Title page

Contents

ABSTRACT 2

I. INTRODUCTION 4

II. CAUSES OF POOR GOVERNANCE: CORRUPTION AND LACK OF CAPACITY 4

III. EFFECTS OF POOR GOVERNANCE ON INCLUSIVE GROWTH 6

IV. POLICIES TO IMPROVE GOVERNANCE: OVERVIEW 9

V. REDUCING DISCRETION WHEN POLICY DECISION IS MADE 13

A. Structural Reforms to Reduce Government Discretion 13

B. Case for Government Intervention: Automation, Outsourcing, Rules, and Procedures 15

Rules and Procedures: Examples of Public Financial Management and Tax Administration 18

Rules and Procedures: Example of Central Bank Safeguards Assessment 19

Rules and Procedures: Example of Financial Sector Assessment Program (FSAP) 20

VI. REDUCING THE LIKELIHOOD OF POOR GOVERNANCE 20

A. Encouraging Good Governance: Human Resource Policies, Political Institutions, and Capacity Building 22

B. Discouraging Poor Governance: Tangible and Non-Tangible Cost, Supply-Side Measures, Anti-Money Laundering, and Anticorruption Frameworks 24

Preventing Criminals from Benefiting from the Proceeds of Corruption: Anti-Money Laundering Frameworks 26

VII. MONITORING AND INFORMING THE POLICY 27

A. Transparency and Accountability 28

B. Official Anti-Corruption Institutions 32

C. Engaging Civil Society 33

Examples of IMF's Governance Policy Advice in Selected Countries 35

VIII. CONCLUSION 37

REFERENCES 38

Table 1. Public Wage Statistics from around the World, 2008-2016 23

Figure 1. Corruption as a Major Obstacle to Do Business 5

Figure 2. Main Effects of Poor Governance: Summary 7

Figure 3. Less Education and Health Spending in Countries with Poor Governance 8

Figure 4. Bribery Dynamics Around the World 10

Figure 5. Improving Governance Decomposed 13

Figure 6. E-Government on Rise 16

Figure 7. Reducing the Likelihood Of Poor Governance Through A Magnifying Lens 22

Figure 8. Open Data Across Government Activities 29