**[Appendix A:]{.smallcaps}**

**[(A Suggested Anti-Corruption Strategic Framework for
USAID/CAR)]{.smallcaps}**

**Problem Statement:**

*How can public/private sector integrity be better promoted through
USAID technical assistance in Central Asia?*

**The 'Business Case' for Integrity and Against Corruption: Why Do
This?**

-   [Integrity Promotes Strong States Necessary to Generate Strong
    Markets]{.underline}. Public sector integrity is one of the most
    important markers of state strength and capacity. Only strong,
    accountable states can create the laws, institutions and incentives
    that in turn generate strong, competitive *markets*. Countries with
    effective public sector administrations tend to be precisely those
    with high standards of living, competitive private sector
    environments, open trade policies, well-trained workforces, strongly
    enforced labor, business and environmental standards, and high
    levels of public good investment

-   [Corruption Facilitates Weak Authoritarianism and Discourages
    Investment]{.underline}. By definition, a corrupt state is an
    incompetent one, which cannot enforce laws, regulations, and codes
    of conduct nor effectively levy taxes and redistribute income. Such
    states compensate for this fundamental inefficiency through
    increasingly authoritarian 'insider' rule based on patron-client
    relationships. Yet this fundamentally contradicts an economic
    environment conducive to broad-based *competitive investment*, and
    resources tend to flow only to those institutions necessary to
    sustain single-commodity economies, without 'multiplier effects'
    that boost infrastructure, industrial and service development.
    Despite resource endowments, such economies generally *fail* to find
    competitive niches in an increasingly globalized economy.

-   [Integrity Legitimizes Political Change and Lowers Costs of Social
    Reform]{.underline}. States marked by high degrees of public sector
    integrity are able to pursue difficult reforms or re-structure their
    economies *precisely* because they enjoy high levels of public trust
    and confidence. 'Clean' states invest in critical public goods (such
    as primary and secondary education, basic healthcare, social
    welfare, pension systems, environmental protection) and thus 'rule
    justly' in the public interest. When reforms are necessary,
    political leaders can appeal to patriotism, national pride and
    social justice to obtain needed support, and thus lower the
    political and social costs of complex transitions.

-   [Corrupt States Lack Political Legitimacy]{.underline}.
    Kleptocracies (where the public sector is primarily a vehicle to
    facilitate organized theft) are rightly perceived by increasingly
    well-informed publics as undeserving of political loyalty and trust,
    which, over time, is magnified by widening gulfs between rich and
    poor, leading to serious political and economic crises. By failing
    to check the propensity to theft of their own long-term resources
    for short-term gain, corrupt states arguably sow seeds of their
    future destruction by galvanizing increasingly interested publics
    against them.

-   [Integrity Fights Poverty and Narrows Income Disparities between
    Rich and Poor]{.underline}*.* Non-corrupt 'clean' states are also
    strongly associated with narrower income disparities between rich
    and poor, and provide greater channels for social, economic and
    political mobility to poorer and marginalized groups. They are also
    able to absorb critical labor force shifts (rural to urban
    migrations, extractive to industrial, and industrial to
    service-based economies) with minimal social stress.

-   [Corrupt States are also Poor States Prone to Conflict]{.underline}.
    The most corrupt countries in the world are also the world's
    poorest, natural resource endowments notwithstanding. Vast gulfs
    between rich and poor contribute to economic insecurity, with
    stronger pressure on elites to remove capital---both human and
    monetary---overseas (using corrupt mechanism to hide assets and
    investments). Such actions only further impoverish their peoples and
    make them increasingly vulnerable to both internal and external
    resource conflicts.

**Solutions: What Lies (and Does Not Lie) Within USAID's Manageable
Interest?**

-   [Goal]{.underline}: To use technical assistance to help change
    *enabling environment for corruption* throughout the region,
    specifically by changing microincentives that can lead to behavior
    change. But this must be balanced against...

    -   [Severe Intervention Limitations]{.underline}. Unless
        interventions succeed in reversing incentives for corruption
        (which are stronger than those for integrity), interventions
        must accept the inevitability that there will be many failures,
        even in the Workshop Recommendations, balanced against piecemeal
        successes. Simply put, incentives to continue short-term
        stealing which benefits a few are simply greater than those for
        longer-term prosperity for all, and even reversing
        microincentives and microenvironments for reform will not soon
        change this.

    -   [Declining Budgets]{.underline}. While declining budgets
        severely constrain large new projects, they also simultaneously
        compel existing programs to undergo far greater scrutiny than
        they currently do, particularly toward the twin goals of
        *avoiding harm* and *maximizing current benefits*.

**A Strategy to Guide Intervention: Lenses for All Programs**

> [(1) Focus on the Scarcity of Information and
> Competition]{.underline}. The larger enabling environment for
> corruption revolves around the *scarcity* of both good information
> (and how to use it to change behavior) and competition (both political
> and economic). A strategy to combat this must use scarce resources *to
> increase the supply of information and provide tools to increase
> political and economic competition*.

-   [Benefits: Safety and Economy]{.underline}. Disseminating
    information, findings, research, but especially tools and
    methodologies that people can use to change their environments,
    USAID will go a long way to counter the larger enabling environment
    for corruption, because it will have helped *level the playing
    field* between governments and their people. Such a strategy
    promotes good without doing harm because it leaves to Central Asians
    themselves the responsibility for using that information in ways
    they feel are appropriate and can use. (By contrast, some
    'anti-corruption campaigns' by governments can easily end up little
    more than witch hunts against opposition politicians and human
    rights activists and must be very carefully monitored.)

-   [Take Advantage of People's Thirst for
    Information...Carefully]{.underline}. The further training,
    professionalism and increased integrity of the 'fourth estate' are
    important precisely because of its ability to provide critically
    needed information to ordinary people genuinely interested in
    corruption issues. But USAID must resist the simple temptation to
    'bribe' journalists to cover more corruption issues, not only
    because this indirectly contributes to corruption, but because it
    may genuinely threaten journalists. Some of that danger can be
    lessened by focusing on the *legal environment* for journalists, and
    recognizing their need to be defended from governments by effective
    legal clinics that will counter government libel and slander cases.

-   [Promote Associational Strength, Which Promotes Independence, Which
    Promotes Integrity]{.underline}. When professional associations
    discover their own strength and overcome barriers to effective
    collective action, they naturally seek to become more independent of
    the state, and that very movement is itself a strong incentive for
    professional and organization transparency and integrity. Those are
    the contesting voices of power and information that USAID knows must
    be strengthened before the larger environment can change, whether in
    business, the judiciary, NGOs, electricity users, journalists, or
    accountants.

> [(2) Incentivize Cross-Recipient Programs]{.underline}. USAID's
> trainings do not sufficiently bring together forums of public, private
> and non-profit sectors *at the same time* and *under the safe roof*.
> It is critical that information training and seminars not focus on one
> sector at the expense of others. Each sector must know that other
> sectors have received the same information, training and suggestions;
> otherwise they will work at cross purposes to one another.
>
> [(3) Recognize the Benefits of Lower-Level Programs and Pursue
> Accordingly]{.underline}. School committees, village and local
> councils not part of the favored network, farmers' organizations and
> small businesses and business organizations have ironically been more
> open to behavior change and information precisely because they have
> not been a part of insider networks of power and patronage. Many of
> these institutions and nexuses can be a focal point for change in ways
> that higher-level institutions often have not, and can be used to
> increase receptivity to change at higher levels of government and the
> private sector.
>
> [(4) Civic Education: Both Necessary and Doable---and Some
> Guidelines]{.underline}. Bring NGOs, government agencies and private
> sector groups together to develop culturally-sensitive presentations
> of corruption into schools, communities and the media, ones which both
> help people to *understand its true costs* and specific ways to pursue
> better models in ways that can also help them to overcome barriers to
> collective action and low levels of social trust that are also part of
> the problem. (Evidence from other corrupt countries shows that when
> people are given better information about the costs of corruption,
> they are less willing to participate in it, and more receptive to
> alternatives.) Transparency International, working in conjunction with
> education sector grantees, can play a key role in this effort. Some
> issues that could be covered:

-   [Gifts v. Bribes]{.underline}*.* There are at least 10 words in
    Kazakh for 'gift'---and not all are tainted. Most Kazakhs consider
    bribe-taking much worse than bribe-giving. Gifts in traditional
    areas may actually be legitimate form of social capital and social
    trust---not to be dismissed lightly. An ethics program can help
    people understand the differences and when each is appropriate.

-   [Patronage v. Pilferage]{.underline}. Patronage isn't always
    pernicious, and forms part of everyday politics in every society,
    but an integrity program can help people understand where it
    works---and where it doesn't, to promote society's overall wealth
    and access to power.

-   [Conflict of Interest v. the Public Good]{.underline}. Few in
    Central Asia or the former Soviet Union understand these concepts,
    even high-level professionals whose job requires them to. Clarifying
    these issues can help people answer the question for themselves:
    '*how much corruption is too much*?' and connect their own personal
    behavior (*kun koru*---just trying to 'see the sun' in Kazakh) with
    the larger system of governance in the country that often leaves
    them with few alternatives. Helping to separate these issues can
    help them understand more clearly what they need to do to change the
    larger systems of rule.

> [(5) Formally Support 'Publish What You Pay]{.underline}.' Although
> some MNCs may oppose this, others want to do the right thing, but are
> waiting for high-level political leadership first. If political
> leaders lead on this issue, the MNCs will pay attention to the details
> of implementation and will be able to work them out. Transparency
> International's proposed 'Integrity Pact' with the oil companies
> deserves support and recognition in this area.
>
> [(6) Anti-Corruption Team Empowerment]{.underline}. The ACT must have
> access to resources and veto power over programs, not simply serve as
> a consultative body. AEFs need to be written with this in mind,
> otherwise the effort will die on the vine.