Good governance theory and practice08

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Good GovernanceGood Governance：：Theory and PracticeTheory and Practice

Non-Degree Training Program for the Professional Non-Degree Training Program for the Professional Human Resource Development Project, Phase III Human Resource Development Project, Phase III

(PHRDP-III)(PHRDP-III)

Ministry of Finance, Republic of IndonesiaMinistry of Finance, Republic of Indonesia

onon

Good Governance: Japanese ExperienceGood Governance: Japanese Experience

GSID, Nagoya UniversityGSID, Nagoya University

11　　 September 2008September 2008

Prof. KIMURA, HirotsuneProf. KIMURA, Hirotsune

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Kofi Annan, former UN Secretary-General (1997-2006), has underscored that "good governance is perhaps the single most important factor in eradicating poverty and promoting development." [1] [1] UN. World Governance Assessment http://www.odi.org.uk/wga_governance/About_WGA.html

The key of economic development in developing countries is to build institutionalization in the economy, society and politics.

Douglas North, Institutions, Institutional Change and Economic Performance (1990), who got the Nobel Prize in the field of economics.

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Dr. Nishimizu Mieko, the Vice-President of the World Bank for South Asia (1997-2003), summarized her experience as such.

“The most important lesson I learnt in the World Bank is that without good governance, we can’t promote healthy nation building.” “The bottom reason of the poverty in South Asia is bad governance in public policy and institution.”

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• The lesson from the last 50 years is that economic growth is the most powerful way of pulling people out of poverty. Over recent decades, Asia has seen dramatic economic growth, first in the East Asian ’Tigers,’ then Thailand, Malaysia and Indonesia, and more recently in China and Vietnam. The picture is very different in sub-Saharan Africa. The percentage of people living in poverty in the region as a whole has increased in the past two decades.

• Effective states are central to development. They protect people’s rights and provide security, economic growth and services like education and health care. Building better governance takes time and has to come from within each country, but international partners can help. This means we need to work not just with governments, but also with citizens and civil society.

DFID. 2006. White Paper: eliminating world poverty making governance work for the poor. pp.43,21.

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Population by regions and poverty reduction Population by regions and poverty reduction

raterate （（ from UNDP MDG Report 2006from UNDP MDG Report 2006）） • The reduction will be attained in East and South Asia. So the focus

should be in East and South Asia and should not be in Sub-Saharan Africa where countries couldn’t substantially reduce the poverty incidence.

－ 21.4% less. No

possibility 44.6%→44.0%（－0.6%）

310M（ 29％） Sub-Sahara

－ 11.5% less39％→ 31％（－ 8%） 430M（ 40％） South Asia

Over-attained already 33％→ 14％（－ 19%） 270M（ 25％） East Asia

Necessary poverty decrease by 2015

1990～ 2002　Ratio of poverty

decrease

Population below poverty 2001（ % in developing

countries）

Region

Total 　　　 1100M（ 100%） 　　 28%→19%（－ 9%） 　　　　　 －5% less　

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The Commission for AfricaThe Commission for Africa. 2005. . 2005. Our Common Interest: Our Common Interest: Report of the Commission for African. Report of the Commission for African. p.24.p.24. You can You can download this report using internet.download this report using internet.

““One thing underlies all the difficulties caused by the One thing underlies all the difficulties caused by the interactions of Africa’s history over the past 40 years. It interactions of Africa’s history over the past 40 years. It is the is the weakness of governance and the absence of an weakness of governance and the absence of an effective stateeffective state. By governance we mean the inability of . By governance we mean the inability of government and the public services to create the right government and the public services to create the right economic, social and legal frameworkeconomic, social and legal framework which will which will encourage economic growth and allow poor people to encourage economic growth and allow poor people to participate in it. All the evidence shows that reductions participate in it. All the evidence shows that reductions in poverty do not come without economic growth. But in poverty do not come without economic growth. But as any gardener will testify, growth will not occur unless as any gardener will testify, growth will not occur unless the right conditions are in place. “the right conditions are in place. “

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４ ４ levels of Governancelevels of Governance

1) Global governance (In reality, International Governance)

2) National level governance• Local governance• Corporate (company’s) governance (This is

most frequently used)

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Jon Pierre & B. Guy Peters define Jon Pierre & B. Guy Peters define governance as:governance as:

• “how to steer the economy and society and how to reach collective goals”

• and categorize (domestic) governance into three elements while saying it has a complicated usage and therefore should be regarded as an umbrella concept.[1]

(1) NPM： New Public Management＝ to improve the management of the government＝ administration management＝ basic understanding of the World Bank and the US←→UNDP and EU have included democratization or the change of government into governance

(2) coordination of sectors of the economy, public-private relationships

(3) “good governance” •

[1] Jon Pierre & B. Guy Peters. 2000. Governance, Politics and the State. pp.1, 14.

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Definition of Governance by AusAIDDefinition of Governance by AusAID

• “Good governance requires policies to promote broad-based economic growth, a dynamic private sector and social policies that will lead to poverty reduction.”[1]

•[1] Australian Government’s Overseas Aid Program, 2000, Good Governance: Guiding Principles for Implementation, p.3.

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KKZ indicators (Kaufmann-Kraay-Zoibo-Lobaton KKZ indicators (Kaufmann-Kraay-Zoibo-Lobaton Indicators) (World Bank USA)≒Indicators) (World Bank USA)≒

Kaufmann and his group constructed six aggregate governance indicators (the indicators are detailed and the total 45 items in 1997 increased to 116 items in 2002 and 190 items in 2005.[1]

(1) Voice and Accountability： aspects of the political process, civil liberties and political rights, independence of the media

(2) Political Stability and Absence of Violence(3) Government Effectiveness: quality of public service provision, the

quality of the bureaucracy, etc. (4) Regulatory Quality: price controls, inadequate bank supervision,

excessive regulation in areas such as foreign trade and business development.

(5) Rule of Law: perceptions of the incidence of crime, the effectiveness and predictability of the judiciary, and the enforceability of contracts

(6) Control of Corruption

[1] Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi. 2005. Governance Matters, Governance Indicators for 1996-2002.

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1st feature: From government to 1st feature: From government to governancegovernance

At the background of understanding, the governance concept includes the change of the 20th century state model to the 21st century state model.

Summarizing the argument of Jon Pierre & B. Guy Peters, firstly, in the bureaucratic sphere, “the Weberian model of the public service characterized most of the advanced western democracies for more than a century.” “This was essentially governance by law. The state was distinctly separated from the rest of society but governed the society by imposition of the law and other forms of regulation.

The present western society is becoming increasingly horizontal = network.” In the network models, the government is conceptualized as components of the complex pattern of interaction.” “The state now seeks to play coordinating role, bringing together public and private resources at little direct cost to the public budget.[1]

What is generally said is the role of the government, especially the local government under the “principle of subsidiarity” (bottom up style democracy) to play as coordinator to connect government and business/ civil society organizations in implementing public services.

[1] John Pierre & B. Guy Peters. Governance, Politics and the State. pp. 15,-16, 35, 55.

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2nd feature: Institutionalization and the 2nd feature: Institutionalization and the importance of bureaucracyimportance of bureaucracy

• “Low cost enforcement of contracts is the most important source of both historical stagnation and contemporary underdevelopment in the Third world.” “Enforcement in the Third World economies is uncertain not only because of ambiguity of legal doctrine (a measurement cost), but because of uncertainty with respect to behavior of the agent.” [1]

• “The state was at the self-evident center of the governance network.” “Another key feature of state strength is its capacity to act. Since action is derived from the state’s capacity to establish priorities and coordinate action among key social actors in the pursuit of its goals.” [2]

• Paolo Mauro insists that an effective government is associated with economic growth by showing indices and taking notice of the importance of the bureaucracy and political stability. “The judiciary system, red tape and corruption indices represent bureaucratic efficiency. “One of the most striking features of data set is the strong association between bureaucratic efficiency and political stability”[3]

•[1] North. Institutions, Institutional Change and Economic Performance. pp. 54, 57-59, 36.

[2] John Pierre & B. Guy Peters. Governance, Politics and the State. pp. 79, 112, 164. [3] Mauro, Paolo (1995) ‘Corruption and Growth,’Quarterly Journal of Economics 110 (3):

pp.686-87.

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3rd Feature: need for strong government to 3rd Feature: need for strong government to promote economy with promote economy with Developmental StateDevelopmental State

After more than 40 years of development effort which started from 1961, a big gap of economic growth among developing countries emerged. What are the causes that created such a big gap?

There is a growing tendency among studies to point to the state and politics as the direct causes.

According to Anne Mette Kjær in her book, “What they do have in common are fairly strong states with the ability to direct development initiatives, and particular kind of state-society relationship that is conducive to economic development.” “The debate quickly came to circle around which type of state-society interaction would best promote economic development and which type of institutions would most encourage innovation and investment.”[1]

[1] Anne Mette Kjær. 2004. Governance. pp.123, 133,135, -24.

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Adam Smith, Adam Smith, The Wealth of Nations, The Wealth of Nations, (1776, Part 5)(1776, Part 5) and after and after

(1) “Invisible hand” can work within the framework of the role of state： defense, legal procedure, public works/facilities (including education), tax, government bond.

(2) After Adam Smith up to 1980 = age of the “failure of market” (a) Fields where free competition doesn’t fit: police, fire station,

water service etc. (b) Employers and employees are not equal→ protection of

laborers with laws: minimum wage, labor conditions, right to unite/strike, insurance of health/ unemployment/ disaster/ pension, vocational school.

(c) Urban Development Policy (urban is artificial from the beginning): urban planning, data collection, transportation system, water works, garbage collection, power, public health service, housing, education and culture, parks, tree planting.

(d) Environmental protection(3) World depression in 1930s → New Deal in the US＝

Nationwide industry rehabilitation, big scale public works, rehabilitation of agriculture/ unemployed = big spending → big government →After the WW : proliferated to all major Ⅱcountries = Bureaucratic/ Industrial/ Welfare State

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Three Basic Development Fields in Developing CountriesThree Basic Development Fields in Developing Countries (1) Building Economic Infrastructure(2) Building Social Infrastructure and environmental

policies　(3) Building Legal-Political Infrastructure (a) Rule of Law system:

(b) Peace and order: (c) Democratic Political Process: government approved by the

parliament, democratic elections, plural party system, (d) Building Civil Society: NGO and CBO (Community Based

Organization), Promoting “right to know” …media, disclosure of government information

(e) Governance• (i) Fight against corruptions; (ii) Institutionalization,

Accountability, Transparency; (iii) Decentralization;• (iv) Promotion of Participatory Democracy

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(1) Building Economic Infrastructure(1) Building Economic Infrastructure

• Preparing Statistics, Macro Economic Policy, Physical infrastructure, Supporting economic development…

Dhaka in Bangladesh: without having urban development strategy and road network, the loss of industrial efficiency and time is big.

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Insufficiency of transportation system Insufficiency of transportation system burdens people’s ordinary lifeburdens people’s ordinary life

Flood of people because of the shortage of buses

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Insufficiency of transportation system Insufficiency of transportation system burdens people’s ordinary lifeburdens people’s ordinary life

JakartaJakarta

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Finance is the blood of Finance is the blood of economy. In rural areas in economy. In rural areas in developing countries, developing countries, government financial government financial system takes important system takes important role.role.

Government local bank in Government local bank in IndiaIndia

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Soil road in CambodiaSoil road in Cambodia（（ Dry seasonDry season））30 years of civil war had resulted in the scarcity of 30 years of civil war had resulted in the scarcity of

infrastructure. In rainy season, this road becomes muddy can’t infrastructure. In rainy season, this road becomes muddy can’t be used and agricultural products can’t be sent to urban areas.be used and agricultural products can’t be sent to urban areas.

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Lack of irrigation system in CambodiaLack of irrigation system in CambodiaUnderground water contains minerals and not suitable for Underground water contains minerals and not suitable for

agriculture.agriculture.

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Rainy season of CambodiaRainy season of CambodiaFlood stays during rainy season and so many land (20% of Flood stays during rainy season and so many land (20% of

the nation) is out of cultivation.the nation) is out of cultivation.

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Land of Bangladesh spreads at the delta of Ganges and Land of Bangladesh spreads at the delta of Ganges and Brahmaputra rivers with frequent floods. Government digs Brahmaputra rivers with frequent floods. Government digs canals and builds roads on the raised ground level (left).canals and builds roads on the raised ground level (left).

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Typical Bangladesh rural roads which are on the Typical Bangladesh rural roads which are on the raised ground level using public workraised ground level using public work

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Well prepared irrigation systemWell prepared irrigation system（（ Central JavaCentral Java））

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The 2The 2ndnd pillar of government role: social pillar of government role: social development and environmental policydevelopment and environmental policy

Primary school in India

Lack of investment results in insufficient class rooms.

In 2002, enrollment of children between 6~14 years old was 　　　 82%.

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Floating (primary) school in CambodiaFloating (primary) school in CambodiaBecause of the low salary, teachers demand children to bring Because of the low salary, teachers demand children to bring

illegal thanks money to teachers. That means they teach illegal thanks money to teachers. That means they teach

corruption to children from the primary school.corruption to children from the primary school.

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Insufficient sanitation connects directly with Insufficient sanitation connects directly with higher level of infant mortality ratehigher level of infant mortality rate

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Former public toilet has changed into private managed toilet.

The “owner” clean the toilet and get money from users.

The human waste enters directly to river . (Jakarta)

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Another example of insufficient infrastructure: electric cable Another example of insufficient infrastructure: electric cable system is terrible: city center of Delhi, Indiasystem is terrible: city center of Delhi, India

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Delhi, which population is 16M, is very good in planting Delhi, which population is 16M, is very good in planting trees along major roads. trees along major roads.

Neem tree is Neem tree is durable to durable to pollution and pollution and has the has the function to function to prevent prevent worms worms coming.coming.

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Selling of turtle eggs is the symbol of low level environmental protection which should be the government role.

(West Kalimantan, 2000)

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Illegal wood cutting from tropical forest is anotherIllegal wood cutting from tropical forest is another symbol of low level environmental protection which should be the

government role.

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33rdrd pillar of government: pillar of government: Building Legal-Building Legal-

Political InfrastructurePolitical Infrastructure

Supreme court in Yangon, Myanmar

The building is the remains of British rule. But the content is “paying good money results in good judge.”

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Policemen playing card during job hours.Policemen playing card during job hours.(India)(India)

In developing countries, “Rule of Law” is the target everywhere. But the implementation is another big issue.

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Elections are the most Elections are the most important pressure important pressure than any other than any other external pressures external pressures from outside from outside (international (international organizations).organizations).

The general election scene The general election scene in Indonesia (1999)in Indonesia (1999)

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Elements of CSOs (Civil Society Organizations) are Elements of CSOs (Civil Society Organizations) are NGO(LSM), community organizations, religious NGO(LSM), community organizations, religious

organizations and media.organizations and media.(TV journalist in India)(TV journalist in India)

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NGOs at tsunami rehabilitationNGOs at tsunami rehabilitation（（ Trincomalee, Sri Lanka)Trincomalee, Sri Lanka)

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Community (in many cases, under the leadership Community (in many cases, under the leadership of village head) is an important part of civil society. of village head) is an important part of civil society.

Village head of Sri Lanka

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Village government office is the integrated service Village government office is the integrated service center in the village.center in the village.

(Indonesia)(Indonesia)

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““Chamber of Commerce and Industry (KADIN) is an Chamber of Commerce and Industry (KADIN) is an important element of civil society.” A carder said to me.important element of civil society.” A carder said to me.

Chamber of Commerce and Industry Chamber of Commerce and Industry at Klon Progo District, Jogjakarta. at Klon Progo District, Jogjakarta. Right side is a young staff newly Right side is a young staff newly recruited from Faculty of Economics, recruited from Faculty of Economics, UGM. UGM.

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Merilee Grindle (political scientist of International Merilee Grindle (political scientist of International Development Center, Harvard University) and her group Development Center, Harvard University) and her group insists to start the governance strategy from the more insists to start the governance strategy from the more

limited notion of “good enough governance,” instead of limited notion of “good enough governance,” instead of a comprehensive development of hundreds of a comprehensive development of hundreds of

governance indicatorsgovernance indicators • All the elements of governance are not always the precondition of

economic growth and poverty reduction. • Some countries like Afghanistan and Liberia are in need of basic

institutions to ensure a modicum of political stability, basic physical protection of citizens;

• Other countries like Nicaragua, Tanzania and Ghana can begin to think more about expanding public services and setting up systems for better management of public resources;

• other countries like India, Botswana, Brazil and Mexico are in position to under take more difficult governance reforms such as putting in place transparent budgeting and accounting processes.”

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Indonesia is at the low level of the 3Indonesia is at the low level of the 3rdrd stage. stage. Governance level is still low in comparison with Governance level is still low in comparison with

Singapore, Malaysia and Thailand. Singapore, Malaysia and Thailand.

• 20:80 Rule (in Japan)= If you have so many problems, concentrate to solve 20% (2~3) most important problems, which will solve 80% of total problems.

• In the reform of Indonesian tax agency, the key was the introduction of LTO.

• The target is upgrading all elements: The introduction of IT system will be one of the major measures.

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Ex: The Total Structure Ex: The Total Structure of Tsunami Disaster Reduction Systemof Tsunami Disaster Reduction System

１． Preparing Anti-Disaster Measures Basic Law and related laws and regulations

２． Building Implementation system of Comprehensive Disaster Reduction Measures including anti-disaster plan, training and arrangement of stakeholders at the national, provincial and city/district government level

３． Anti-disaster education, evacuation plan and drills in all schools regulated by the Department of Education

４． Networking government, government agencies like Meteorological Agency, and researchers in various research institutes

５． Preparing Anti-disaster parts in homepages of national government, provincial and local governments, universities and institutions

６． Exhibition centers of Anti-disaster measures at various local governments and institutions

７． Implementing Anti-disaster education to local government staffs, neighborhood organization and companies

８． Increasing programs of Anti-disaster measures and early warning reports in media

９． Proliferation of disaster durable buildings and evacuation centers

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The common target of Governance aid isThe common target of Governance aid isCapacity DevelopmentCapacity Development

• Capacity Building = strengthening responsive power = the key word is the institutionalization (of plan, budget, personnel →implementation management = putting the process under the transparency and accountability)

• Three tiers of capacity building (1) Individual level： human resource development and specialty ←OJT/OffJT（ on/ off the job training）、 salary, labor

condition, merit system(2) Organization level： system for managing the organization ≒

target is policy led management ←management structure, job circumstances, leadership, incentive、 right man to right place, promotion system

(3) System level： Accountability system of all government institutions, policy formation mechanism (including the level of financial devolution, co-administration), law system and its level of implementation (how far the local autonomy is; how far the political will of leadership against the corruption)

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Basics of capacity building individual level Basics of capacity building individual level [1][1]

(1) OJT/OffJT + exchange of experiences in the section and over the sections

(2) Make staffs accumulate experiences in the field(3) Make staffs experience working in different sections(4) Make staffs experience participatory way of government

management so as they can have the sense of CS (Customer Satisfaction) and also how to connect with government policies. Government staffs know “from the government to governance” but largely they don’t know actually how to implement that (concrete cases).

(5) Make staffs experience how to train junior staffs and systematize training of junior staffs in the organization

(6) Don’t train junior staffs for “wait for the instruction.” Give them chances (= authority).

= All of individual level capacity building connects with organization level capacity building.

• [1] Cf. Mark Turner, 1997, Governance, Development and Public Administration.p.117.

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T h a n k Yo u f o r y o u r A t t e n t io n