GOVERNANCE AND ANTI-CORRUPTION REFORMS IN DEVELOPING COUNTRIES: POLICIES, EVIDENCE AND WAYS FORWARD

Mushtaq H. Khan

No 42, G-24 Discussion Papers from United Nations Conference on Trade and Development

Abstract: International institutions and in particular the World Bank and the IMF are rightly giving a great deal of attention to issues of governance in developing countries, and particularly corruption. While they are right to believe that governance matters, governance in the most successful developing countries has often been starkly at variance with the good governance model. Even the most successful developing countries have suffered from significant corruption and other governance failures during the early stages of their development. This should not be interpreted to mean that corruption and the goals of good governance are not important. Pressure to reduce corruption and move towards good governance is both necessary and desirable but these ends cannot be achieved unless attention is also given to other governance capacities required for accelerating and sustaining growth. The very desirable goals of good governance may be neither necessary nor sufficient for accelerating and sustaining development. We identify a number of different structural drivers of corruption that operate because of the poor fiscal capacities and structurally weak property rights of developing countries. These imply that aggregate corruption is likely to be high in all developing countries, but successful countries have institutions and governance capabilities that enable them to “manage” the structural drivers in ways that allow economic development and in turn create the conditions for a sustained improvement in good governance. In contrast, other developing countries lack these institutions and capabilities and suffer from poor economic prospects and political instability to varying extents. The challenge for developing countries is to learn the right lessons from the international experience and identify reform agendas appropriate and feasible for their own circumstances. Even the most successful anti-corruption strategies are unlikely to result in dramatic across-the-board improvements in most developing countries. But if they are properly designed to attack the most damaging effects of particular types of corruption, they may still be very successful in accelerating economic development and improving the conditions of political viability. The current governance and anti-corruption agendas supported by international agencies do not achieve this. They do not identify the structural drivers of corruption, and they do not identify feasible responses to these drivers that are likely to improve development prospects in particular countries. More worryingly, by setting broad anti-corruption and good governance goals they may be doing damage by setting unachievable targets for developing countries and diverting attention from critical governance reforms.

Date: 2006
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