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Prevention of corruption in autonomous public institutions

by Jessica Obeid

“You can’t build a great building on a weak foundation.” The same applies to institutions. Strong institutions are critical for crisis recovery and economic development. In Lebanon there are several autonomous institutions that, theoretically, were supposed to be shielded from political interference and improve sectorial performance. Yet, in practice, these institutions suffer from structural problems that have rendered them a vehicle for vested interests, leading to a reduction of the country’s competitiveness and a deterrence to investments.

 Autonomous public institutions, by design, should benefit from an independent decision-making process, autonomous employment and access to resources. These institutions’ characteristics have been largely defined by their post-civil war restructure. The then-governments attempted to expand the role of the public sector while developing the private sector. The linkages between business people and politicians increased as more financing was available within the private sector compared to the public sector. This has led to the emergence of ministers and public officials with private sector’s interests of profit-making while operating within public institutions – even autonomous ones.

This phenomenon is witnessed clearly in the health and power sectors. The focus of private profit on the provision of health services has exacerbated inequality and weakened public hospitals. In electricity, reforms have largely remained on paper and citizens perceive the national electricity utility, Electricité du Liban (EDL), as a symbol of corruption.

Structural defects

There are obvious trends in the Lebanese autonomous public institutions: weak governance, illusion of autonomy portrayed in the political involvement in these institutions, and lack of accountability.

Corruption arises when there is a level of autonomy and availability of resources, but there is also political meddling in decision-making and recruitment, compounded by an absence of mechanisms to promote responsibility and accountability for specific actions. The involvement of certain ministers in the institutions’ decisions results in further blurring of the autonomy and boundaries between the institutions and ministers. Autonomous employment also took a hit when it was modified by the Council of Ministers to require its approval for public employment and appointments. The absence of accountability is rooted in the structural gaps within the parent institution. These shortcomings span from the design to the implementation stage of these autonomous institutions and can be summarized by: 1) the opacity of mandates and functions of the institution; 2) the absence of or weakened regulatory oversight; and 3) flawed coordination in assessment and organization. As a rule of thumb, the ownership, board of directors, and management of the institution should be separated. When the lines become blurred between the owner or parent institution and the management entity of the autonomous institution, responsibility becomes scattered and answering to actions becomes impossible. This is further aggravated when there is the lack of an oversight entity that controls and monitors the performance of the relevant sector’s institutions. The parent entity then deviates from its mandates and designated role, leading the way to ministerial exertion of power over decision-making in the autonomous institutions, thus exposing the latter to vested interests and corruption. The end result is therefore institutional corruption and the eroding of citizens’ trust as these institutions increasingly appear to serve the private interests of government officials.

Botched reforms

As economic crises mount, the need for reforms multiplies as states can no longer afford the cost of the status quo, and as citizens turn more towards the public sector for service provision. However, reforms do not happen in a vacuum, and solid institutions are a prerequisite to enable the adoption and implementation of reforms. Following Lebanon’s protests in October 2019, and later the county’s first Eurobonds default in March 2020, calls for enhanced governance across all sectors have increased but were met with complete absence of political will for effective reforms. Instead, the country has witnessed the emergence of the “décor-reforms” that give the illusion that something is being changed without actual implications on the end result, which continues to be institutional corruption.

Nowhere is this more evident than in the electricity sector. In July 2020, the cabinet appointed an Electricité du Liban (EDL) board of directors, allegedly as one of the reform measures, following a 2-decade board vacuum. Yet, instead of hiring for expertise, credibility and independent thinking, the cabinet appointed the board based on sectarian and political affiliations. The first test of the board happened a few weeks later when the Beirut blast severely damaged the utility’s headquarters, leading to deaths, injuries, and the loss of the national control center and data, in the absence of digital records and archives. Instead of stepping up, the board remained in idle mode.

The chronic dominance of private interests in the healthcare sector and public hospitals also emphasizes the need for institutional reforms and digitization. Minor attempts to develop and invest in governmental hospitals resulted in shy improvements in the public access to healthcare. The investments were impaired by major institutional shortcomings including lack of monitoring and supervision and overall transparency, and weak recruitment criteria and administration. The absence of digital medical records for each patient further reduced the sector’s efficiency.

Moving Forward

Corruption has cost the country tremendous debt, in addition to the deterioration of the quality of life and overall competitiveness. Economic recovery and attraction of future capital will hinge on reducing corruption and improving institutional performance. Thus, commitment to a long-term robust transformation plan is urgent. These transformations are embedded in institutional reforms that start with the creation of independent oversight and regulatory bodies in order to define functions through multi-stakeholder representation. Oversight and regulatory bodies should integrate into a broader framework of reforms and therefore require political commitment. They should have financial autonomy as well as the authority and capacity to assess the quality of regulation, coordinate with stakeholders, and make independent decisions. Another major requirement for their successful performance is hiring independent professionals on the basis of competence and relevant qualifications. The institutional mandates should be clearly defined to mitigate the risks of bending stakeholders’ authorities and responsibilities. Many layers of functionality, expertise, regulatory, and human resources are required to design the detailed structures. The political appointee or relevant minister should have a definite role that limits political influence on a sector. The latter’s performance should be dictated by experts and should derive from solid policies, regulatory frameworks, and institutional structures, which would curb and control vested interests.

In order not to fall in the trap of previous shortcomings, putting in place adequate monitoring and accountability mechanisms is a critical factor for institutional reforms. Promoting these accountability mechanisms and transparency also entails citizens’ engagement. Not only is this necessary for improved sectoral performance and services, but also for ensuring a people-centered recovery. This is addressed in Lebanon’s Reform, Recovery and Reconstruction Framework of December 2020 which recommends implementing oversight mechanisms for assistance funds in order to promote transparency and accountability, and ensuring an effective enabling environment inclusive of non-governmental organizations at all the stages from consultation to monitoring[2].

The National Anti-Corruption strategy supports the sectoral reforms efforts through the provision of a practical roadmap and measurable indicators in its 7th outcome (preventive measures against corruption integrated at the sectoral level) in order to achieve a gradual integration of the institutionalized corruption prevention platform across sectors. The prevention plan can therefore be optimized and segregated into both the electricity and health sectors. This would allow the concentration of resources into focused areas, building capacities and developing mitigation plans relevant to the specific type of corruption and threat per sector[3].

There are no reforms without solid institutions and one cannot improve what is ignored. The starting point is to tackle the institutional structural woes and adopt a methodology for managing corruption risks. An assessment of these risks should be undertaken across the different processes of the autonomous institutions in order to determine and estimate the level of risks and analyze the enablers. The result would be an identification of the high-risks decision-points, thus enabling an optimal mitigation.

Jessica Obeid is an independent energy policy consultant

Disclaimer: The analysis, views and policy recommendations of this article do not necessarily reflect the views of the United Nations, including UNDP, or its Member States. The article is an independent piece commissioned by UNDP as a build up to the “Prevention of Corruption in Autonomous Public Institutions” webinar organized in partnership with Executive Magazine.

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Jessica Obeid

Energy consultant, former resident fellow at Chatham House-London, and former chief energy engineer at UNDP-Beirut

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