Good governance can deliver
significant improvements in living standards for people in
developing countries, and although a number of countries have
improved rapidly in recent times, too often there has been
inaction, and leaders face the challenge of setting clear targets
of good governance standards and tracking their progress.
Government reformers, citizens,
domestic enterprises and foreign investors see governance as the
key ingredient for sustainable development and a sound investment
climate, and around the world demand data and analysis to monitor
the quality of governance over time. Aid donors, too, know that aid
flows are most effective in countries with good institutional
quality.
The World Bank is helping these
countries, and their development allies in civil society and the
donor community, by providing a set of governance indicators that
can help depoliticize efforts to track the quality of institutions,
support capacity building, improve governance and address
corruption.
In a new research report issued
today, Daniel Kaufmann, Director of Global Governance at the World
Bank Institute, and Aart Kraay, Lead Economist in the Bank's
Research Group, unveil an expanded and updated set of worldwide
governance indicators, which cover 209 countries between 1996-2004.
Beginning in the late nineties they began to develop and analyze
measures for six components of good governance:
Voice and Accountability – measuring
political, civil and human rights
Political Instability and Violence – measuring the likelihood of
violent threats to, or changes in, government, including
terrorism
Government Effectiveness – measuring
the competence of the bureaucracy and the quality of public service
delivery
Regulatory Burden – measuring the
incidence of market-unfriendly policies
Rule of Law – measuring the quality
of contract enforcement, the police, and the courts, including
judiciary independence, and the incidence of crime
Control of Corruption – measuring
the abuse of public power for private gain, including petty and
grand corruption (and state capture by elites)
Using a state-of-the-art
methodology, these indicators are constructed on the basis of
hundreds of variables measuring a wide range of governance issues,
drawn from over thirty separate data sources from different
institutions worldwide. A key finding is that a realistic (one
standard deviation) improvement in, for example, the quality of
rule of law (or in other dimensions of governance, such as Voice or
Accountability, or in Control of Corruption) in a country can be
expected to result, on average, in about a 300 percent increase in
per capita incomes in the longer term.
· Improved governance leads to
higher standards of living and poverty alleviation. The research
finds that improved standards of living are in fact the result of
improved governance – and not the other way around. Improving
governance in poor countries, such as in Sub-Saharan Africa, for
example, would yield significant results. Yet good governance is
not a luxury that only wealthy countries can afford. Examples
include the cases of Botswana, Chile, Slovenia and the Baltics, for
instance – emerging economies that have already attained high
quality governance.
· Such improvements in governance
are realistic. For example, for improvements in the rule of law, a
one standard deviation difference would constitute the realistic
improvement from the low levels of a country such as Somalia to
that of Laos, or from the level of Laos to Lebanon, or from that of
Lebanon to Italy, or from Italy to Canada. For Voice and
Accountability it would constitute the improvement in the levels of
a country like Myanmar to that of Kazakhstan, or from the level of
Kazakhstan to that of Georgia, or from the level of Georgia to that
of Botswana, while for Control of Corruption it is the improvement
from the levels of Equatorial Guinea to those of Cuba, Honduras or
Uganda, or from those of Uganda to those of Lithuania or Mauritius,
or from those of Mauritius to those of Portugal, or from those of
Portugal to the stellar standards of Finland, Iceland or New
Zealand.
· Measuring governance changes over
time: significant improvements are feasible. The study presents a
new methodology to assess changes in governance over time, finding
that over a short 6-to-8 year period significant improvements (and
deteriorations) have taken place in a number of countries. This
suggests there is little truth to the common perception that
improvements in governance only occur over the long-term while
deterioration can occur very quickly. For instance, since 1996
there has been significant improvement in Voice and Accountability
in a number of countries, such as in Bosnia, Croatia, Serbia,
Ghana, Indonesia, Sierra Leone, Slovak Republic and Peru, yet
deterioration has also taken place in a similar number of
countries. With these aggregate indicators it is also possible to
ascertain that some countries have experienced significant changes
in briefer time spans, such as the case of the major improvement in
the ‘Voice' variable for Senegal, Turkey, Chile, Mexico and Nigeria
during the 1998-2004 period, or the improvements over the same
period in Government Effectiveness in South Africa, Latvia,
Madagascar, South Korea, Estonia and Bulgaria.
· Yet the worldwide reality is
sobering: limited progress on average. In spite of improvements in
some countries, there have been at least as many countries where
deterioration has taken place in many dimensions of governance, and
many more where no significant change is apparent yet. Thus, on
average the quality of governance around the world has remained
stagnant, highlighting the urgent need for more determined progress
in this area in order to accelerate poverty reduction.
· Demand for rigorously monitoring
progress: the power of data. The United States has recognized this
by drawing heavily upon this research and set of governance
indicators for the Millennium Challenge Account. The Millennium
Challenge Account (MCA), which allocates some new US aid to poor
countries based on their performance in three policy areas:
governing justly, investing in people, and promoting economic
freedom, uses these indicators to rank countries' corruption
levels. Madagascar recently received the first MCA grant after
competing for funds with similarly ranked countries. Other
governments as well as civil society groups are increasingly
utilizing these indicators for monitoring performance, analysis and
policy input, while reform-minded policy-makers are using the
indicators to promote change within their countries.
While the latest study containing
the updated governance indicators represents a significant step
forward in helping countries measure and monitor their performance
on aspects of governance with a higher degree of precision than
before, Kaufmann and Kraay stress that the remaining margins of
error still require caution in interpretation for this and any
other type of governance indicator, and caution against precise
rankings.
"In spite of a number of shining
examples, the fact is that, on average, neither the rich nor the
poor worlds have improved in their standards on governance over the
past eight years. This sobering reality ought to motivate
collective action in the next stage," says Kaufmann.
He stresses that in looking ahead,
we ought to frankly distill the lessons of success and failures,
abandon interventions that do not work, such as single-minded
anti-corruption campaigns, and focus on voice and transparency
reforms instead.
The user-friendly governance
indicators interactive web page allows the user to compare a single
country's performance across all six governance indicators, or to
compare several countries against one of the six measures, and to
instantly produce any chart, table or governance map of their
choosing.
(China.org.cn May 10, 2005)