Is “Good governance” important for promoting economic development in Nepal?

Over the past decade, “good governance” has become of increasing importance to the development debate. This essay will strive to provide contextualisation for its introduction, including a brief overview of “development” and its discourse, and then proceed to offer some examination of what the term good governance denotes, differentiate good governance from preceding development trends, and finally examine some empirical evidence of the effects of good and bad governance in practice. The essay in its current confines will however only briefly touch upon or avoid altogether the much wider and significant discussions in various academic fields upon the much more exacting terms of “democracy”, “governance” and so forth.

The most effective way to define “development” is to understand what and how it is measured (or perhaps how its absence is measured). Until the 1980s, development was defined primarily by monetary advancement, with development analysts identifying levels of development according to the growth and increase of GDP and per capita GDP within a country. There are however multiple issues in defining development based on GDP alone. GDP fails to take account of the large informal sectors and non-financial trade prevalent in many countries, and, as a mean average, per capita GDP makes no adjustment for the economic inequality between people. A low GDP could indicate an immeasurable economy, and a high per capita GDP could hide a big divide between rich and poor.

With financial measurements alone proving insufficient to define and understand development, a composite index, named the Human Development Index (HDI), was created in 1990 by Mahbub ul Haq and Amartya Sen to ‘shift the focus of development economics from national income accounting to people centered policies’ (Haq 1995). The HDI was included in the United Nations Development Program’s (UNDP) Human Development Report and originally compared countries according to their life expectancy, literacy and per capita GDP. Since its launch, the report’s methodology has changed somewhat in response to changing interpretations of what development entails, to look more widely at health, “knowledge”, and living standards respectively, replacing the GDP measurement with gross national income (GNI), introduced to alter GDP according to any interest being paid (or received) to service foreign debts (UNDP 2010). The HDI has subsequently spawned a whole range of progeny for defining and measuring development, such as those based on purchasing power parity, access to development, consumption or contextualisation of poverty (Khan 1996).

Despite the HDI’s importance in defining what we understand as development, the index is restrained from tackling more recently identified and somewhat contentious factors due to its mandate to establish a broad global consensus and satisfy the requirements of a range of governments. The latest 2010 HDI report succeeds in adding inequality-adjusted and gender-inequality-adjusted indices, although neither participation, gender nor equality are included within the main index and instead have been relegated to their own separate indices, to avoid what the UNDP refers to as ‘measurement issues’ (UNDP 2010). The UNDP does however openly recognise that the HDI only offers a ‘broad proxy’ of development, and, in response to the above, and somewhat rebelliously, underlines that it ‘does not reflect political participation or gender inequalities’ (UNDP 2010).

The HDI is also criticised for only providing a macro-level narrative. More intuitive tools are now defining development according to a micro-level focus, identifying the groups within countries that are not developed or developing, and that are not obtaining the national HDI averages due to some particular characteristic, what Sen (1981) refers to as a process of indentifying those that are not developed and then aggregating their similarities. This method of breaking down levels of development according to those groups which cannot attain it is in contrast to the Keynesian tenet of top-down government intervention and the macro-level definition of “giving” development. The bottom-up and equitable approach to development inevitably intensifies further questions of whether services and support provided by the government and other sources are reaching the right places in an efficient and targeted manner, or whether the reason why they failed to reach the right place is because either those delivering such services and support did not comprehensively understand the local development needs and context, and could not make the right decisions accordingly, or they themselves are impeding development. Such uncertainty poses a further question: is a comparative lack of development in some places partly the result of bad governance?

The manner in which states, and the governments that manage them, have tried to tackle the comparative lack of development has largely been determined according to wider global and regional influences and trends. Strategies for developing have included Keynesian “modernisation” and import-substituting industrialisation in the 1950s; export expansion, agricultural “green” revolutions and population control in the 1960s; contextualisation, rejection of GDP growth in favour of pro-poor distribution, and trade liberalisation in the 1970s; and democratisation in the 1980s (Khan 1996). The Overseas Development Institute (ODI) summarises such trends according to global shifts in development thinking and emphasis as demonstrated in Table 1.

Table 1 (Hyden and Court 2002)

Focus Emphasis
1950s-60s Projects For the people
1960s-70s Programmes Of the people
1970s-80s Policies With the people
1990s-present Politics By the people

Success or failure in each of these trends is now widely agreed to be, to a significant extent, dependent upon the quality of the decision-making, policy creation and implementation ability of the government and state institutions. Whilst not wishing to delve too deeply into the various debates as to the exact meaning of governance,[1] for the purposes of this essay, we shall be primarily interested in governance in its broadest sense of rule-maker and rule-implementer, and consequently its ability to be either a facilitator or an impeder to development (Khan 1996, p.29).

Streeten’s polar opposite description is useful to understand what we mean by the facilitator or impeder government, and as a result discover what can be regarded as good and bad governance. He compares the differences between an idealistic, competent and informed government creating policy and implementing programmes above personal interest or conflict and promoting the common good overall, against a corrupt and inefficient predatory government making ill-informed decisions, maximising individual profit and undermining development at every opportunity (Streeten 1994). The earliest link established at the inter-governmental level between such good and bad governance and its effect on development is the World Bank’s 1989 report Sub-Saharan Africa: From Crisis To Sustainable Development which established that good governance was a vital factor in development, and that Sub-Saharan Africa had faired comparatively poorly in developing due partly to its bad governance. Following the aforementioned trend in advocating democratisation as the solution to development, no doubt partly causing what Huntington (1991) describes as the ‘third wave of democratisation’, this new trend of “good governance” began to emerge in the 1990s to explain why democratisation had not lived up to its developmental promises in some places (Abrahamsen 2000). Proponents of democratisation as a catalyst for development underlined that in many places, states had been wrongly characterised as having democratised after having held elections, but had not established alongside universal suffrage the development-inducing factors of advanced democracies, such as participation in decision making or accountability. Instead, they argued, in many places what resulted was the continuation of what Ayoade refers to as ‘states without citizens’, where people have so little trust or expectation in their elected government, they tend to ‘do it themselves’ (Ayoade 1988).

The new good governance trend built upon the democratisation advocates’ belief that the quality of governance by the government and state institutions could catalyse development. Brinkerhoff adds to Streeten’s description of good governance by summarising that good governance is the successful management of competing interests for the common good while incorporating and integrating effectiveness, legitimacy and security (2007). Khan expands our understanding by detailing the three resultant procedural aspects of good governance, and, in particular, the ensuing relationship between people and government policy and implementation (1996, p.28). They include:

(i)         the ability of citizens to express views and access decision making freely;

(ii)        the capacity of the government agencies (both political and bureaucratic) to translate these views into realistic plans and to implement them cost-effectively; and

(iii)      the ability of citizens and institutions to compare what has been asked for with what has been planned, and to compare what has been planned with what has been implemented.

These aspects also highlight one key relationship change in the good governance trend: the movement from a needs-based approach to development to a rights-based one, where people are entitled to a government that responds to their needs and where people are not deprived, but rather lack opportunity to develop. Alongside this changed relationship is the resultant establishment of clear norms and international standards of governance, and the obligation to have a strong civil society, including an independent media, in order to create checks and balances and provide for accountability. The new relationship relies upon good institutional design and broad areas of traditional political engineering (Robinson and White 1998, p.33).

The United Kingdom’s Department for International Development (DfID), a major partner in development projects, has expanded the necessary factors of good governance in a 2006 White Paper, Making governance work for the poor, creating the ‘Capability, Accountability and Responsiveness Framework’,[2] which aspires to create a ‘common language’ for good governance by describing the behaviour, relationships and organisational attributes required (Moore and Teskey 2006). The Overseas Development Institute (ODI) has expanded the White Paper in Table 3 below.

Table 3 (Court 2006)


Assessments of good governance are today also carried out by a variety of actors, inter-governmental, non-governmental, academic and corporate, including the World Bank Institute, the World Bank, Transparency International, the Economist Intelligence Unit, Global Integrity and the aforementioned ODI.

This is not to say that good governance is a commonly agreed doctrine in itself. Indeed, with so many different donors, inter-governmental institutions, non-governmental organisations and academics all defining and measuring, there is evidently a wide and sometimes conflicting disagreement as to the criteria and form of good governance, all of which proves problematic to those governments attempting to implement changes to improve themselves and their institutions (Abrahamsen 2000). Indeed, in 2010, this author himself took part in coordinating an international conference designed to add further to the global good governance debate.[3]

Some argue that the absence of an agreed definition of good governance is due to it being smoke and mirrors, democratisation in all but name, and a continuation of the hypothesis of Halperin, Siegle and Weinstein, which maintains that countries with democratic governments develop quicker and more sustainably that those without (Halperin, Siegle et al. 2005) (Siegle, Weinstein et al. 2004). Others go further and contend that the good governance doctrine’s claims to empower, democratise and liberate are in fact the ‘stuff of dreams’ (Rist 1997) and conceal the underlying intention of certain unnamed actors to advance economic liberalisation and promote the Washington Consensus, outlined by the economist John Williamson in 1989 as an ostensible agreement to endorse and further 10 free market policies as essential elements to create development and strengthen economies, and utilised by the International Monetary Fund (IMF) and the World Bank, amongst others (Williamson 1989). Abrahamsen (2000, p.xii) claims that the good governance doctrine:

‘narrates governance in a manner that serves to blur the distinction between democratisation and the retreat of the state from the social and economic fields and therefore constructs a new legitimacy for economic liberalisation in the form of structural programs.

She continues:

‘Empowerment in the good governance parlance signifies merely that people should “pull their weight” and make development projects more cost efficient, and again the near fusion of democracy and economic liberalism in the good governance discourse becomes apparent.

The claim that the doctrine of good governance has many similarities with its predecessor the doctrine of democratisation (see for example the principles of good governance in Table 3), or indeed with economic liberalisation, appears true to an extent. According to research carried out by White (1998, p.25), the number of authoritarian governments that could be classed as exercising good governance are few and far between, and those that do, are in fact verging on the edge of democratisation. White also argues that in those governments that have been:

‘singularly unsuccessful in establishing a capacity for good governance and socio-economic improvement [a] change in political regime may be highly relevant as an alternative way of achieving an “effective developmental state” [and that the] central features of liberal democracies’ selection of political leaders through popular elections, open and unfettered competition for political office, and the pressures exerted by a free press and public opinion are essential mechanisms for creating a state which is responsive, efficient, and accountable.’

However, as some proponents of good governance argue, democratic countries with relatively good governance systems such as those in Latin America have been overtaken in many development measurements such as the HDI by others with similarly good governance but without or with only limited democratic institutions, such as Japan, South Korea, Singapore, Taiwan, Hong Kong, and so forth. Jeffries (1993) adds to the aforementioned countries the governments of Rawlings (president of Ghana, 1993-2001) and Museveni (president of Uganda, 1986-present) as instances of good governance without democracy, and goes on to avow that the creation of good governance is important to development far beyond the nature of its political category. Jeffries believes that democratisation is ‘relatively speaking an irrelevance’ and that a government’s primary responsibility, regardless of it being democratic or authoritarian, is to create an effective state, establish good quality institutions and build state capacity and commitment, all elements of good governance.

Khan (1996, p.2) supports Jeffries’ argument that good governance is more important for development than democratisation, stating that:

‘the varied experiences with poverty alleviation in Asia do tend to suggest that the alleviation of poverty not only requires focused planning approaches but, for these approaches to succeed, a sensitive and a committed governance is also required.

But Khan also goes on to contest Abrahamsen’s view that good governance in such countries is synonymous with economic liberalisation and the Washington Consensus’ promotion of the small state, arguing that amongst the Asian Tigers (namely Hong Kong, Singapore, South Korea and Taiwan, so-called for their rapid industrialisation between the 1960s and 1990s), the most significant universal feature was good governance and the states’ aptitude to know when it was necessary to intervene, and ability and capacity to do so. Sklar (1987, p.714) appears to find the most appropriate compromise by broadly supporting Khan and Jeffries, whilst giving some ground to Abrahamsen and White, in arguing that ‘democracy comes to every country in fragments or parts; each fragment becomes an incentive for the addition of another’. In essence, good governance is broadly more likely to be achieved in democratic states, but good governance can occur in more authoritarian situations too.

As many political scientists have argued, when people gain even limited development with greater access to education, communications and what Diamond (1989) refers to as the ‘democratic ethos’, any legitimacy for governing that is grounded in tradition, religion or custom becomes difficult to maintain and people almost naturally call for democratisation. In response, many governments have pledged to democratise and by doing so deliver development to the people. However, in some cases such new democratic governments fail to instigate good governance simultaneously due to weak institutional design (Lijphart and Waisman 1996), be it that poorly designed presidential systems have a tendency to impede representation and institutional building (O’Donnell, Schmitter et al. 1986), or that badly designed parliamentary systems can fail to create consensus or produce clear lines of accountability (Haggard and Kaufman 1994).

In newly democratising states, particularly in Africa and Latin America (Rueschemeyer, Stephens et al. 1992), good governance is often neglected in the scramble for democracy, as old elites attempt to defend their higher status and living standards at the expense of creating good quality institutions or a stable and peaceful country. Such states often have limited or repressed civil societies, state institutions that purposefully fail to represent the people equally, and systems based on clientelist or patronage. Khan (1996, p.1-3) explains such democratic states in Asia as consisting of:

‘unfavourable power relationships, insensitive government apparatus and undemocratic political structures [that] consistently disadvantage the poor and maintain simultaneously a disproportionately smaller wealthier class.

He continues:

‘not all population groups living in these countries have benefited equally from the success of their overall economic development. In fact despite economic development at the macro level in some countries, unfavourable policy environments, unequal power relationships and unequal access to state resources may actually have helped to benefit a minority at the expense of the larger community.

Furthermore, we can extract from Diamond’s political science hypotheses that the presence of democracy itself can be a hindrance to good governance. If development fails under an authoritarian government, it is the authoritarian system itself that is at fault and must be changed, whereas if development fails under a democratic government, it is the government’s fault and the government must be changed rather than the system itself, which may consequently be prolonging bad governance (Diamond 1989).

Having defined and differentiated good governance and established that democracy, while sharing many commonalities, is not one and the same, and that, in some cases, has itself undermined or at least slowed the formation of good governance, it is important to outline more clearly the evidence that good governance alone is necessary for development to occur. Khan’s case study research in Asia shows quite clearly that good governance positively influences and enables development, even more so than the presence of rich resources (1996, p.2):

‘economic development trends in Asia suggest that countries which maintain good policies with good governance have achieved better results than those which, despite a generous resource base and infrastructure, have performed relatively badly.

Khan’s research compares two geographically, politically and (initially) demographically similar countries, the Philippines and Malaysia, and contrasts the effects of their respective bad and good governance systems upon their development over four decades (see Table 4). Solely focusing on their GDP growth rate, Khan finds that Malaysia’s good governance is a key determinant to its economic success, declaring the Philippines failure to develop as being due to its highly bureaucratic, hierarchical and elitist governance structures, which overwhelmingly fail to achieve either the ability or the sensitivity to address development needs.

Table 4 (Khan 1996, p.67-115)

1965-73 1973-80 1980-90
 Philippines 5.4% 6.3% 1.1%
 Malaysia 6.7% (^24%) 7.5% (^19%) 5.2% (^473%)

We can add further to Khan’s development hypothesis by examining the comparative difference between both countries in regards to their HDI results over a similar period (see Table 5). With the exception of adult literacy levels, which the Philippines had an early lead over Malaysia, with the latter rapidly catching up, the results show Malaysia to be clearly in the lead, and, as Table 4 reflects, comparatively more stable in its increases in comparison to the Philippines.

Table 5 (UNDP 2010)

1980 1990 2000 2010
Philippines Life expectancy 61.1 65.4 69.5 71.9
Adult literacy 83.3 93.6 92.6 93.5
Income (GNI PPP) $2815 $2568 $2977 $3903
Malaysia Life expectancy 66.7 70.1 72.5 74.3
Adult literacy 69.5 82.9 88.7 92.2
Income (GNI PPP) $5109 $6889 $10218 $13737

If we then add data from the Corruption Perceptions Index, produced by the non-governmental organisation, Transparency International (see Table 6), we can see that the experienced level of corruption, established previously as an indicator of the quality of governance, is substantially higher in the Philippines as compared to Malaysia, which is almost on par with some countries in Western Europe.

Table 6 (Transparency-International 2010)

1995 2000 2005 2010
Philippines 2.77 2.8 2.5 2.4
Malaysia 5.28 4.8 5.1 4.4

More broadly, empirical research into particular components of good governance and their effect on development show widespread positive effects. A 1995 World Bank report testing the relationship between strong property rights and development concluded that ‘institutions that protect property rights are crucial to economic growth and to investment’ and in some case studies, ‘point to effects that rival even those of education’ (Knack and Keefer 1995, p.18-19). The report continues to state that so important are the institutions that protect property rights, that they affect not only growth, but also investment and the efficiency of such investment.

Other empirical research, such as a study of 152 countries carried out by La Porta, Lopez-de-Silanes, Shleifer, and Vishy (La Porta, Lopez-de-Silanes et al. 1999), point to a strong positive link between development and good governance, and in particular efficient, responsive and non-corrupt interventions by government, and of significant relevance to our earlier debate, not the small government advocated by the Washington Consensus, but rather a medium size government with a large public sector collecting comparatively high levels of taxation. Their research also highlights the cyclical nature of good governance and development, the first contributing to the second, and those experiencing the second then calling further for the first. Reversely, evidence of bad governance such as inefficiency, lack of participation, poor property rights, corruption and inadequate provision of public services results in amongst other outcomes, higher child mortality, lower levels of literacy and inferior infrastructure.


We have explored in this essay the continually evolving target of “development” as constantly demanding the creation of new approaches and new doctrines in response (Hyden and Court 2002, p.2). The latest doctrine, “good governance” is not entirely, as Abrahamsen (2000, p.xi) would have us believe, ‘merely the latest reproduction of the “dream of development”’, or an amalgamation of economic liberalism and democratisation, although elements within its advocates do prompt a sense of déjà vu. Neither is good governance a luxury for rich countries or confined to those regions that are comparatively more developed.[4] Instead, good governance is a somewhat broad concept that combines and applies a range of values such as participation, fairness, decency, accountability, transparency and efficiency, to the manner in which governments and state institutions work. Our brief examination and comparison of the Philippines and Malaysia as examples of good and bad (or at least better and worse) governance over the past four decades is symbolic of the wide amount of empirical evidence available that suggests that the quality of governance is a necessary factor to development. While it can never be declared that good governance is the final doctrine we shall see in relation to development, it is indisputable that good governance encourages and enables people to respond to and grasp a wider and higher quality spectrum of opportunities which will ultimately result in development (Khan 1996, p.117).

Finally, in a last salute to those questioning the relevancy of the good governance doctrine, in future far more needs to be asked regarding two particular areas of good governance that were unfortunately beyond the remit of this short essay: firstly, whether or not donor aid itself obstructs good governance by removing the causal link between payment of taxation and governance, particularly in regards to accountability; and secondly, why the good governance agenda is not necessarily pursued with the same resolve and willpower within those international and donor institutions that are flying its flag.


Abrahamsen, R. (2000). Disciplining democracy : development discourse and good governance in Africa. London, Zed.

Ayoade, J. (1988). States without citizens. The precarious balance : state and society in Africa. D. Rothchild and N. Chazan. Boulder ; London, Westview: x,357p.

Brinkerhoff, D. W. (2007). Governance in post-conflict societies : rebuilding fragile states. London, Routledge.

Court, J. (2006). Governance and aid effectiveness: Has the White Paper got it right? . London, Overseas Development Institute.

Court, J., G. Hyden, et al. (2002). Governance performance: the aggregate picture. World Governance Survey Discussion Paper 3 New York, United Nations University.

Diamond, L. (1989). “Beyond authoritarianism and totalitarianism: strategies for democratization.” Washington Quarterly 12(1): 141-63.

Haggard, S. and R. R. Kaufman (1994). “The Challenges of Consolidation.” Journal of Democracy 5(4): 5-16.

Halperin, M. H., J. T. Siegle, et al. (2005). The democracy advantage : how democracies promote prosperity and peace. New York ; London, Routledge.

Haq, M. u. (1995). Reflections on human development : how the focus of development economics shifted from national income accounting to people-centred policies, told by one of the chief architects of the new paradigm. New York ; Oxford, Oxford University Press.

Huntington, S. P. (1991). The third wave : democratization in the late twentieth century, University of Oklahoma Press.

Hyden, G. and M. Bratton (1992). Governance and politics in Africa, Lynne Rienner Publishers.

Hyden, G. and J. Court (2002). Governance and Development. World Governance Survey Discussion Paper 1. New York, United Nations University.

Jeffries, R. (1993). “The state, structural adjustment and Good governmet in africa’.” Journal of commonwealth and comparative studies 31(1): 20-35.

Khan, M. A. (1996). Economic development, poverty alleviation and governance : the Asian experience. Aldershot, Avebury.

Knack, S. and P. Keefer (1995). Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators. Washington DC, World Bank.

La Porta, R., F. Lopez-de-Silanes, et al. (1999). The Quality of Government. NBER Working Paper Series No 6727. Cambridge, Mass, National Bureau of Economic Research.

Lijphart, A. and C. H. Waisman (1996). Institutional design in new democracies : Eastern Europe and Latin America. Boulder, Colo. ; Oxford, Westview Press.

March, J. G. and J. P. Olsen (1995). Democratic governance. New York, Free Press.

Moore, M. and G. Teskey (2006). The CAR Framework: Capability, Accountability, Responsiveness. What Do These Terms Mean, Individually and Collectively? A Discussion Note for DFID Governance and Conflict Advisers. London, Institute of Development Studies.

O’Donnell, G. A., P. C. Schmitter, et al. (1986). Transitions from authoritarian rule : Conference : Papers. Baltimore, Johns Hopkins University Press.

Rist, G. (1997). The history of development : from western origins to global faith. London, Zed Books.

Robinson, M. and G. White (1998). The democratic developmental state : politics and institutional design. Oxford, Oxford University Press.

Rueschemeyer, D., E. H. Stephens, et al. (1992). Capitalist development and democracy. Cambridge, Polity.

Sen, A. (1981). Poverty and famines : an essay on entitlement and deprivation. Oxford, Clarendon, 1982.

Siegle, J. T., M. M. Weinstein, et al. (2004). “Why democracies excel.” Foreign Affairs 83(5): 57-71.

Sklar, R. L. (1987). “Developmental Democracy.” Comparative studies in society and history 29(1): 714.

Streeten, P. (1994). Strategies for human development : global poverty and unemployment. Copenhagen, Handelshøjskolens Forlag.

Transparency-International (2010). Corruption Perception Index. Berlin, Transparency International.

UNDP (2010). Human Development Report. New York, United Nations Development Program.

Williamson, J. (1989). Latin American Readjustment: How Much has Happened. Washington DC, Institute for International Economics.



[1] For more on the governance debate, see Hyden, G. and M. Bratton (1992). Governance and politics in Africa, Lynne Rienner Publishers, or March, J. G. and J. P. Olsen (1995). Democratic governance. New York, Free Press.

[2] For an example of the Framework in practice, see the review of Nigeria

[3] See for details of a 2010 campaign to raise the importance of information flows, particularly via a free media, on good governance in the run up to the United Nations 2010 MDG+10 Summit in New York.

[4] See for example good governance in Tanzania, in Court, J., G. Hyden, et al. (2002). Governance performance: the aggregate picture. World Governance Survey Discussion Paper 3 New York, United Nations University.


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