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Thursday, March 13, 2008

What is 'Good Governance'?

Paper presented at the Global Conference on Good Governance jointly organized by FAPCCI & GFPR on 8th & 9th March 2008 at Hyderabad by Y. Babji, Research Scholar

1. Governance

The concept of “governance” is not new. It is as old as human civilization. Simply put “governance” means: the process of decision-making and the process by which decisions are implemented. Governance can be used in several contexts such as corporate governance, international governance, national governance and local governance.

Since governance is the process of decision-making and the process by which decisions are implemented, an analysis of governance focuses on the formal and informal actors involved in decision making and implementing the decisions made and the formal and informal structures that have been set in place to arrive at and implement the decision. Government is one of the actors in governance. Other actors involved in governance vary depending on the level of government that is under discussion. In rural areas, for example, other actors may include influential land lords, associations of peasant farmers, cooperatives, NGOs, research institutes, religious leaders, finance institutions political parties, the military etc. The situation in urban areas is much more complex. Figure 1 provides the interconnections between actors involved in urban governance. At the national level, in addition to the above actors, media, lobbyists, international donors, multi-national corporations, etc. may play a role in decision making or in influencing the decision making process.

All actors other than government and the military are grouped together as part of the “civil society”. In some countries in addition to the civil society, organized crime syndicates also influence decision making, particularly in urban areas and at the national level.

Similarly formal government structures are one means by which decisions are arrived at and implemented. At the national level, informal decision making structures, such as “kitchen cabinets” or informal advisors may exist. In urban areas, organized crime syndicates such as the “land Mafia” may influence decision-making. In some rural areas locally powerful families may make or influence decision-making. Such, informal decision making is often the result of corrupt practices or leads to corrupt practices.

2. Good Governance

The terms governance and good governance are increasingly being used in development literature. Governance describes the process of decision-making and the process by which decisions are implemented (or not implemented). Hereby, public institutions conduct public affairs, manage public resources, and guarantee the realization of human rights. Good governance accomplishes this in a manner essentially free of abuse and corruption, and with due regard for the rule of law.

Good governance defines an ideal, which is difficult to achieve in its totality. However, to ensure sustainable human development, actions must be taken to work towards this ideal. Major donors and international financial institutions, like the IMF or World Bank, are increasingly basing their aid and loans on the condition that reforms ensuring good governance are undertaken.

Good governance can be understood as a set of 8 major characteristics: These characteristics assure that Corruption is minimized, The views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision making

1. Participation

Participation by both men and women. Participation could be either direct or through legitimate intermediate

institutions or representatives. Participation also means freedom of association and expression on the one hand

and an organized civil society on the other hand.

2. Rule of law

Good governance requires fair legal frameworks that are enforced impartially. Full protection of human rights,

particularly those of minorities. It also means independent judiciary and an impartial and incorruptible police force.

3. Transparency

Decisions taken and their enforcement are done in a manner that follows rules and regulations. Information is

freely available and directly accessible to those who will be affected by such decisions and their enforcement


Institutions and processes try to serve all stakeholders within a reasonable timeframe.

5. Consensus orientation

Need of mediation of the different interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved. It also requires a long-term perspective for sustainable human development and how to achieve the goals of such development.

Equity and inclusiveness

Ensuring that all members of society feel that they have a stake in it and do not feel excluded from the mainstream. This requires all groups, and especially the most vulnerable to have opportunities to maintain or improve their well being.

Effectiveness and efficiency

Processes and institutions produce results that meet the needs of society while making the best use of resources at their disposal. It also means sustainable use of natural resources and the protection of the environment.


Governmental institutions as well as the private sector and civil society organizations must be accountable to the public and to their institutional stakeholders.

In general organizations and institutions are accountable to those who will be affected by decisions or actions.

3. Good governance agenda

In the last few years issues of good governance have been receiving considerable attention in political discourse in India. In fact, the term good governance is used so widely now that it is coming to replace in popularity that other buzzword of the Eighties and the Nineties, civil society. A set of strategies to achieve good governance is being put forward by international lending agencies such as the World Bank as also by our own government. Andhra Pradesh has even agreed to set up a center for good governance to guide reforms in the State and train officials.

It is claimed that reforms could help to lift developing countries like India out of the morass of problems in which they have been stagnating. The kind of problems generally identified would include bureaucratic delays and inefficiency, corruption, poor quality pubic services and a judicial system, which is collapsing under the weight of archaic procedures and a huge backlog of cases. Not state can afford to be less than efficient in a globalising environment, it is maintained, and good governance is a necessary condition for attracting capital and maintaining stable growth. Political leaders talk glibly now about the need for the state to ‘steer, not row’, the need to ‘slim down’ the state and encourage private capital initiatives, and the need to build capabilities rather than redistribute wealth.

This rhetoric bears a close resemblance to what has been heard during the Clinton and Blair administrations in the United States and Britain. But in those countries it provoked a great deal of debate in which political parties and intellectuals participated. In India on the other hand, the tendency has been to accept it as a form of received wisdom and there has been relatively little public debate about the ideology and assumptions, which lie behind the reform package, let alone the reforms themselves. Given the far-reaching nature of the changes being introduced, such complacency could be dangerous.

Reforms package

The package of reforms, which is being presented as necessary for good governance, forms part of the wider agenda of economic reforms and liberalization. Neo-liberal reforms demand that the state withdraw from some of the responsibilities undertaken in response to social democratic and welfarist objectives. The state should not attempt politically to manage economy and society and guarantee welfare but it would remain the primary provider of social goods like health, education and security. It would also need to provide adequate material infrastructure to attract capital and promote economic growth. To fulfill these responsibilities, the State should act in partnership with interests in civil society and the non-governmental sector, involving them wherever appropriate in decision-making and implementation. The corporate world has acquired an image of sleek efficiency and rationality and the media today is projecting corporate manager as the embodiment of wisdom. We seem to have moved from a belief in the generalist administrator to belief in the versatile manager who can tune his/her skills to a variety of tasks ranging from building airports, education or garbage disposal.

To streamline public administration, reformers advocate the incorporation, wherever possible, of some of the values and techniques of corporate management – the profitability criteria, cost-benefit analysis and economic rationality. The emphasis is not so much on achieving an egalitarian society but on developing individual capabilities. This could sometimes mean changing the nature of the social goods provided. For instance, if economic rationality is applied to services such as education or health care, targets would have to be redefined in terms of increasing productivity, or providing supply of skilled manpower for needs defined by the market. In India we are already beginning to see the results of such analysis. In addition, apart from streamlining public administration, some tasks could be contracted out, or shared with private bodies, or privatized.


Since greater accountability is claimed as one of the advantages of good governance, how would this be ensured? Traditionally, in a parliamentary system, political accountability of the executive is to the voters through elected assemblies. Administrative and legal accountability of the executive branch is through administrative procedures and the law courts. But if decision- making and implementation is now to be shared with private interests it may become difficult to fix political responsibility. Following the new Anglo-American model some State Governments in India have adopted a stakeholder approach according to which the corporations which provide public services would be held responsible to their end users, or consumers, provided of course they pay for the services. Citizens should get the rights appropriate to consumers. This would include right to information, the right to demand quality services, the right to approach consumer courts, and the right to be consulted on important decisions. How effective these rights would be remains to be seen since some services are likely to remain monopolies.

Untidy political negotiations

Reformers are never tired of proclaiming their faith in democracy but the thrust of the managerial turn in public administration is likely to be away from widening the area of democratic participation. Untidy political negotiations are seen as a possible source of corruption and a diversion from economic rationality. The good governance project is essentially executive-led and political accountability is limited. It is not a mere coincidence that Andhra Pradesh has had reservations about the panchayat system or that in Karnataka legislators and corporators have been complaining about being excluded from the many task forces which are being set up. Some of the fault no doubt lies with political parties that have not taken up the issues seriously except for opposing particular decisions for populist reasons. Raising important issues seems to have become the responsibility of NGOs and social movements but their influence on political parties is limited.

The reforms represent a new orientation towards State and society according to which the notion of collective welfare and a shared identity as citizens will be replaced by a more individualistic ethos. The State will, at best, try to help individuals cope with the vagaries of the market but it will no longer guarantee minimum standards. Some of the changes that are taking place may be inevitable, some may also be desirable, but in either case they raise many important issues, which deserve serious debate.

4. Good Governance – a Recipe

Narendra Modi’s resounding success in Gujarat proves the point that voters care for good governance and a dedicated leader trying his best to weed out corruption. We have many totally honest leaders like the prime minister, chief ministers of West Bengal and Orissa, but they have not tried enough to push for good governance. It is high time good governance is given a national priority.

Governance or institutional security is an important component of economic security. An Economy with high transaction costs is not efficient, and lack of efficiency means erosion of competitiveness. High transaction costs are not just a production issue; it’s a distribution issue as well. Poor governance will result in the poor management of crucial policy interventions in poverty reduction and social development.

In comparison with other major emerging and industrialized economies, India scores poorly in institutional security. A few indicators illustrate this point. It takes four years to enforce a contract in India, more than three times that of China and more than twice that of Brazil. Transparent and efficient enforcement of contracts is a key ingredient of institutional support to economic activity and efficient transfer of goods and services. In terms of property registration, an essential element of the business environment, India’s performance is poor. It taken 50 days to register a property as compared to less than 30 days in China, and less than 10 days in the United States and Thailand. Average cost of a business start-up is over 60 percent of per capita income, much higher than any of the comparator countries.

Transport and electricity costs due to poor regulatory environment are transaction costs to all sectors that use these inputs. India has the highest cost of electricity among major industrialized and emerging economies ($0.8 per kwh for industry as against $0.1 kwh in China), result of the highest transmission and distribution losses in the world, or in other words a quarter of the gross electricity output. Transport costs are very high in India. It accounts for 25% of total import costs as against only 10% in comparator countries. This does not augur well for India’s competitiveness. Besides poor infrastructure, the problem squarely lies with the regulatory environment for roads where the state governments issue the operator licenses; control the routes, time of operation and the fees. These arrangements are easily susceptible to rent seeking.

5. What Chidambaram & Kofi Annan say?

Speaking during the presentation of the budget for 2008-09, Chidambaram said “Two thousand years ago Saint Tiruvalluvar set the benchmark for good governance in the following immortal words: (Generous grants, compassion, righteous rule and succour to the downtrodden are the hallmarks of good governance.)”

Kofi Annan (The Ghanaian Diplomat, 7th Secretary General of the United Nations and Nobel Peace Prize Winner in 2001) says, “Gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development and building good governance”.

6. IMF’s View

The IMF places great emphasis on good governance when providing policy advice, financial support and technical assistance to its member countries. It promotes good governance by helping countries ensure the rule of law, improve the efficiency and accountability of their public sectors, and tackle corruption.

The term governance, as generally used, encompasses all aspects of the way a country is governed, including its economic policies and regulatory framework. Corruption is a narrower concept, which is often defined as the abuse of public authority or trust for private benefit. The two concepts are closely linked: an environment characterized by poor governance offers greater incentives and more scope for corruption. Many of the causes of corruption are economic in nature, and so are its consequences – poor governance clearly is detrimental to economic activity and welfare. Because of their economic nature, issues related to governance and corruption often fall directly within the mandate and expertise of the IMF.

7. The new Right: The Right to good Governance

“Citizens have several rights specifically enumerated in the Indian Constitution. They have the right to equality, freedom of speech, right to life and liberty and now right to education of children. Founding fathers of the constitution debated over these rights and now these are part of Constitution. But one area, which did not receive the attention initially, was the citizen’s right to ‘Good Governance’. Effective implementation of Constitutional rights is vital to provide meaning and substance to the written words and vision of our Constitution makers,” said B.K. Chaturvedi, the then Cabinet Secretary in August 2005.

By the foregoing it can be said that good governance also means caring for the governed and judiciously managing the affairs of governance, by all means and by all those who rule. Good Governance is the buzzword, a mantra of management, a recipe, a new right, a hallmark and the Order of the Day.


1.United Nations Economic & Social Commission for Asia and the Pacific


3.The Hindu, 31st July 2001 – Good Governance agenda

4.The Financial Express, 3rd March 2008 – Good Governance must be recipe for 2008

5.Budget Session of the Parliament

6.International Monetary Fund

7.The Indian Express, 25th August 2005 – The new right: The right to good governance