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p. 32 of 34 BACK | NEXT Executive Summary Introduction Good governance defined The elements of good governance The Bank’s concern with governance quality The Bank’s approach to governance issues Promoting the elements of good governance in Bank operations The Bank’s modalities for enhancing governance in DMCs Resource implications Reporting arrangements

Governance: Sound Development Management

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The Bank’s modalities for enhancing governance in DMCs

The Bank has always contributed significantly to increasing the quality of governance in its DMCs. This has been especially true since the adoption (in 1992) of the Bank’s medium-term strategic frameworks and the pronounced emphasis on the equity and sustainability aspects of economic development. But even before 1992, indeed, from their very inception, the Bank’s operations have had an impact, to a greater or lesser degree, across the full range of the areas of action indicated in the previous chapter. Given the nature of the Bank’s activities, however, the categories of action that have benefited most directly have been public sector management and participatory development processes. This is likely to be the case in the future also, although the other areas mentioned will be targeted as well. As its focus on governance issues sharpens, the Bank will ensure that this dimension of its development assistance is highlighted appropriately. This will be achieved by identifying systematically, in consultation with the DMCs concerned, the opportunities for promoting quality governance in individual operations and procedures.

In making its approach to governance operational, the Bank will build on the experience gained thus far. As mentioned, Bank operations have contributed generally to improving governance standards in DMCs. More specifically, the manner in which the Bank has addressed “crosscutting” concerns (e.g., environmental protection) offers a useful analogy. Together, these considerations suggest that the Bank should integrate governance dimensions into its operations. This means ensuring, to the extent possible, that Bank-supported programs and projects are designed such that they raise governance quality in the sectors concerned (e.g., through inclusion of appropriate policy measures, project components, or TA). In addition, the Bank will provide, on request, advisory TA for specific governance-oriented policy studies, seminars, and training. In all cases, the guiding principle for the Bank will be to act on the basis of agreement with the DMC concerned.

Given this approach, the Bank’s focus on governance improvement will cover, as appropriate

1. discussion in the country operational strategy study of governance issues in specific sectors, with a view to addressing them in the country assistance plan;

2. more detailed analysis of governance aspects in the context of loan-related economic and sector work, including assessments of the institutional capacity of borrowing entities;

3. coverage of governance aspects in policy dialogue and policy-intensive lending operations;

4. integration of capacity-building initiatives into the country assistance plan through advisory TA and project preparation and implementation (emphasizing in both cases longer term links with selected DMC agencies, for maximum impact);

5. implementation of the shift towards process-oriented projects, with participation of beneficiaries (as well as affected groups) at different stages of the project cycle;

6. expanding cooperation with NGOs;

7. TA in support of the privatization initiatives of DMCs;

8. advisory TA for reform of laws and regulations dealing with tariffs, trade, environmental legislation, and the like;

9. compilation of best practice, in the region and elsewhere, concerning relevant governance aspects; and

10. regional TA for analyzing public sector reform in general, and success cases in particular.

In due course, it is likely that capacity-building activities and assistance for legal reform will become central pieces in the Bank’s efforts to help improve governance in DMCs. The focus in respect of capacity building will be on sector-level and national institutions in DMCs, aiming at enhancing the effectiveness of public administration and development management. Where appropriate, it will also cover institutional development of the local/provincial agencies and the private sector.²⁷ As regards legal reform, the Bank will emphasize customs, tariff, and other trade laws, laws and regulations affecting direct foreign and portfolio investment, banking and capital market regulations, and environment laws.

To signal its commitment to fostering quality governance in DMCs, the Bank is also simultaneously taking a number of initiatives to improve its own performance in this regard. These include the TFIPQ, and follow-up thereto;²⁸ reorganization of the Bank’s structure; adoption of a new policy concerning confidentiality and disclosure of information; consideration of an inspection function within the Bank; and articulation of a human resources development strategy for the Bank.

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