This paper was written by Ian Bannon(Central America Country ManagementUnit) as an input into the Workshop onTransparency and Governance,organized as part of the ConsultativeGroup Meeting for the Reconstruction and Transformation of Central America,held during May 25-28, 1999, inStockholm, Sweden. The paperpresents the World Bank’s perspectiveon the fight against corruption,drawing on a number of World Bank and other sources. It briefly sketcheselements of a conceptual frameworkon corruption, explains the WorldBank’s strategy to address corruption,and focuses on Bank efforts to supportanti-corruption programs in countries that request such assistance. It endswith some concluding thoughtsdesigned to stimulate discussionduring the workshop. While the paperdiscusses the broad elements of anti-corruption strategies, and some of the lessons learned by the World Bank andothers, it also points to some elementsand examples that may be relevant tothe efforts of Central Americancountries to both ensure thetransparent use of reconstruction aid, as well as longer-term efforts toensure that transparency and improvedgovernance become integral elementsin these countries’ strategies forsustainable development. Table of Contents Toward a Conceptual Framework DefinitionCausesMeasuring CorruptionEffects of Corruption Helping Countries Fight Corruption: The World Bank’s Strategy Economic ReformsStrengthening InstitutionsReforming the Public SectorFinancial managementCivil service reformTax and revenue departments Public procurementDecentralizationLegal and Judicial ReformJudicial reformSpecial anti-corruption bodiesCivil Society Concluding Thoughts References and Further Reading Text Boxes: Box 1: Guatemala’s Integrated Financial Management SystemBox 2: The Office of the OmbudspersonBox 3: Nicaragua: Building a National Integrity System Toward A Conceptual Framework Corruption is a complex phenomenon.Its roots lie deep in bureaucratic andpolitical institutions, and its effect ondevelopment varies with countryconditions. But while costs may varyand systemic corruption may coexist with strong economic performance,experience suggests that corruption isone of the most severe impedimentsto development and growth inemerging and transition economies. Corruption is widespread in manydeveloping and transition economies,not because their people are differentfrom people elsewhere, but becauseconditions are ripe for it. Themotivation to earn income through corrupt practices is extremely strong,exacerbated by poverty and by lowand declining civil service salaries.Coupled with a strong motivation is thefact that there are ample opportunitiesavailable to engage in corruption. Corruption flourishes where distortionsin the policy and regulatory regimeprovide scope for it and whereinstitutions of restraint are weak. Theproblem of corruption lies at theintersection of the public and the private sectors. It is a two-way street.Private interests, domestic andexternal, wield their influence throughillegal means to take advantage ofopportunities for corruption and rentseeking, and public institutions succumb to these and other sources ofcorruption in the absence of crediblerestraints. Even if detection is possible,punishments are apt to be mild whencorruption is systemic—it is hard topunish one person severely when so many others are likely to be equallyguilty. Corruption violates the public trust andcorrodes social capital. A small sidepayment to obtain or speed up agovernment service may seem a minoroffense, but it is not the only cost.Unchecked, the creeping accumulation of seemingly minor infractions canslowly erode political legitimacy to thepoint where even noncorrupt officialsand members of the public see littlepoint in playing by the rules.Credibility, once lost by the state, is very difficult to regain. Definition Many definitions of corruption havebeen advanced, none fully satisfactoryand comprehensive. Although it maybe difficult to define