Www.australia.cmu.edu Leadership in Governance and Accountability Prof Emil Bolongaita

www.australia.cmu.edu

Leadership in Governance and Accountability

Prof Emil Bolongaita


“Poverty is not natural. It is people who have made poverty and tolerated poverty, and it is people who will overcome it. And overcoming poverty is not a gesture of charity. It is an act of justice.” - Nelson Mandela

Outline


• Governance and market failures• Governance challenges in Nepal• Government failures: controlling itself (corruption)• Government failures: fostering enterprise (competition)• Thoughts on personal effectiveness


“the manner in which power is exercised in the management of a country’s economic and social resources for development”

- World Bank (1992)

“the structure and functioning of the legal and social institutions that support economic activity and economic transactions by protecting property rights, enforcing contracts, and taking collective action to provide physical and organisational infrastructure”

- Avinash Dixit (2009)

“a government’s ability to make and enforce rules, and to deliver services, regardless of whether that government is democratic or not”

- Francis Fukuyama (2013)

Governance


Market failures

If property rights are fully specified and transaction costs are zero, the allocation of resources will be efficient.

- Coase theorem

“a situation in which a market left on its own fails to allocate resources efficiently”

- Gregory Mankiw

“a situation in which a private economy lacks the incentives to create a potential market in some good, and the non existence of this good results in the loss of efficiency”

- Kenneth Arrow 1969


• Monopolies• Externalities• Public goods• Asymmetric information• Tragedy of commons• Destructive competition

Examples of market failures

Governance constraints


• Quality of governance of a country impacts on bureaucratic capacity to deal with market failures.

• Countries with higher quality of governance have more bureaucratic capacity to develop and implement effective responses to market failures.

• Countries with poorer quality of governance have more institutional and organizational limitations to effectively dealing with market failures.

Accountability matters


• Accountability for government responsibility to deal with market failures is diminished by corruption.

• Corruption purchases public officials and distorts the policy process – tackling wrong problems and seeking wrong solutions.

• Corruption co-opts regulators to favor the regulated, and disadvantages ordinary citizens, who pay disproportionately or even when they shouldn’t be paying at all.

• Corruption captures judges and law enforcers and destroys rule of law and prevents institutional development.

• Corruption prevents access of the poor and marginalizes them.

Low voice and accountability


http://info.worldbank.org/governance/wgi/pdf/c166.pdf




High political instability and violence






Low government effectiveness






Poor regulatory quality






Weak rule of law






High level of corruption






% of people asked, in the past three years, how has the level of corruption in your country changed

Government failure: corruption

Source: Daily Lives and Corruption: Public Opinion in South Asia, Transparency International, 2011.


Citizen experiences of bribery by sector or agency



Nepalis bribe to speed things up: efficiency calls!



Many accountability agencies, but not enough accountability?


• Limited jurisdiction• CIAA cannot investigate judiciary, military,

private sector, and impeachable officials • Limited capability of investigators and

prosecutors• Seconded to CIAA with limited experience

• Recruitment options narrow• Constrained by civil service rules, cannot

recruit at large

CIAA constrained


Nepalis trust media most to fight corruption



Nepalis consider political parties and parliament most corrupt: legitimacy problem



Ease of Doing Business in the World 2015

Source: www.doingbusiness.org

Government can tackle market failures through more effective policymaking, regulation, enforcement, and service delivery in fostering competition and enterprise development.

http://www.doingbusiness.org/

Domains of government effectiveness


POLICY

REGULATION

ENFORCEMENT

SERVICE DELIVERY

1) Policy – government decision2) Regulation – rules for implementing decision3) Enforcement – incentives to ensure implementation4) Service delivery – citizen benefits


Starting a business

Best in category: New Zealand - # of procedures (1), # of days (0.5 day), cost (0.3% of per capita income)


In DB 2014: Nepal made starting a business easier by reducing administrative processing time at the company registrar and by establishing a data link between agencies involved in incorporation process.



Building a warehouse

Best in category: Hong Kong - # of procedures (5), # of days (66 days), cost (0.4% of warehouse value)


In DB 2015, Nepal’s ratings improved after Kathmandu Metropolitan City (KMC) implemented an Electronic Building Permit System where permit and design plans and other docs can be submitted online and processing can also be tracked online.



Getting new electricity connection

Best in category: South Korea - # of procedures (3), # of days (18), cost (41% of per capita income)




Registering property

Best in category: Georgia- # of procedures (1), # of days (1), cost (0.1% of property value) Source: www.doingbusiness.org

In DB 2010, Nepal ranking improved when it made property transfer easier by reducing the registration fee.



Getting credit

Best in category: New Zealand – strength of legal rights (12), depth of credit information (8), credit bureau coverage (100%)


In DB 2010, Nepal improved access to credit information by starting to distribute historical data

Indicator Nepal South Asia OECDStrength of legal rights index (0-12) 7 5 6Depth of credit information index (0-8) 0 3 7Credit registry coverage (% of adults) 0 3.2 12.1Credit bureau coverage (% of adults) 1 11.3 67

DB 2015 Rank 116 DB 2014 Rank 111 Change in Rank -5



Indicator Nepal South AsiaPayments (number per year) 34 31.4Time (hours per year) 334 325.3Profit tax (%) 17.7 17.9Labor tax and contributions (%) 11.3 8.7Other taxes (%) 0.5 13.1Total tax rate (% profit) 29.5 39.7

DB 2015 Rank 126 DB

2014 Rank 120 Change in Rank -6

Paying taxes

Best in category: United Arab Emirates – Payments (4x), Time (12 hours)




Trading across borders

Indicator Nepal South Asia OECDDocuments to export (number) 11 8 4Time to export (days) 40 33.4 10.5Cost to export (US$ per container) 2,545.00 1,922.90 1,080.30Documents to import (number) 11 9 4Time to import (days) 39 34.4 9.6Cost to import (US$ per container) 2,650.00 2,117.80 1,100.40


Best in category: Singapore – docs to export and import (3), time to export (5 days), time to import (3 days), cost to export and import ($460)




Indicator Nepal South Asia OECD

Time (days) 910 1,076.90 539.5

Cost (% of claim) 26.8 30.4 21.4

Procedures (number) 39 43.3 31.5

Enforcing contracts

Best in category: Singapore – time (150 days), cost (25.8% of claim), procedures (21)

DB 2015 Rank 134 DB 2014 Rank 134 Change in Rank 0


In DB 2012, Nepal’s ranking improved due to Better oversight and monitoring in the court, and speeding up the process for filing claims.



Indicator Nepal South Asia OECD

Time (years) 2 2.6 1.7

Cost (% of estate) 9 10.1 8.8

Recovery rate (cents on the dollar) 43.7 36.2 71.9

Resolving insolvency


Best in category: Finland – time (0.9 years), cost (3.5% of estate), recovery rate (90.2 cents)



Becoming a more effective leader


1. Ask what needs to be done?2. Ask if is right for the organisation?3. Develop an Action Plan4. Assign responsibility for decisions5. Communicate decisions and actions6. Focus on opportunities, not problems7. Be productive with your meetings8. Say “We”, not “I”

Source: Peter Drucker, The Effective Executive.
