Abstract
The Role of the Fund in Governance Issues - Review of the Guidance Note - Preliminary Considerations - Background Notes
Note I. Distinguishing Governance, Good Governance, and Corruption1
This Note provides a framework for understanding the concepts of governance, good governance and corruption. It begins with a general overview of terms and then explores the role of the Fund in addressing governance, good governance, and corruption issues relevant to its mandate. An annex describes the evolution of these terms, focusing on the experiences of the World Bank, United Nations Development Programme, and the Organization for Economic Co-Operation and Development.
A. Overview of Terms
1. In discussing the Fund’s engagement on governance issues, it is important to clarify the definitions of key terms. In particular, “governance,” “good governance,” and “anti-corruption” are often discussed interchangeably or as if they have universally agreed-upon definitions, which is not the case. A report by the Organization for Economic Co-Operation and Development (OECD) found that international organizations used 17 different definitions for the term “governance,” often using it interchangeably with the term “good governance.”2 Thus, a review of the literature is warranted.
B. Governance
2. Beginning with the broadest term, “governance” is generally understood to concern the various institutions, mechanisms, and established practices through which a country exercises governmental authority, discharges its responsibilities, and manages its public resources. This includes processes at the country level, including institution-level arrangements. Governance is an inherently neutral term, describing a framework—including the institutions, mechanisms, and practices through which a country exercises governmental authority and manages its public resources—but not its outcome. While there is a general consensus on the basic concept, different authors and institutions tend to have specific focuses within this universe—indeed, the same institution may define “governance” differently over time and for different purposes.3 Also, the term often is not confronted head-on even in key reports. 4
3. International organizations have advanced various definitions that are generally oriented toward their mandates. The World Bank in a watershed 1992 report introduced the concept of governance which it defined as “the manner in which power is exercised in the management of a country’s economic and social resources for development.”5 This is the 25th anniversary of that report, in which the Bank significantly enlarged its engagement in public sector management and gave intellectual leadership to the development community in this area. The broader acceptance of the term, in all its nuances, and the importance of some of its key features, such as institutions, must be acknowledged.6 Other institutions, while accepting the concept, gave their own contributions to the term. The United Nations Development Programme (UNDP) in 1995 defined governance as “the exercise of political power to manage a nation’s affairs.”7 Subsequent UNDP documents have elaborated the concept and, since 2002, UNDP has been using the term “democratic governance” to refer to a system of governance that allows people’s rights and freedoms to be respected and for them to have a say in the decisions that affect their lives.8 The African Development Bank follows a similarly broad approach.9 The OECD uses the following definition: “the use of political authority and the exercise of control in a society in relation to the management of its resources for social and economic development.”10 The Asian Development Bank (1995) has explicitly chosen a definition reflecting its interests in development, and its reasoning is worth noting:
Among the many definitions of “governance” that exist, the one that appears the most appropriate from the viewpoint of the Bank is “the manner in which power is exercised in the management of a country’s economic and social resources for development.” On this meaning, the concept of governance is concerned directly with the management of the development process, involving both the public and the private sectors. It encompasses the functioning and capability of the public sector, as well as the rules and institutions that create the framework for the conduct of both public and private business, including accountability for economic and financial performance, and regulatory frameworks relating to companies, corporations, and partnerships. In broad terms, then, governance is about the institutional environment in which citizens interact among themselves and with government agencies/officials.11
C. Good Governance
4. Whereas “governance” refers principally to the process of governing, “good governance” is a more qualitative concept. This latter term is not neutral but instead recognizes that the quality of governance can impact its effectiveness. “Good governance” has been promoted by many major development organizations; former UN Secretary General Kofi Annan once said that “good governance is perhaps the single most important factor in eradicating poverty and promoting development.”12 Despite this emphasis, there is no single agreed definition of the term, with the definition evolving over time and each institution incorporating elements central to its own mandate (see the section below on “The Fund’s Focus”).13 The existing definitions bridge different domains, including economic (typically covering the management of public accounts, of public resources and the stability of the regulatory environment); social (typically covering strong institutions and an inclusive society); and political (typically covering the legitimacy of government through systems of public accountability, respect for human rights and the rule of law).14 In recent years there is some pushback against using the term because of the implication that only a single model of governance is good.15
5. The range of definitions can be broadly divided into those that are policy-neutral and those for which politics is integrated into the definition.16 Also, definitions have progressively shifted from a normative to a more organizational approach, which emphasizes improving the functioning of institutions towards outcomes. The World Bank’s original definition, which dates back to the 1980s, is clearly policy neutral. The definition identifies three core elements, which can be broadly categorized as political, economic, and developmental: (a) the form of the political regime (the process by which governments are selected, monitored, and replaced); (b) the economic aspect (the management of a country’s economic and social resources); and (c) the developmental aspect (the capacity of the government to effectively formulate and implement sound policies).17 Because the World Bank’s mandate prohibits involvement in politics, the Bank’s work on good governance, notably in the earlier period, typically was restricted to the latter two aspects on the assumption that the political element can be kept distinct. This approach has been followed by other organizations, including the Asian Development Bank, whose definition explicitly remains policy-neutral and has focused solely on effectiveness in implementing chosen policies. In more recent years, however, the World Bank has moved away from using the term “good governance.” This reflects a shift from a normative to a functional-organizational approach, which focuses more on the nature and details of governance arrangements and targets assistance to improve organizational arrangements, functions, and outcomes. Consequently, the term hardly appears anymore in the World Development Report 2017, which instead is focused on governance, which integrates the political context into analytical and operational engagements.
6. Other organizations from the outset followed the view that the functioning of political systems cannot be cleanly separated from the other aspects of “good governance.”18 For example, UNDP’s definition developed to include two core features: (1) a distinction between economic, political, and administrative governance; and (2) inclusion of the concept of “empowerment,” which refers to empowerment of poor and disenfranchised persons and communities through self-organization.19 Instead of distinguishing the political from the technical-administrative aspects of governance, UNDP focuses on the object of governance (the economy, the decision-making process, and the bureaucracy), each of which bundles political and technical-administrative aspects.20 Similarly, the OECD finds that the technical-administrative and political aspects of good governance are closely linked. The OECD has developed a definition of what it refers to as “participatory development/good governance.”21 This concept has different building blocks, such as participatory development, democracy, good governance and human rights. In this approach, each building block contains elements of politics.22
D. Corruption
7. As acknowledged in the 2016 IMF staff discussion note, a comprehensive definition of “corruption” is difficult to formulate given the variation in corrupt behavior and its concealed nature.23 While there are several definitions in use, the one used by the 1997 Board Guidance Note and the 2016 staff discussion note is “the abuse of public office for private gain.”24 This definition, which is used again for purposes of this paper, has been adopted by a variety of organizations, including the World Bank and Transparency International, and is consistent with the provisions of the United Nations Convention Against Corruption.25,26 This definition focuses on abuse by public actors, meaning that, for purposes of this stocktaking review, fraudulent acts perpetrated exclusively by private citizens are not covered. It should also be noted that this definition is broadly interpreted to include non-financial gains. For example, an official contributes to corruption if, as a result of political interference, he or she abuses public office by making a determination for reasons other than those identified as relevant by the legal or administrative framework he or she is responsible for administering. Thus, awarding a procurement contract to a company because the company is owned by a family member would give rise to abuse of public office.
8. The presence of corruption generally indicates shortcomings in “good governance.”27 Corruption carries an inherently negative connotation and is generally inconsistent with good governance, particularly when it is pervasive. This would be the case, for example, where it becomes normal that bribes—rather than laws and regulations—determine tax assessments, the awarding of construction contracts, or the outcome of court cases.28 Good governance is even more deficient in situations where the laws and regulations themselves are steered by corruption because legislators and officials are beholden to private interests rather than to the public interest (“state or regulatory capture”).29 Nevertheless, “governance” covers a broader range of issues than just “corruption.” It is possible therefore, for a country to have weak governance (such as may arise from weak institutions or poor political arrangements) but not face major corruption issues. That said, efforts to improve good governance would generally tend to limit opportunities for corruption, even if those efforts are primarily focused on other goals, such as improving effectiveness, efficiency and equity.
E. The Fund’s Focus
9. Given the wide reaches attributed to “governance,” “good governance,” and “corruption,” the scope of the Fund’s interest within these spheres should be clarified. Fundamentally, the Fund’s involvement is limited by its mandate as set forth in Article I of the Articles of Agreement, which is centered on promoting the stability of the international monetary system.30
10. Guided by this principle, the 1997 staff guidance states, “the Fund’s involvement in governance [is] limited to economic aspects of governance,” that is the use of economic institutions to guide economic behavior to meet a country’s social and economic objectives.31 Thus, the staff guidance note sees the Fund as contributing to governance through policy advice and technical assistance in two broad spheres: (a) the management of public resources by public sector institutions (e.g., treasury, central bank, public enterprises) including through administrative procedures (e.g., expenditure control, budget management), and (b) the development and maintenance of a stable economic and regulatory environment conducive to efficient private sector activities (e.g., price systems, exchange and trade regimes, banking systems and their regulation). It should be noted, however, that the discussion within and between other International Financial Institutions over the years (see Annex) has revolved in part around the issue of whether the economic aspects of governance can be fully separated from the institutional-political aspects, and this challenge will continue to confront the Fund and other IFIs in their work.32
11. The Fund’s mandate similarly restricts the definition of “good governance” for Fund purposes to economic aspects. The 1997 staff guidance note uses the term in the sense of how well institutions meet broad goals for managing public resources and promoting efficient private sector activities. These economic aspects of good governance include administrative efficiency and policy effectiveness. They can also, however, include fairness and equity, since serious shortcomings in the evenhandedness of the implementation of a governance regime—as distinct from the social or political preferences that it embodies—can have a corrosive impact on trust and compliance with institutions, laws, and policies to the detriment of economic goals over the medium to long term.
12. The Fund’s engagement on issues of corruption depends on the implications for macroeconomic performance. The 1997 staff guidance note—while subsuming “corruption” under the term “governance”—outlines when IMF involvement is appropriate, noting that staff “should be guided by an assessment of whether poor governance would have a significant current or potential impact on macroeconomic performance in the short and medium term and on the ability of the government credibly to pursue policies aimed at external viability and sustainable growth.”33 Corruption, being one symptom of “poor governance” would be subject to this assessment. In assessing the impact on macroeconomic performance, short- and medium-term considerations might include foregone tax revenues or misspent public expenditures. In considering the impact of corruption on the “ability of the government credibly to pursue policies,” consideration could be given to the impact of the experience and perceptions of corruption on the business climate and on trust and compliance with the institutions and policies that are needed for effective economic governance.
Annex I of Note I. Evolution of the Concept of Good Governance
1. This annex explores the origins of the terms “governance” and “good governance” as well as how—and why—the terms have evolved. Among international organizations, it can be said that the story begins with the World Bank’s exploration of these concepts in the late 1980s, moves through a significant shift in the 1990s with similar but competing definitions from the World Bank (eschewing political systems) on one hand and UNDP and the OECD (infusing political systems into the definition) on the other, which have come together again over the past decade. The distinction between the concepts of “governance” and “good governance” is not always clearly demarcated and can be fluid: The former is often explored through the lens of the latter, given international organizations’ focus on promoting optimal practices.
The World Bank’s Experience
Definition1/
The World Bank’s original definition of “good governance” covered the following three elements: (i) the form of political regime; (ii) the process by which authority is exercised in the management of a country’s economic and social resources for development; (iii) the capacity of governments to design, formulate and implement policies and discharge functions.
The World Bank has, over time, stepped back from using the term “good governance”, reverting to the term “governance” instead. This points to a shift from a normative to a more functional-organizational approach which focuses on organizational arrangements, functions, and outcomes, both between state actors and between state and non-state actors.
1/ There is considerable fluidity in the World Bank’s definitions, which reflects an ongoing internal discourse within the Bank. This definition consolidates views over time in the following sources: World Bank, 1991; World Bank, 1992; World Bank, 1994; World Bank, 2000.2. The concept of “good governance” finds its origin with the World Bank, which first used the term in the late 1980s and shaped the related discourse for over two decades.1 The contours of the concept remain unsettled—more generally and within the Bank, which never articulated a single unambiguous and operational definition of the concept—both because of changes in insights and broader developments.
3. Important work in the late 1980s and early 1990s by the World Bank laid the groundwork for much of the development in this field. Good governance was first explored by the World Bank in a 1989 report titled, Sub-Saharan Africa: From Crisis to Sustainable Growth (the “1989 Africa Report”), which explored why economic performance in some countries was noticeably lagging. It listed a number of often-cited factors, such as international market factors and weak national policy making, but also identified “poor public administration” and a “crisis of governance” as key underlying causes.2 The report referred to governance as “the exercise of political power to manage a nation’s affairs.” The 1989 Africa Report opened the door for an important adjustment in the thinking and policies of the World Bank, and shortly thereafter the Bank established an interdepartmental task force on governance. In June 1991, the task force published a widely cited discussion paper, Managing Development: The Governance Dimension. This, in turn, became the basis of the seminal work in the field, Governance and Development (the “1992 G&D Report”), which remains the conceptual launch pad for much of the thinking since.3 The revolutionary aspect of the 1989 Africa Report and the 1992 G&D Report is that they triggered a broader reassessment of the role of the state in development.
4. This early World Bank work helped pivot the conversation from “less government” to “better governance.” Institutional thinking in the 1970s and 80s had been shaped by neo-liberal development theory, which tended to view the state, while important, as a hindrance to development. World Bank development policies during this period, therefore, called for a shrinking of the state to curb public spending and maximize the space for the market to take over. The 1989 Africa Report and 1992 G&D Report reassessed the role of the state and argued that economic development required the state to adopt a major role in creating a favorable environment: “[G]ood governance is central to creating and sustaining an environment which fosters strong and equitable development, and it is an essential complement to sound economic policies.” 4 Thus, the Bank’s work on development started to focus attention on how developing countries are governed and to actively support “good governance.”5
5. This shift made it necessary that the Bank define “governance” in order to articulate the nature of its own engagement. The definition which percolated identifies three core elements, which can be broadly categorized as political, economic, and developmental: (a) the form of the political regime (the process by which governments are selected, monitored, and replaced); (b) the economic aspect (the management of a country’s economic and social resources); and (c) the developmental aspect (the capacity of the government to effectively formulate and implement sound policies).6
6. The World Bank’s definition was shaped by its mandate, which prohibits the institution from engaging in politics.7 The definition therefore aims to distinguish the political from the other technical components in “good governance” and allow the World Bank to focus its activities on the latter.8 In this regard, even the early reports, such as the 1992 G&D Report, restrict “good governance” to the “efficient” management of a country’s economic and social resources and institutional capacity.9
7. Even as the distinction between the political and technical features remained the core feature of the definition in World Bank documents, in fact the two could not always be kept clearly distinct. While the distinction may seem clear on paper—and indeed was the only basis on which the World Bank could engage on the topic of good governance at all—a recurring theme in the debates both within the institution and beyond, was whether these two aspects of good governance can be separated. Even within the Bank there were competing definitions of “good governance” in which these political elements were more manifest.10 The World Bank became increasingly open about that political dimension as awareness increased that the purely economic and “efficiency” focus of governance depended on the quality of governance, including concepts which encroached on the political domain, such as accountability, inclusiveness, legal certainty, public sector management, transparency, and combating corruption. That shift can be illustrated with the concept of “accountability,” which initially was viewed as an internal governmental bookkeeping matter. By the late 1990s, thinking had changed, and the concept included accountability towards market players and stakeholders, which was a more political concept. On that basis, the World Bank launched new policy frameworks for governance reform, such as civil service reform and public sector management. This then also pulled the World Bank into developing an anti-corruption agenda which became an important and key component in its development work generally.
8. By the late 1990s, the World Bank reports reflect a shift in its approach. The 1997 World Development Report reflects this change.11 The WDR 1997 (and following reports) flagged that it had been assumed that improvements in governance would benefit all (a “lifting of all boats” avant la lettre), when actually that was not necessarily so.12 Even in settings of aggregate growth, structural poverty persisted. The WDR 1997 in this regard made two important points: it linked good governance with poverty reduction and lifted out the qualitative aspects of governance as being critical. Notably, it argued that structural poverty persisted because of the inability of the poor to articulate and convey their challenges and needs; and it identified the trust deficit mentioning specifically corruption, nepotism, and mismanagement.13 The World Bank’s more recent work on governance has emphasized building institutions. As stated above, it stepped back from the concept of “good governance” and focused on “governance” instead, in which the political context is integrated into its analytical and operational engagement.14
9. As noted in the World Bank’s 2017 background paper, criticism of the World Bank’s approach generally rests on three grounds. First, there is a limited understanding of how to build effective institutions. This means that institutions that are effective in a given country are sometimes seen as a one-size-fits-all solution that is recommended, unmodified, for other country contexts. Second, it remains unclear why some countries with high growth also rate very poorly on governance. Third, the World Bank does not address political aspects of governance directly, focusing instead on technical issues. This final criticism is one that can be equally leveled at the Fund and that other IFIs have tried to address in their approaches to governance.15
UNDP’s Experience
Definition1/
UNDP’s understanding and use of the term governance has evolved from its initial 1997 definition of governance, which focused on the exercise of economic, political and administrative authority to manage a country’s affairs at all levels. (i) Economic governance included the decision-making processes that affect a country’s economic activities and its relationships with other economies. (ii) Political governance was the process of decision-making to formulate policy. (iii) Administrative governance was the system of policy implementation. Encompassing all three, good governance defined the processes and structures that guide political and socio-economic relationships.
In 2002, UNDP nuanced and expanded on this definition by emphasizing, inter alia, that people’s human rights and fundamental freedoms should be respected, they should have a say in decisions that affect their lives, and they should be able to hold decision-makers accountable. This it termed “democratic governance.”2/ Building on that definition, UNDP today qualifies “democratic governance” as being more than a set of values, norms, and principles. It also represents an incremental process of shaping and nurturing a resilient and inclusive social contract between the state and its citizens, in which, in addition to the above, citizens have equal opportunities, are protected from arbitrary action, and have economic opportunities and freedoms.
1/UNDP, 1997a.2/UNDP, 2002.10. UNDP began exploring “good governance” at almost the same time as the World Bank.16 It came to the topic for the same reasons as the World Bank, but for some time had already been involved in supporting government capacity in developing countries with the so-called Management Development Programs. UNDP, as a result, had a close understanding of the relevance of governance broadly for development. However, UNDP embraced the political (power-related) and democratic aspects to a much greater degree than the World Bank. First, differences in mandate allowed UNDP to come to the issue of development from a different perspective, mindful of the role of democratic political processes.17 Second, UNDP’s areas of concern notably cover social indicators, involving such topics as health and education as well as access to decision-making processes on the distribution of public goods.18
11. This orientation of UNDP was echoed in its initial definition of “governance,” which notably encompassed human development. In the mid-1990s, UNDP adopted key elements of the conceptual framework developed by the World Bank, notably by following the distinction between the political regime on the one hand, and governance instruments and capacity on the other hand. However, whereas the World Bank purposely aimed to exclude the political component from its involvement, UNDP embraced it to emphasize the aspect of “human development,” which was central to its mandate and approach.19 UNDP declared upfront: “Governance and human development are indivisible.” 20
12. In 1997, UNDP underwent a significant shift, however, launching a radical alternative to the conceptual framework developed by the World Bank that explicitly embraced the role of political systems. The shift was driven in large part by the view that “good governance” should address structural imbalances in society that result from the human development component (poverty, discrimination, illiteracy, insecurity, corruption, exclusion etc.).21 In “Reconceptualising Governance” and later reports,22 UNDP set forth an approach with two core features: (1) a distinction between economic, political, and administrative governance; and (2) inclusion of the concept of “empowerment,” which refers to empowerment of poor and disenfranchised persons and communities through self-organization. The first feature represents a subtle but important difference from the World Bank definition. The World Bank aimed to distinguish the political from the technical-administrative aspects of governance; UNDP focused on the object of governance (the economy, the decision-making process, and the bureaucracy), each of which bundled political and technical-administrative aspects. The UNDP approach thus integrates an understanding of the importance of political systems into the definition at all levels. The second feature also represented a break from the World Bank, which had been neutral on empowerment, as the issue approaches or even crosses the line into politics.23
13. UNDP’s understanding of governance continues to evolve, in line with other shifts in international discourse, which increasingly recognize the relationship between forms of governance and peace. This is reflected in the adoption of Sustainable Development Goal (SDG) 16: “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.” It is also reflected in UNDP’s approach to governance and conflict prevention: “As a set of values and principles that prioritize respect for human rights and fundamental freedoms, and promote the rule of law, accountability and transparency, democratic governance is a critical instrument for promoting social cohesion, preventing conflict and ensuring inclusive, safe and peaceful societies. Vice versa, investments in conflict prevention, dialogue and mediation and in the consolidation of sustainable peace should no longer be restricted to conflict and crisis situations, but need to be institutionalized as part of the governance and development work of the organisation.”24
The OECD’s Experience
Definition
The OECD definition of governance has evolved through the years. In the 1990s, it defined governance as “the use of political authority and the exercise of control in a society in relation to the management of its resources for social and economic development.”1/ It distinguished the following different aspects of governance: “the form of the political regime; the processes by which authority is exercised; and the capacity of the government to formulate and implement policies.” The OECD also identified the following building blocks of “participatory development/good governance”: participatory development, democracy, good governance and human rights. These building blocks became the basis for a detailed set of engagements on public governance issues in the recent decade.
1/OECD, 1993.14. In 1989, the OECD also entered into the global discussion on “governance.” Its initial contribution was setting forth as an objective for the coming decade “participatory development,” which referred to the promotion of democratic and accountable political systems, respect for human rights and effective and accessible legal systems.25 The OECD shortly thereafter also embraced the term “good governance” and the associated World Bank definition.26
15. As its work evolved, the OECD developed a hybrid concept of “participatory development/good governance,” with the following building blocks: participatory development, democracy, good governance and human rights.27 This has resulted in a more limited technical-administrative meaning for “good governance,” but one in which each building block is infused with a political undercurrent.28 Compared to the World Bank’s separation of political aspects from technical-administrative aspects, the OECD tends to find a close link between them. The OECD often uses the term “good governance” in its reports without specifying whether it refers to the broader “participatory development/good governance” concept or to just the narrow building block of “good governance.” Consequently, even though the OECD has often indicated that it follows the World Bank definition of “good governance,” the OECD approach can be viewed as an alternative due to the emphasis it places on the political aspects, notably participatory development, democracy and human rights.
16. Over the past decade, the OECD further developed the key building blocks of sound public governance. These include effective cross-government coordination to design, implement, and monitor the performance of effective national strategy, including strategies to fight corruption; the effective use of evidence, including performance evidence, in decision making; effective coordination between levels of government to design, implement and monitor the performance of strategy, including to fight corruption; and effective engagement with citizens and civil society stakeholders at all points in the policy cycle. The building blocks also focus on how to implement reforms to enhance sound public governance through effective change management and peer-to-peer exchange of practice and evidence on what works in improving public governance.
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Prepared by Julianne Ams and Sebastiaan Pompe (both LEG).
OECD, 2009. The report also found that international institutions used “governance” and “good governance” interchangeably, generally without clearly distinguishing between one and the other, and attributing qualitative criteria (proper to “good governance”) to the “governance” concept. Academic research generated another seven definitions which were different from those of the OECD (Weiss, 2010).
The United Nations Economic and Social Council conducted an extensive review of the literature defining governance in 2006 (UNESC, 2006). For further examples of approaches to defining governance in different organizations see Center for Global Development, 2013; International Fund for Agricultural Development (IFAD), 2016; United Nations Economic and Social Commission for Asia and the Pacific, 2009; United States Institute of Peace (USIP), 2010; and World Bank, 2011.
For example, World Bank (2007), which outlines the World Bank’s strategy on governance, provides no explicit definition beyond a brief quote from former Bank president Paul Wolfowitz. Similarly, African Development Bank (2008) defines good governance in a short footnote. European Commission (2001) provides a similar treatment. See Gisselquist, 2012.
World Bank, 1992, p.1. The Bank’s World Development Report 2017 (World Bank, 2017a) stresses the fact that governance should not be simply viewed as a top-down, formal and instrumental process, but instead has strong interactive elements, with a mix of formality and informality and strong underlying power drivers (which may not solely be vested in formal structures). It states: “governance is the process through which state and nonstate actors interact to design and implement policies within a given set of formal and informal rules that shape and are shaped by power.” The Report consequently is unenthusiastic about top-down anti-corruption strategies, which fail to recognize that corruption is increasingly less transactional, and more based on networks of common interests and vested in social expectations (World Bank, 2017a, Spotlight 1).
The World Bank’s most recent exploration of governance was published this year and contains a wealth of information on its work in this sphere. World Bank, 2017a. See also World Bank, 2017b.
UNDP, 1995, p. xii & xiii. See also the Annex of this Note.
UNDP, 2002, notably page 51.
“Governance can be defined as a set of institutions, processes, policies, laws, and behaviours that affect the manner in which power is exercised in the management of a country’s economic, financial and social resources across the public, private and non-state sectors.” African Development Bank, 2014, section 1.1.
OECD, 1993, para. 31.
Asian Development Bank ,1995, p. 3.
UN, 1998.
UNHROHC, undated (stressing that there is “no single and exhaustive definition of ‘good governance’”). See, for example, African Development Bank, 2014 (emphasizing development and inclusion); Asian Development Bank, 1995 (explicitly remaining policy neutral and focusing solely on effectiveness in implementing chosen policies); IFAD, 2016 (emphasizing democracy); USIP, 2010 (emphasizing transparency and inclusion of civil society groups); UNDESA, 2007 (emphasizing democracy).
See examples, supra, fn. 3; Kaufmann, 2005 (distinguishing between the economic, the political and the institutional dimensions; the institutional dimension is defined as “the respect of citizens and the state for institutions”).
The WDR 2017 still uses the term, but very sparsely.
For a fuller explanation of these two approaches, see the Annex to this Note.
See, inter alia, World Bank, 1994, p. xiv.
See, e.g., IFAD, 2016 (emphasizing democracy); USIP, 2010 (emphasizing transparency and inclusion of civil society groups); UNDESA, 2007 (emphasizing democracy).
More recently, UNDP made an explicit link between democratic governance and conflict prevention: “As a set of values and principles that prioritize respect for human rights and fundamental freedoms, and promote the rule of law, accountability and transparency, democratic governance is a critical instrument for promoting social cohesion, preventing conflict and ensuring inclusive, safe and peaceful societies. Vice versa, investments in conflict prevention, dialogue and mediation and in the consolidation of sustainable peace should no longer be restricted to conflict and crisis situations, but need to be institutionalized as part of the governance and development work of the organisation.” UNDP, 2016.
See, e.g., OECD, 2014, Section 3.2.
The OECD has been refining its key building blocks of sound public governance in recent years to considerable detail. See, Annex I, para. 16.
IMF SDN, 2016, Section II.
IMF SDN, 2016, pp. iii, 4; IMF, 1997a, fn 2.
For the World Bank approach, see World Bank, 2017a at Spotlight 1. In recent years, the World Bank’s definition of “corruption” has shifted to encompass also individuals and firms that have been put in a position of trust through an act of the state. This extends the scope of corruption to include firms that are state-owned as well as nongovernmental organizations tasked to carry out state functions such as service delivery. For the Transparency International approach, see Transparency International’s website.
Article 19 of the UNCAC on Abuse of Functions states: “Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the abuse of functions or position, that is, the performance of or failure to perform an act, in violation of laws, by a public official in the discharge of his or her functions, for the purpose of obtaining an undue advantage for himself or herself or for another person or entity.” UNODC, 2004.
During the IMF Board discussion of the 1997 Guidance Note, several Directors stressed that “corruption” is not interchangeable with “bad governance” but rather is a symptom of a lapse in good governance. IMF, 1997a at 6, 10, 12, 41. See also Copenhagen Consensus, 2004, p. 1 (“Corruption is one symptom” of a failure of governance, and “efforts to promote ‘good governance’ must be broader than anti-corruption campaigns.”).
See World Bank, 2006a (“Bad governance is associated with corruption, distortion of government budgets, inequitable growth, social exclusion, lack of trust in authorities. Inefficiency of formal governance institutions leads to creation of informal institutions that substitute for the functions that the formal ones are unable to perform.”); World Bank, 1992 (“weak institutions, lack of an adequate legal framework, weak financial accounting and auditing systems, damaging discretionary interventions, uncertain and variable policy frameworks, and closed decision-making … increase[] risks of corruption and waste.”).
IMF SDN, 2016, pp. 4, 9.
See IMF, 1997a, para. 5: “The Fund is primarily concerned with macroeconomic stability, external viability, and orderly economic growth in member countries. Therefore, the Fund’s involvement in governance should be limited to economic aspects of governance.” In discussing the role of the Fund in governance issues, Executive Directors have also stressed that Fund involvement must be limited to aspects within the Fund’s mandate. IMF, 1997b.
The 1997 Guidance Note acknowledges the difficulty of separating the political and the economic aspects entirely but stresses that Fund involvement should be limited to the economic aspects of governance (IMF, 1997a). The Guidance Note therefore adopts the dichotomous approach of the World Bank in which political and technical-economic aspects can be kept separate. However, while the Fund’s focus is on the economic consequences of poor governance and corruption, these consequences can arise from “non-economic” causes, whether state-capture settings and monetized governance, systemic weaknesses in accountability frameworks, data and reporting inadequacies, or institutional weaknesses with wide-ranging impacts (such as judicial weaknesses). Some of these issues are identified in a forthcoming Regional Economic Issues chapter on governance. This issue and the challenge of the strict dichotomy of the 1997 Guidance Note was flagged by prominent observers even at the time. Thus, James (1998) wondered whether the dichotomy could be maintained in reality, particularly in light of the Fund’s involvement in topics like military procurement, corruption, democracy and “informal networks,” while later reports suggest that the distinction has effectively been abandoned. Santiso, 2001.
IMF, 1997a, para. 9.
The World Bank recently published a background paper on the World Bank’s evolution on governance that provides an excellent history (World Bank, 2017b).
World Bank, 1989, pp. 30, 60 and 192.
World Bank, 1992, p.1. See also World Bank, 1997, overview (arguing that the state had been too narrowly seen as a “producer” or “creditor” in the development arena, and instead was rather a “partner, catalyst and facilitator,” and whose institutions were critical in putting in place the hard and soft infrastructure on which the market (and society) depend).
World Bank, 1992, pp.47–50.
See inter alia, World Bank, 1994, p. xiv.
World Bank Articles of Agreement, Article IV, Section 10 and also Article III, Section 5(b) and Article V, Section 5(c). Conjunctly with the 1989 Africa and 1992 G & D Reports, the World Bank Legal Department in 1990 issued a Legal Memorandum which aimed to corral the debate to the Bank institutional mandate, by cutting out the political dimension and restricting it to economic development issues. See World Bank, 2017b at II.B.
This also is the cornerstone of the IMF definition in the 1997 Governance Note (IMF, 1997a).
“[G]overnance is defined as the manner in which power is exercised in the management of a country’s economic and social resources for development. Good governance, for the World Bank, is synonymous with sound development management.” World Bank, 1992, p. 1. See also Theobald, 2002, at p. 62 (noting that “good governance” would not take into account human rights issues, which are outside the World Bank’s mandate).
Thus Kaufmann, et al. (World Bank, 2010, p. 3) give the concept a more political content: (a) the process by which governments are selected, monitored, and replaced; (b) the capacity of the government to effectively formulate and implement sound policies; and (c) the respect of citizens and the state for the institutions that govern economic and social interactions among them.
Id.
The development of the Poverty Reduction Strategy Process (PRSP), to be articulated in a bottom up process, came out of this process.
See World Bank (2017b) for an overview; World Bank, 2002; World Bank, 2003; World Bank, 2004; World Bank, 2006b, Ch. 6; World Bank, 2011. World Bank 2017b represents the views of the author and not the World Bank.
For criticisms of the Fund on this count, see, supra, fn. 32 of this Note.
From the Human Development Report 1992 onward, the term became well used in official UN documents. UNDP, 1992; examples of citations can be found, infra, fn. 22.
This was enhanced by differences in management structure between both organizations—with the World Bank having a system of weighted voting powers and UNDP having a system of one vote per member country—thus enabling different outcomes.
See UNDP’s mission statement.
In 1995, UNDP set up the Management Development and Governance Division, which was tasked inter alia to develop the “good governance” agenda and concept. The Division published a report in the same year which tried to set a new course away from the World Bank definition, notably by stressing the inseparable nature between “good governance” and “human development.” UNDP, 1995, p. xii.
See UNDP, 2002, p. 4 (“Granting all people political equality does not create an equal desire or capacity to participate in political processes – or an equal capacity to influence outcomes. Imbalances in resources and political power often subvert the principle of one person, one vote, and the purpose of democratic institutions. And judicial proceedings and regulatory institutions are undermined if elites dominate them at the expense of women, minorities and the powerless.”).
UNDP, 1997a. See also UNDP, 1997b; UNDP, 1997c; UNDP, 1999; UNDP, 2000; UNDP, 2002.
See Weiss, 2000, p. 804 (noting that the UNDP definition evinces support for empowerment, “that is, providing the tool for democracy and freedom that are integral to the political and civic dimensions of governance,” while the Bank “treats [these issues] as second order concerns.”).
OECD, 1989. This was set forth by the Development Assistance Committee (DAC) of the OECD, which refers to the Ministers for Development Aid and supporting administrative units that meet annually to prepare meetings and issue policy documents. The OECD therefore is both a forum for donor discussions and an independent actor in policy debates.
See, e.g., OECD, 2014, Section 3.2.
The OECD debate was hamstrung by the fact that it referred to its “pd/gg” policy generally as “good governance,” when “good governance” also was one of four components thereof. This explains the apparent contradiction in OECD reports, some of which say that the OECD definition of good governance is different from the World Bank, and sometimes that it is identical. See, e.g., OECD, 1995, p. 14.