The issues and implications around economic governance

Today, in Bangladesh, economic governance is seen as a critical factor for a society without inequalities and exploitation and to ensure a structure with transparency and accountability. As a concept, economic governance may cover a lot of grounds. 

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At one extreme, it is sometimes used to cover everything under sound economic management. In that case, economic governance becomes all encompassing, including policies -- macro, fiscal, monetary as well as institutions for implementing those policies. 

 

At the other extreme, economic governance, as a concept, is sometimes kept limited to the management of economic institutions. Most of the diverse notions of economic governance lie between these two extremes. 

 

A crucial issue, however, is to recognize that economic governance is a means, and not an end itself. If that premise is accepted, then it is essential to contextualize economic governance, ie, economic governance for what. Thus, for our purpose also, we have to contextualize economic governance in the perspective of inclusive growth and poverty reduction. 

 

 

One critical element for ensuring inclusive growth and poverty reduction is the issue of equity -- equitable participation as active agents in growth and poverty reduction and equitable benefits in the fruits accrued. One fundamental pre-requisite to ensure both inclusive growth and poverty reduction is equitable access to basic social services (health, education, safe water) and productive resources (land, credit, productive inputs). 

 

 

If this is done, then people can effectively build their capabilities, participate in the growth and the poverty reduction process, take advantage of the opportunities, and reap benefits from them. 

Thus, in the perspective of inclusive growth and poverty reduction, economic governance should be contextualized in terms of equitable access to basic social services and productive resources.

 

 

Markets play a major role in the provisioning of basic social services and productive resources, both through public as well as private means. But people enter the markets with different levels of endowments, which determine their level of access to basic social services and productive resources. 

 

 

So, the playing field is uneven. The role of economic governance in the context of the market can be to provide a regulatory framework which can ensure a more even playing field. Only then an equitable access to basic social services and productive resources can be ensured. 

 

 

The issue of regulatory framework for the market becomes even more important in the context of private provisioning of the services. The private provisioning can be efficient, but not necessarily equitable. The state can play a major role in outing a regulatory framework to ensure equity along with efficiency. 

 

 

Regulatory frameworks for markets may become a shield in protecting access of poor people to basic social services and productive resources particularly in times of vulnerabilities and risks. 

 

 

Such vulnerabilities and risks may occur during any crisis setting -- financial turmoil, natural disasters, or political upheaval and conflicts. Regulatory frameworks for markets can ensure protection of services and resources for not only the vulnerable groups operating within markets, but with proper linkages, it may also cover people who are outside the markets. 

 

The allocation of resources in an equitable fashion is thus a major economic governance issue

 

The provisioning of basic social services and productive resources is dependent on the resource envelope. The allocation of resources in an equitable fashion is thus a major economic governance issue. In this context, economic governance may encompass the following seven areas:

 

First, there is a revenue generation aspect of the resource envelope. Issues related to revenue generation include identification of base, efficiency in administration, and equity in burden-incidence. Economic governance should cover all three areas.

 

Second, there are allocation, reallocation, and expenditure issues. Allocation and reallocation of resources to human priority issues, particularly to basic social services and fundamental productive resources have to be addressed by economic governance. 

 

Expenditures on these fronts would help enhance not only total provisioning of such services and resources; but when they are accompanied by other measures, such as the location of these services, the appropriate use costs to poor people, the equitable access issue is also improved.

 

Third, external official development assistance (ODA) is also an important part of the resource envelope. Negotiations with external development partners, prioritizing the use of ODA in line with national strategies, management of ODA including issues of coordination are aspects of economic governance which have implications for equitable access to basic social services and productive resources.

 

Fourth, economic governance should also cover issues like management of external debt, debt sustainability and use of debt relief for human priority concerns.

 

Fifth, decentralization of public resource management is a critical area for economic governance. The respective mandate, role and responsibilities of national governments and sub-national governments in resource generation, allocation, and expenditures are important issues in both overall provisioning of as well as access to basic social services and productive resources.

 

 

Sixth, efficiency in resource use is a major determinant both in areas of overall provisioning of basic social services and productive resources as well as access to them. This is an issue which economic governance should look at.

 

 

Seventh, the issue of resource envelope -- both in terms of generation and allocation -- is related to monetary policies, which are managed by an independent central bank. Economic governance should concentrate on the working of this autonomous institution, the policies of which, in conjunction with fiscal policies, will have an impact on resource generation and allocation for equitable access to basic social services and productive resources. 

 

Economic governance can cover issues of regional or sub-regional public goods. Regional public goods can take the form of trans-national highways, or sub-regional labour and environmental standards, or regional framework for water-sharing and conflict resolution, environmental regeneration. 

For example, in terms of trans-national highways, economic governance can focus on inter-country consortia; or in case of labour and environmental standards, it can concentrate on sub-regional legal aid centres for trade negotiations; or in areas of migration, it may work on regional migration frameworks. 

 

 

With these kinds of public goods, groups of countries, particularly from poorer regions, have a better negotiating power with regard to their partners, which may ultimately result in better benefits from globalization, leading to better overall provisioning of basic social services and productive resources as well as equitable access. 

 

Dr Selim Jahan is Former Director, Human Development Report Office and Poverty Division, United Nations Development Program, New York, USA.