101354 Coordinating for Good Governance, Development Committee, Annual Meetings 2006, Singapore Paul Wolfowitz World Bank President September 18, 2006 As we developed this paper, we had valuable input beginning with the report from the Blair Commission on Africa, and then, more recently, an excellent White Paper from DFID, an EU policy paper and a US policy initiative. The Board has been deeply engaged in helping shape the paper and I look forward to their continued oversight and involvement as we implement this strategy. I view this paper as a starting point as we implement the plan, it will be important to listen and learn from our developed and developing country partners. While I expect to have regular briefings and discussions with the Board on progress made to implement the strategy, I think it might make sense to have a review of progress on implementation at the Spring meetings. I believe that good governance policies and practice cannot be ends unto themselves. Rather, they are the means to achieve better development results. Sound principles of accountability and transparency not only assure funds are spent as intended, but also are essential to accelerating economic growth, helping the poor to escape poverty,and achieving the MDGs. While it speeds growth, in fact, establishing good governance requires steady, thoughtful persistence. It takes place over time, not overnight. Engaging more deeply and broadly with our country partners to support their efforts to build institutions and improve governance is our objective, but sometimes these policies or institutions fail or governance is weak, and we may be faced with the challenge of fighting corruption—a fight which must be part of a program to improve governance. In these difficult circumstances, we cannot ignore problems or challenges, instead we must find solutions which are innovative and flexible and which respect the unique constituents and conditions in each country. We cannot abandon the poor because their government or institutions are weak. That would mean they would be penalized twice. Our strategy is clear: in the most difficult cases the bank “will engage in areas and sectors where adequate governance arrangements are possible, with a likely focus on building capacity, meeting the basic needs of the poor and working, within our legal mandate, with institutions outside of central government.� If we are to achieve results, we must recognize frankly that there are exceptional circumstances, where institutional weakness or lack of political will complicates the development environment. In these exceptional circumstances, we must look for alternative ways to remain engaged to solve development problems. On this issue, I think the DFID paper gets it exactly right - - “Good governance is not just about government. It is also about political parties, parliament, the judiciary, the media and civil society. It is about how citizens, leaders, and public institutions relate to each other in order to make change happen … Good governance requires three things: state capability, responsiveness and accountability.� The strategy you are considering matches this approach, identifying similar options and avenues for improving accountability and integrity. Good governance begins with country ownership. As the EU paper notes, “reforms cannot be imposed from the outside. If there is little ownership on the partners side, support from the international community can produce limited results if any.� As I have traveled, I have been struck by how much demand there is for governance reforms and how frequently reformers inside the government are pushing needed governance reforms forward. These champions of reform deserve our support, especially when they are leading the government, as for example in Liberia. Our partners already have figured what our papers and strategies are memorializing. They are taking the steps necessary to strengthen governance standards and, yes, when absolutely necessary, developing the means to work around problems of weak governance and combat corruption. The Africa Peer Review Mechanism put in place by NEPAD (the New Partnership for Africa’s Development) is a good example of improved standards of performance and accountability. And, the Indonesian government’s recent pledge of $1 billion to an initiative to scale up community driven accountable development projects was designed to work around stubborn problems at the center. Both efforts recognize the link between good governance mechanisms and achieving results. While our starting point is the relationship with the developing country, the Bank Group must also work closely with other donors, multilateral banks and international organizations to assure greater coordination and collaboration in reaching our common development goals. As one step, I am especially pleased at the agreement achieved this week by a Task Force on fraud and corruption set up by of all the MDBs last Spring. We have now agreed on a common set of principles and guidelines for investigations and information sharing which will protect all of our interests. Built on the premise of broad collaboration with donors and deeper engagement with developing countries, our new strategy also supports strengthening our own work to make it more objective and systematic, ensuring consistent treatment across countries. This doesn’t mean one size fits all. To effectively support our individual partners, the strategy proposes improving our project evaluation, design, and supervision and providing technical assistance and good governance teams or advice where appropriate. The more closely we work with our partners to build in effective governance and transparency principles as project and sector work begins, the more likely we are to reduce the problems of corruption later. We will work at the project level, the country level and in partnerships with you to learn, adapt and improve our efforts to assure good governance provides a solid foundation for development. In common purpose, developed and developing countries, donors and recipients, bilateral and multilateral organizations, governments and civil society, together can accelerate our achievement of the MDGs. Let us remember that the purpose of our discussions is to be stronger and more effective in the fight against poverty. Let us keep in mind three things: We have an obligation to the poor people of the world and to the people who expect us to help them that all of our funds go – as our Articles of Agreement specify – for the purposes intended. Those purposes are to provide good schools for poor children, to help poor mothers get access to good health care and to give poor workers the chance for a good job – not to line the pockets and bank accounts of the corrupt and powerful. Second – and this is a point that is sometimes lost sight of – the demand for those resources far exceeds what is available. If we waste our assistance on projects or institutions where money is not being used properly, it comes at the expense of many other countries or ministries or organizations that have demonstrated need and capability to use more than what is available for them. And finally, particularly as we head into another round of IDA replenishment, we need to be convincing with our donors that we are making good use of their resources. If we fail to do that, we will fail our obligations to the poor who are our ultimate clients. For all of these reasons, the effort to strengthen and improve governance is a key element in the fight against poverty. I appreciate that hard work by our staff and the many contributions by shareholders to today’s strategy document, and I look forward to our discussion.