Improved public governance in Middle East could boost economic growth by one percentage point a year

Better Governance for Development in the Middle East and North Africa, second in a series of reports focusing on development in MENA, argues that good governance rests on the twin values of inclusiveness and accountability. The report reveals that the failure of MENA countries to ensure these has weakened their economic growth and human development. And, as men and women in MENA are living today at a time of rising expectations and growing economic challenges, the gap between societies' achievements and people's aspirations puts development in MENA at risk.

"Development is not only about incomes and wealth. It is also about the broader quality of life: having educational opportunities, access to quality healthcare and clean water, equality of treatmen and the freedom to participate in the governance process," says Christiaan Poortman, World Bank Vice President for the Middle East and North Africa. "Good governance is essential to secure these values, because it ensures that state authority is exercised in ways that respect the integrity, rights and needs of everyone in the country."

Development Handicapped by Limited Inclusiveness and Accountability
Governments in MENA have sought to provide a broad range of public goods, achieving remarkable results in recent years. Lebanon raised the rate of childhood immunization from virtually none to more than 90 percent in one decade. Tunisia increased the number of phone lines by fivefold, also in one decade. And despite the water scarcity afflicting most countries, the region enjoys among the best access to water for its people.

"Gains of the last decades in basic services are being threatened by weaknesses in inclusiveness," cautions Mustapha Nabli, Chief Economist for the Middle East and North Africa region at the World Bank. "Pressures from rising populations, increasing urbanization and growing complexity of modern public services have strained the coverage of many public services, creating gender inequities and urban-rural gaps in literacy and other social indicators."

According to the report, inclusiveness is based on equality, which is enshrined in virtually every constitution in MENA. Inclusiveness protects people's basic rights, treating everyone uniformly before the law, allowing all to participate in governance, and assuring equal opportunities to access public services.

The region is particularly lagging in the second core value underpinning good governance, accountability. This draws on the notion of representation—of holding public figures answerable to their constituents—a value that most MENA constitutions also recognize by vesting sovereignty in the people. Accountability depends on public transparency, which requires knowledge and readily available information on what government does. Accountability also rests on mechanisms such as contestability and a strong ethic of service to the public, which encourage government officials to act in the public's interest—or be removed from office for poor performance.

Some countries in the region have made strides towards greater transparency. Iran publishes its full national budget and televises its parliamentary debates, like some other countries in the region. The media is also contributing to the public debate on government accountability in countries like Iran and Algeria, and is particularly vocal in Lebanon. Satellite televisions are playing an increasingly important role in transmitting information across previously impenetrable borders.

But in general, MENA countries exhibit a pattern of limited and reluctant transparency. It has the least empirical data on issues that relate to governance. No country assures citizens the right to government information. Activities of the media are carefully monitored and controlled in most countries, stifling public debate. And although countries like Bahrain and Morocco have recently strengthened parliaments, accountability mechanisms in the region consistently continue to be weak because of excessive concentration of power in the executive authority and limited channels for citizen participation. Contestability for most public officials through regular, fair and competitive processes remains rare.

Weak Governance at the Root of Deficiencies in Growth and Public Service Delivery
Weak governance has taken a toll on economic performance. Productivity has been on the decline in MENA for three decades. Average annual per capita growth for the region stands at 0.9 percent since 1980, less than that of sub-Saharan Africa. Studies have shown that if, over the past 15 years, MENA had matched the average quality of administration in the public sector for strong performers in Southeast Asia (Malaysia, Indonesia, Philippines, Singapore and Thailand), the region's growth rates would have been higher by about one percentage point a year. This would have meant that average incomes per person would be double what they are today.

"There is clearly a strong economic rationale for MENA countries to embrace good governance," stresses Charles Humphreys, Lead Economist at the World Bank and lead author of the report. "The quality of governance helps shapes the quality of policy formulation and implementation, which in turn determines whether there is effective delivery of public services and an attractive business environment for investors."

The absence of a sound governance system, therefore, hinders governments' ability to meet the growing demand for more jobs and better social services, as well as more rights, from a burgeoning young population. Economic growth and job creation is restrained by sluggish private investment, which in turn is the result of a poor overall climate for investment. This again is caused by poor governance—policies that are often inefficient, ineffective or biased, by bureaucratic structures that are uncertain, ineffective and costly, and by inadequate public services needed by businesses. In a world where public services are increasingly complex—from ensuring internet access to delivering market-relevant education—the inflexible policies, limited flows of information and large cumbersome administrations of many MENA countries fail to keep up with demands and aspirations of both businesses and citizens. As a result, human development suffers both from material and social deficits and from the failure to assure human rights for all.

Public governance weaker in MENA than in the rest of the world
The MENA region ranks at the bottom in terms of overall governance quality when compared with countries with similar characteristics in East Asia, Eastern Europe or Latin America, as well as with other developing countries. This is one of the key findings in Better Governance for Development in the Middle East and North Africa, which constructed an index based on worldwide data for 22 indicators. Within the MENA region, richer countries have, on average, better scores on the governance index—a pattern that also holds for the world as a whole.

But digging deeper, the report makes a fundamental distinction. MENA countries are typically only slightly worse than their comparator countries on an index of the quality of administration—which assesses the strength of the rule of law and protection of property rights, the efficiency of the bureaucracy, the quality of regulations, and the control of corruption.

But on an index of public accountability—which assesses how well the citizens can access government information, openly debate public policy in the media, and participate in processes to hold their leaders and public officials accountable—virtually every MENA country ranks behind, typically far behind almost all comparator countries. The low rating persists across countries of different incomes. In fact, the richer the MENA country, the worse the gap with its worldwide peers.

Bridging MENA's Governance Gap
As the region's index scores suggest, the governance challenge does not lie only in the capacity of MENA administrators. It is specifically in the institutions that ensure public accountability that governance in MENA is weakest.

"For the young men and women entering the labor force, the region's economies need to create productive income-generating opportunities through economic growth, and the government needs to provide key public services ranging from education to a good business environment," explains Nabli. "Good governance is central to the solution—it holds the promise of growth and social improvement; it is also a fundamental dimension of human development itself."

Countries—both their governments and people—need to therefore commit to a program to enhance governance, says Better Governance for Development in the Middle East and North Africa.

"Meeting the governance challenge is no simple matter, either technically or institutionally," explains Humphreys. "Moving towards greater inclusiveness and accountability requires time, because it involves changing traditions and confronting privileged interests. It requires tolerance of compromises and mistakes, while the institutions required for good governance, especially those of citizen participation, gain capacity and credibility. But there are ample grounds for optimism, stemming from experience both globally and within the region."

The report offers a structured program of reform that revolves around 'five pathways' that lead to better governance. They include expanding inclusiveness, national actions to strengthen external accountabilities, national checks and balances to strengthen internal accountabilities, local actions to strengthen external accountability and administrative measures for better internal accountability. And the elements of each country's program and the specific mechanisms for implementing them will be matters for individual societies to decide through open debates and consultations.

"The next steps are the hands of the countries in the MENA region," explains Jean-Louis Sarbib, former World Bank Vice President for the Middle East and North Africa. "The people and their governments must publicly commit to bring the quality of their governance up to par with the best in the world, and to formulate and implement their programs to do so in a participatory process that guarantees inclusiveness and accountability.