W’Bank: Seeking Improved Governance, Growth

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Abimbola Akosile examines a newly-released World Bank policy report, which urges developing countries and international development agencies to rethink their approach to governance, as a key to overcoming challenges related to security, growth, and equity

The 2017 World Development Report: Governance and the Law explores how unequal distribution of power in a society interferes with policies’ effectiveness.

The report, which was released in Washington, USA on January 30, notes that when policies and technical solutions fail to achieve intended outcomes, institutions often take the blame. However, it finds that countries and donors need to think more broadly to improve governance so that policies succeed.

It defines better governance as the process through which state and non-state groups interact to design and implement policies, working within a set of formal and informal rules that are shaped by power.

Resource Management
According to the World Bank Group President Jim Yong Kim “As demand for effective service delivery, good infrastructure, and fair institutions continues to rise, it is vital that governments use scarce resources as efficiently and transparently as possible”.
“This means harnessing private sector expertise, working closely with civil society, and redoubling our efforts in the fight against corruption. Without better governance, our goals of ending extreme poverty and boosting shared prosperity will be out of reach,” he added.

Effective Policies
The 307-page report looks at country examples, including state building in Somalia, anti-corruption efforts in Nigeria, growth challenges in China, and slums and exclusion in India’s cities. It identifies three winning ingredients of effective policies: commitment, coordination, and cooperation.

As three core functions to produce better governance outcomes, institutions need to bolster commitment to policies in the face of changing circumstances. This would help, for example, in cases where decision makers spend windfall revenues instead of saving them for the future, or when leaders renege on peacebuilding agreements in the absence of binding enforcement.

The report also noted that institutions need to enhance coordination to change expectations and elicit social desirable actions by all. Challenges occur in many contexts, from finance to industrial clusters and urban planning. Financial stability, for example, relies on beliefs about credibility, it added.

Institutions were also urged to encourage cooperation, the report noted. Effective policies help promote cooperation by limiting opportunistic behaviour such as tax evasion- often through credible mechanisms of rewards or penalties. Individuals may have incentives to behave opportunistically, it added.

Promoting Change
According to the report, unequal distribution of power can exclude groups and people from the rewards and gains of policy engagement. Yet meaningful change is possible with the engagement and interaction of citizens, through coalitions to change the incentives of those who make decisions; elites, through agreements among decision makers to restrict their own power; and the international community, through indirect influence to change the relative power of domestic reformers.

Based on extensive research and consultations in many countries over the past two years, the report proposes principles to guide reform and change the dynamics of governance for equitable development.
The report finds that good policies are often difficult to introduce and implement because certain groups in society who gain from the status quo may be powerful enough to resist the reforms that are needed to break the political equilibrium.

Achieving Goals

The World Bank report noted that many aspects of governance have intrinsic value, in particular the notion of freedom. In economic terms, freedom can be seen as an opportunity set, and development can be seen as “the removal of various types of unfreedoms” (exclusion from opportunities), where these unfreedoms reduce people’s capacity to exercise “their reasoned agency”.

As essential as such an intrinsic value as freedom is, its instrumental value also matters because of the “effectiveness of freedoms of particular kinds to promote freedoms of other kinds”, it added.

The Report acknowledges the intrinsic value of various dimensions of governance, as well as the notion of development as a positive freedom, while also recognising their instrumental value to achieving equitable development.

As noted, the analysis in the Report starts from the normative standpoint that every society cares about freeing its members from the constant threat of violence (security), promoting prosperity (growth), and ensuring that such prosperity is shared (equity). It also assumes that societies aspire to achieving these goals in environmentally sustainable ways.

According to it, the establishment of the Millennium Development Goals (MDGs) in 2000 and the recent ratification of the Sustainable Development Goals (SDGs) by member countries of the United Nations are examples of the efforts to set common goals for social and economic advancement. SDG 16 calls for promoting “peace, justice, and strong institutions,” and it is explicitly related to governance.

Nevertheless, beyond its intrinsic value, the SDG 16 goal also has important instrumental value because its attainment will aid in the attainment of all the other SDGs, according to the World Bank. Indeed, achievement of all the development goals will require a solid understanding of governance to enable more effective policies, the report noted.

Nigeria Scenario
In Box 7.3 which focused on pockets of effectiveness in Nigeria, the World Bank report noted that the emergence of “pockets of effectiveness” depends on political support from powerful elite actors. Taking steps to ensure the professionalisation and autonomy of an individual government agency often precedes wholesale reform of the bureaucracy because political elites may seek effective management of a particular sector, it added.

According to it, high-level political interest in and commitment to an agency’s success and political insulation from other elites whose interests the autonomous agency may harm are essential for effectiveness.

“Agency autonomy is most likely to be supported when the agency provides benefits that are immediate, identifiable, and beneficial to an important group of elite actors who “have a conception of the state as a public good, rather than simply as a target of predation or a tool for gaining advantage over others”, the report also noted.

But, according to the Bank report, autonomy and political support are not enough; bureaucratic pockets of effectiveness require adequate resources as well as managerial factors that support rational decision making, including meritocratic recruitment, internal discipline, and performance-based management.

It considered the National Agency for Food and Drug Administration and Control (NAFDAC) in Nigeria as an illustration of one such pocket of effectiveness. The agency was created in 1993.

“In 2001 President Olusegun Obasanjo had a personal interest in combating counterfeit and dangerous drugs as a way to improve Nigeria’s international image. He wanted in part to seek debt relief, but also to boost his personal reputation and international prestige. He selected Dora Akunyili to head NAFDAC because of her reputation for incorruptibility.
“NAFDAC was then granted autonomy from the Ministry of Health to recruit staff members and was given an independent budget. It was also allowed to operate free of political control.

“Under Akunyili’s leadership and Obasanjo’s direct support and clearance, NAFDAC returned to Nigerian ports, from which it had been banned in 1996, and NAFDAC clearance of imported goods again became compulsory, which broke the clearance monopoly of the Customs Service and plugged a major leak for imported counterfeit products”, the report noted.

According to the World Bank, “Challenging the interests of these powerful elite interests (the Customs Service) would not have been possible without agency autonomy and direct support of the president. In 2007 NAFDAC ranked first in a national poll of agency effectiveness (at 70 per cent, it was 12 percentage points higher than the nearest agency).”