Regional Initiative on Governing Development and Developing Governance in the Middle East and North Africa (MNA)
This initiative aims to raise the level of debate and engagement on this issue within the Region among intellectuals, opinion leaders, policymakers, civil society and donor agencies including within the Bank itself, with the eventual aim of affecting the direction, content, and speed of reforms that aim to the way development efforts are governed so as to maximize improvement in living standards. It is the view in the region that the governance issue in MNA must be tackled regionally, as well as nationally and locally – in part to circumvent country sensitivities, and in part to forge a multicountry consensus on the need for greater action in this area. This work will eventually help inform a policy paper to help guide World Bank activities dealing with governance issues in countries in the region.
Accordingly, the two primary audiences for the initiative are those in the region who are carrying on the debate on governance and development – whether they are inside or outside of government, and Bank staff (and to some extent those in other external agencies) who work on development in the region.
The link between governance and development has been well-understood for some time.  In countries with poor governance, development paths have concentrated resources in the hands of the few, and economic and political institutions have been slow to adapt to the challenge of global flows of information, products and capital.
In the MNA region overall, weak governance institutions and processes could arguably be associated with disappointing economic performance – the region had, during the 1980s and the 1990s, disappointing rates of GDP growth. More seriously, per capita incomes in the two decades were essentially unchanged.
MNA countries and International Comparisons of Governance Indicators
The 2001 World Bank’s internal Country Performance and Institutional Assessment (CPIA) ratingsfor equity of public resource use, property rights, budgetary and financial management, and the quality of public administration generally put the simple average for the 9 MNA countries covered (Algeria, Djibouti, Egypt, Jordan, Iran, Lebanon, Morocco, Tunisia, Yemen) squarely in the middle of Bank borrowers. However, there is a very wide variation among MNA countries with Tunisia typically near the top and Lebanon and Djibouti near the bottom. Ratings for macroeconomic management and for transparency, accountability and corruption in the public sector tend to be comparatively lower for MNA countries, though again with wide variation.
A similar pattern emerges from the comparative data compiled by Kaufmann, Kraay, and Zoido-Lobaton: MNA countries place above the average on the rule of law and political stability (reflecting in part the characteristics of autocratic regimes including monarchies, of which there are probably proportionately more in MNA than any other region), in the pack in terms of government effectiveness and regulatory framework, but clearly below average on two key measures: voice and accountability and control of corruption. This conclusion is reinforced when the analysis is done adjusting for different income levels across countries. ( Daniel Kaufmann, Aart Kraay and Pablo Zoido-Lobaton (2002), "Governance Matters II: Updated Governance Indicators for 2000-01." http://info.worldbank.org/governance/kkz/.)
The perceptions of generally inadequate governance in the region belie a more complex reality, as measured by common indicators of governance. First, despite wide dispersion with regard to public sector characteristics, the MNA region on average performs as well or better as other regions along the dimensions of rule of law, stability of governments, general budgetary and financial management (including equity), and public administration. However, when compared with countries at similar income levels, MNA appears to perform below average on indicators of transparency, voice and accountability, and the control of corruption.
Second, the evidence does not point to systematically worse public service delivery. Despite persistent perceptions that public service delivery in MNA countries is weak, worldwide comparisons (including OECD countries) on a wide array of health, education, and infrastructure outcomes, taking account of differing income levels, suggest that – on average – the quality of service delivery in the region is not uniformly worse than in other regions and in some cases is significantly better. The averages do, however, mask wide variation across countries.
MNA versus others in service delivery
A cross-country analysis of over 50 service indicators, controlling for GDP per capita and regional differences, found that MNA countries on average have significantly better indices of some health outcomes – including longer life expectancy, lower expectation of disability, and greater access to sanitation facilities, often achieved with lower public spending. On the other hand, mortality rates in many countries remain above norm, and adult illiteracy is significantly higher in MNA. In terms of service delivery inputs, again, indicators such as enrollment rates are no different from other regions, and some indicators, such as small primary class sizes, are significantly better. With the exception of the use of telephones and computers, infrastructure services are typically no worse and sometimes, as in access to improved water sources, significantly better than in other regions.
Because of wide variation within the region, the statistical significance of results often depends on which countries are included in the sample, but the broad patterns appears to be robust. Reconciliation of these empirical results with widely held perceptions requires further work. Negative perceptions may reflect a tendency in MNA countries to use an OECD, rather than a developing country, standard, to make comparisons with the past when services may have been better even if they remain relatively good, or the existence of difficult bureaucratic access to services, which taints perceptions of quality.
Despite evidence that public administrations are relatively effective in the region, the other problems of poor governance in MNA – especially limited transparency, control of corruption, voice, and participation – are magnified by the comparatively large public sectors. Government spending, of the order of 30 percent of GDP in most MNA countries, are driven in part by an “employment imperative” that arises from the demographic bulge and relatively modest economic performance, leading to high unemployment rates (averaging over 15 percent).
Thus, the stereotypical country in the region is one with a large public sector, highly centralized government, an overstaffed civil service, and relatively little participation. Worse, dialogue on public sector reform is often held back by heightened political sensitivities, stemming in part from rising fundamentalist movements and efforts to curb them, from strong entrenched vested interests that control public policy – sometimes of longstanding feudal or tribal origins and sometimes reflecting the concentrated power of a sheltered business elite, from the prevalence of violence – some linked to the persistent conflict between Israel and the Palestinians and some to tribal and sectarian rivalries, and from the prevalence of autocratic regimes.
The activity on governance, by design, has two interlinked components: the formation and expansion of a network that diagnoses, debates and offers solutions for governance-related problems in the region, and the publication of a series of analytical pieces that explore the issues of governance and development in the region. While the analytical part of the exercise is critical to the effective functioning of the network – offering a common frame of reference and a common language within which to organize the dialogue – it will, in turn, be influenced and informed by the dialogue itself and the broad range of experiences and interests represented in the network. Thus, the outputs of this work include both traditional “products” (publications) and the “process” by which these papers are prepared and used. The two are closely interrelated and mutually supporting.
Accordingly, the activity will be spun out on two interwoven threads. The analytical path aims to use the core members of the network in partnership with the Bank team – to explore, within a common framework, what governance (and good governance) means for the region, and to distill the variety of experiences, causal forces, and possible solutions across the countries in the region into lessons for reinforcing governance. The debate and dialogue path aims to raise the quality of public dialogue on governance, to build the network among the initial members, and then, on the basis of the findings, to extend the discussion to a wider group of policy makers, opinion leaders, academics and others in civil society, with the goal of widening the network created under this activity as well as of strengthening other existing networks.
While one of the striking features of the MNA region is the paucity of data on governance generally – and on corruption and transparency in particular, this initiative does not envisage generating new raw data from surveys. Thus, the analytical work will necessarily rely on existing data and on informed opinion and analysis, although it can be expected to augment the demand for such data and, through its network, to facilitate efforts to collect it.
This consensus is being built from a growing understanding on how better governance can drastically improve institutional outcomes at a micro level (for example, Langseth et al 1997 on public service delivery in Uganda; and Yao 2001 on the effects of civil service reform in Shunde, China). The broad finding is also being confirmed by more recent rigorous cross-country regression analysis (for example, Kaufmann, Kraay and Zoido-Lobaton 1999 on the links between per capita income and a range of governance indicators).