In recent years the World Bank has been a prolific producer of documentation discussing governance as a general tool in the international development process. However, during the course of the Twelfth Replenishment discussions for the International Development Association (IDA12), the concept of good governance was specifically mentioned in the context of institutional assessment criteria. The World Bank’s perspective of good governance is set out below in general terms and then the view of the same concept as expressed in the IDA12 discussions is mentioned specifically.
In the 1992 report entitled “Governance and Development”, the World Bank set out its definition of good governance. This term is defined as “the manner in which power is exercised in the management of a country’s economic and social resources for development”.
The report stated that the World Bank’s interest in governance derives from its concern for the sustainability of the projects it helps finance. It concluded that sustainable development can only take place if a predictable and transparent framework of rules and institutions exists for the conduct of private and public business. The essence of good governance was described as predictable, open and enlightened policy, together with a bureaucracy imbued with a professional ethos and an executive arm of government accountable for its actions. All these elements are present in a strong civil society participating in public affairs, where all members of the society act under the rule of law. In analysing governance, the World Bank drew a clear distinction between the concept’s political and economic dimensions. As the World Bank’s mandate is the promotion of sustainable development, its call for good governance exclusively concerns the contribution the concept makes generally to social and economic development and specifically to the World Bank’s fundamental objective of sustainable poverty reduction in the developing world.
The World Bank identified three distinct aspects of governance:
(a) the form of the political regime;
(b) the process by which authority is exercised in the management of a country’s economic and social resources for development; and
(c) the capacity of governments to design, formulate and implement policies and discharge functions.
The first aspect is deemed to be outside the World Bank’s mandate, thus its focus has been on the second and third aspects.
In the 1994 report entitled “Governance: The World Bank’s Experience”, the recent progress made by the Bank in this area is set out under four different aspects, which provide a template against which its governance work can be assessed:
(a) Public-sector management. This is the most readily identified dimension of the World Bank’s governance work. The language of public-sector management is predominantly technical, changing the organizational structure of a sector agency to reflect new objectives, making budgets work better, sharpening civil-service objectives and placing public-enterprise managers under performance contracts.
(b) Accountability. Governments and their employees should be held responsible for their actions.
(c) Legal framework for development. Appropriate legal systems should be created that provide stability and predictability, which are the essential elements in creating an economic environment in which business risks may be rationally assessed.
(d) Transparency and information. The themes of transparency and information pervade good governance and reinforce accountability. Access to information for the various players in the market is essential to a competitive market economy.