October 30, 2002	Wednesday	Sha’aban 23,1423

ISLAMABAD, Oct 29: The sustainability of growth process is based on structure of governance and its institutions,” says Finance Minister Shaukat Aziz.

Speaking at a “Strategy Forum” in Dubai on Monday, the details of which were released by the Ministry of Finance on Tuesday, Mr Aziz said that it was now undisputed that governance matters critically in economic growth.

“Indeed, the sustainability of growth process largely depends on the structure of governance and its institutions. It needs no elaboration that in the economies of sustained and dependable growth governance features as prominently in objectives of economic policy as, for instance, the stability of macroeconomic framework. Just as a stable macroeconomic framework provides the background that nurtures efficient economics of private sector, good governance creates certainties about rights and obligations, enforcement of contracts and predictable consequences for breaches of rules and regulations,” he said.

The forum, organized by the government of Dubai, focussed on future trends and to design appropriate economic strategies for the region. This largely attended forum, which was inaugurated by Sheikh Mohammed Bin Rashid Al Maktoum, Crown Prince, included several speakers invited from all over the world, including Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud, Mervat Tallawy, Under Secretary General of the United Nations and leading economists, academics, financiers and members of the private sector.

The finance minister said that it should not be surprising that governance issues were gaining increasing importance alongside globalization. The primary engines of globalization are openness and competition, which in themselves are no guarantee for fairness and equity of the process. It is governance in many of its manifestations that gives the agents the necessary confidence to participate in the process without fear of bias and discrimination.

“Thus a successful move to globalization requires considerable emphasis on governance, without which the full potentialities of the economy will not be actualized,” he added. Given this central importance of governance in economic growth, Mr Aziz added, one would like to know that constitutes governance and what strategies would be needed to promote good governance. This is a subject that has recently attracted the attention of the researchers and policymakers. “There are no celebrated theories that we may press for service. Our knowledge and understanding of the dimensions of governance is nascent and evolving. At this stage, there are at least four aspects that I consider indispensable in any meaningful discourse of governance.”

First and what can be termed as the traditional aspect of governance, is its administrative dimension. This covers such institutions as the legislature, civil services, police and judiciary. Clearly, this is the most primitive view of governance, yet having the most fundamental position in the functioning of any society. These institutions provide the rudimentary structure for an organized society. “We can describe it as the outer periphery of the governance structure under which more sophisticated sub-systems will have to be built to make necessary impact on the process of growth.”

The second aspect is the people’s participation in the development process. This aspect begins by appropriately identifying the stakeholders in the process. Clearly, government, business and people are the key stakeholders in any society. The greatest benefits will accrue to the society when all these groups have common objectives, goals and aspirations. For that to happen it is imperative that their spheres of responsibility and functions are properly specified and respected. The People’s participation in matters of governance and understanding of economic and social policies. The business has to be given the necessary freedom to run the economic activities within the parameters of laws and regulations. While weaker segments of the people will have to be assisted for becoming productive and efficient members of the society, merit and transparency will have to be the supreme considerations in distributions of state contracts, appointments, licenses, concessions and other privileges.

“It is only through a system of participative governance, economic freedom and merit-based distribution of state privileges that a people-inclusive development can be engendered that is capable of unleashing the best potentials of all stakeholders”.

The third dimension, he said, related to access to information. There is no way to judge the effectiveness of the first two dimensions of governance unless people have access to information that can reveal such knowledge. No claims of transparency and fairness would hold ground unless accompanied by free and unhindered access to information relating to the functioning government. This is an over-riding requirement across all branches of government — fiscal, monetary, corporate, law enforcement and judicial. People need, or should have the right, to access information not only to make right decisions but also to ensure that they are not unfairly treated. Thus disclosure of information has become an important dimension of governance structure. “Failure to do so attracts suspicions and erodes the competitive position of the country in the globalization race,” Mr Aziz said.

Finally, he pointed out that accountability is a dimension that completes the governance square. “As I mentioned at the outset, good governance creates certainty and predictability of political, social and economic engagements. In its absence; openness and competition are recipes for chaos and disorder as opposed to being engines of economic development and prosperity. But one aspect of governance that induces orderly behaviour is the fear of its instrument of accountability.

The accountability here means accountability of not only offenders but of those also who have mismanaged their trusts — be they politicians, bureaucrats, law enforces, judges, corporate manages and labour leaders. All holders of office of public trust, in the public or private sector, should be accountable for their performance and dealt with accordingly. Clearly, this will call for elaborate legal framework as well as institutional capacity to undertake the required exercise. But people’s oversight is the most effective of all arrangements. It is public awareness and their response to breach of trust that will play the most effective watchdog for holding such people accountable. This then is the ultimate objective and measure of good governance. All aspects of governance converge to accountability. To the engines of openness and competition, governance acts like a circuit breaker against undue surge in the flow of electricity.