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D. Murali

GOVERNANCE is too fashionable a topic to ignore. The Naresh Chandra Committee, also known as the governance think-tank, is active again to push in the second phase of corporate reforms, even as we struggle to implement the first phase.

And the World Bank, which is also quite active in the governance sphere, has brought out Governance Matters III for comments. The paper, prepared by Daniel Kaufmann and his team defines governance as the traditions and institutions by which authority in a country is exercised.

Governance includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. The authors present estimates of six dimensions of governance — voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption. `Voice and accountability', in turn, includes a number of indicators measuring "various aspects of the political process, civil liberties and political rights".

The study that covers 199 countries and territories for four time periods — 1996, 1998, 2000, and 2002 — measures the extent to which citizens of a country are able to participate in the selection of governments.

As history shows, it is when voice is muted that accountability goes haywire.

The second governance cluster, labelled `political stability' with the subtext "absence of violence", combines several indicators measuring perceptions of the likelihood that "the government in power will be destabilised or overthrown by unconstitutional or violent means, including domestic violence and terrorism".

A measure that would be relevant to many state governments, because this index captures the idea that the "quality of governance in a country is compromised by the likelihood of wrenching changes in government".

As a metric to assess the ability to formulate and implement sound policies, `government effectiveness' combines responses on "quality of public service provision, quality of the bureaucracy, competence of civil servants, independence of civil service from political pressures, and the credibility of the government's commitment to policies". All these are the "inputs" that the government needs "to be able to produce and implement good policies and deliver public goods".

`Regulatory quality' is focussed on policies, and includes measures of market-unfriendly policies. These relate to price controls, adequacy of bank supervision, and regulation of foreign trade.The last two clusters relate to the respect of citizens and the state for the institutions. `Rule of law' includes indicators that measure "the extent to which agents have confidence in and abide by the rules of society".

What are the indicators? Perceptions of the incidence of crime, effectiveness and predictability of the judiciary, enforceability of contracts and so on. "Together, these indicators measure the success of a society in developing an environment in which fair and predictable rules form the basis for economic and social interactions, and importantly, the extent to which property rights are protected."

Last, but not the least, is the `control of corruption' dimension — to measure perceptions of corruption, defined usually as `the exercise of public power for private gain'.

Corruption is the manifestation of "a lack of respect of both the corrupter (typically a private citizen or firm) and the corrupted (typically a public official or politician) for the rules which govern their interactions, and hence represents a failure of governance".

As any research, this paper provides individual countries with "a set of monitorable indicators of governance" to benchmark against. Disappointingly, India's score is 0.38 for voice and accountability, -0.84 for political stability, -0.13 for government effectiveness, -0.34 for regulatory quality, 0.07 for rule of law and -0.25 for control of corruption. A long way to go, indeed.

(hindubusinessline@hotmail.com)

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