M.G. Quibria

Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia

This paper seeks to explore the relationship between economic growth and governance performance in Asian developing economies. This exploration yields some interesting conclusions. First, notwithstanding its tremendous economic achievements, the state of governance in Asia is not stellar by international comparison. Indeed, the majority of these countries seem to suffer from a governance deficit. Second, contrary to our expectations, data do not suggest any strong positive link between governance and growth: paradoxically, countries that exhibit surpluses in governance on average grew much slower than those with deficits. The paper ends with some conjecture about this apparent paradox.

Aid effectiveness: research, policy and unresolved issues

This paper provides a critical review of the recent research on aid effectiveness. It argues that there is an enormous disjunction between research on aid effectiveness and current policies and practices: in particular, recent empirical research efforts have spawned a large body of work that is rife with controversies and insiders’ drama, but sheds little light on important policy issues regarding allocation, design and delivery of foreign aid. The paper argues that a convergence of the two universes – research and policies – is essential both for a sophisticated understanding of the underlying issues and for formulating appropriate policies and practices for aid effectiveness.

Foreign Aid and Corruption

The history of foreign aid has been inextricably linked with corruption. Since the inception of the International Development Association (IDA) in 1960, a large body of writings has emerged on the corrosive effect of corruption that undermines the effectiveness of foreign aid. To improve the development impact of foreign aid, the international development community has taken a firm stance against corruption. This essay begins with a brief discussion of the definition, type and measurement of corruption; it argues that given the underlying conceptual and data issues, there is no index of corruption that can meaningfully capture all its multifarious dimensions into a single number. This, in turn, renders the task of measuring inter-temporal variations of corruption in a country virtually impossible. This section is followed by a review of various anti-corruption measures recently implemented by donors and recipient countries to combat corruption. This review suggests that these measures have had a substantial impact on combating corruption in aid-recipient countries. This success notwithstanding, the recent intensive campaign against corruption appears to have reached a point of diminishing returns in terms of its impact on aid effectiveness. The final section argues that combating corruption is not an end in itself; it is a means to an end (i.e., attaining aid effectiveness). The current strategy of combating corruption emphasizes establishing new departments, implementing new procedures, and strengthening prosecution; it has little direct bearing on the results foreign aid seeks to achieve, such as inclusive growth, efficient service delivery or environmental sustainability. The strategy of combating corruption should, therefore, be subsumed under the strategy of aid effectiveness for maximum development impact.

Foreign Aid and Corruption: Anti-Corruption Strategies Need Greater Alignment with the Objective of Aid Effectiveness

Abstract:The history of foreign aid has been inextricably linked with corruption. Since the inception of the International Development Association (IDA) in 1960, a large body of writings has emerged on the corrosive effect of corruption that undermines the effectiveness of foreign aid. To improve the development impact of foreign aid, the international development community has taken a firm stance against corruption.

The Case Study of Aid Effectiveness in Bangladesh: Development with Governance Challenges

This paper provides a critical review of aid effectiveness in Bangladesh. Focusing on the contributions of major donors, the paper uses a qualitative triangulation approach to assessing aid effectiveness, based on the subjective judgments of donors and recipients. This approach was motivated by the deficiencies of the currently available quantitative methods as well as by a lack of adequate and reliable quantitative data. Foreign aid has had a mixed performance in Bangladesh. The responsibility for the failure lies with both the government and donors. Donors’ current approach to aid delivery has many shortcomings; addressing them would require changes that (a) allow for greater flexibility in the delivery of aid; (b) provide recipient countries with more policy space; and (c) emphasize results. However, these steps, by themselves, will be insufficient, unless followed with complementary measures by the recipient country — to ensure good governance and to enhance domestic capacity to implement sophisticated projects.In the past, despite infrastructural constraints, policy deficiencies and weak governance, the Bangladesh economy achieved considerable success in many areas. This success — reflected in exports of garments and textiles, remittances from overseas workers and breakthrough in agricultural production — is a testament to people’s entrepreneurial abilities. If the country can maintain its current growth momentum, it would soon join the ranks of the middle-income countries, but the path to this middle-income status is paved with many obstacles — of policy and infrastructure as well as of weak governance. Even though Bangladesh made a transition from authoritarianism to democracy, it shares many of the flaws of a fledgling illiberal democracy. Although the system allows for institutions of representations such as elections and parliament, it lacks institutions of restraint, as provided by an independent judiciary, by separation of powers to maintain law and order and to ensure the rule of law etc. An illiberal democracy can be a breeding ground for corruption and crony capitalism.These governance problems notwithstanding, the country did well in the past. However, it would be wrong to extrapolate the past into the future. In the process of economic development, the role of institutions varies from one stage to another; many aspects of governance that were less critical in the past will become more central in the future — as the economy makes a transition from a predominantly rural and agricultural phase to one that is urban and industrial. The hope is that the political leadership will initiate changes in policies and institutions in synchrony with the evolving exigencies of the economy. If that happens, foreign aid could be an enormous catalyst for economic development — and poverty may soon become a thing of the past.