90142 January 2014 – Number 114 STRENGTHENING GOVERNANCE & INSTITUTIONS IN MENA: ISSUES & PRIORITIES Guenter Heidenhof1 other institutions of accountability, legislative oversight though parliaments Introduction – Governance has been an explicit with independent oversight institutions part of the Bank’s developmental agenda since such as Supreme Audit Institutions, Anti- the latter part of the 1990s, though elements of Corruption Agencies, etc. good governance have always played a role in the institution’s work on development. These FIGURE 1 ranged from project focused work on financial management and procurement to the various sector governance components embedded in many of the Bank’s adjustment and sector operations since the 1980s. More recently, the Bank has evolved towards a more explicit acknowledgment that inefficiencies and weaknesses in the institutional environment have a direct impact on the achievement and the quality of development results. In MENA, governance is a critical part of the regional strategy and plays an important role at the sector and topical level in all four pillars of the regional strategy (Figure 1). A credible system of ‘good governance’ has various dimensions which, in broad terms, include: (iii) A robust civil society and media, which (i) Political accountability which refers to is an essential part of ensuring good political competition including broad based governance. Obviously freedom of political parties, adequate transparency and expression and open media are key regulation of party financing, and, among elements here together with civil society others, disclosure of parliamentary votes. organizations acting as watchdogs to monitor public and private agencies and (ii) Checks and balances, essentially focused on the use of feedback mechanisms from ensuring separation of powers, including an citizens such as citizen report cards, independent and effective judiciary and surveys, etc. An effective private sector interface is also essential and involves a variety of mechanisms and agencies 1 Guenter Heidenhof is Sector Manager in the Public Sector ranging from effective business and Governance unit (MNSPS) of the Middle East and North regulations, good public-private region of the World Bank. dialogue to collective business FIGURE 2 associations, etc. (iv) Effective public sector management is another key dimension with a focus on a strong and results-oriented public administration, ethical leadership and safeguards regarding assets, conflict of interest rules, effective financial management, procurement, and regulatory agencies. (v) Decentralization and local participation with appropriate accountability and effective citizen oversight and participation is likely to improve services delivery and greatly enhance the effectiveness of the FIGURE 3 implementation of government policies and strategies. Governance Challenges: While not an exhaustive list, these dimensions provide a set of basic principles and mechanisms that comprise the foundation of good governance. Most countries in the world experience varying strengths and weaknesses relating to governance systems, such as weak institutions and procedures, low performance and low quality in services, inefficient public spending and low capacity. Other ‘breakdowns’ may include excessive administrative discretion and malfeasance, political corruption, the broader issue of state capture, and patronage, nepotism, Arab Spring and the Governance Agenda: The secrecy and information asymmetry. Arab Spring has highlighted some important governance challenges across the region, in Regional Context: If compared to the rest of the particular the very high concentration of world MNA’s governance indicators (Figure 2) political and economic power by the governing are notably weak and are particularly elites and those close to them, a general lack of pronounced in areas such as transparency, civil transparency and accountability of state actors liberties, media freedom, participation and and deeply felt feelings of a lack of dignity, social accountability. As a consequence, overall social justice and inequality by the populace at government accountability is weak and public large. sector service delivery does not meet the expectations of citizens. There is little In response to these challenges the Bank focused improvement on governance indicators since the prominently on cross cutting governance Arab Spring (see for example Figure 3) which reforms that signal a break from the past. Such points to deeply rooted governance issues that reforms include: are difficult to overcome. (i) Promoting government transparency with a focus on access-to-information, the disclosure of economic and social data, and January 2014 · Number 114 · 2 transparency of administrative processes (ii) Strengthening Government Accountability and procedures. is a key area (Figure 5). Activities focus inter alia on reducing excessive centralization of (ii) Improving accountability with independent the state through administrative and fiscal monitoring of government activities and deconcentration and decentralization. The more efficient accountability institutions, i.e. Bank also provides assistance to improve the judiciary, Supreme Audit bodies, etc. access to and the quality of services via e- Included are administrative reforms to government reforms, service standards, improve public performance, e.g. via performance monitoring, etc. Expenditure transparent service delivery standards. management and public procurement reforms are also part of this agenda. (iii) Fostering broad-based participation by enhancing civil society involvement in FIGURE 5 design and implementation of government programs and strengthening of sub- national governments, and strengthening of sub-national governments and improving the mechanisms for public participation at the level of country systems. The Bank has been involved in a wide range of governance activities in virtually all countries in the region. Main areas of engagement include: (i) Building credible State/Institutions remains a priority. Large public sectors (Figure 3) are (iii) Supporting Open Government Reforms is a a characteristic of most MENA countries, key part of the governance agenda (see often with quality and efficiency problems . Figures 6&7). The objective of Bank Bank engagement here is to clarify core supported reforms is to enhance citizen government functions, including service participation, access to information and provision in health, energy and financial promote government transparency through regulations. Libya and Yemen have broader legislation and new institutions. The Bank state-building through institutional and also promotes the systemic inclusion of civil capacity development. Rationalizing SOEs society in projects, in particular on and other agencies is also part of the monitoring & evaluation. agenda, especially in energy, transport, banking, etc. via corporate governance and FIGURE 6 performance monitoring. FIGURE 4 January 2014 · Number 114 · 3 FIGURE 7 toolkit which allows MENA universities to benchmark themselves to improve transparency and accountability. Efforts on corporate governance of state-owned enterprises are ongoing in Iraq, Morocco, and Tunisia. There are also studies and engagements on Public Investment Management in Tunisia and Public expenditure reviews in Morocco. Some Key Challenges and Issues: To support subnational government reforms, adequate sequencing and coordination between central/regional and fiscal/institutional reforms (iv) Improving the Rule of Law is critical to and local government reforms is needed. Also Bank governance work. Helping needed are integrated teams to promote governments fight corruption is one part of subnational government reforms (e.g. Morocco). this agenda. Another is to bridge the gap Key challenges to social sector service delivery are between legislation and its implementation. institutional and governance weaknesses which In some MENA countries this includes prevent better service quality and delivery. comprehensive support on legal and justice Weak public investment management is the main reforms. reason for the low execution rate of investment budgets in many countries. This concerns Highlights from Governance Engagements in countries trying to scale up public investments. MENA: On policy dialogue, the Bank engages In strengthening social accountability, there is a with most MENA countries on governance and need to engage on both supply and demand institutional development issues, though areas sides, ensuring that enhanced public of focus and uptake differ. In a number of engagements lead to long-lasting results. countries in the region there is interest in reforms on access to information, citizen Conclusion: In MENA the governance agenda is participation and more transparent government integrated in virtually all sectors and is an operations, often reflected in Country Assistance important part of sector dialogues. Clearly, Strategies and Interim Strategy Notes. visible and tangible changes will take time. Governance reforms require a long term Lending operations include Development Policy engagement and support, underlining the need Loans (DPLs) on governance in Tunisia and the to stay the course despite potential setbacks and “Hakama”2 series in Morocco which integrate slow progress. general and sector governance issues. Technical assistance for governance and institutional development is being provided to various countries, including Egypt, Iraq, Morocco, the Contact MNA K&L: Palestinian Territories, Tunisia, Yemen and Gerard A. Byam, Director, Strategy and Operations. MENA Region, The World Bank some GCC countries. There are procurement Preeti S. Ahuja, Manager, MNADE reforms in Egypt, Jordan, Morocco, the Regional Quick Notes Team: Omer Karasapan Palestinian Territories, Tunisia and Yemen. Tel #: (202) 473 8177 There is a pipeline of innovative analytic and The MNA Quick Notes are to summarize lessons learned advisory work on governance and service from MNA and other Bank Knowledge and Learning delivery in health, rule of law gap analysis, activities. The Notes do not necessarily reflect the views of the World Bank, its board or its member countries. informal sector governance and the political economy of procurement reform. Some have been completed, i.e. a university benchmarking 2 Arabic for Governance. January 2014 · Number 114 · 4