# **Implications for Reform**

At a general level of strategy design, the empirical analysis of the governance diagnostics provide important country-specific inputs for action and reform. In many countries, these surveys have highlighted the variety of forns of corruption and identified institutions afflicted by misgovernance and in which corruption is particularly pervasive. Given the prominence we ascribe to state capture and related forms of influence by the elite in providing a plausible explanation of why growth may not translate into improved governance, then strategies to improve governance and combat corruption ought to specifically address such undue influence and capture. This implies a strategy that departs from conventional public sector reform, which typically focuses on the internal management and functioning within government. The research on state capture for transition economies, as well as analysis of govemance diagnostics in some Latin American countries, point to the importance of voice and external accountability mechanisms, of political contestability, and of transparency reforms (including media freedom, disclosure of votes by parliamentarians, declaration of assets by politicians, and regular monitoring through surveys and report cards). This necessitates a move towards collective-action modalities, including not only selected agencies in the executive, but reformists throughout, including the parliament , civil society, and the private sector. 37 Similar lessons emerge from an earlier governance diagnostic survey carried out in Bolivia, where over 1,200 public officials working in over one hundred public agencies were interviewed in depth on diverse dimensions of institutional performance and governance vulnerabilities. Figure 8 shows the relationship across government agencies in Bolivia between either the reported prevalence of administrative forms of bribery (as well as state capture manifestations) (the vertical axis) and three possible reform dimensions (the horizontal axis): (i) transparency (with regard to budgets, personnel management, and administration); (ii) the existence of citizen feedback mechanisms (which are acted on by the agency); and (iii) their reported employee satisfaction with regard to pecuniary and nonpecuniary compensation. Each of these three possible reform dimensions is depicted in one of the panels in figure 8 on the horizontal axis. The first two panels show a clear association between transparency and external feedback mechanisms, on the one hand, and corruption (including state capture), on the other, controlling for other factors. In contrast, there is little if any association between the public officials' response on their perceived satisfaction with their pay and bribery or capture. While the structural relationship between determinants of corruption and capture and such governance outcomes is likely to vary across 37. While the involvement of nongovernmental organizations and related civil society segments as agents to improve governance has become more prominent in recent years, the role of the competitive private sector (including associations of traders, exporters, and small and medium-sized enterprises) has been underemphasized.

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