Issues in Governance

Presented by Dr. M Rijal

Supported by R Pandey

RK Pandey, Mobile: 98510-86884

 Organization of the Talk
Common Definitions
Democratic Governance
The WB Indicators
How Does Nepal Fare?
Global Perspective
Global Positives & Negatives
Governance in Nepal
What Went Wrong

RK Pandey, Mobile: 98510-86884

 Common Definitions
UNDP
Exercise of economic, political &
administrative authority to manage a
country’s affairs at all level
Comprises mechanisms, process &
institutions through which citizens &
groups articulate their interests, exercise
their legal rights, meet their obligations, &
mediate their differences

RK Pandey, Mobile: 98510-86884

 Common Definitions, contd
World Bank
Three aspects of governance
Form of political regime
Process by which authority is exercised in
the management of a country’s
economic & social resources for
development
Capacity of governments to design,
formulate & implement policies &
discharge function

RK Pandey, Mobile: 98510-86884

 Common Definitions, contd
OECD
Encompasses the role of public authorities
in establishing the environment in which
economic operators function and in
determining the distribution of benefits
as well as the nature of relationship
between the ruler and the ruled

RK Pandey, Mobile: 98510-86884

 Common Definitions, contd
Institute of Governance, Ottawa
Sum of the many ways individuals &
institutions, public & private, manage
their common affairs
Continuing process through which
conflicting or diverse interests may be
accommodated and co-operative action
may be taken

RK Pandey, Mobile: 98510-86884

 Common Definitions, contd
Democratic Governance (UNDP)
Aims at building institutions & rules that
are not only efficient and fair, as well,
but also are developed through a
democratic process in which all people
have a political voice
i.e., it incorporates into the notion f good
governance for development, democratic
processes and institutions, and a
concern with the securing of political &
civil rights & freedoms as human rights
RK Pandey, Mobile: 98510-86884
 Common Definitions, contd
Mahbub ul Haq
Good Political Governance
Structures & processes that support the
creation of a participatory, responsive &
accountable polity
Good Economic Governance
Competitive, non-discriminatory &
equitable economy
Good Civic Governance
Society in which people are given the
ability to self-organize
RK Pandey, Mobile: 98510-86884
 Democratic Governance (UNDP)
Human rights & political freedom
Voice in government decisions
Accountability
Inclusive & fair rules
Gender equality
Free from discrimination (race, ethnicity,
class, gender, etc)
Needs of future generations
Responsive economic & social policies
Economic & social policies aim at poverty
eradication & expanding choices
RK Pandey, Mobile: 98510-86884
 Indicators (WB Study)
Process by which governments are selected,
monitored & replaced
Voice & accountability, political stability & absence
of violence
Ability of governments to formulate &
implement sound policies
Government effectiveness, regulatory quality
Respect of citizens & state for the institutions
that govern economic & social interactions
among them
Rule of law, control of corruption
RK Pandey, Mobile: 98510-86884
 Voice & Accountability
Orderly transfers of political power
Political rights
Vested interests
Accountability of public officials
Civil liberties & Human rights
Freedom of association
Freedom of press

RK Pandey, Mobile: 98510-86884

 Political Stability
Armed conflicts
Violent demonstrations
Social unrest, including ethnic tensions
International tensions/ terrorist threat

RK Pandey, Mobile: 98510-86884

 Governance Effectiveness
Quality of public service provision
Quality of bureaucracy / institutional
effectiveness
Credibility of Government’s
commitment to policies
Quality of general infrastructure
Quality of public schools
Public service vulnerability to political
pressure
RK Pandey, Mobile: 98510-86884
 Regulatory Quality
Unfair competitive practices
Government’s attitude towards investment
Price controls
Discriminatory tariffs
Excessive protections
Discriminatory taxes
Extent of dominance of SOEs
Regulation of foreign trade

RK Pandey, Mobile: 98510-86884

 Rule of Law
Violent crime
Organized crime
Fairness of judicial process
Enforceability of contracts
Speediness of judicial process
Confiscation/expropriation
Intellectual property rights protection
Private property protection

RK Pandey, Mobile: 98510-86884

 Control of Corruption
Public trust in financial honesty of
politicians
Corruption among public officials
Corruption as obstacle to business
State capture, including positions of
power through patronage

RK Pandey, Mobile: 98510-86884

 How Does Nepal Fare?
The World Bank Study [2003]

1996 1998 2000 2002

Voice & Accountability 0.13 -0.01 -0.12 -0.52
Political stability 0.14 -0.43 -1.02 -1.63
Governance effectiveness -0.32 -0.94 -0.72 -0.51
Regulatory quality -0.24 -0.34 -0.30 -0.50
Rule of law -0.34 -0.25 -0.31 -0.50
Control of corruption -0.26 -0.59 -0.42 -0.30

(Scores range from -2.5 to 2.5)

RK Pandey, Mobile: 98510-86884

 Global Income Disparity
Share, in 1990, of
Richest 20% Poorest 20%
GDP 86 1
Exports 82 1
FDI 68 1
Telephone Lines 74 1.5
Internet users 93 0.2

RK Pandey, Mobile: 98510-86884

 Forces of Globalization
Decline in costs of 1960 1990
Computers 125 1
Telephone calls 15 1
Air transport 2 1

RK Pandey, Mobile: 98510-86884

Declining Influence of Government
1997 Data
Total sales of General Motors $164 B
Total GDP of Thailand $154 B
Total sales of Hollywood movies $30 B
Total sales of movie Titanic $1.8 B
Total GDP of Nepal $4.8 B
Of 100 largest economies in the world
50 countries 50 MNCs

RK Pandey, Mobile: 98510-86884

 Rampant Poverty & Low HDI
Of 6 B people in the world,
2.8 B live on less than $2 a day
1.2 B live on less than $1 a day
Under 5 mortality
In rich countries 1 in 100 children
In poor countries 20 in 100 children
Malnourishment
In rich countries < 5%
In poor countries 50 %
60 countries ended 1990s poorer

RK Pandey, Mobile: 98510-86884

 Global Politics
Since 1980, 81 countries democratized,
47 fully functioning democracies
37,000 INGOs in 2000
Only 14% of parliamentarians women,
10 countries with none
Only 6 vetoes cast in UN security
council in the second half of 1990s (cf
average of 25 between 1946-1995)

RK Pandey, Mobile: 98510-86884

 Global Positives
Lowering of ideological tensions since
the end of the Cold War
Emerging consensus on the need for
certain economic & new political
reforms
Heightened flows of information made
possible by the ICT technology
advances

RK Pandey, Mobile: 98510-86884

 Global Positives, contd
Extreme poverty
29% in 1990 to 23% in 1999
In 1990s,
800 M people gained access to improved
water, & 750 to improved sanitation
Between 1970 & 200, Under 5 mortality
96 to 56 per 1,000
Primary school enrolment
80% in 1990 to 84% in 1998
Death from interstate conflict down 3 times
in 2990s from 1980s

RK Pandey, Mobile: 98510-86884

 Global Negatives
Declining global ODA grossly insufficient
to meet MDGs
Nearly 3.6 M killed in wars within states
50% more refugees & internally
displaced in 1990s
Half of all civilian war casualties are
children
Estimated 300,00 child soldiers
worldwide
RK Pandey, Mobile: 98510-86884
 Governance in Nepal
3 General Elections & 2 Local Election
Strong decentralization law
About 200,000 elected representatives
in local government
About 36,000 of them women
Strong growth of civil society
Revolution in media

RK Pandey, Mobile: 98510-86884

 Governance in Nepal, contd
Stronger anti-corruption regime
CIAA, Corruption control act
Reforms aimed at building inclusive
society
NHRC, NWC, NDC, NAIP
Initiation of devolution of basic service
to LGIs
Initiatives for public expenditure
priritization
RK Pandey, Mobile: 98510-86884
 Governance in Nepal, contd
1990 2000
GDP 100 175
Literacy 40% 55%
Life expectancy 40 yrs 62 yrs
Infant Mortality (1,00) 102 64
Child Mortality (1,00) 162 91

RK Pandey, Mobile: 98510-86884

 Governance in Nepal, contd
1989 2000
Social spending 2.2 times
Revenue 2.3 times
Industrial production 3.3 times
Exports 4.7 times
Exports to India 18.7 times
Service exports 2.8 times
Tourism income 1.6 times
Forex reserve 3.8 times
RK Pandey, Mobile: 98510-86884
 Governance in Nepal, contd
1989 2000
Energy consumption 1.4 times
Hydro-power generation 3.0 times
Road 2.3 times
Telephones 6.9 times
School enrolment 1.5 times
Schools 1.6 times
Health centers 4.1 times

RK Pandey, Mobile: 98510-86884

 What Went Wrong
12 Governments in 13 years
Stagnant agriculture
grew only 1.5 times in 11 years
Export trade benefited almost
exclusively Kathmandu valley and
few major towns
Export trade with no significant
backward or forward linkage

RK Pandey, Mobile: 98510-86884

 What Went Wrong, contd
Delay in banking & financial sector
reform much needed with economic
liberalization
Inadequate bank supervision and the
resultant in large non performing
assets
Organized interest groups reaping
economic benefiting from the
political patronage

RK Pandey, Mobile: 98510-86884

 What Went Wrong, contd
Lack of transparency in political party
financing opening room of political
graft & corruption
Sense of supremacy over law
reinforcing political graft & corruption
Continued petty corruption leading to
further alienation & powerlessness

RK Pandey, Mobile: 98510-86884

 What Went Wrong, contd
Tendency for graft & corruption
reinforced by
Weak institutional capacity to combat
corruption
Weak government fund disbursement
procedure, & auditing
Faulty public procurement rules
Revenue leakage

RK Pandey, Mobile: 98510-86884

 What Went Wrong, contd
Political patronage leading to inefficiency,
irresponsiveness in civil service
Lack of appropriate pay & other incentives
resulting in a civil service incapable of
leading economic growth & private sector
development
Bias in public expenditure towards urban &
modern sector of the economy
Centralized political system failing to deliver
services to poor, inaccessible & remote
areas
Lack of effective public programs to mitigate
the adverse effects of transition toward
market economyRK Pandey, Mobile: 98510-86884
 What Went Wrong, contd
Excessive burden of recurrent expenditures,
and inefficient & wasteful SOEs
constraining much desired public
investment in rural economic and social
infrastructure development
Disproportionate share of increased social
sector spending to urban economy &
richer population
Due to centralization, social sector spending
could not benefit interior & backward
regions
Inability to reach out to poor, marginalized
and vulnerable
RK Pandey, Mobile: 98510-86884
 What Went Wrong, contd
Lack of hard budget constraint leading to
a lack of prioritization in public
expenditures
Lack of resources & poor capacity of LGIs
Public expenditures on
primary vs tertiary education
primary vs hospital health care
Rural vs urban drinking water and sanitation

RK Pandey, Mobile: 98510-86884

 What Went Wrong, contd
Increased public awareness, expectation,
not matched by economic growth,
opportunities leading to widespread
frustration in the rural areas providing
breeding ground for Maoist insurgency
Break down, near collapse of government in
rural areas outside district headquarters
Existing violent conflict between pro & anti
2047 constitution complicated by new
triangular conflict

RK Pandey, Mobile: 98510-86884