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Governance in Asia: From Crisis to Opportunity
Next StepsThe Bank reacted quickly to the Asian financial crisis by supporting banking, financial sector, and corporate governance reforms; fiscal decentralization; and structural reforms in health, education, and labor market policies. Aside from the response to the crisis, new governance policies are in place, specialized staff are being recruited, and Bank loans and technical assistance are increasingly targeted at improving governance in DMCs. The basis for concerted and successful assistance has been laid. For this initial progress to be consolidated and expanded, progress in three priority areas is needed in the medium term: (i) better diagnostic tools and drawing on knowledge of good practice, (ii) improved implementation processes for governance reforms, and (iii) tracking evolving notions of good practice. (i) Better diagnostic tools and drawing on knowledge of good practice: All governments need some basic capabilities to carry out essential functions effectively. The Bank needs to draw on appropriate knowledge, including manuals and guiding principles, to define good practices that most DMCs should consider. Diagnostic tools can help DMCs monitor their governance reforms. As noted at the outset of this chapter, the application of models evolved elsewhere has historically led to major problems in countries that have very different income levels, implementation capacities, and institutional landscapes. Careful and realistic assessment is needed of the costs and benefits of possible institutional innovations, in light of the characteristics and administrative capacity of the individual country. The Bank can build on recent work of other international organizations, as it pulls together knowledge about good practices and diagnostic tools in this complex area.23 The main efforts at external dissemination of good practice will revolve in 1999 and 2000 around a series of in-country workshops on public expenditure management, civil service/public administration, and local government, eventually covering every DMC in the Asian and Pacific region. The Bank's Strategy and Policy Office is producing manuals and handbooks for these workshops in cooperation with staff of OECD, and with the advice of individual experts from other major international financial institutions and academia. Also, accountability institutions and mechanisms in different countries will be reviewed. Finally, several new technical assistance operations are ongoing or under preparation (Box 11). (ii) Improved implementation processes for governance reforms: As manuals and diagnostic tools are developed and governments set strategies for organizational development and policy reform, the second priority for medium-term improvement is the processes for carrying out these strategies. The Bank needs better processes for addressing governance concerns in its projects, and for anticipating and dealing with crosscutting governance issues affecting the Bank's project portfolio in each DMC. Too often the Bank and other development partners invest large sums to design institutional reforms that are not effectively implemented.24 Again, the Bank is fortunate to be able to build on recent work by other organizations.25 The following are the lessons of this work.
One might say that DMCs need to adopt the "Noah Principle" of management: "No more prizes for predicting rain; only prizes for building the ark."26` The difficulty is in finding leverage points that can be empowered to bring about the required changes in practice. Some of the steps needed are as follows.
This will be a two-tiered approach. The first tier will be the leverage point. The Bank will proactively seek this out, based on the criteria above. The second tier will be weaker organizations that have not yet demonstrated their commitment and effective contribution to good governance principles. The Bank will directly support the first tier, and use it as a catalyst for change of the second tier. This assumes that commitment in the second tier is best forged by national leverage points, rather than directly by the Bank. (iii) Tracking evolving notions of good practices: The Asian financial crisis shows that change can be rapid and unpredictable at the dawn of the 21st century. Institutional forms that have worked in the past are being continuously challenged and reinvented. Governments cannot be left behind in this change process. Some of the institutional forms best suited to achieving good governance will be changing. The Bank will be tracking these trends, and advising DMCs on them. The explosive growth of electronic networks is already facilitating new forms of citizen participation in governance, and new organizational forms. For example, an increasingly common form of business organization is set up around individuals and small businesses linked by the Internet. Tasks are carried out by independent contractors without layers of managers, deadlines, budgets, and other traditional control systems of bureaucratic hierarchies. This emerging organizational form is perhaps best understood from a metaphor. "When we look up in the sky and see a flock of birds flying in formation, we tend to assume that the bird in front is the leader and is somehow determining the organization of all the other birds. In fact, biologists tell us, each bird is following a simple set of rules-behavioral standards-that result in the emergence of the organization. The bird in front is no more important than a bird at the back or a bird in the middle. They are all equally essential to the pattern that they're forming."27 These and other changes are already encouraging nations to adhere to global standards to compete for trade and investment. Some aspects of sovereignty, such as those related to economic regulation and public accountability, are becoming structured around international instruments. Even though these are normally legally nonbinding, there are still agreed mechanisms for surveillance and compliance.28 No one can predict the speed or the extent to which these changes will alter the face of governance in DMCs. Yet it is necessary to conceive of completely new organizational landscapes where underlying good governance values will not only likely prevail, but also where the way governments carry out their business drastically changes. The Bank will work to keep its governance policies, manuals, and diagnostic tools fully up to date on emerging practices from the region and beyond, and draw from these practices to give DMCs support appropriate to their cultural, historical, and economic situations. Governance institutions are also changing. Many governments are changing the way they do business, forming partnerships, contractual arrangements, and electronic networks with private businesses, NGOs, and individual citizens to develop public policies and deliver public services. As these trends continue, large, hierarchical government organizations in DMCs may give way to smaller, network-facilitating groups, joining with various partners to carry out particular tasks, all of whom can work together because they follow the agreed "rules of the game."
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