Good governance vital for healthy sustained economic development

Good governance was the core promise of President Maithripala Sirisena. Good governance is an end in itself. It is vital for democracy, decency and dignity of human society and encompasses a whole range of social, political and economic activities. Good governance is crucial for economic efficiency and sustained healthy economic development.

President Obama once said that what Africa required was not strong men but strong institutions and good governance. A strong government without good governance is a disaster.

Good governance and economic development

The nexus between good governance and economic development is not always clear. The IMF has pointed out that "promoting good governance in all its aspects, including ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption" are essential elements of a framework within which economies can prosper. The IMF has spelled out good governance in economic management as "improving the management of public resources through reforms covering public sector institutions (e.g., the treasury, central bank, public enterprises, civil service, and the official statistics function), including administrative procedures (e.g. expenditure control, budget management, and revenue collection); and supporting the development and maintenance of a transparent and stable economic and regulatory environment conducive to efficient private sector activities (e.g., price systems, exchange and trade regimes, and banking systems and their related regulations)."

The blatant breech of these principles of good governance by the previous regime is obvious.

Lapses in good governance

The management of public finances is one area where governance is of paramount importance. Good governance is needed to ensure fiscal discipline that brings down the fiscal deficit to lower levels than at present. This is vital to attain higher levels of economic growth.

It is vital that wasteful expenditure is cut down and there is prudence and accountability in the use of public resources. Good fiscal management is vital to avoid inflation, find resources for developmental needs and social welfare expenditure.

Costly projects

Large expenditure on infrastructure projects

By Nimal Sanderatne whose costs are much higher owing to large misappropriations and deliberate overbuilding and design are not only more costly, but their construction could be sub-standard or even defective.

Tax exemptions

There is woeful inadequacy in tax collection owing to the lack of proper surveillance of tax payers and the granting of exemptions. Recent evidence of vast amounts of taxes being unpaid due to interference and bribery are clear instance of bad governance.

Foreign investment

Bribery and corruption are reasons why some countries have failed to attract adequate investments, while others, like Singapore, have attracted investment. Vital foreign investments have been discouraged owing to officials and ministers demanding bribes. When foreign investors perceive a high degree of corruption, the higher transactions costs and tedium make them shy away from investing.

Rule of law

The rule of law and protection of fundamental rights of citizens, including property rights, have an important bearing on economic development, apart from their intrinsic value in a decent and civilised society. Protection of human rights and impartial enforcement of laws require an independent judiciary and an impartial and incorruptible police force. An independent Judicial Services Commission, Police Commission and Public Service Commission can be ensured by the reintroduction of the 17th Amendment to the Constitution that would ensure good governance.

Transparency and accountability

Two elements of good governance, transparency and accountability have been woefully lacking. Transparency means that decisions are taken and enforced in an open manner that follows rules and regulations. For this to be realised information must be freely available and accessible to those who would be affected by such decisions.

Accountability of public funds is a key requirement of good governance. Flagrant violations of good governance revealed by the Parliamentary Committee on Public Enterprises (COPE) did not lead to remedial measures. The present regime could initiate measures on the basis of these reports.

Formidable problems

The fundamental macroeconomic problems of reducing the fiscal deficit, reducing foreign debt and bringing down the trade deficit that were discussed in the previous three columns cannot be resolved in a hundred days, but steps could be taken in the right direction. The first step is to recognise that these are serious problems requiring remedial measures.

Good economic management

Good economic management has a direct relationship to good governance. The careful and prudent use of public funds and accountability in the use of public finances is a fundamental tenant of good governance. Efficient economic management of public enterprises by capable, efficient and incorruptible officers is imperative. Good governance implies that public expenditure is allocated according to economic and social priorities and transparent methods are adopted in granting of government contracts.

The last government flouted these principles blatantly and interpreted good governance to mean "development" at any cost and getting things done irrespective of costs and benefits. The huge costs incurred in massive infrastructure projects without consideration of their benefits and the burden of servicing foreign debt were violations of the principles of good economic management.

Initial steps

What is needed in these first hundred days is clear evidence of steps to ensure good governance and good and efficient economic management. One of the key measures would be to remove inefficient and corrupt officials and appoint persons of proven capability, efficiency and integrity. There is evidence that this has been done in key positions with some excellent former Administrative and Foreign Service officers being appointed to key positions. It is important to ensure that efficient persons continue to replace inefficient and corrupt officials in government departments, ministries and public enterprises.

Conclusion

Good governance will be an important determinant of the pace and character of economic development in the next decade. The establishment of the rule of law, protection of property rights, safeguarding of human and fundamental rights, the implementation of justice, eradication of waste, prudence in public expenditure and minimising of bribery and corruption are among the facets of good governance that must prevail for the economy to grow to its full potential.

Lack of good governance -- exemplified by ineffective enforcement of regulations, lack of independent institutions and incompetent public administration -- leads inexorably to economic waste, inefficiencies and, as happened, eventually to political turmoil. In today's complex global economy, sustained good economic performance requires a range of well-functioning institutions that do not fall within a single leader's purview.