2014. Of this amount, GTQ 1,823,481,700 (5.4%) corresponds to the microcredit portfolio, representing a decrease of 17% over the previous year.
Aseguradora Rural is an insurance company include in Grupo Financiero Banrural operating through the network of agencies in some agents of the Bank. It is developing a variety of insurance products aimed at the country's rural population, whether employed or entrepreneur population. One of the examples is migrant insurance, which ensures the disappearance of remittances by the death of the person sending them and repatriation of the body with USD 2.90 minimum premium a month. Student insurance that covers medical care of the minor and total disability of the parent or guardian is another one.
Grupo Financiero Banrural has the policy of combining the launch of its new products that promote financial inclusion with a financial education that supports the clients to be able to analyze the product and its capacities to use them. Thus generating potential win-win situations since financial education can generate greater and better use of services.
2) MICOOPE, the Cooperatives Affiliated to FENACOAC and COLUMNA S.A.
The federated system of Cooperative Savings and Credit, FENACOAC and its corporate brand MICOOPE represents 25 Cooperatives with about 1,518,000 affiliates. They handle 237 agencies and 218 MICOOPE agents and have 105 MICOOPE ATMs and ATMs affiliated with VISA International.
They cover all the departments of the country with presence in physics or associates in 80% of the municipalities. Most of the partners (45%) are middle- and lower middle-income earners, but there are also a large number of farmers and traders, and 43% are women.
186 • 2016/17 Knowledge Sharing Program with Guatemala The credit portfolio of the cooperatives affiliated to December 2015 reached the equivalent of USD 1,385 million, and it was generated by about 510,000 loans in force, of which an estimated 40% or 205,000 correspond to the micro or small-scale productive sector.
With respect to the loan portfolio, the following can be observed: first, interest rates fluctuate between 14% and 18% annually, depending mainly on the cooperative that grants, the guarantee and the term. It is estimated that 6.5% represents financial costs, 3% specific costs of administration of savings, 2% general operating expenses, and 1% provision
Second, the average loan amount at the system level is GTQ 37,250 and the deposit balance GTQ 27,000. The total deposits of USD 1,008 million. Of these deposits, 53% represent fixed-term deposits, 45% at sight, and 2% scheduled savings up to 5 years. The compound passive rate is 6.4%. Of the deposits, 45% receive up to 5% interest, 53% from 5% to 9%, and 2% more than 9% with a maximum of 11%.
Aseguradora COLUMNA S.A. attends cooperative associates with a limited quantity and variety of products, its main function being the management of MICOOPE guarantee fund resources at this time. Through this deposit guarantee fund, the payment of up to GTQ 80,000 is guaranteed to each depositor in the event of a bankruptcy of the Cooperative.
Payment of remittances is possible among its agencies and most of the Bank’s agents, with a network of about 15 remittance companies, the most important being Sigue Money Transfer and Ria Money Transfer.6) It manages 1,600,000 transfers per month, amounting to about 20% of the market transactions.
The Federation manages the so-called corporate products, such as ATMs, the Guarantee Fund, and the payment of remittances, while each Cooperative maintains autonomy regarding its loan portfolio, products, and conditions. As long as the each one maintains the performance standards prescribed by the Federation, they are protected by the Fund of Warranty. MICOOPE also manages a regulated Exchange House
In terms of development programs, MICOOPE manages a program for the productive use of remittances such as the migrant-backed loan (MBL) with the IDB (Inter-America Development Bank) - Multilateral Investment Fund.
6) It does not include Western Union, the company that dominates the Guatemala remittance market with the about 40 percent share.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 187 3) Non-profit Microfinance Organization
There are many small non-profit microfinance organizations and several associations in Guatemala. REDIMIF (The Network of Microfinance Institutions of Guatemala) is a non-profit microfinance organization specialized in microfinance, created for the constant strengthening and improvement of the active institution members. It provides and facilitates each institute financial, technical, and training products and services, as well as representation of an association. REDIMIF seeks the self-sustainability of its programs and those of the institution members, to contribute to the development of the micro and small enterprise sector of the country.
At the end of 2015, it is made of fifteen organizations with 152 agencies and 170,403 clients and a loan balance of USD 103,359,000, representing an average balance per organization of USD 6,890,600. Of these loans, 60.6% belong to loans to communal banks, while 20.2% and 19.2% are assigned to solidarity groups and individuals.7)
The Fundación Génesis Empresarial affiliated with Acción Internacional is the largest non-profit MFI in the country, with national coverage through 51 branches and 37 offices. The number of active clients reached 117,363, generating a total active portfolio of GTQ 660 Million, representing an average balance of about GTQ 5,550 by the end of 2014. Of these active clients, 64% are women and 36% are men: 43% clients apply for the agricultural product while 27%, 15.5%, 9%, and 1% clients do for microenterprise, housing, community banks, and small business, respectively. 0.5% is allocated to the new educational credit product. Its geographical coverage through 51 branches and 37 offices covers all departments of the country and most of its municipalities.
FUNDEA (Fundación para el Desarrollo Empresarial y Agricola) and FAFIDESS (La Fundación de Asesoría Financiera a Instituciones de Desarrollo y Servicio Socia) are non-profit MFIs that were pioneers in Guatemala’s microfinance. FUNDEA has 33 agencies and service points in nine departments initially targeting the agricultural and livestock producers of the highlands. The FAFIDESS Foundation was initially dedicated to community groups formed by women traders from the highlands. It has 18 agencies, 28,900 clients, of which 95% are women, representing a portfolio of about USD 15 million (GTQ 100 million) with an average loan of GTQ 4,000 and average balance of GTQ 3,250.
FIACG (Fundación Internacional para la Asistencia Comunitaria Guatemalteca) is a relatively small NGO whose clientele consists exclusively of women, its unique
7) It should be noted that the word “commercial bank” is officially reserved for financial institutions regulated by the SIB.
188 • 2016/17 Knowledge Sharing Program with Guatemala method being the original communal group model that emphasizes group savings. It was born in the capital city serving neighborhoods and vulnerable groups, and has recently expanded to the departments north of the capital. It manages a portfolio of around GTQ 18,856,000 with 10,000 clients and an average balance of less than GTQ 2,000. It has no agencies.
4) Other Entities
Compartamos S.A. affiliated with Banco Compartamos de México and the Chamber of Microfinance of Guatemala are also well known in the microfinance market in Guatemala. Compartamos stands out for a strong growth in its portfolio and number of clients that caused a portfolio quality crisis and moderate contraction during 2015, currently serving about 75,000 clients with a portfolio of GTQ 81 million.8) It is also notable that agiotistas, such as “Guateprenda,” “Chepe te Presta,” and “Colombians of the day,” continue and are strengthened in the urban centers of rural areas.
There are some non-regulated entities too. The aforementioned non-banking entities are implementing or considering the following institutional strategies to be able to distinguish themselves in an always-competitive environment.
For example, Genesis Empresarial is committed to organizational modernization through the application of the microcredit factory concept. It works to be a microcredit and financial services supermarket, based on the automation of operational processes of credit analysis, disbursements, and payments. It does not necessarily intend to a legal transformation.
Microfinance PLUS is integrating credit with financial services with greater social orientation. It develops programs with a savings and credit component. Compartamos and/or FINCA, as parts of an international consortium of regulated companies, also help the MFIs in Guatemala to improve their efficiency.
3.3. Microfinance Law and Regulation
In April 2016, the new law called “the Microfinance and Non-profit Microfinance Institutions Law” was passed by Congress of the Guatemala and thereafter, three legal figures have been created in Microfinance activities.9)
The first one is savings and loan microfinance entities (MAFs). It takes deposits from the public and issue debt as well as providing microcredits and other services.
8) MIX Refocused approach, Summary of trends Guatemala, December 2015. 9) Before April 2016, there is no formal law to regulate the microfinance industry.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 189 The second one is Investment and credit microfinance entities (MIFs) which offer microcredits and other financial services. It may only raise funds by issuing debt. The third one is Non-profit microfinance institutions (NMFIs) which neither take deposits nor issue debt but may offer microloans and other non-savings financial products. They receive deposits or contributions from their associates and from third parties, such as cooperatives, community development associations, NGOs, private institutions.
MAFs and MIFs are supervised by the Superintendencia de Bancos while NMFIs will be done by Ministry of Economy. This law is a kind of standard one: similar one is already made in several other countries such as Honduras, Cambodia, Myanmar, and Vietnam.
3.4. Major Characteristics and Challenge to Microfinance Industry
3.4.1. Overview
In Guatemala, from 2011 to 2015, various institutions, consulting firms and guilds have attempted to define, quantify, and identify the causes of the microfinance development problem and its associated problems such as globalization, over- indebtedness, financial exclusion, lack of funding, corruption and fraud, etc. These efforts have been directed mainly by qualitative methods or studies, using instruments, techniques, and research tools such as focus groups, in-depth interviews with clients, in-depth interviews with stakeholders and experts.
The measurement and use of qualitative schemes can provide some indicators on possible causes and solutions. However, they have been carried out with participating institutions from a segregated national scenario (by network, by institution, by funder, by interested group, etc.).10)
For the purposes of the present study, those requiring debt relief are defined as individuals or families with the inability to meet credit commitments in a timely manner, making sacrifices beyond their ability to pay, even putting at risk their livelihoods, assets and/or equity in order to honor its commitments in full and on time.11) Due to its importance, the concept of delinquency due to over-indebtedness is also defined as the inability to pay all debts in full and on time. Delinquencies for over-indebtedness only occur when this situation occurs in a chronic way, that is, in
10) At the time of the present study, there was no effort to quantitatively study and measure the phenomenon and less to do so under the rules of inferential statistics and at the national level. 11) Defined in meeting of 03-03-2014 by: REDIMIF over-indebted commission, IDB counterpart institutions, FDLG, OIKOCREDIT, and consultant.
190 • 2016/17 Knowledge Sharing Program with Guatemala several consecutive periods and against the will of the borrowers.12)
According to these research studies, the following several characteristics and challenges are identified: over-indebtedness, dominance of separate local units without any central coordination, lack of supervision and regulation by central governmental agency.
3.4.2. Over-indebtedness
The data presented in the
shows the number of over-indebted clients Guatemala. It is estimated by the study “Diagnosis of Rural Financial Markets and Environment and Proposal of Strategic Lines of the National Microfinance Network”, as an input to “The Formulation of the Regional Program for the Expansion of Rural Financial Services and Environment of REDCAMIF” by the Regional Commission of Rural Finance and Environment in August 2010 with additional data to 2015 of REDIMIF and projection model elaboration based on information compiled and consolidated.13) According to the comparisons and conclusions, clients serving the microfinance sector in Guatemala amounted to 1,023,127, making the same inference that 44.48% clients are over-indebted signifying 455,087. Total Number of Over-indebted Clients Guatemala% of Over-indebted Customers in Over-indebted Inference Customers according Microfinance Market Customers to the Study Estimate of Total 1,023,127 455,087 44.48% Market
Source: Own elaboration with inference based on field data on Factors that Condition Over-Indebtedness in the Microfinance Sector in Guatemala by Grupo Analítica, 2015.
Based on the parameters established above with their respective percentages, those over-indebted are classified as group 1 with credit less than GTQ 50,000,000, group 2 with credit between GTQ 50,000,000 up to a range of GTQ 160,000,000 and group 3 with amounts greater than this amount. As seen in
, the group 1 amounts 88.35% while group 2 and group 3 do 9.02% and 2.64%, respectively. With the shares of each group, the average loan amount for each group and the 12) Adapted from: Center for Microfinance, Over-indebtedness and Microfinance: Constructing an Early Warning Index, University of Zurich, 2010. 13) Data generated by means of statistical inference using a linear regression model based on consolidated information from different sources, includes intermediation entities that support the sector such as Banks, Cooperatives FENACOAC, REDIMIF and other non-affiliated DPOs and Cooperatives. REDCAMIF and REDIMIF, Diagnostico de los Mercados Financieros Rurales y Ambiente, y Propuesta de Líneas Estratégicas de la Red Nacional de Microfinanzas, como insumo a la formulación del Programa Regional de Expansión de los Servicios Financieros Rurales y Ambiente de REDCAMIF (2010).
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 191 number of total over-indebted customers, it can be inferred that the risk for over- indebtedness in clients at the national level amounts to GTQ 1,137,569,034. This shows the impact of the microfinance sector, which is over-indebted to the national level in the country’s economy.
Total Amount of Outstanding Debt of Clients, GuatemalaAverage Inference Credit Limit Amount Number of Percentage Category Amount (GTQ) of Debt Client (%) (GTQ) (GTQ) Group 1 Up to 50,000 2,093.16 402,067 88.35 841,592,495 Group 2 50,000.01 ~ 160,000 4,193.92 41,027 9.02 172,064,844 Group 3 Over 160,000 10,332.36 11,993 2.64 123,911,694 Total 455,087 100.00 1,137,569,034
Source: Own elaboration with inference based on field data on Factors that Condition Over-Indebtedness in the Microfinance Sector in Guatemala by Grupo Analítica, 2015.
According to the report of “Over-Indebtedness: A Risk Management Approach by Firth (2014),” similar circumstances in other countries have preceded debt crises. In particular, the authors cite examples in Bolivia and India. In addition, a 2010 CGAP analysis of the credit crises in Nicaragua, Morocco, Bosnia-Herzegovina, and Pakistan found three common denominators, circumstances that are also beginning to be evident in Guatemala:
• Concentrated market that manifests itself through competition and the existence of multiple loans; • Overburdened systems and controls applied by MFIs; • Erosion of the credit discipline of MFIs.14)
Aware of this situation, in REDIMIF in Guatemala, the Commission against Over-indebtedness, made up of officials from some Affiliated Institutions of the Network, emerges and launches the National Campaign against over-indebtedness in Guatemala. The idea and the need to carry out a study that helps to determine the factors that affect and cause the problem of the development of microfinance and its associated problems such as globalization, lack of funding, corruption and fraud, etc.
14) Greg Chen, Stephen Rasmussen, y Xavier Reille, “Growth and Vulnerabilities in Microfinance,” (CGAP: Febrero del 2010). 28/10/13, Se accede a: http://www.cgap.org/publications/growth-and-vulnerabilities- microfinance.
192 • 2016/17 Knowledge Sharing Program with Guatemala The Commission for the Prevention of Over-Indebtedness REDIMIF, together with the entities that have supported the initiative (hereafter the Commission [2015]), hire Grupo Analítica, S.A. to carry out the research titled "Factors that Condition the Over- Indebtedness in the Sector of Microfinance in Guatemala" presented and edited in June of 2015.15)
The reports derive the following conclusions as below. First, the magnitude of the over-indebtedness in the market of the microfinance of Guatemala, reaches three well-differentiated segments. It clearly represents the three types of clients in a situation of over-indebtedness. The first type is the one that they cannot cover their expenses with their income, representing 13.39% of total clients. The clients covering only 70% to 100% of their expense by income, i.e., at risk of losing their surplus, are identified with 7.90%. Customers covering only expense with their income represent 23.20% of total clients. These three segments provide us, at the national level, the situation of over-indebtedness represents 44.48% of the total population of the clients of the microfinance sector.
Second, the over-indebted regions such as Totonicapán, Suchitepéquez, Quetzaltenango, Zacapa and Sacatepéquez are also the ones whose poverty index were as high as 50% to 78% according to the heat map of National Survey of Living Conditions 2011 (Encuesta Nacional de Condiciones de Vida, 2011). These households are not able to cover their food and vital food basket. According to the results of the present study, the average income of customers is GTQ 2,700.00, against a basic food basket of GTQ 3,405.60 and a basic food basket of GTQ 6,214.60, according to the CPI data as of June 2015. In addition to this parameter, over-indebted clients are using on average 50% of their income to pay debts, the average term being granted up to 12 months to pay, and it is determined that the client owns a single debt and with a lower incidence of multi-debt Is a cause of over-indebtedness.
Third, according to the descriptive statistical data, the over-indebtedness is a phenomenon that equally affects the clients, without discriminating the area of geographical location (urban and/or rural) and biological sex.
Fourth, over-indebtedness affects clients differently depending on their ethnic group, education level, family size, and age The Mayan people has higher rate of over-indebtedness by 10.26% than the Latino. In the case of civil status, the 80.58% of over-indebtedness clients have a family (married or unmarried), and 71% of them do not have a study or some elementary school. The ratios of the age from 21 to 30 and 41 to 50 have practically a percentage of 21.5% each and being of greater incidence the age range between 31 to 40 years with 32.45% of total over-
15) Comisión Para la Prevención del Sobreendeudamiento, “Factores Que Condicionan el Sobreendeudamiento EN EL Sector DE Microfinanzas en Guatemala” 2015.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 193 indebtedness clients. In the case of family burdens, 92% of all over-indebtedness clients have families of one to six, being the most the range of one to three. This shows that households made up of a family are the most vulnerable to over- indebtedness.
Fifth, the main economic activity of the over-indebted clients is trade, which represents 81.83%. It means that there is a risk of concentration of economic activity in this segment of the market, since activities such as housing, tourism, handicrafts, agriculture, services, have rates ranging from 0.97% to 7.21% of over-indebtedness on average.
Sixth, 36.89% of over-indebted clients make monthly savings on average a maximum GTQ 207.43. So it is required to provide an appropriate deposit instrument for them.
3.4.3. Dominance of Separate Local Units
Many MFIs have been managed by separate local units. While there are hundreds of local cooperative across the country, they do not cooperate with each other. Each village manages its own cooperative independently. As a result, size of individual local cooperative and MFI is very small and is managed less efficiently. Staffs on MFIs and the leaders of local cooperative did not have appropriate expertise in this business. As explained in section 2.1, microfinance is different from local charity and it belongs to the financial activity. It should impose adequate interest rate, monitor the credit risk, and reduce the default rate. It is a highly saturated market without institutions dedicated to innovation or creation of new and competitive products. Furthermore, each one is managed independently, and no central agency or league exists yet. As a result, economies of scale effects do not work.
Many MFIs do not share their information with each other or them with the existing credit bureaus. So they are lack of coordination and cooperation among institutions and vulnerable to the credit risk very much. Clients may be served by multiple institutions, especially in consumer credit, which may accelerate the issue of over-indebtedness.
Most MFIs are lack of systematic future development strategy and plan. Any business entity should make an appropriate business plan and strategy to reach the future goal and to maintain sustainability. Usually, it examines the current and business environment, analyzes the risk and opportunity, derives the business plan and road map, and finally, implements them. Up until now, MFIs on Guatemala did not have such a business planning implement activity.
194 • 2016/17 Knowledge Sharing Program with Guatemala 3.4.4. Lack of Proper Supervision and Legal Framework
According to the Microfinance and Non-profit Microfinance Institutions Law legislated in April 2016, there are three MFIs such as MAFs, MIFs and NMFIs. While MAFs and MIFs are supervised by the Superintendencia de Bancos, NMFIs is done by Ministry of Economy.
Currently, no or few detailed regulations are imposed on MFIs. Furthermore, Ministry of economy does not have the appropriate experience and capacity because it was not a financial supervisory agent but an economic planning and policy implementing ministry.
At the same time, Ministry of Economy did not have a clear understanding the microfinance business and activities yet. It is not because inadequacy or incapability of the civil servants of Ministry of Economy but because not much studies and research has not been done. No comprehensive survey on MIFs has been done yet in Guatemala and most studies and evaluation on microfinance activity are made based upon the partial examination. Up until recently, government did not recognize the importance of MFIs.
3.4.5. Clients of Microfinance
There are several interesting characteristics on the microfinance clients as follow. First, most microfinance clients in Guatemala use only a single institution. The Commission (2015) reported that of the total sample of 1,621 clients, 69.40% of the interviewees have this commitment with a single institution. The data is confirmed by comparing it with that of the CREDIREF credit bureau, which has a difference of only 0.52% between the two data compared.
Second, most clients live in the same community for a long time. According to the Commission (2015), 97.5% of clients have lived in the same community on average 23 years. Overall, 47.43% have their own house and 17.61% live with relatives and to a lesser extent rent.
Third, a very limited amount of education and training are provided to the microfinance clients. Only 33.70% of the clients receive training in subjects that are related to their microenterprise activity, while the other debt-burdened clients with the highest number of debts receive less percentage of training. With regard to debt management training, only 26.91% of over-indebted clients claim to receive it, 71.84% do not receive such training. Of the over-indebted clients, 71.43% do not answer the question about whether they know the percentage charged by their interest rate on the credit or credits acquired, indicating that they may not know it.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 195 Fourth, while the credit investigation procedure exists and about 90% of the first credits are made with it, only 70% of the second credit is done with the credit investigation one. The 81.4% of credit clients receive supervision by the institution, but as it is having a larger number of debts and is more over-indebted, the supervision decreases even to a level of 42.85%. In other words, the more over- indebtedness is, the less follow-up receives.
3.4.6. Challenges and Future Conditions
MFIs face more competition from commercial banks. Currently, the interest rate for microfinance loan is twice or three times higher in some cases than those of commercial bank loan. Recently, the global interest rate approached to zero and many commercial banks find it very difficult to make a profit at the conventional deposit and loan account. Therefore, they are approaching the microfinance market slowly to looking for the way to provide the high interest loan.
Future environments for MFIs in Guatemala are not favorable. Opening of financial market of Guatemala and its globalization will make the MFIs less competitive to the conventional financial institutions such as commercial banks.
With more urbanization, the cohesiveness of society will reduce, and as a result, traditional credit risk minimization methods, such as relationship-based banking or group-based models, may not work anymore. In such case, if the economy stagnated, then MFIs may fall into serious financial problem.
4. Korea’s Experience of Microfinance and SME Financing through Credit Unions and Cooperatives 4.1. Development of SME Financing Through Credit Union and Credit Cooperatives in Korea
4.1.1. Establishment of Credit Union and MG Community Credit Cooperatives
When Korea was in the early development stage of the 1960s and 1970s, assessments to the financial service from formal institutions were very limited, as in the many developing countries. Traditional lending among the same local village residents or usury was the main source of credit. Especially, small business firm or farmers in the countryside had an extreme difficulty to approach the financial
196 • 2016/17 Knowledge Sharing Program with Guatemala resource. At that time, several financial services similar with the currently called microfinance activity were born with the establishment of credit union, credit cooperative etc.
A credit union in Korea is a not-for-profit financial institution. It aims to promote the collection and distribution of funds based on a common bond held between individuals or groups willing to cooperate. It is made of member of the same community, workplace, and organization.
The first credit union in Korea, called the Holy Family Credit Union, was organized by Sister Mary Gabriella in 1960 for the employee of Maryknoll Hospital and Catholic Relief Services in Busan. With its success, it was able to be extended to the other communities across the country within a few years.
Soon, the credit union movement was set into large-scale action, and as a result, the number of credit union increased very rapidly. In addition, it succeeded in establishing a more institutional framework, the Korean Credit Union League with 63 local credit unions in 1964.
The establishment of the Credit Unions Act of 1972 provided a sound legal basis for them, marking a turning point in credit union development. It legally defined the activity of Credit Union and the establishment of the National Credit Union Federation of Korea (NACUFOK).
According to the law of 1972, Credit Union deals in the following services: receipt of deposits and installment deposits from members, extension of loans to members, domestic exchange services, execution of business on behalf of the government, public organizations, the NACUFOK or financial institutions, separate safekeeping, and discounting of bills.
Credit Union is allowed to borrow funds within the limits of an amount equivalent to five% of its total assets or its total amount of equity capital, whichever is greater. As to its fund management, Credit Union may extend loans to single borrowers within the limits of an amount equivalent to 20% of its equity capital or one% of its total assets, whichever is greater. It must maintain a minimum of 10% of its balance of deposits and installment deposits as repayment reserves, and deposit half of those reserves with the NACUFOK.
The NACUFOK is a not-for-profit corporate body composed of Credit Unions that operate the following services: guidance on, surveys of and public relations for the businesses of unions; provision of educational programs; inspection and supervision of unions; mutual aid services for members; and the conduct of credit services and projects commissioned by the government or public organizations.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 197 Credit services offered by the NACUFOK include the receipt and management of deposits, installment deposits, and repayment reserves from Credit Unions; the extension of loans to Credit Unions; and domestic and foreign exchange services. Since their 2004 exclusion from the deposit insurance coverage provided by the Korea Deposit Insurance Corporation, to guarantee the return of deposits to member Credit Unions established and have been operating a credit union deposit protection fund of their own.
In 1971 the year prior to establishment of the Credit Unions Act, the member of NACUFOK was only 582, but it increased to 1,666 by the end of 1997. The 1997–98 Korean financial crisis caused a rapid expansion in non-performing bonds, however, making a large number of insolvent credit unions to be liquidated or merged out of existence.
While it has experience very hard time for the past decades, it grew the one of the largest financial institution in Korea. At the end of 2015, its asset value recorded to USD 56.3 billion and the number of its local unions to it 911 and the number of its members raised to 5.71 million. It is supervised by Ministry of Finance.
4.1.2. Establishment of MG Community Credit Cooperatives
MG Community credit cooperatives originated with a credit union established in South Gyeongsang Province in 1963 under the auspices of the National Reconstruction Movement Federation. At that time, its activities were very similar with those of credit union.
MG Community Credit Cooperatives thereafter, began to be extended across the nation. Following the 1972 implementation of the Credit Unions Act, community credit cooperatives fell under the provisions of that act and the nomenclature for them was unified as “village banks.” Its national level league called the Korean Federation of Community Credit Cooperatives (KFCC) was established 1973 and more formulated in 1982 with the law of Community Credit Cooperative Act.
Upon 1982 enactment of the Community Credit Cooperatives Act, the name was then changed to “community credit cooperatives,” and a solid foundation was laid for the independent development of community credit cooperatives.
MG Community Credit Cooperative provides the following services: receipt of deposits and installment deposits from members, extension of loans to members, domestic exchange services, execution of business on behalf of the government, public organizations or financial institutions, separate safekeeping, and more. Except for certain services such as the discounting of bills, a community credit cooperative performs nearly the same functions as a credit union.
198 • 2016/17 Knowledge Sharing Program with Guatemala Regarding operational restrictions, MG Community Credit Cooperative is only allowed to borrow funds from the KFCC, the government, public organizations, or financial institutions, within the limits of the aggregate of its invested capital and reserved funds. Its credit ceilings on individual borrowers may not exceed 20% of the aggregate of its invested capital and reserved funds. It must also maintain a minimum of 10% of the balance of its deposits and installment deposits as repayment reserves, and must deposit half of those reserves with the KFCC.
The KFCC, a not-for-profit corporate body composed of community credit cooperatives, deals in the following services: guidance on, surveys of and training in the businesses of member cooperatives; inspection and supervision of member cooperatives; provision of mutual aid services; and conduct of projects commissioned to it by the government or public organizations. It provides credit services, including receipts of deposits and installment deposits from member cooperatives, the lending of funds, guarantees of payments, and discounts of bills; domestic and foreign exchange services; separate safekeeping; execution of business on behalf of the government, public organizations or financial institutions; and the underwriting and sale of securities. The Federation has established and operates a deposit protection reserve fund to guarantee the return of deposits and other savings to members.
By the time the Community Credit Cooperatives Act was legislated in 1982, 11,719 MG Community Credit Cooperatives were in operation, with 5.38 million members. However, the implementation of this act was followed by a reorganization of insolvent cooperatives, causing the total members of cooperatives and their members to decline sharply ― to 5,360 and 3.84 million, respectively, by the end of 1983. The number of MG Community Credit Cooperatives has continued to decrease in the period since, while membership has gradually increased.
At the end of 2015, the value of its assets reached USD 126 billion, and the number of local office increased up to 1,372, while that of its members did 18.6 million. Therefore, the MG Community Credit Cooperative became one of the largest financial institutions in Korea. It has been supervised by the Ministry of Government Administration.
4.1.3. Cooperation between Local Offices and Central Offices of Credit Unions and MG Community Credit Cooperatives
The central offices of MG Community Credit Cooperatives (KFCC) and Credit Union (NACUFOK) were established in 1973 as the related law for each institute was made in 1972.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 199 To improve the efficiency and to develop its management capacity of each local one, the Korean government decided to establish national central offices of credit union and credit cooperative. It had many different challenges at that time.
First, as the number and size of local credit union and credit cooperatives increased, they became very important local financial institutions. Most offices were not managed efficiently and local officers did not receive appropriate training. Government realized that without systematic guidance and supervision on them, it could bring a serious problem.
Second, government liked the local credit union and credit cooperatives to enjoy the economies of scale effect. It enabled local ones to share their experience and knowledge and to make a concrete development plan to prepare for the future.
Third, it established the provident funds to improve the confidences on the local office from the members. Once many members set up such a fund to share the risk of the bankruptcy, the market of local credit union and cooperatives could be more stable.
After its establishment, local offices of Credit Unions and MG Community Credit Cooperatives succeeded in building good alliance with central agency. Most of the assignments of central office are made as below.
First, the central office guided, advised, supervised, and inspected on the financial activities on the local one. With this function, the central office could prevent the financial statements of local ones from deteriorating in advance.
Second, the central office took charge in education and training activity for the officers and members of local credit unions. The central office developed the customized training programs for the local officers and member and implemented them on a national scale.
Third, the central office was able to build up its ICT system and to take research on their future development. Although the role of ICT system became more and more important, local ones could not catch up because it cost too much money. The central ones installed the expensive central systems and made local one to utilize them at an affordable cost.
Fourth, the central office designs its development plan and initiates its implementation. It was a big burden for each local one to make a development plan and to implement it because it did not have such a capacity. In fact, central offices made comprehensive development plans in every decade and actually implement them in many ways, contributing its development for decades
200 • 2016/17 Knowledge Sharing Program with Guatemala Fifth, the central office accumulated the provision funds to restore the confidence on individual offices. It helped more people to take membership on the local credit union and cooperatives.
Sixth, the central office relayed the inter-lending activity among credit unions or cooperatives. The central office took financial resources from surplus credit unions and redistributed them into deficit credit unions, eventually raising the efficiency of the system.
In reality, the relatively good cooperation between the central office and the government has been made under strict regulation and supervision by the government.
4.1.4. Bum-burst Experiences of Credit Union and MG Community Credit Cooperatives
[Figures 3-5] and [Figure 3-6] show the number of offices and members of MG Community Credit Cooperatives since the beginning of its activity in 1964. It shows that it had very rapidly expanded for two decades. In 1977, the number of local office and members reached up to 42,436 and 7.5 million respectively.
From 1978, the activity of Credit Unions rapidly shrank. As seen in [Figure 3-7], the number of local office of credit cooperatives union reduced 5,340 in 1982 and the number of members did to 3.8 million in 1983.
The number of Credit Unions and their members also show a similar pattern to those of community credit cooperatives. Right after establishment in the early period, it was extended into the other cities and villages across the country. The numbers of credit union and the members increased to 582 in 1971 and 138.7 thousand in 1972. As seen in [Figure 3-7], the number of office fell into 246 in 1972. It reached up to 1,321 in 1982 but decreased to 1,231 in 1983.
During the crisis of 1997 and 1998, both Credit Unions and MG Community Credit Cooperatives also show the same pattern. Their numbers of office and members rapidly fell and they had to undergo restructuring process.
There are several explanations for these bum-burst experiences of Korean Credit Union and MG Community Credit Cooperative activities in the past years. When Credit Union was introduced in early 1960s, many local and low-income families thought that they would be benefited by approaching to these new financial resources. They took these opportunities to start new businesses or to expand their previous business. Some even used these ones to refinance the previous high interest debts.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 201 As the activities of Credit Unions had been known to local societies, many villages and towns began to establish its own ones and old ones expanded their sizes of business activities. As a result, both the numbers of members as well as the office did too for years. However, it did not long time to show their financial problems because they were not prepared for it yet. Most managers of Credit Unions or MG Community Credit Cooperatives were not experts in banking and financial activities. Their credit risk systems were not as well designed as those of the commercial banks in terms of soundness or efficiency management. An appropriate prudential regulation was not made yet.
During the booming period, they did not make any problems. However, when the recession came, some credit unions had to close down due to the insolvency of the large number of members. Right after the second old shock of 1978 and 1979 and the recession in the following years, some credit unions became insolvent, and public money had to be injected into them. They had to undergo restructuring process.
At that time, appropriate training systems were not established, and practical education was not provided for managers and members. In 1960, “education before joining” was the right word to represent the business and management style of Credit Unions and MG Community Credit Cooperatives. Members of local Credit Unions did not understand the spirits of credit union at that time. They thought that if they built their own credit unions, they could easily access to the financial resources. They think they are small local banks which did not ask credit record or collateral.
Since 1980s, several progresses have been made in the management of Credit Unions. First, they recognized the importance of credit risk analysis and credit rating system. They put more resource on the credit risk analysis and check the over- indebtedness of the clients.
Second, they recognize the importance of training and education for the staffs of credit unions and cooperatives. For example, the central office, NACUFOK, was equipped with its own education facility for participants of local credit unions in 1981.
Third, the central office made its own development plan and tried to implement it. They recognized that the economic and financial environment of credit union and cooperatives would change unfavorably to themselves. For example, Korean financial market will be more liberalized and opened in the future. At the same time, they knew that urbanization would deteriorate of economic activities of countryside.
202 • 2016/17 Knowledge Sharing Program with Guatemala Furthermore, they thought that they had to prepare for the ICT revolution and its impact on financial industry in 2000s and 2010s. The expansion of electronic banking and fintech will deteriorate the activity of credit unions and credit cooperatives. The numbers of members of both credit cooperatives and credit unions have continuously increased, while the numbers of offices of credit cooperatives and credit unions in Korea have decreased. They had to expand the size of each branch but to close down some of them.
[Figure 3-5] Numbers of Office of MG Community Credit Cooperatives
50,000
40,000
30,000
20,000
10,000
0 4 7 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 6 6 7 7 7 7 8 8 8 9 9 9 0 0 0 0 1 1 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2
Source: MG Credit Cooperatives, 50 Years of MG Credit Cooperatives, 2014.
[Figure 3-6] Numbers of Members of MG Credit Cooperatives in Korea
20,000,000
15,000,000
10,000,000
5,000,000
0 5 2 6 9 0 3 7 1 4 8 5 2 9 6 3 7 0 4 1 1 0 0 0 0 9 9 9 8 8 8 7 7 7 6 7 6 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1
Source: MG Credit Cooperatives, 50 Years of MG Credit Cooperatives, 2014.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 203 [Figure 3-7] Numbers of Office of Credit Unions
2,000
1,500
1,000
500
0 4 1 8 5 2 9 6 3 0 7 4 1 8 5 2 9 6 3 0 1 1 0 0 0 9 9 9 9 8 8 8 7 7 7 6 6 6 6 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Source: NACUFOK, 50 Years History of Credit Union in Korea, 2012.
[Figure 3-8] Numbers of Members of Credit Unions in Korea
8,000,000
6,000,000
4,000,000
2,000,000
0 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 1 4 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 1 1 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2
Source: NACUFOK, 50 Years History of Credit Union in Korea, 2012. MG Credit Cooperatives, 50 Years of MG Credit Cooperatives, 2014.
204 • 2016/17 Knowledge Sharing Program with Guatemala 4.2. Development of New Microfinance Programs after 2000
4.2.1. Overview
Microcredit was first introduced by non-profit organization such as Korea Microcredit Joyful Union and The Social Solidarity Bank (called as SSB) in early 2000s in Korea.16) As the unemployment rate rose and the city poverty problem expanded after the financial crisis of 1997 and 1998, these NGOs began to take interest in this relatively new business activity called microcredit lending.
Joyful Union has achieved remarkable success by expanding its activities beyond making simple small loans, despite the impression that the concept of microfinance is not fitting to the urbanized and developed Korean society. For example, by the end of 2008, it provided loans of KRW 3 billion to 157 communities. At that time, almost half of fund was financed by the Ministry of Health and Welfare and other half was done by other large commercial bank and private companies such as KB bank and Samsung.17)
It was after the global financial crisis of 2008 that the Korean government actively began to promote the microcredit activity. The Ministry of Strategy and Finance and the Financial Service Commission, which were in charge of economic and financial policy, changed several bank and finance laws and regulation related to the microcredit business to provide the national scale national microfinance activity.18)
Based upon these laws, several microfinance-related public agencies such as Korea Inclusive Finance Agency or Microfinance Centers were established and the several microfinance policy loans were launched such as Sunshine Loan, New Hope Loan, Microcredit Loan or The Smile Microcredit and Refinancing Loans programs.
In addition, the financial approach to the microfinance began to be emphasized instead of welfare one. Commercial banks, credit guarantee institutions, and local financial institutions became providers of these new programs, and general financial management techniques, such as credit evaluation, credit rating, business consulting, debt refinance consulting, and other techniques, were employed for microcredit business management principles.
16) Joyful Union started its microcredit business in 2000 as the first Korean branch of the Grameen Bank in Bangladesh, with a fund of USD 50,000 from Grameen Trust. 17) The Ministry of Health and Welfare provided on average USD 2 million to the microcredit institutes annually. 18) For example, several laws such as Banking Act and National Basic Living Security Act were amended in 2009 and new law called “Establishment, etc. of Microfinance Foundation Act” (2014), “Inclusive Finance Support Act” (2016) were legislated.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 205 4.2.2. Major Programs
4.2.2.1. The Smile Microcredit
The Smile Microcredit was designed to provide unsecured small loans to low- income households or small business owners by The Smile Microcredit Bank (SMB). SMB is a non-profit organization funded by deposits in dormant accounts and donations. It also provided business development services or management training for self-support, as other typical MFIs do. Under this program, six large non-financial conglomerates and five financial companies in Korea managed SMB branches.19)
4.2.2.2. Sunshine Loan
The Sunshine Loan is a subprime unsecured personal loan (microcredit) by non- bank depository institutions, which was introduced in 2010. If financial institutions issue Sunshine Loans to the individuals with low income or bad credit, the Korean Credit Guarantee Foundation partially guarantees loans.
Sunshine Loan succeeded in reducing financial exclusion of those who were formerly forced to use moneylenders charging very high interest rates. However, financial institutions providing this loan had to take care of its high credit default rate to secure their soundness because it is a partially guaranteed program.20)
4.2.2.3. New Hope Loan
New Hope Loan is a microcredit loan run by 15 commercial banks and specialized bank with their own fund. The objective of New Hope Loan is to provide a client- tailored loan to low-income and low-credit ratings individuals. Originally, they were supposed to provide this product for 5 years limited period but with its successful operation, they extended operation of this product more.
The next-upper low-income group was eligible for an application qualification in this program. Interest rate reduction favor is applied to eligible repayment borrowers and individuals with low income.
19) The SMB provides low-interest loans ranging from 2% to 4.5% to people with low credit ratings of grades 7 to 10. 20) For this reason, the Korean Credit Guarantee Foundation had to change its guarantee rate. At first, the guaranteed rate was 85 %, but it was adjusted to 95 percent after too few loans were issued by financial institutions. Later, after high default rate was observed, the guaranteed rate was altered to 90 percent.
206 • 2016/17 Knowledge Sharing Program with Guatemala 4.2.2.4. Refinancing Loans
It is called as the “Switch-Over Dream Loan” allowing low credit rated borrowers to approach to a new loan using government credit guarantees supported by the Credit Recovery Fund, which is financed by dormant savings accounts in financial institutions and by Korea Asset Management Corporation (KAMCO) a public financial institution.
The new loan was given to the low-income people with a lower interest rate as well as with extended maturity helping to reduce their financial burden. Later it was expanded after the National Happiness Fund was established in March 2013.
Four Major Policy Microfinance ProductsRefinancing The Smile New Hope Loan Sunshine Loan Loans Microcredit Starting date November, 2010 July, 2010 August, 2012 September, 2012 Supervisory Government FSS FSA, Bureau of SME FSC FSC Agency Volume of Amount USD 3 billion USD 3 billion USD 0.6 billion USD 0.6 billion (2017) Local Credit guarantee agency, Guarantee None Korea Happy Fund None Korea Inclusive Finance Agency Funding guaranteed through contributions from non- Deposits in dormant Fund Source Bank own fund bank depository Korea Happy Fund accounts, donations institutions (KRW 1 trillion) and the government (KRW 1 trillion) (1) Those making (1) Those making (1) Those making (1) People with bad KRW 45 million or KRW 4.5 million or KRW 35 million or credit rating (7-10) less a year with bad less a year with bad less a year with bad (2) The poor, those Support credit rating (6-10) credit rating (6-10) credit rating (6-10) eligible for basic qualification (2) Those making (2) Those making (2) Those making living allowance and KRW 35 million or KRW 35 million or KRW 45 million or earned income tax less a year with a less a year less a year credit credit rating (1-5)
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 207
ContinuedRefinancing The Smile New Hope Loan Sunshine Loan Loans Microcredit (1) Employee: KRW 15 million, (2) Refinance: (1) Operation: KRW (1) KRW 30 million KRW 30 million, (3) 20 million, (2) new Credit Limit for for regular loan, (2) Businessmen: new Refinance: KRW 30 start: KRW 50 million, each product KRW 5 million for start: KRW 50 million million (3) Education: KRW 5 emergency credit Operation: KRW 20 million, (4) Emergency: million, Refinance: KRW 10 million KRW 30 million 6.64~7.99% in Mutual Interest Rate 6.0~10.5% Bank, 8.06~10.02% 6~10.5% Less than 4.5% Saving Bank Mutual bank, Saving Institutions Commercial banks bank and MG credit Commercial banks SMB branch cooperative
Source: Website of Korea Inclusive Finance Agency.
4.3. Policy Implications for the Development of Microfinance
4.3.1. Important of Korea’s Experience
For almost past seventy years, two financial institutions of Credit Union and MG Community Credit Cooperatives have been responsible for providing financial service to the local residents in rural area in Korea. They help local residents to improve their living standard by appropriate financial service. Although these institutions have experienced many difficulties, they overcome them and finally they became some of largest financial institutions in Korea. It is not easy to find the case that local credit unions and credit cooperatives built a centralized system and succeeded in competing over other giant financial institutions such as commercial banks.
The MFI in Korea was a relatively new one born after the Asian financial crisis of 1997-98. Their assignment was to provide the finance service to the urban low- income residents. Because of very high urbanization rate, taking care of urban poverty problem was the important assignment for Korean society. Their main customers were urban low-income residents rather than those of rural areas. As a result, the financial products provided by these MFIs are different from those of other developing countries.
208 • 2016/17 Knowledge Sharing Program with Guatemala For these reasons, most of implications in terms of the development of microfinance of rural area in Korea are different from those of other ones. Instead, the experience of Credit Union and MG Community Credit Cooperatives are more meaningful and applicable to them.
4.3.2. Policy Implications
For years, the microfinance sector and financial institutions responsible for inclusive finance has been affected by different problems such as globalization, over- indebtedness, financial exclusion, lack of funding, corruption and fraud, etc. Korean Credit Unions or Community Credit Cooperatives were not exceptions. As a result, their activities shrank substantially in some times or some of local institutions had to fall, restructure, or go bankrupt. Based upon the examination of the experiences of the Korean ones and the analysis on the recent development of microfinance industry of Guatemala, the following recommendations on the MFIs can be suggested to improve the efficiency and maintain its sustainability.
First, several measures and tools to evaluate the credit risk should be employed. MFIs should have the institutional commitment to hire a bureau of credit references, to deliver and receive up-to-date information from clients in order to reference and investigate the level of indebtedness and at any time avoid over-repayment according to their lending policies. MFIs may periodically review their credit policies and employ the characteristics of customers such as ethnicity, schooling, age, client's family responsibilities, family vulnerability, aspects Savings, and remittances. In terms of product design of credit maturity, a review is also necessary, since the client's vulnerability of one-year terms. It is also recommended that credit assessment policies that included the client's payment morale or "willingness to pay,” which have been shown to be relaxed, by credit officers, supervisors and even the institutions should be revised. In many case, the loans are too generous to fit with modern economic context that the client lives today.
Second, it should be able to use modern techniques. There are affordable sophisticated and user-friendly software that facilitate the work for MFIs. For example, PreCREDITPRO is available through the debt overhang campaign. In addition, more diversified products may be provided to the clients. For years, the credit program has remained the same, while a large number of innovative credit products have been made. In addition, it is suggested the use of a predictor model proposed to determine the level of over-indebtedness, integrating it into the information management system of the institution or for its ease of use to do it in an Excel sheet.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 209 Third, MFIs neglect the issue of financial education, both for their internal and external clients. Therefore, it is vital to resume these actions, activating the strategic alliances that are necessary to train their staff and clients in issues that are binding on microfinance and other activities that help the integral development of the client. This is because it has been verified in the previous study that the clients do not know the interest rate that they pay for their credits to the institutions that provide these services.
Fourth, NMFIs are not financed by deposit or borrowing but by the contribution of the foreign and domestic NGO and other institutions. As a result, their amounts of activities on microfinance and related ones may be restrained by the contributions from outside donors. There should be systematic ways to take the domestic and foreign contribution. For example, regular meetings should be made between NMFIS and major contributors and brochures or financial activity reports should be distributed to the contributors.
The government or supervisory agency on MFIs has to prepare to take care of the high indebtedness of microfinance industry.
First, it is a priority that MFIs, government entities, funding institutions and any other relevant players in the sector should be aware of the high level of over- indebtedness that the country is experiencing and that it should prepare for mitigation and contingency programs or plans. These actions should be prioritized according to the percentages of over-indebtedness that each region presents and be congruent with the food and vital needs that each family demands.
Second, it is advisable for MFIs to prioritize the factors that determine the over- indebtedness of a client, to construct their forms, evaluation sheets or to restructure their methodologies. It is recommended the inclusion and use of the prediction model suggested by the study in MFIs’ information management systems (software) due to their simplicity, agility, efficiency, and easy interpretation.
Based on the present study, research on active product methodologies, socio- economic evaluation processes and credit models with different types of assistance or training should be provided. In addition, other institutions, researchers, and even MFIs are encouraged to deepen their research and to expand their scope. Maintaining the health of institutional portfolios and the prevention of client over- indebtedness can be major object of this research.
To implement the above strategies, a national institutional framework should be made. It has to analyze and evaluate the environments of the local microfinance market and system and design the policy and strategies for them.
210 • 2016/17 Knowledge Sharing Program with Guatemala Their main assignments are as bellows. The central office guides, advises, supervises, and inspects on financial activity on the local one and it should take charge in education and training activity for the participants of local office. It may build up the financial infrastructure for local one and it relay the inter-lending activity among credit unions or cooperatives. It should make its own development plan and initiate its implement. Finally, it helps to establish its credibility as a financial institution. It may design the provision funds to restore the confidence on individual offices and local branches.
At first, it may be easy to establish such an institution at once. As a result, a several steps are required. First, a simple alliance among the nearby regions should be made among local MFIs. They may share the experiences with each other and had the same necessary training together. Second, a more formal regional one is established at each region. Its size become larger and more activities can be made. At the final stage, a national association based upon the law should be made.
At the same time, alliance between NMFIs and other MAFs such as Savings and Loan MFIs are recommended to share their information and experiences. Currently, MAFs such as Savings and Loan MFIs has a better system and more experience in financial business. Therefore, NMFIs may take lessons and knowledge with MAFs through the alliance.
5. Concluding Remarks
It is very important for developing countries to secure the necessary financial resource to take off from the low-income stage. One of the important difficulties for them is the low investment ratio caused by the lack of financial resources. Especially, the low-income families of the developing country have very limited financial resources. Either formal financial institutions such as commercial banks are not located to the nearby place to them or they cannot satisfy the condition for them to ask.
The government of Guatemala recognized this fact and selected the theme of development of Microfinance or Financing of SMEs as one of 2016 KSP subjects. To accomplish the objects of 2016 KSP with Guatemala, KSP team plans to take the following five steps. The first step is to describe basic theory of financial accessibility of SME, microfinance and economic development. The second step is to analyze the current market condition and legal framework for microfinance in Guatemala. In this step, we clarify what should be done in Guatemala based upon economic theory and research on Guatemala. The third step is to examine the cases of Korean development of microfinance and financial accessibility to the local resident in rural
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 211 area. The fourth step is to provide the practical policy suggestions to the Government of Guatemala.
Microfinance is a kind of financial services for small sized entrepreneurs, businesses and farmers lacking access to regular banking and related financial services. Typically, the loan amounts are not more than several hundred dollars. MFIs are the ones that provide the microfinance service to the public. It ranges from small non-profit organizations to larger banks. MFIs include both for-profit companies, as well as non-profit organizations.
Like many developing countries, Guatemala has a bank-oriented financial system. Microcredits in Guatemala are defined as those credit assets granted to a single individual or legal entity, which together are not more than GTQ 160,000, in the case of national currency, or the equivalent of USD 20,800, in the case of foreign currency, to finance the production and marketing of goods and services. The strategic importance of MFIs in Guatemala is based on its specialization in financing the productive enterprises of MSMEs. In comparison, commercial banks allocate most of their loans to finance consumption (32%). The cooperatives allocate the largest percentage of their portfolio to housing (41%). MFIs specialize in placing their portfolio in loans that finance productive enterprises (50%).
Microfinance is provided by many different agents from a regular bank to non- regulated entities. There are several networks among MFIs such MICOOPE and REDIMIF etc. Some of them are NGO typed one.
The research on the microfinance industry on Guatemala highlights the following several interesting facts. First, many users of microfinance have contacted with a single institution. Second, over-indebtedness is a phenomenon that equally affects the clients, without discriminating in terms of geographical location. Third, most client on microfinance have lived in the same community quite a long time. Third, many clients who are indebted to a debt do not receive training of the microenterprise activity. Fourth, with an appropriate predictor model, it was possible to determine with high reliability the condition of over-indebtedness of a client. Several challenges and problems are argued on microfinance as follows: unfavorable future environments, low efficiency, lack of strategy and development plan, tense competition from commercial banks, lack of coordination and cooperation among institutions, lack of proper supervision, less understanding of microfinance market by government office.
In the early development stage of 1960s and 1970s, assessments to the financial service from formal institutions in Korea were very limited, as in the many developing countries. Traditional lending among the same local village residents or
212 • 2016/17 Knowledge Sharing Program with Guatemala usury was the main source of credit. A local credit union and credit cooperative help to solve this problem. Although they had a hard time, as they had to restructure several times, they managed successfully and finally became some of the largest financial institutions today. They made the central offices authorized by the law and succeeded in harmonize the work between the central and local offices. For example, first, the central office guided, advised, supervised, and inspected the financial activity of the local one. The central office took charge in education and training activity for the participants of local credit union and helped to build its infrastructure and future development. It relayed the inter-lending activity among credit unions or cooperatives.
From these analyses, following policy implications are suggested. First, several measures and tools to evaluate the credit risk should be employed. Second, it should be able to use modern techniques to improve its efficiency. Third, MFIs should take the appropriate education both for their internal and external clients. Fourth, NMFIs should be systematic ways to take the domestic and foreign contribution. Fifth, the government or supervisory agency has to prepare to take care of the high indebtedness of microfinance industry.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 213 References
Almeyda, Gloria and Brian A. Branch (1998), Microfinance in Guatemala: The Case of Credit Unions: Unión Popular Credit Union (Tiquisate), Unión Progresista Amatitlaneca-UPA Credit Union (Amatitlán), World Council of Credit Unions Research Monograph Series 13. Bank of Korea, Statistical Database, www.eco.sbok.or.kr. Bank of Korea (2011), Financial Institutions in Korea. Firth, Barry (2014), Over-Indebtedness: A Risk Management Approach, The Microfinance CEO Working Group, VisionFund International. Bateman, Milford (2010), Why Doesn’t Microfinance Work?, Zed Books. Bateman, Milford (2013), The Age of Microfinance: Destroying Latin American Economies from the Bottom Up, ÖFSE Working Paper 39. Center for Microfinance (2010),Over-indebtedness and Microfinance: Constructing an Early Warning Index, University of Zurich. Chen, Greg, Stephen Rasmussen, and Xavier Reille (2010), Growth and Vulnerabilities in Microfinance, CGAP. Comisión Para la Prevención del Sobreendeudamiento (2015), Factores Que Condicionan el Sobreendeudamiento EN EL Sector DE Microfinanzas en Guatemala. Congress of the Republic of Guatemala (2016), Development of the Microfinance Sector. Decree 25-2016, Initiative 4791. Dabla-Norris, Era, Yixi Deng, Anna Ivanova, Izabela Karpowicz, Filiz Unsal, Eva VanLeemput, and Joyce Wong (2015), Financial Inclusion: Zooming in on Latin America, WP/15/206. Grameen Foundation and IFC (2015), Factors Influencing Poverty Outreach among Microfinance Institutions in Latin America. Helms, Brigit (2006), Access for All: Building Inclusive Financial Systems, CGAP. IMF, World Economic Outlook. IMF, Financial Access Survey. Isern, Jennifer (2004), What is a Network? The Diversity of Networks in Microfinance Today. Jones, Randall S. and Myungkyoo Kim (2014), Addressing High Household Debt in Korea. Economics Department Working Papers No. 1164, OECD. La Superintendencia de Bancos de Guatemala (2015), Boletin Annual De Estadisticas Del Sistema Financiero. Lee, Young Youn and Hyun-Hoon Lee (2013), “Inclusive Growth, Financial Exclusion and Microfinance in the Republic of Korea,”Korea and the World Economy.
214 • 2016/17 Knowledge Sharing Program with Guatemala MacFarquhar, Neil (2010), “Banks Making Big Profits from Tiny Loans.” The New York Times, April 13. Mesbah-Khavari, Dina (2005), Credit Union Remittance Services in Guatemala: Expanding the Access of Low-Income Remittance Recipients to Financial Institutions, microREPORT # 24 April 2005. MG Credit Cooperatives (2014), 50 Years of MG Credit Cooperatives. Microfinanzas Banana Skins 2012, La Encuesta CSFI de Riesgo de Microfinanzas, Permaneciendo Relevante (UK: Centro para el Estudio de la Innovación Financiera), 7. 21/10/13, http://www.citi.com/citi/microfinance/data/news120628.pdf. MIX Refocused Approach (2015), Summary of Trends Guatemala. NACUFOK (2012), 50-Year History of Credit Union in Korea. Oh, Yoonhae (2015), “Effect of Consulting on Microcredit Repayment in Korea,” KDI Journal of Economic Policy, Vol. 37 No. 1, KDI. Oh, Yoonhae (2015), “Differentiating the Guaranteed Rate: A Way to Improve the Sunshine Loan Program,” KDI Focus No. 40, KDI. Patiño, Omar Alonso (2008), Microcredit: History and Successful Experiences of its Implementation in Latin America. REDCAMIF and REDIMIF (2010), Diagnostico de los Mercados Financieros Rurales y Ambiente, y Propuesta de Líneas Estratégicas de la Red Nacional de Microfinanzas, como insumo a la formulación del Programa Regional de Expansión de los Servicios Financieros Rurales y Ambiente de REDCAMIF. Richardson, David C. and Barry L. Lennon (1994), The Impact of Credit Unions in Guatemalan Financial Markets: Experiences from the Guatemala Cooperative Strengthening Project, World Council of Credit Unions Research Monograph Series Number 3. Soursourian, Matthew and Edlira Dashi (2016), Taking Stock: Recent Trends in International Funding for Financial Inclusion, CGAP. Superintendency of Banks (2016), Report of the Financial System to the Monetary Board March 2016. Swiss Contact (2016), El Sistema de Mercado de Servicios Financieros en Guatemala: Factores que Promueven y/o Limitan el Acceso a Personas de Bajos Recursos, Septiembre, Swiss Contact. Walter, Reynold O. P., President (2006), Best Practices for National and Regional Microfinance Networks - The Experience of Latin America and the Caribbean, REDCAMIF, Guatemala, Central America.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 215 Yim, Eun-eui and Bo-young Park (2015), “Practices and Principles of Microcredit in South Korea: A Case Study on Social Solidarity Bank,” Asian-Pacific Journal of Social Quality Vol. 2 No.1, 1-15.
216 • 2016/17 Knowledge Sharing Program with Guatemala Appendices
Appendix 1. List of Banks in Guatemala
Type (Number) Notes Bank Institutions (18) El Crédito Hipotecario Nacional de Guatemala Has recently shown interest in SMEs Banco Inmobiliario, S. A. SME credit program Banco de los Trabajadores Banco Industrial, S. A. enrolled in the lGSS for workers Banco de Desarrollo Rural, S. A. Emphasis on rural financial inclusion Banco Internacional, S. A. Citibank, N.A., Sucursal Guatemala Vivibanco, S. A. Housing Banco Ficohsa Guatemala, S. A. Consumption Banco Promerica, S. A. Banco de Antigua, S. A. Consumption Banco de América Central, S. A. Banco Citibank de Guatemala, S. A. Banco Agromercantil de Guatemala, S. A. Manages lessor Direct attention to SMEs, Second floor for IMF, Banco G&T Continental, S. A. insurance Banco de Crédito, S. A. Banco Azteca de Guatemala, S. A. Popular consumption Banco INV, S. A. Financial Companies (13) Corporación Financiera Nacional Financiera Industrial, S. A. Financiera Rural, S. A. Financiera de Occidente, S. A. Financiera de Capitales, S. A. Financiera Summa, S. A. Finance the agricultural sector Financiera Progreso, S. A. Financiera Agromercantil, S. A. Financiera MVA, S. A. Financiera Consolidada, S. A. Financiera de los Trabajadores, S. A. Financiera Credicorp, S. A. Financiera G & T Continental, S. A.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 217 Type Notes Storage Companies (14) Almacenes de Depósito de El Crédito Hipotecario Nacional de Guatemala Almacenadora Guatemalteca, S. A. Almacenes Generales, S. A. Almacenadora Integrada, S. A. Central Almacenadora, S. A. Centroamericana de Almacenes, S. A. Almacenadora del País, S. A. Almacenadora Internacional, S. A. Almacenes y Servicios, S. A. Almacenadora Corporativa, S. A. Almacenadora de la Producción, S. A. Almacenes y Silos, S. A. Almacenadora Tecún Umán, S. A. Almacenadora Pelícano, S. A. Insurance Company (28) Departamento de Seguros y Previsión de El Crédito Hipotecario Nacional de Guatemala Seguros G&T, S. A. Some operations with non-profit MFIs BMI Compañía de Seguros de Guatemala, S. A. Seguros Universales, S. A. AIG Seguros Guatemala, S. A. Pan-American Life Insurance de Guatemala Some operations with non-profit MFIs Compañía de Seguros, S. A. Seguros Alianza, S. A. Aseguradora General, S. A. Seguros El Roble, S. A. Aseguradora Guatemalteca, S. A. Seguros de Occidente, S. A. Aseguradora La Ceiba, S. A. Aseguradora de los Trabajadores, S. A. Columna, Compañía de Seguros, S. A. Part of MICOOPE MAPFRE, Seguros Guatemala, S. A. Seguros Agromercantil, S. A.
218 • 2016/17 Knowledge Sharing Program with Guatemala Type Notes Pioneer in the field of rural insurance and Aseguradora Rural, S. A. microinsurance Departamento de Fianzas de El Crédito Hipotecario Nacional de Guatemala Afianzadora Guatemalteca, S. A. Afianzadora G&T, S. A. Aseguradora Fidelis, S. A. Fianzas de Occidente, S. A. Fianzas El Roble, S. A. Seguros Privanza, S. A. Corporación de Fianzas, Confianza, S. A. Afianzadora Solidaria, S. A. Afianzadora de la Nación, S. A. Bupa Guatemala, Compañía de Seguros, S. A. Houses of Exchange (3) Lafise Guatemala, S. A. Global Exchange, S. A. Servimicoope, S. A. Affiliated to MICOOPE Entities Outside Place Offshore (6) Westrust Bank (International) Limited Occidente International Corporation Mercom Bank Ltd. BAC Bank Inc. GTC Bank Inc. Transcom Bank (Barbados) Limited Houses of Bank (9) Mercado de Transacciones, S. A. Asesores Bursátiles de Occidente, S. A. Sociedad de Corretaje de Inversiones en Valores, S. A. Agrovalores, S. A. G&T Contivalores, S. A. Bac Valores Guatemala, S. A. Asesoría en Valores, S. A. Casa de Bolsa G&T Continental, S. A.
Chapter 3 _ Enhancing Financial Accessibility of SMEs through Microfinance Institute • 219 Type Notes Internacional Casa de Bolsa, S. A. Credit Cards (6) Contécnica, S. A. All are potential competition in the long-term Tarjetas de Crédito de Occidente, S. A. Tarjeta Agromercantil, S. A. Credomatic de Guatemala, S. A. G&T Conticredit, S. A. Cititarjetas de Guatemala, Limitada Other Institutions (4) Instituto de Fomento de Hipotecas Aseguradas Mortgages for home loans -FHA- Departamento de Monte de Piedad de El Crédito Regulated lender Hipotecario Nacional de Guatemala Arrendadora Agromercantil, S. A. Regulated landlord in the country Interconsumo, S. A.
Source: Superintendency of Banks of Guatemala, Lista de Entidades Supervisadas a diciembre de 2016, 2016.
220 • 2016/17 Knowledge Sharing Program with Guatemala Appendix 2: Legislative Decree 19-2002, on the Law on Banks and Financial Groups
A) ARTICLE 1. Purpose. The purpose of this Law is to regulate the creation, organization, merger, activities, operations, suspension of operations, and liquidation of banks and financial groups as well as the establishment and closure of branches and representative offices of foreign banks.
B) ARTICLE 2. Name. For the purposes of this Law, the name “bank” includes the banks incorporated in the country and the branches of foreign banks established therein.
C) ARTICLE 3. Banking financial intermediation. Banks authorized in accordance with this Law or specific laws may carry out financial banking intermediation, consisting of the habitual realization, in public or private, of activities that involve the raising of money, or any instrument representative thereof, of the public, such as The receipt of deposits, the placement of bonds, bonds or other obligations, for financing of any nature, regardless of the legal form adopted by said deposits and financing.
D) ARTICLE 4. Exceptions. Entities receiving deposits or contributions from their partners and third parties, such as cooperatives, mutual societies, community development associations, community-based associative enterprises, non-governmental organizations and private development organizations, among others, and which are regulated by A special law, are exempted from the provisions of this Law. In any case, such entities shall be obliged to submit periodic or occasional information required by the Superintendency of Banks.
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.go.kr www. ksp ity 30149, Korea C
Center for International Development, KDI cid.kdi.re.kr Knowledge Sharing Program www.ksp.go.kr (set) www.mosf.go.kr www.kdi.re.kr 9 3 SBN 979-11-5932-241- SBN 979-11-5932-227- I I Tel. 82-44-550-4114 Tel. 82-44-215-7762 Korea Development Institute 263 Namsejong-ro, Sejong Special Self-Governing Ministry of Strategy and Finance Korea Government Complex-Sejong, 477, Galmae-ro, Sejong Special Self-Governing City 30109,
