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Reconceptualising Governance

January 1997

January 1997

Publisher: Department of Public Affairs, UNDP, New York, pp. 93 & xi.

Authors:

Peter Blunt

UNSW (Canberra)

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Content uploaded by Peter Blunt

Content may be subject to copyright.

Reconceptualising

Governance

Discussion paper 2

Management Development and Governance Division

Bureau for Policy and Programme Support

United Nations Development Programme

New York January 1997

Preface

United Nations Development Programme (UNDP) believes that the

primary purpose of government should be to promote sustainable

human development in ways that reduce disparities in income, well-

being, education and opportunity among all people without depriv-

ing future generations of, at the very least, similar levels of well-being,

security and choice.

For governments to work humanely, effectively and efﬁciently

towards these ends, the elements of governance, their interactions and

their effects on sustainable human development must be better under-

stood. UNDP is committed to helping its member countries achieve

these goals.

This series of discussion papers is a manifestation of UNDP’s con-

tinuing search for answers to the perplexing and difﬁcult questions

surrounding governance in the modern nation-state. Our ﬁrst discus-

sion paper, published in 1995 (Public Sector Management, Governance

and Sustainable Human Development), was our ﬁrst clearly articulated

step in this direction, taken on the basis of widespread consultation

and dialogue.

This discussion paper, which has also been subjected to exhaustive

internal and external review and discussion, builds on the foundation

laid by the ﬁrst and should be read as an extension of our earlier argu-

ments. It emphasises the realms of governance (civil society, the state

and the private sector), the institutions that set the rules and the organ-

isations that implement policy and strategy accordingly. This paper

also extends the discussion of sustainable human development and

speculates about the effects of some major forces driving change on the

key aspects of governance. The paper is not, however, a statement of

iii

UNDP policy or strategy. A UNDP policy paper on these matters has

been published separately.

The paper is based on drafts written by Professor Dennis

Rondinelli and Professor Peter Blunt. They drew on ideas explored in

a high-level seminar involving experts, practitioners and UNDP per-

sonnel from different backgrounds and geographical regions. This, the

ﬁnal version of the paper, reﬂects these and other substantive contri-

butions by staff members of the Management Development and

Governance Division of the Bureau for Policy and Programme Support

(BPPS), UNDP.

As with the notion of sustainable human development, our under-

standing of all of the aspects of governance addressed in this paper can

only beneﬁt from detailed, informed discussion of this type. Our views

on what constitutes sound governance in different circumstances will

be reﬁned in the light of such discussion, subject always to constraints

imposed by our imperfect ability to comprehend complexities and to

foretell the future.

The views expressed in this paper are not necessarily shared by

UNDP’s Executive Board or the member governments of UNDP.

G. Shabbir Cheema

Director

Management Development and Governance Division

Bureau for Policy and Programme Support

New York, January 1997

Contents

Preface iii

Executive Summary ix

1. Concepts of Governance and Sustainable

Human Development 1

What is Sustainable Human Development? 3

What is Governance? 8

What Are the Relationships Between Governance

and Sustainable Human Development? 11

Domains, Institutions and Organisations of Governance 13

Institutions and Organisations 13

Domains or Realms of Governance 14

What Are the Characteristics of Good Governance? 18

2. Governance Domains and Their Roles in

Sustainable Human Development 21

The Role of the State 21

Creating a Conducive Economic Environment 22

Protecting the Vulnerable 25

Improving Government Efﬁciency and Responsiveness 26

Empowering People and Democratising the Political System 27

Decentralising the Administrative System 30

Closing the Gaps Between Rich and Poor 35

Encouraging Cultural Diversity and Social Integration 36

Protecting the Environment 37

Upholding Gender Equality 40

The Role of Civil Society 41

The Role of the Private Sector 48

3. Governance and Sustainable Human

Development in a Changing World 55

Breakdown, Breakthrough and Fibrillation 57

Into the New Era 58

Environmental Degradation 58

Economic Globalisation 60

The Collapse of Communism 62

Strategic Multi-polarity 63

Religious and Ethnic Tensions 65

4. Challenges for the Future: Building Governance Capacity 67

The Cross-Cutting Issues 67

New Challenges to State Structures 67

Governance and Gender Equality 72

Governance and Poverty Alleviation 76

Management of Financial and Natural Resources 79

Governance for Sustainable Human Development 84

Reﬁning Concepts of Governance

in International Assistance Programmes 85

References 87

Sources by Chapter 92

Boxes

1. Characteristics of Good Governance 19

2. Policy Reforms Required in Transitional Economies 22

3. Civil Service Reform in Eritrea 28

4. Technical Assistance to the Parliament in Moldova 31

5. Decentralisation in Honduras 33

6. Urban Management and the Environment 38

7. Empowerment of Women in South Africa 42

8. LIFE: An Innovative Approach to

Participatory Local Governance 45

9. Government and Private-sector Development in Egypt 50

10. Electoral Assistance to Bangladesh 70

11. Gendered Governance 73

12. Local Development Funds—Promoting

Decentralised, Participatory Planning and Financing 80

13. Environmental Policy in Central and Eastern Europe 82

vii

Executive Summary

This discussion paper extends the discussion concerning the nature

and relationships between governance and sustainable human devel-

opment, begun by the Management Development and Governance

Division of UNDP in its ﬁrst discussion paper, Public Sector

Management, Governance, and Sustainable Human Development, pub-

lished in 1995. Amajor contribution of the paper here is its detailed dis-

cussion of the nature of governance, deﬁned as the exercise of political,

economic and administrative authority to manage a nation’s affairs.

This deﬁnition is deliberately broad, comprising the complex array of

mechanisms, processes, relationships and institutions through which

citizens and groups articulate their interests, exercise rights and oblig-

ations and mediate differences. Governance is not the sole province of

the state. Its functions are delegated to, or assumed by, other institu-

tions and organisations in the private sector and civil society. These

operate in a legal and policy setting deﬁned largely by the state, but

otherwise exercise independently retaining political, economic and

administrative authority.

Sustainable human development is an important, and necessary,

unifying theme of the paper, serving throughout as a reminder of

what governance policies and actions should promote. Here, the dis-

cussion is extended to include the notion of “capability depriva-

tion”—an important adjunct to the idea that poverty is simply a

matter of insufﬁcient income. The most recent thinking about sus-

tainable human development is more conscious of the limits of

growth, recognising that there is not always a positive connection

between GDP growth and human development—indeed, sometimes

the reverse is the case.

The paper is organised into four chapters. The ﬁrst chapter intro-

duces and deﬁnes the concepts of governance and sustainable human

development, as well as key terms such as “institution” and “organi-

sation”. Although governance is described as encompassing every

institution and organisation in a society—from the family to the state—

this chapter focuses on three important domains of governance: the

state (political and governmental institutions), the private sector and

civil society. Governance is deﬁned as the exercise of political, eco-

nomic and administrative authority to manage a nation’s affairs. It is

the complex mechanisms, processes, relationships and institutions

through which citizens and groups articulate their interests, exercise

their rights and mediate their differences.

The second chapter examines the major domains of governance in

greater detail, recognising that each will have a major impact on

achieving sustainable human development. Major areas of policy are

considered, including poverty and income and capacity disparities,

the environment, the economy, government performance, decentrali-

sation, gender equality and social integration.

Chapter three looks at the dramatic changes in economic, political

and social systems, evident since the early 1980s. These changes have

resulted in a global environment characterised by breakdown, break-

through and ﬁbrillation, each shaping future settings of governance.

The chapter analyses some of these major forces of change, including

environmental degradation, economic globalisation, religious and eth-

nic tensions, the collapse of communism and strategic multi-polarity

and reviews the implications of these changes for governance and sus-

tainable human development.

Finally, chapter four considers the key question of building capac-

ity for governance in relation to the challenges posed by the demands

of poverty alleviation, gender equality, environmental protection and

job creation. The paper concludes by stressing the importance of fair,

efﬁcient and equitable systems of governance for all countries in

today’s climate of uncertainty and change. It calls for international

assistance organisations to ﬁnd ways to incorporate concepts of good

governance into the design and implementation of all their develop-

ment activities. Above all, it recognises that a greater understanding of

the concept of governance is necessary to better target international

assistance and improve the quality and sustainability of human devel-

opment in our societies.

1. Concepts of Governance

and Sustainable Human Development

There is a growing international consensus that sound governance is

essential in achieving sustainable human development. UNDP has

been at the forefront of these developments, stressing that “capacity

building for effective, sound governance should be UNDP’s primary

means” of poverty eradication. UNDP’s Administrator describes the

organisation’s position as follows:

The goal of governance initiatives should be to develop capacities that are

needed to realise development that gives priority to the poor, advances

women, sustains the environment, and creates needed opportunities for

employment and other livelihoods (UNDP, 1994).

But notions of what constitutes good governance vary a great deal.

This is partly because contemporary literature on the role of the state

still does not contain a clearly deﬁned and well thought through

framework that, ﬁrst, identiﬁes the elements to be included in a com-

prehensive theory of governance and, second, elaborates how this

should be linked to development.

In its ﬁrst discussion paper on this topic, Public Sector Management,

Governance, and Sustainable Human Development, published in 1995,

UNDP drew attention to the importance of the public sector manage-

ment aspects of governance and how improvements in this area might

promote the realisation of objectives of sustainable human develop-

ment. While it also considered such issues as state and market roles

in public management, public enterprise performance, privatisation

and private sector development, the emphasis was public sector

management, in such areas as civil service reform, leadership, strate-

gic management, management training and development and

accountability.

Aparticularly important theme of this paper was the idea that the

notion of sustainable human development, as well as the means for

attaining it (governance), should be subject to interpretation according

to different national circumstances. The core argument holds that the

pragmatic concerns of human development in poor countries should

outweigh the ideological (and other) preoccupations of richer, indus-

trialised countries. It suggested that for too long the architecture of

development has been dominated by the interests and ideological pref-

erences of the rich and powerful countries.

There were at least three omissions in that initial analysis, how-

ever. First, not enough was made of the deﬁciencies of the doctrine that

sees economic growth as a panacea for problems of development. This

is the major contribution of the latest Human Development Report (1996).

It exposes the myth that economic growth automatically leads to

human development. Among other things, it shows that there are fre-

quent disparities between national rankings by income and by human

development: high levels of human development are not uncommon

at low income levels and, conversely, lower human development can

be found at higher income levels. It also draws attention to the marked

contrasts in human development within countries (rich and poor

alike), which are particularly noticeable when human development

among indigenous populations is evaluated separately. And it points

to human development weaknesses in OECD countries, where,

despite high per capita incomes, more than 100 million people live

below national poverty lines.

Second, the 1995 UNDP paper presented an incomplete picture of

the major realms of governance and the institutional landscape within

which political, social and economic activity takes place—that is, the

systems or frameworks of rules and procedures that help to govern

such activity and the organisations that carry it out. A high-level

seminar sponsored and convened by the UNDP in early 1996 involv-

ing prominent practitioners, academics and consultants provided

many useful insights into these issues.

Third, the ﬁrst paper had only limited discussion of the forces of

change shaping the future of governance—in particular, the implica-

tions of globalisation and environmental degradation.

Accordingly, the primary aims of this paper are to provide a fuller

account of governance by examining its major realms of activity—the

state, the private sector and civil society—and to consider how these

help attain sustainable human development; and to distinguish between

the institutional and organisational components of governance.

This paper also sets out the latest thinking on sustainable human

development and speculates about the effects on the evolution of this

concept and that of governance in the rapidly changing and increas-

ingly complex and turbulent social, political, cultural, economic, tech-

nological and ecological environments.

As good governance is now widely considered to be the primary

means for achieving sustainable human development, its constituent

parts and the ways in which these can be combined to produce good

governance, must be better understood. Moreover, because they are

not static concepts, they must be the subject of continuing informed

debate by all members of the global community.

What is Sustainable Human Development?

UNDP’s mission is to promote sustainable human development, which

it has deﬁned primarily through its Human Development Report, issued

since 1990. The UNDP derives its concept of sustainable human devel-

opment partly from the recommendations of the 1987 Brundtland

Commission report, which deﬁned the term to mean meeting the needs

of the present generation without compromising the needs of future

generations; partly from the Rio declaration and other UN documents;

and from work done by non-governmental organisations (NGOs) over

the past 30 years. UNDP regards human development as a process of

enlarging the choices for all people in society.

Thus, sustainable human development places people at the centre

of the development process and makes the central purpose of devel-

opment as creating an enabling environment in which all people can

enjoy a long, healthy and creative life. Human Development Report 1994

deﬁnes sustainable human development as follows:

Sustainable human development is pro-people, pro-jobs, and pro-nature. It

gives the highest priority to poverty reduction, productive employment,

social integration, and environmental regeneration. It brings human num-

bers into balance with the coping capacities of societies and the carrying

capacities of nature…It also recognises that not much can be achieved with-

out a dramatic improvement in the status of women and the opening of all

opportunities to women. (p. 4)

Sustainable human development not only places people at the cen-

tre of development but “advocates protection of the life opportunities

of future generations as well as present generations and respecting the

natural systems on which all life depends” (UNDP 1994, p. 12).

But, Human Development Report 1996 makes the important point

that legitimate interest in intergenerational equity should not distract

attention from serious contemporary inequities. Robert Solow, the

Nobel laureate in economics, explains what he calls “the paradox con-

nected with the popularity of sustainability” thus: “If the underlying

reason has to do with the dislike for inequality, there is at least as strong

a case for reducing contemporary inequality (and probably stronger)

as for worrying about the uncertain status of future generations. Those

who are so urgent about not inﬂicting poverty on the future have to

explain why they do not attach even higher priority to reducing

poverty today” (UNDP 1996a, p. 16).

Acentral feature of the latest thinking recognises that economic

growth is a means to achieve sustainable human development ends

rather than an end in itself. The social and environmental implica-

tions of untrammeled economic growth must be critically examined.

In the words of Fernando Cardoso, the president of Brazil, “Realism

obliges us not to ignore efficiency. But for any development to be

human, we must go beyond the logic of economics” (UNDP 1996a, p.

44).

This means, for example, that we must adopt a more balanced

view of the meaning of national economic performance as it is usu-

ally portrayed in national “league tables”, we especially must not

assume that higher income automatically means a better quality of

life. First, it is clear that the relationship between economic growth

and sustainable human development is not always positive.

Countries that rank well according to income often fall down the lad-

der when ranked on human development. Moreover, many rich and

poor countries have marked internal disparities—indigenous peoples

and ethnic minorities fare particularly badly when comparisons of

sustainable human development are made with the rest of the

population.

Second, GDP measures of national income provide notoriously

inaccurate accounts of activity that has considerable social, environ-

mental and economic value. They also underrepresent the negative

consequences for people and the environment of measurable economic

activity. Indeed, there is a perverse, antisustainability logic inherent in

GDP. For example, as Charles Handy points out, if national infra-

structure is bad, accidents go up, which increases the amount spent on

hospital care, vehicle repairs and so on. Likewise, money can be spent

if factories pollute the rivers, oceans and atmosphere. All of these

ﬁnancial transactions increase national wealth as calculated by GDP.

That is, the way we measure national wealth is not just inaccurate, it

encourages activities that are contrary to the long-term interests of peo-

ple and the environment.

Its deﬁciency as an accurate indicator of worthwhile social and

economic activity arises from the fact that it is simply an account of the

visible transfers of money within a society. Thus it makes many major

omissions and commissions. Conspicuously absent from such calcula-

tions is the unpaid work carried out—usually by women—in the home

economy and the activities of the informal sector. Also missing are vol-

untary and charitable work and extended family support such as car-

ing for relatives and the elderly, which are central to social life in

developing countries. In other words, “adding up all the ﬁnancial

transactions by all the companies and institutions in a country, con-

verting it to dollars and dividing it by the number of people in a soci-

ety does not tell you how comfortable they are” (Handy, 1995, p. 221).

Nor does it tell you how much work of considerable value to society

is being done but is unrecorded or how much work is being done that

is contrary to human and environmental interests but is accorded pos-

itive economic value. These are the positive and negative invisibles of

development.

In these respects UNDP’s notion of sustainable human develop-

ment has made its greatest contribution—by giving value to health,

education and opportunities for participation, not just ﬁnancial

wealth, in calculations of national development. These matters are

important because wealth calculations also inﬂuence how govern-

ments behave. For example, as Human Development Report 1996, Handy

and others have made clear, national income accounts are run on a

cash-ﬂow basis: money in versus money out. Investments and expen-

ditures are treated in the same way—they are both money out, despite

the fact that investments may lead to future savings or increased

revenue, whereas expenditures are lost forever. Under this approach

education and health are always costs, never investments. Cash-ﬂow

accounting also allows the one-off sale of assets to be treated as

revenue, not a windfall, never to be repeated. This severely distorts pri-

orities. There is no incentive for governments to think long term; no

way to attach value today to investments that will yield beneﬁts tomor-

row. The future is hostage to the short-term need to pay the bills. Most

individuals can tell the difference and most household incomes are

managed accordingly. As Handy points out, most people turn “large

sums of investment (house purchases for example) into smaller

streams of expenditure, by means of a loan or a mortgage. If we are

wise, we borrow only to ﬁnance investment not to cover the monthly

bills. Government muddles them up”.

Using more valid accounting methods generate interesting results.

When they were applied to (the much-heralded case of) New Zealand,

for example, they showed that the country’s net worth had deterio-

rated by as much as $12 billion over the past 20 years. To its credit, the

New Zealand government now publishes two sets of accounts, one

that shows cash-ﬂows and another set of what Handy calls “business”

accounts, which presents a more balanced view of the way in which

present actions affect the future.

Of course, it is not just the methods of measuring that must be

improved, but also our willingness and ability to measure and attach

value to things other than material well-being, or monetary wealth.

Many non-ﬁnancial indicators are difﬁcult to measure because they are

intangible: such as the dignity that comes from being a member of a

society that treats people of all ethnic backgrounds equally, the oppor-

tunities for self-fulﬁlment that arise in a society with free access to edu-

cation, the security that comes from extended family networks or

effective health services, or the beneﬁt of safe water supplies, adequate

shelter, satisfying jobs, a pollution-free environment, sunshine and so

on. All of these, and many others, signify quality of life to ordinary peo-

ple, but we have yet to ﬁnd ways of translating them into indicators

that catch the attention of governments. For all of these reasons resi-

dents of Tokyo, citizens of the richest country in the world, compared

their quality of life unfavourably with that of the citizens of the

European Community (EC) countries, except for the Portuguese, in a

recent survey.

The most recent account of human development, Human

Development Report 1996, which attempts to make allowances for many

of these points, consists of the following dimensions:

•Empowerment—meaning the expansion of people’s capabilities

and choices; the ability to exercise choice based on freedom from

hunger, want and deprivation; and the opportunity to participate in,

or endorse, decisions that affect their lives.

•Cooperation—meaning the acknowledgement that a sense of

belonging is an important source of personal fulﬁlment, well-being,

enjoyment, purpose and meaning. In this sense human development

concerns itself with the ways in which individuals cooperate and

interact.

•Equity—meaning capabilities and opportunities, not just

income. In this view, for example, everyone should have access to

education.

•Sustainability—meaning meeting the needs of the present gener-

ation without compromising the ability of future generations to be free

from poverty and deprivation and to exercise their basic capabilities.

•Security—particularly security of livelihood, meaning freedom

from threats such as disease or repression, or from sudden harmful dis-

locations in their daily lives.

It follows that economic growth should be a means to these ends.

It is the responsibility of governments to ensure that this is the case,

and to ﬁnd ways of ensuring that qualitative measures of progress are

given at least as much prominence as the more usual quantitative indi-

cators of economic wealth. Governments must create conditions that

improve empowerment, cooperation, equity, sustainability and secu-

rity. Failure to create such an enabling environment makes it more dif-

ﬁcult for all people to attain these objectives and makes it impossible

for marginalised groups in society to beneﬁt from economic and social

progress.

What is Governance?

The challenge facing all societies is to create a system of governance that

promotes, supports and sustains human development. But the search

for a clearly articulated concept of governance in market economies has

only just begun. Some international organisations emphasize public-

sector management, while others have assumed strong advocacy posi-

tions relative to democracy. Understandably, this diversity of views,

and their limitations, has hindered dialogue, understanding and accep-

tance among developing countries. UNDP takes a broader view that,

while acknowledging the critical importance of public-sector manage-

ment issues, incorporates other realms of governance, as well as the

organisations and institutional frameworks that establish the working

parameters of governance and execute its policies and strategies.

In this paper governance is deﬁned as the exercise of political, eco-

nomic and administrative authority to manage a nation’s affairs. It is

the complex mechanisms, processes, relationships and institutions

through which citizens and groups articulate their interests, exercise

their rights and obligations and mediate their differences.

Governance embraces all of the methods—good and bad—that

societies use to distribute power and manage public resources and

problems. Sound governance is therefore a subset of governance,

wherein public resources and problems are managed effectively, efﬁ-

ciently and in response to critical needs of society. Effective democra-

tic forms of governance rely on public participation, accountability

and transparency.

Many observers think that the primary purpose of effective demo-

cratic forms of governance should be to promote sustainable human

development. Although governance encompasses every institution

and organisation in society, from the family to the state, the deﬁnition

presented here focuses on three important domains of governance that

directly contribute to achieving sustainable human development.

These include the state (political and governmental institutions), civil

society organisations and the private sector.

In this broad conceptualisation, four types of governance are iden-

tiﬁed, which, to varying degrees, are all subject to the inﬂuence of civil

society and the private sector:

•Economic governance includes processes of decision-making that

directly or indirectly affect a country’s economic activities or its rela-

tionships with other economies. UNDP recognises that economic gov-

ernance has a major inﬂuence on societal issues, such as equity, poverty

and quality of life.

•Political governance refers to decision-making and policy imple-

mentation of a legitimate and authoritative state. The state should con-

sist of separate legislative, executive and judicial branches, represent

the interests of a pluralist polity, and allow citizens to freely elect their

representatives.

•Administrative governance is a system of policy implementation

carried out through an efﬁcient, independent, accountable and open

public sector.

These elements constitute the governance system, that is, the for-

mal institutional and organisational structure of authoritative deci-

sion-making in the modern state. Systemic governance encompasses the

processes and structures of society that guide political and socio-

economic relationships to protect cultural and religious beliefs and

values, and to create and maintain an environment of health, freedom,

security and with the opportunity to exercise personal capabilities that

lead to a better life for all people.

All developing countries face continuing challenges in renewing

political institutions, ﬁnding new modalities of governance and expand-

ing political capacities to guide national economic and social activities

to optimise the attainment of the objectives of sustainable human devel-

opment objectives. They must construct and legitimise a political system

that promotes participation and can elicit at least a minimum public con-

sensus on social and political goals; create the circumstances for con-

structive engagement with civil society; encourage political, business

and civic leaders to articulate and pursue social and economic priorities;

and guide the actions of public and civil society organisations towards

social, cultural, environmental and economic objectives that are sus-

tainable and beneﬁcial to people and the environment.

What Are the Relationships

Between Governance and

Sustainable Human Development?

Governance transcends the state to include civil society organisations

and the private sector, because all three are involved in most activities

promoting sustainable human development. UNDP focuses on four

aspects of sustainable human development: poverty reduction, job cre-

ation and sustainable livelihoods, environmental protection and

regeneration and the advancement of women. It does this in a number

of ways, most notably through broad-ranging human resource devel-

opment, which contributes to all four aspects of sustainable human

development by preparing people for productive participation in

social and economic life. For example, employment generates income

for individuals and households, resulting in higher consumption and

greater savings and investment. It provides resources that women can

use to improve their knowledge and skills to earn more income. Better

educated and trained people have a stronger appreciation for envi-

ronmental resources and greater ability to protect and regenerate

them. In all aspects of human resource development, civil society plays

important roles in providing services and opportunities for develop-

ment and in inﬂuencing government policies.

The aspects of human resource development that contribute most

to sustainable human development are health and nutrition, general

education, vocational training and managerial capability. And in each

of these areas, all domains of governance play important roles. Health

and nutrition are essential to sustainable human development, for

example, because they have immediate impacts on people’s dignity,

self-esteem and productivity and long-term effects on increasing their

ability to absorb new knowledge. Improvements in health and nutri-

tion contribute to social harmony and well-being, as well as increase

productivity by reducing worker absenteeism due to illness and

lethargy, increase people’s energy levels and stamina and improve

their mental processes. Economic and social beneﬁts also come from

the favourable impacts of better health and nutrition on the abilities of

children and adults to learn and through prolonging the duration of

their active participation in society.

Although government has an important role to play in assuring

maximum levels of public health, NGOs and civil society organisa-

tions are assuming stronger roles in providing and delivering health

care services and in championing the interests of the poor more gen-

erally, in both industrialised and developing countries.

General education also has strong impacts on sustainable human

development. It improves literacy, numeracy and skills. Primary and

secondary education create access to opportunity and can increase

labour productivity by increasing people’s willingness and capacity to

learn. Numeracy and literacy are essential for skill development, espe-

cially in technology-oriented activities. Vocational training contributes

to sustainable human development by enhancing workers’ ability to

make more productive use of capital and technology and by better

preparing them to work in speciﬁc occupations. Vocational training

usually focuses on craft, technical and trade skills and some aspects of

business management. It is often provided by governments through

public high schools; but in many countries it is also offered through

public and private community colleges, private companies, non-

governmental vocational schools, trade unions, employers’ associa-

tions and non-proﬁt organisations.

Managerial capability helps the private and the public sectors to

operate efﬁciently and effectively at home and, in some cases, to

engage in global economic transactions and to create the jobs and

income needed to achieve sustainable human development. The

growth of national industrial and service sectors depends on improv-

ing entrepreneurial, technological and managerial capabilities.

Entrepreneurs identify new opportunities for investment and mobilise

the resources needed to bring innovations to market. They take the

risks of commercialising ideas, products and services before their

commercial viability is generally recognised. When they are success-

ful, their ventures create new jobs and sources of income. Government

and private-sector organisations play a crucial role in developing man-

agement capacity, but civil society organisations are also training

grounds for community management and leadership.1

Domains, Institutions

and Organisations of Governance

Asound system of governance is essential for creating an enabling

environment in which to pursue sustainable human development. The

three major domains or realms of governance should be compatible

and, preferably, cooperative.

Governance exercises its inﬂuence, and in turn is inﬂuenced by,

institutions and organisations. The institutions and organisations of

governance must be designed so as to contribute to sustainable human

development by establishing the political, legal, judicial and social cir-

cumstances for poverty reduction, job creation, environmental protec-

tion and regeneration and the advancement of women.

Institutions and Organisations

How can we distinguish between institutions and organisations? The

concept of “institution” carries more than the usual amount of intel-

lectual baggage, having been the subject of intense discussion and the-

orising in sociology since at least the time of Weber. It is a difﬁcult idea

to pin down, however, a problem exacerbated by the opaqueness of

much writing in sociology. Awidely used deﬁnition of the term is that

provided by Scott (1995): “Institutions consist of cognitive, normative

and regulative structures and activities that provide stability and

meaning to social behaviour” (p. 33). “Institutionalisation” follows

from this: it is “the social process by which individuals come to accept

a shared deﬁnition of social reality—a conception whose validity is

seen as independent of the actor’s own views or actions but is taken

for granted as deﬁning ‘the way things are’ and/or the ‘way things are

to be done’” (Scott, 1987, p. 496). Institutionalisation therefore pro-

duces shared assumptions, beliefs and values, often of a religious or

cultural nature. From this, it follows that institutions more fundamen-

tally inﬂuence social behaviour, are more encompassing and longer

lasting than organisations. At times, however, the distinctions between

the two become blurred. Examples of institutions include: the legal and

judicial systems, political systems, family and kinship structures and

(confusingly perhaps) the state itself.

Formal organisations, on the other hand, are composed of groups

of individuals who come together to pursue agreed objectives that

would otherwise be unattainable or that would be attainable but only

with signiﬁcantly reduced efﬁciency and effectiveness. Such organisa-

tions are structured, meaning that they involve the division of labour

into units of different size and composition, and the coordination of

the activities of these different elements—sometimes referred to as dif-

ferentiation and integration. UNDP’s view of governance encom-

passes both its institutional and organisational components.

Domains or Realms of Governance

The UNDP Administrator’s report to the Executive Board in 1994,

Initiatives for Change, emphasizes that “capacity building for sound gov-

ernance underpins all of these [sustainable human development] objec-

tives”. It notes that “the effectiveness of government and its relationships

to civil society are key determinants in whether a nation is able to create

and sustain equitable opportunities for all of its people”. It also acknowl-

edges that the relationships between government and the private sector

and between the private sector and civil society are essential to creating

a strong enabling environment for sustainable human development.

All developing countries face the continuous tasks of redeﬁning

the roles of the state, civil society organisations and the private sector,

and the relationships between them, and of improving their efﬁciency

and responsiveness so that all members of society can participate effec-

tively in economic and social development. The relationships between

these domains should be seen as complementary.

The state. Among the most important tasks of states in the future

will be creating a political environment that is conducive to sustain-

able human development by redeﬁning the role of government in

social integration, the economy and protection of the environment;

protecting the vulnerable in the population; creating political commit-

ment to economic, social and political restructuring; providing infra-

structure; decentralising and democratising government; and

strengthening the ﬁnancial and administrative capacities of local,

urban and metropolitan government (see for example, box 1).

Government institutions will retain important roles in protecting

the environment; maintaining social harmony, security and order; sta-

bilising macroeconomic conditions; generating revenues to ﬁnance

and provide essential public services and infrastructure; maintaining

standards of public health and safety for all at an affordable cost; and

regulating those economic activities that are “natural monopolies” or

that can adversely affect the general welfare of citizens.

Government institutions are also necessary for empowering the

people they are intended to serve: providing equitable opportunities

and ensuring social, economic and political inclusion. Empowerment

can only take place within a conducive institutional environment com-

prising properly functioning legislatures, legal and judicial systems

and electoral processes. Legislative bodies, like parliaments, made up

of freely and fairly elected members and representing different parties

are crucial to popular participation and ofﬁcial accountability.

Effective legal and judicial systems protect the rule of law and human

rights, particularly those of women and minorities. Open electoral

processes build public conﬁdence and trust—and thus political

legitimacy.

In transition and developing countries, especially, it may be

important in certain circumstances for governments to decentralise

administration and democratise the political system by strengthening

the ﬁnancial and administrative capacities of local, urban and metro-

politan levels of government. This may require constitutional, legal

and administrative reforms, enhancing the legitimacy and authority of

the judiciary and parliaments, and strengthening those executive

agencies that promote and support sustainable human development.

The private sector. The market and the private sector clearly have

crucial roles to play in development. In adopting market approaches,

however, it is necessary to be aware of the dangers of adopting “solu-

tions” that have not been carefully tailored to the circumstances in

which they are to be applied, and of the possible negative conse-

quences of introducing sweeping and rapid economic transformation

without adequate institutional preparation—particularly because the

negative consequences of such changes are likely to be felt most

acutely by the poor and the environment.

The market approach to economic development “is concerned with

creating conditions in which the production of goods and services can

ﬂourish with the support of an enabling environment for private sector

activity and an economic framework of incentives and rewards for good

organisational and individual performance”.2The extent and nature of

government intervention will clearly need to be considered carefully in

the light of particular national and international circumstances.3

Sustainable human development depends in part on creating liveli-

hoods and providing sufﬁcient incomes through productive employ-

ment so that people can improve their living conditions. The ability of

the private sector, including the informal sector, to create jobs and

expand employment depends, however, on market development.

Market development, in turn, depends on expanding and strengthening

the private sector by providing incentives and support for privatising

state-owned enterprises, developing small- and medium-sized

enterprises, and under some circumstances attracting, developing and

expanding transnational corporations.

Transnational corporations clearly extend their operations beyond

national boundaries in ways that governments cannot. This means that

national economies are linked not only by markets, but are also inte-

grated at the levels of production and business culture. These bonds can

clearly strengthen economic ties, but, unless managed properly, they

can also affect, sometimes adversely, local cultures and social capital.

In many developing countries, the business practices of private

enterprises must also be reoriented to make them more successful

internationally. The forces promoting economic globalisation are also

changing fundamentally the ways in which industries and enterprises

must compete in the world market.

But to ensure the sustainability of the beneﬁts of market and pri-

vate sector development, governments must develop the institutional

regulatory frameworks required to assist the underprivileged and the

environment.

Civil society organisations. Strengthening the enabling environ-

ment for sustainable human development depends not only on a state

that governs well and on a private sector that provides jobs and income,

but also on civil society organisations that facilitate political and social

interaction and that mobilise various groups in society to participate in

economic, social and political activities. Civil society organisations are

creations of society. They provide important checks and balances on

government power and on the private sector, but they can also con-

tribute to, and strengthen, both of the other domains. They can help

monitor the environment, resource depletion, pollution and social

abuses; contribute to economic development by helping to distribute

the beneﬁts of economic growth more equitably within society; and

offer opportunities for individuals to improve their standards of living.

Civil society organisations channel people’s participation in eco-

nomic and social activities and organise them into more potent groups

to inﬂuence public policies. They have an important role in mitigating

the potentially adverse effects of economic instability, creating efﬁcient

mechanisms for allocating social beneﬁts, and providing a voice for

poorer groups in political and government decision-making. They can

also serve as means for protecting and strengthening cultural and reli-

gious beliefs and values.

Civil society organisations can also help people to overcome mar-

ket failures and weaknesses. Cooperatives, for example, help some

groups in society by uniting them into organisations through which they

can obtain greater strength in market transactions. Consumer coopera-

tives have a long history in Europe. They give low-income households

greater purchasing power and cost advantages by combining their pur-

chases and eliminating intermediaries. They can also negotiate better

prices with agribusinesses, processors and distributors. Farmers have

also combined their purchasing power through cooperatives to obtain

farm inputs and equipment less expensively, and to offer credit to mem-

bers. Farmers’ cooperatives have been successful in Europe, North

America and many developing countries in obtaining better prices for

agricultural goods by bulking their members’ products.

Civil society is an ever-changing kaleidoscope of organisations and

institutions as diverse as trade unions, NGOs, community-based organi-

sations (CBOs), families, tribal groups, religious entities, charities, clubs,

foundations, political parties, cooperatives, citizens’ watch-dog organisa-

tions, cultural groups, sports associations, environmental groups, special

interest groups, professional associations, support groups, academic and

research institutions, consumer groups and service organisations. Local

communities, but not local government, are included in civil society.

What Are the Characteristics

of Good Governance?

Much has been written about the characteristics of efﬁcient govern-

ment, successful businesses and effective civil society organisations,

but the characteristics of a good system of governance deﬁned in soci-

etal terms remain somewhat elusive. In UNDP’s 1996 Workshop on

Governance for Sustainable Human Development, participants from

around the world were asked to identify the characteristics of a good

system of governance. Their responses, which are summarised in box

1, complement, reinforce and extend the seven criteria identiﬁed in the

ﬁrst UNDP discussion paper on this topic. These were: legitimacy, free-

dom of association and participation and freedom of the media, fair

and established legal frameworks that are enforced impartially,

bureaucratic accountability and transparency, freely available and

valid information, effective and efﬁcient public sector management,

and cooperation between governments and civil society organisations.

Both the workshop participants and scholarly studies point out that

good governance systems are participatory, implying that all members

of governance institutions have a voice in inﬂuencing decision-making.

Box 1 Characteristics of Good Governance

• Participatory

• Sustainable

• Legitimate and acceptable to the people

• Transparent

• Promotes equity and equality

• Able to develop the resources and methods of governance

• Promotes gender balance

• Tolerates and accepts diverse perspectives

• Able to mobilise resources for social purposes

• Strengthens indigenous mechanisms

• Operates by rule of law

•Efﬁcient and effective in the use of resources

• Engenders and commands respect and trust

• Accountable

• Able to deﬁne and take ownership of national solutions

• Enabling and facilitative

• Regulatory rather than controlling

• Able to deal with temporal issues

• Service-oriented

This is the foundation of legitimacy in democratic systems. The proce-

dures and methods of decision-making should be transparent so that

effective participation is possible. Those who are chosen to make deci-

sions in government, business and civil society organisations should be

accountable to the public, as well as to institutional stakeholders.

Governance institutions should be efﬁcient and effective in carrying out

their functions, responsive to the needs of people, facilitative and

enabling rather than controlling, and operate according to the rule of

law. One of the great challenges for all governance institutions is to

engender and command the respect of the people they serve. These

institutions should be tolerant of diverse perspectives, provide equi-

table access to opportunities and be service-oriented.

All institutions and organisations of governance have responsibil-

ities for ensuring gender equality and the participation of women in

decision-making at all levels. Institutions of governance should be able

to develop the resources and methods for improving their own

processes and procedures, for sustaining effective elements of their

own structures, and for using and strengthening indigenous mecha-

nisms through which people can cope effectively with problems. As

well as fulﬁlling their own speciﬁc missions, all institutions of gover-

nance should be able to mobilise resources for common or shared pur-

poses, to identify and take ownership of solutions to national social

problems, and to be creative in developing new mechanisms for deal-

ing with rapidly changing problems and challenges over time.

Notes

1. Methods and techniques for assessing management development

needs are discussed in Kubr and Prokopenko (1991).

2. See UNDP (1995b, p. 29).

3. These issues, together with the nature of state-private sector interaction,

were considered in some length in chapter 2 of the ﬁrst discussion paper,

and will therefore not be repeated here. See UNDP (1995b, pp. 29–51).

2. Governance Domains and Their Roles

in Sustainable Human Development

Most groups, organisations and institutions in society have an influ-

ence on, and are influenced by, governance functions. But three

domains of governance—the state, the private sector and civil

society—have particularly strong impacts on achieving sustainable

human development. Therefore, it is important to examine in greater

detail the roles of each in promoting sustainable human

development.

The Role of the State

The current rapid, accelerating, and sometimes unpredictable,

political, economic and social change creates enormous challenges for

political and governmental institutions. In developed and developing

countries the state is increasingly being compelled to redeﬁne the role

of government in all spheres of social and economic activity to ensure

conducive policy environments for sustainable human development.

In developing countries many structural adjustment programmes of

the 1980s and early 1990s called for cutting back the role of government

in the economy. Yet governments have played and continue to play an

important role in creating enabling institutional environments for sus-

tainable human development. Among the most important tasks of the

state are: creating an economic environment conducive to sustainable

human development, protecting the vulnerable, improving govern-

ment efﬁciency and responsiveness, empowering people and democ-

ratising the political system, decentralising the administrative system,

reducing gaps between rich and poor and between the weak and the

powerful, encouraging cultural diversity and social integration, and

protecting the environment.

Creating a Conducive Economic Environment

Political and governmental institutions in Eastern Europe and the

Commonwealth of Independent States (CIS), former centrally planned

socialist economies in Asia and Latin America that are in transition to

market systems, and poor countries in South Asia, Central America

Box 2 Policy Reforms Required in Transitional Economies

1. Pricing reform and free-market pricing

Eliminate central allocation and rationing

Raise prices on necessities

Free competitive sectors

Privatise and regulate natural monopolies

2. International conditions

Remove quantitative restrictions and substitute tariffs

Align exchange rates

Allow foreign investment

Establish convertibility of currency

3. Capital market changes

Free interest rates

Introduce commercial banking separated from central bank

Control money supply

4. Labour markets

Introduce antitrust laws and regulations

Introduce unemployment insurance and welfare norms

Introduce housing reforms for mobility

5. Hard budget constraints

Reform accounting

Remove proﬁt constraints

Remove credit constraints

End tax and regulatory haggling

(Box 2 continues next page)

and Africa all face difﬁcult challenges in creating a new policy

environment for economic growth and social progress. Governments

must ﬁnd ways of transforming state-controlled economies into

market-oriented systems if they are to free the private sector to create

jobs, increase incomes of workers and participate more effectively in

international economic transactions (box 2).

This often requires complex structural adjustment and economic

stabilisation policies that focus on developing market institutions and

liberalising trade regulations. The government must enact and enforce

laws that promote economic competition, decentralise economic

decision-making, stabilise inﬂation, reduce public deﬁcits and free the

Box 2 (continued)

6. Stabilisation

Reduce budget deﬁcits

Raise interest rates

Introduce anti-inﬂation policies

7. Budget reforms

Remove redistributional pricing and substitute income-tested

transfers

Remove subsidies from failing ﬁrms

8. Decentralisation of economic decisions

Allow private property

Separate ﬁrms from government

9. Competition

Break-up monopolistic state ﬁrms

Free ﬁrms to lay off workers

Allow entry of foreign ﬁrms

Encourage small enterprises

10.Institutions of the market

Establish contract and bankruptcy law

Train managers

Nurture home economics

Source: UNIDO (1991, p. 39).

market to set prices for privately produced goods and services.

Economic reforms must impose hard budget constraints on state enter-

prises, promote privatisation, create freely operating capital and

labour markets and create a trade regime that promotes international

trade and investment.

Experience suggests that the long-term success of economic

adjustment requires strong political coalitions and determined polit-

ical leaders to set the direction for development. The experience of

states in East Asia in mobilising governmental and political resources

for economic development illustrates how progress is achieved.

Strong political leaders in Singapore and the Republic of Korea, for

example, were able to guide economic development through a bal-

anced combination of political controls and economic incentives that

built supporting political coalitions. They were able to increase the

size and dynamism of the private sector, distribute ownership of

assets more widely, and attract foreign and domestic private

investment.

Economic and structural reforms are complex and politically dif-

ficult to carry out in all countries. Their success depends on creating

strong political commitment, sustainable institutions and improved

management capacities. If balanced market development is to suc-

ceed, the role of the state must be well-defined, and government must

play an active role in creating conditions that allow the private sector

to expand and participate responsibly and effectively in international

trade and investment. Among the most important macroeconomic

management functions of government are to stabilise macro-

economic conditions, generate revenues to finance essential public

services and infrastructure, maintain standards of public health and

safety, encourage the informal sector, ensure access to capital markets

and training for the poor, link GDP growth to job creation and

regulate those economic activities that are natural monopolies or that

can adversely affect the environment or the general welfare of

citizens.

Protecting the Vulnerable

In most developing countries undergoing economic transition, gov-

ernments must also protect the vulnerable in the population from cat-

astrophic results, at least until they are able to participate productively

in social and economic activities. By the mid-1980s, studies began to

show that structural adjustment could have negative effects on the

poorest populations. Transition economies in Central and Eastern

Europe found that there were signiﬁcant economic and social costs

associated with reform.

Although the transformation to market-oriented economic systems

brought great economic and political beneﬁts to many people in Central

and Eastern Europe, the transition also brought relatively high unem-

ployment, especially among lower-skilled, less-educated and long-time

state enterprise employees, and drastic declines in GDP, ranging up to

40% in some countries immediately following macroeconomic reforms.

Transition countries saw an increase in poverty related both to unem-

ployment and unfavourable temporary economic conditions, and

many experienced a deepening of inequality in income, capability and

security, as private entrepreneurs and professionals gained in wealth

and opportunity relative to the rest of the population.

In many developing countries adjustment policies resulted in

higher unemployment in urban areas and lower incomes for the poor-

est in the urban labour force. In countries where the policies were

either inappropriate or ineffectively implemented, they hurt labour

markets and worsened the living conditions of the poorest.

Among the most important policies for protecting economically

vulnerable segments of the population are: ensuring the survival of pen-

sion systems where this is the primary or sole source of cash incomes for

those who are too old to work; creating or maintaining reasonable unem-

ployment beneﬁts for those workers who are released from jobs in state

enterprises, laid-off because of restructuring after privatisation, or are in

the process of changing employment; establishing and maintaining a

system of private health and social insurance to replace those provided

in state enterprises for workers who face loss of short-term income

because of health problems; and maintaining social assistance pro-

grammes for the disabled, disadvantaged or the poor who are adversely

affected by economic reforms or privatisation.

To create an efﬁcient and effective system of social beneﬁts, eligi-

bility requirements must be carefully designed to protect all who are

most vulnerable, to set beneﬁts at levels that are within the limits of

available government resources, and to foster development of the pri-

vate sector and market competition.

Improving Government Efﬁciency and Responsiveness

If the state is to create an enabling environment for sustainable human

development, it must have an administrative system that is honest,

efﬁcient and responsive to the people. Moreover, to establish condi-

tions that help the private sector to be competitive in the emerging

global economy, governments must provide high-quality public ser-

vices through responsive organisations that meet the needs of private

enterprises, civil society organisations and citizens. People around the

world are demanding better government at lower cost. As a result,

many governments are undertaking extensive administrative and civil

service reforms. Former Canadian cabinet minister Marcel Masse suc-

cinctly summarised the pressures for change in the way governments

perform: “Governments can no longer monopolise, or even concen-

trate on, programme delivery” alone; they require the participation of

private and non-governmental organisations if services are to reach

clients effectively and efﬁciently. Governments organised functionally

will be too inﬂexible and isolated to respond effectively to public

needs. Moreover, senior ofﬁcials cannot simply manage programmes

vertically. They must “spend more time collaborating with other

institutions and integrating their policies horizontally”, and pushing

operational responsibilities lower down in the organisation.

Masse argues correctly that because people in a growing number

of countries have little respect for authority, governments must per-

suade and motivate citizens to secure their allegiance. And because

many societies in established and emerging market economies are

becoming less coherent and uniﬁed, “governments must now act as

consensus makers bringing together the various stakeholders in an

effort to get some sort of common action”. This means that government

ofﬁcials must spend more time persuading and communicating, and

less time managing service delivery, which can often be done more

effectively through organisations outside of government. Finally, he

says that “governments must try harder to understand the process of

making citizens productive, both socially and economically”, and con-

centrate on creating an atmosphere for positive change.

Sustainable human development requires public administration and

civil service systems that are able to attract qualiﬁed, competent, honest

and realistically paid individuals into public service. If people are to have

conﬁdence in government, they must have a civil service system that

relies on merit-based recruitment and promotion, incentive-based com-

pensation and clearly deﬁned reward-oriented career paths. The civil ser-

vice must be able to attract and retain a corps of professionals who are

responsible for formulating and implementing economic policies and

support them with good training, an appropriate degree of indepen-

dence and professional reward structures. Professional civil servants

must be protected from political interference in carrying out their respon-

sibilities. Finally, the civil service system should be ﬂexible enough to

facilitate communications between the public and private sectors (box 3).

Empowering People and Democratising the Political System

Empowerment and democratisation can only take place within a con-

ducive institutional environment comprising properly functioning

parliaments, legal and judicial systems and electoral processes.

Parliaments made up of freely and fairly elected members represent-

Box 3 Civil Service Reform in Eritrea

UNDP has supported downsizing in Africa with mixed success. A good

example is Eritrea, where UNDP has been supporting the government’s

Public Sector Management Programme since 1993. The overall aim of the

Programme is to build an effective and efﬁcient public sector that is

accessible to, and capable of serving the needs of, the mass of Eritreans.

To do this, the intention was, and is, to create an effective and efﬁcient

public service characterised by a customer orientation, little red tape,

courtesy, responsiveness, ﬂexibility and facilitation. The UNDP project,

now in its second phase, is aimed at initiating urgently needed activities,

including:

•Improving the structure and functioning of the Eritrean Civil Service

• Strengthening human resource management and human resource

development systems

•Institutionalising a quality management system that identiﬁes and

solves consumer problems quickly and is responsive to their needs and

wants

• Improving operations and service delivery, such as increasing the

availability and validity of information; addressing women and gender

issues; strengthening provincial and local government and decentralisa-

tion; enhancing public enterprise performance; and assisting with the

implementation for privatisation.

One of the completed activities of the project has been a government-

wide functional (largely strategic and organisational) analysis conducted

on two levels—the government administrative system as a whole, and

individual ministries within it. The report was prepared by UNDP con-

sultants who asked each agency to answer questions such as: “What is our

mission?”, “Is it still the right mission?”, “Is it still worth doing?”, “If we

were not already doing this, would we go into it now?”. The answer to the

last question was often: “Yes, we would go into this again, but with some

changes. We have learned a few things”.

These ﬁndings became the basis for recommendations presented to the

government. The cabinet has since analysed these and agreed on the over-

all structure of ministries. Agovernment task force was then set up to study

the internal structure of each ministry, on the basis of the functions review

and cabinet decision, and to determine what staff would be needed based

on this structure. The process up to this point took about 12 months.

(Box 3 continues next page)

ing different parties are crucial to popular participation and ofﬁcial

accountability. Effective legal and judicial systems protect the rule of

law and human rights. Open electoral processes that build public con-

ﬁdence and trust are important for establishing political legitimacy.

Moreover, governments everywhere need to consider decentralis-

ing the political and economic systems to make them more responsive

to global economic changes and to the political demands of citizens.

Box 3 (continued)

It was only when this work was completed that downsizing began.

About 10,000 staff of a total of about 25,000 were retrenched, based on the

recommendations of the task force. This included roughly 6,500 civilians

and 3,500 ex-combatants who had been working in the civil service. These

included almost all messengers, cleaners and secretaries below the senior

executive level—and these services are now contracted out when needed.

Retrenchment has also been carried out in parastatals (10,000 out of

20,000) and the Asmara Municipality (2,000 out of 3,000). Some 50,000 ex-

combatants have also been demobilised. Unlike other such programmes

in Africa, this was not voluntary. Retrenchees were paid six months salary,

plus any pension entitlement. Throughout this process, salaries have not

been changed.

The Eritrean experience with downsizing is unusual in Africa because

of its homegrown nature and the speed of action. The only external fac-

tors were the UNDP-supported government-wide functional review and

a study on civil service laws and salary scales, both of which have had an

important catalytic role.

In Eritrea the government has emerged as victor in a long civil war.

With victory came self-conﬁdence, popular support in the form of

national consensus, peace and stability. These conditions have provided

Eritrea with a long-lasting impetus and momentum in its nation-building.

It is not this victory and the conditions it brought about alone, however,

that are the main catalysts, but the commitment, dedication, determina-

tion, integrity and self-reliance that the government inherited from the

many years of the Eritrean Peoples Liberation Front struggle to achieve a

vision without outside help.

Source: UNDP.

Political decentralisation gives more political clout in decision-making

to citizens or their elected representatives, and is usually associated with

representative government, citizen participation and democratisation.

Decentralisation is frequently associated with democratisation because

it allows citizens, or their representatives, to formulate and implement

policies more effectively than if all decisions were made by a small polit-

ical elite or only by national political authorities. Democracy guarantees

individual freedom, gives all citizens equality before the law and allows

them to elect and remove their political leaders. Political decentralisa-

tion also implies the selection of representatives from local electoral

jurisdictions. Selection of ofﬁcials from small jurisdictions allows citi-

zens to know better their political representatives, who in turn, know

better the needs and desires of their constituents.

Democracy is sometimes seen as a legitimate goal in its own right.

The argument is that while more basic needs, such as food and shelter,

may have more urgency and importance for the poor, much depends

on the manner in which these needs are satisﬁed. Higher production,

for example, can result in forms of enslavement, often requiring peo-

ple to work for long hours in dangerous conditions. Governments

should therefore work to ensure the satisfaction of basic needs in ways

that are humane. In many circumstances this can best be done by

increasing economic democracy. Civil society organisations such as

trade unions have a vital role to play in that (box 4).

Decentralising the Administrative System

In many developing countries problems have arisen from the heavy

concentration of control by the central government in the provision of

public services and infrastructure. Financial, administrative and

organisational problems vary in severity, and central governments dif-

fer in their capacities to deal with them. But the problems are similar

everywhere. Most ofﬁcials are primarily concerned with managing

macroeconomic policies and with maintaining national political

stability. They are often only concerned with services and infrastruc-

ture when it involves large-scale, capital-intensive investments. Rarely

do internal incentives exist for central government ministries to per-

ceive citizens as their customers and, consequently, many do not deﬁne

their major functions as satisfying citizens’ needs and demands. And

weak administrative capacity at the national level in many countries

limits the government’s ability to improve service delivery, even if

more ﬁnancial resources were available.

Box 4 Technical Assistance to the Parliament in Moldova

Since independence in 1991, Moldova has been in transition to independent

statehood based on political democracy and a market economy. Making this

possible has required building the legal and other necessary institutions. The

transformation of the institutional framework and of the political and

administrative systems is therefore an important part of transition. Moldova

inherited a political and administrative system, which was from the Soviet

era, designed to serve a centrally planned economy and function as a tool

for authoritarian control. In addition, having been a part of a larger nation,

Moldova missed the most central democratic institutions. Parliament in the

newly independent country grew out of the former Supreme Soviet of

Moldova. Thus, transition of Parliament into a legislative body suited to its

new role in a democracy was an important part of institutional reform.

UNDP assistance to Parliament was planned as a component of a com-

prehensive programme on Governance and Democracy, including sup-

port to the judiciary and local government. Because of its political

urgency, a small initial project was started for Parliament before the fund-

ing for the whole project was secured. Its aim was to provide immediate

short-term help in response to acute and clearly deﬁned requirements

faced by the Parliament during transition.

These were the main objectives:

• To establish an efﬁcient organisational structure and good working

methods in Parliament

• To develop an enhanced awareness of the role of Parliament in a

modern democracy.

(Box 4 continues next page)

Governments should therefore consider decentralising their

administration to perform their functions more effectively and to

ensure the implementation of economic adjustment and human devel-

opment programmes (box 5). The ability of enterprises and industries

to participate successfully in international economic transactions and

to generate revenues in domestic markets depends on the availability

and quality of support services and physical infrastructure. Highly cen-

tralised governments may be less effective in creating an economic

environment conducive to business than governments that are more

decentralised and able to respond quickly to changes in local needs and

Box 4 (continued)

The activities were:

• Seminars for the members of Parliament and parliamentary staff

•Review of the draft Constitution, regulations of Parliament, the Law

on the Status of a Deputy in Parliament, the Law on Elections to Parliament

and other laws

•Advise on Constitutional law to the Parliament

• Production of a Manual for the Members of Parliament

• A study tour by a group of members of Parliament and parliamen-

tary staff to the Parliaments of France and Belgium.

External support was provided by senior experts on law making and

on parliamentary procedures and organisation from the Netherlands dur-

ing three missions to Moldova.

The assistance was the ﬁrst of its kind received by the Parliament of

Moldova. Among other things, it provided timely and experienced advise

on the Constitution now in force. Areport, “A Concise Introduction to the

Constitutional Law of Moldova”, was drawn up by the experts. The

review of other laws was also much appreciated by Parliament and the

comments made by the experts were taken into consideration when these

laws were passed.

The manual, produced in Romanian and English, has been distributed

to all Members of Parliament to be used in their day-to-day work, and that

of parliamentary staff. It is also useful for a larger audience, especially ofﬁ-

cials of government, and for educational and research institutions.

Source: UNDP.

conditions. Governments in developing countries all face challenges in

determining the allocation of functions and responsibilities among cen-

tral governments, local governments and the private sector.

Administrative deconcentration seeks to redistribute authority,

responsibility and ﬁnancial resources for public services among different

levels of government. It can be deﬁned as “the transfer of responsibility

for planning, management, and the raising and allocation of resources

from the central government and its agencies to ﬁeld units of government

Box 5 Decentralisation in Honduras

The Government of Honduras, through the Presidential State

Commission, has undertaken a far-reaching programme of state moderni-

sation. In 1990 a UNDP Umbrella Project for Support for the Coordination

of the State Management Improvement Programme was launched. The

project provided a Secretariat to the Presidential State Commission, which

is central in the state’s modernisation. As well as being responsible for for-

mulating and coordinating national reform and modernisation policies,

the Commission acts as a political counsel on state modernisation issues.

Akey aspect of reform focuses on decentralisation.

Decentralisation is particularly challenging for Honduras, which has

had one of the most centralised administrative structures in Central

America. UNDP support has assisted the Government in making signiﬁ-

cant progress in several areas. It successfully created the technical and polit-

ical conditions necessary for the adoption of the National Decentralisation

Policy and programme, on the basis of consensus with the state institutions

and social groups involved. The strongly centralised mechanisms of

authority clearly needed more local participation to make clear demands

for decentralisation from the municipal level.

Anew Law on Municipalities was approved, providing ways to

increase ﬁnancial and executive municipal autonomy, including the trans-

fer of 5% of the governments annual tax revenues to municipalities. It also

gives municipalities full responsibility for development, approval and

administration of budgets. No longer required to contract with national

public enterprises for public utilities, municipalities can now contract

independently for services that can be provided more efﬁciently locally.

(Box 5 continues next page)

agencies, subordinate units or levels of government or semi-autonomous

public authorities or corporations, area-wide, regional or functional

authorities” (Rondinelli, Nellis and Cheema, 1983).

Decentralisation can also be accomplished through devolution,

which means establishing or strengthening sub-national units of gov-

ernment that are largely independent of central government control

and that have broad authority for operations across sectors.

It is important, however, that governance at the local level take

account of the traditional structures of authority in society. Tribal chiefs

Box 5 (continued)

Three pilot projects on decentralisation have been undertaken in major

cities, the largest and most developed of which is Pedro Sula. The city has

a fully autonomous Public Water Company and its transportation services

are completely privatised. Particularly interesting is the “Cabildo

Abierto”, an institution that enables the municipality to alleviate poverty

in the poorest areas of the city by preparing projects and programmes

through consultation and consensus building. Projects are prepared by

technicians of the municipality in consultation with local community rep-

resentatives, signed by the mayor, and ﬁnanced through cost-sharing

arrangements between the municipality and communities. The project

helped to foster this community participation in identifying priority

needs and coordinating with central, local and community entities in the

provision of services, including budgeting of required resources.

The project has had some difﬁculties. There was, of course, resistance

to decentralisation by central state authorities, who fear a loss of power

and tend to confuse decentralisation with privatisation. In the health sec-

tor there is opposition to decentralisation as it means the transfer of jobs

from cities to municipalities and may result in a loss of votes and power

to central authorities. In cases where resistance from the central authori-

ties is strongest, it was important that clear demands for decentralisation

were voiced at the municipal level, which means building public aware-

ness. This is one area in which additional support is required to create a

bottom-up approach to reform.

Source: UNDP.

possess legitimate power passed down through generations and

endorsed by the people. The process of decentralisation and partici-

pative governance should not lead to a breakdown of the existing

order of society or the elimination of traditional mechanisms for

resolving conﬂicts and managing common property, unless these are

clearly oppressive or discriminatory.

Closing the Gaps Between Rich and Poor

One of the most alarming aspects of economic growth in recent times

is the sharply increasing disparities between rich and poor in many

countries. As Lester Thurow points out, in the 1980s all of the earnings

growth in the USA accrued to the highest paid 20% of the workforce—

an astounding 64% of this went to the wealthiest 1% of the population.

At the same time the income of the average Chief Executive Ofﬁcer of

the Fortune 500 increased from 35 to a barely believable 157 times that

of the average worker. Similar disparities are evident in developing

countries. For example, the income-share ratios between the highest

and lowest 20% of income earners in Brazil is 32.1, in Panama it is 29.9

and in Guinea-Bissau it is 28.0. This is what the latest Human

Development Report calls “ruthless growth”.

Some countries in East Asia are notable exceptions as far as the dis-

tribution of income and capability are concerned. Indonesia, the

Republic of Korea and Singapore, for example, have managed to

achieve sustained high economic growth with equity. Indeed, income

disparities have been reduced.

But poor people are impoverished in other ways—in education, in

health and in opportunities. The latest Human Development Report refers

to this as a “poverty of capabilities”; in parts of South Asia, disparities

on the capability index are more pronounced than on income (29% of

people are income poor while more than 62% are capability poor).

It is the role of governments to attempt to reduce disparities in all

of these areas. The policy means for doing this will rarely be straight-

forward or immediately apparent, but it is becoming increasingly evi-

dent empirically (it always was logically) that the market cannot

achieve these things if left to its own devices. Prudent government

intervention is necessary.

Encouraging Cultural Diversity and Social Integration

Encouraging cultural diversity and social integration is particularly

difﬁcult but crucial. At ﬁrst sight, they may seem to be incompatible.

But experience shows that people want to maintain their cultural iden-

tity and roots while feeling socially integrated. When they are pre-

vented from doing this, or are disenfranchised by governments,

conﬂict is inevitable. Recent history demonstrates vividly the dangers

and costs of mishandling such issues. Governments must therefore

ensure that political systems are accessible to all and that legal systems

afford equal protection to all in society. These are fundamental require-

ments, which not only produce harmony and security, but enrich the

stock of social and cultural capital of the state.

This role of the state acknowledges that social interaction is the

essence of human life. People’s lives are lived out in a complex net-

work of social structures—families, small enterprises, local self-help

groups, multinational corporations and the state. Participation in the

life of the community, therefore, has tremendous social value. It is an

important source of well-being, enjoyment, fulﬁlment and meaning.

The sense of social cohesion from culture is crucial to this and to the

shaping of individual and group development. In the same way that

biodiversity in the natural world is a valuable resource, so cultural

diversity provides a treasure chest of knowledge, understanding and

practices that should be nurtured, not stamped out. This is not to say

that judgement should be suspended in relation to all aspects of tradi-

tional culture. For example, some cultural practices, such as infanticide

and the burning of widows, are abhorrent to universal standards of

ethics and human rights.

Governments should therefore exercise judgement concerning the

effects of mass media and consumerism on cultures, particularly those

that are most vulnerable to destructive outside inﬂuences.

Protecting the Environment

Destruction of the environment clearly threatens all life on earth. This

is where the effects of ruthless economic growth are the most damag-

ing. National accounting systems are particularly relevant in this area

of government responsibility. Systems that integrate economic and

environmental accounting, such as those currently being developed by

the Statistical Division of the UN and the World Bank, must be applied,

and supportive policies put in place and enforced.

Policy guidelines are found in the Declaration of Rio, Agenda 21,

arising from the Earth Summit held there in 1992. The principles agreed

on cover questions of ﬁnancing, technology transfer, institution build-

ing, forestry, desertiﬁcation, climate change, biodiversity and so on.

Funding to protect the environment is clearly a critical issue for

many developing countries (box 6). Emission permits that are tradable

internationally can provide both a cost-effective use of funds devoted

to pollution control and non-budgetary resource transfer. Reduction of

developing-country debt and removal of trade barriers and discrimi-

natory subsidies would provide several times the amount now

received in development assistance. An important theme of the Rio

summit was the acknowledgement by the rich countries of their bur-

den of responsibility in putting their own houses in order, eloquently

expressed by Maurice Strong, the Conference Secretary-General:

The rich must take the lead in bringing their development under control,

reducing substantially their impacts on the environment, leaving environ-

mental ‘space’ for developing countries to grow. The wasteful and destruc-

tive lifestyles of the rich cannot be maintained at the cost of the lives and

livelihoods of the poor, and of nature.

Also acknowledged at the Rio summit was the crucial role of civil

society organisations as routes for popular participation in environ-

mental protection.

Most fundamental of all, perhaps, was the recognition at Rio that

our economic system does not promote environmental protection.

Indeed, its principles are contrary to the interests of the environment.

It was concluded that the whole system is in need of radical revision

so as to make it genuinely responsive to ecological imperatives.

These issues are crucial obligations of national governments but

also transcend them. They will require a new global partnership that

Box 6 Urban Management and the Environment

Over the past 10 years the Urban Management Programme has developed

into a major UNDP initiative with the aim of building and strengthening

the capacities of governments and stakeholders to address urban prob-

lems, including poverty, the environment and the need for economic stim-

ulation. The Programme focuses on urban poverty alleviation, urban

environmental sustainability, and participatory urban governance and

operates in Africa, the Arab states, Asia and Latin America. The

Programme is an inter-regional urban initiative conceived as a global

technical assistance programme through a partnership between UNDP

and United Nations Center for Human Settlements (UNCHS) as the

executing agency.

The Urban Management Progamme supports various activities,

including city and country consultations, advisory services for upstream

policy-making, and networking with selected technical institutions from

within the region. The Programme, now in its third phase of operation,

has made remarkable progress in establishing regional networks of pro-

fessionals, urban governments and civil society organisations that,

through consultations, have identiﬁed salient issues in need of urgent

attention and action. As a result of these consultations, more than 300

activities have been initiated, focusing primarily on urban management

related to municipal ﬁnance, sustainable infrastructure, land tenure, envi-

ronmental improvement and poverty alleviation.

(Box 6 continues next page)

not only recognises the ‘transcending sovereignty of nature’, but is pre-

pared to sacriﬁce material progress that satisﬁes short-term national

interests for the longer-term good of people and the planet.

Upholding Gender Equality

Gender equality is a central feature of sustainable human develop-

ment. The 1995 Human Development Report notes that: “Upholding the

equality of rights is not an act of benevolence by those in power. It is

needed for the progress of every society”. Ideally, gender equality

should be a given in society. Unfortunately, women still do not receive

an equal share of opportunities, beneﬁts and responsibilities of citi-

zenship and development.

Box 6 (continued)

In Latin America many environmental activities have centred around

liquid waste management and the role of scavengers in solid waste man-

agement, while in the Arab states emphasis has been on recycling plas-

tics, bones, rags, glass and paper, with an important regional initiative on

solid waste management in Yemen. Strengthening professional compe-

tence in handling environmental questions has been a major concern in

Africa. In Asia regional seminars sought to raise awareness among health

ofﬁcers of the close link between urban health and the environment.

The focus on poverty alleviation has been a priority for the Urban

Management Programme since 1992. Most activities in this area are cur-

rently focused on establishing guidelines and regulatory frameworks for

dealing with this important aspect of urban management. Recent inter-

ventions in Africa focused on children in especially difﬁcult circum-

stances, involving communities at the grassroots level. In two of the Arab

states an innovative credit scheme has resulted in successful

microenterprise programmes. A region-wide study in Asia on access to

housing ﬁnance for the poor resulted in the publication of a guide book

on Finance and Resource Mobilisation for Low-income Housing and

Neighbourhood Development.

Source: Urban Management Programme, UNDP.

As with the other aspects of governance, goals of gender equality

will vary according to social, cultural and economic environments of

different countries. Countries will attach different priorities to, for

example, education, pay, maternal health, representation in parlia-

ment, discrimination at work, domestic violence, family law and so on.

The acceptance of difference, however, should occur within a frame-

work of universal standards of ethics and human rights.

Gender equality is impossible without strong political commitment

and fundamental changes to societal norms and values in the long term

(box 7). Stereotypes of men and women need to be replaced by a view

that accepts all people as equally deserving of choice and opportunity.

Again, the market left to its own devices will not bring about

needed change. Government intervention and policy action, both

national and international, are required. The Human Development

Report 1995 draws attention to the following agenda for policy action:

•Establishing a timetable to end legal discrimination and a framework

for the promotion of legal equality. Examples where action could be taken

include: instances of unequal pay for equal work, and legal indiffer-

ence to violence against women; campaigns to make women aware of

their legal rights and to mobilise support for attaining these rights;

afﬁrmative action to give access to legal redress for poor women; and

legal ombudswomen.

•Changing social and institutional norms. This means encouraging

men to participate in family care, allowing ﬂexible work schedules,

expanding public service to include child care, changing tax and social

security incentives, and changing laws on property inheritance and

divorce.

•Setting targets for participation. In 1990 the UN commission on the

Status of Women recommended that 30% participation be regarded as

the minimum for decision-making positions at the national level. Few

countries outside Scandinavia have achieved this though some

developing countries—including Thailand, Viet Nam, Argentina,

Bangladesh, Tanzania and India—have set such targets.

•Establishing programmes for increasing women’s opportunities.

Three areas are critical: education, reproductive health rights and

access to credit.

•Improving access to economic and political opportunities. This

should include basic social services, programmes for poverty reduc-

tion, employment and capacity building.

The Role of Civil Society

Arobust network of social and civil society organisations—which polit-

ical-economist Robert Putnam refers to as “social capital”—contributes

to the capacity of society to help in human development. Putnam’s

studies of regional economic development in Italy showed clearly that

regions with higher endowments of social capital were far more

successful at stimulating and sustaining economic growth, social

progress and democracy over a long period than regions with less social

capital. Regional development districts were established throughout

the country and had the same structures and authority and substantial

amounts of money (about 10% of GDP) to spend for economic devel-

opment. Despite their identical form, some regions ﬂourished and oth-

ers failed to achieve their objectives. Putnam found that the

regions—some predominantly Catholic, some communist and others

almost feudal—with strong and extensive networks of social and civic

organisations invariably did far better than those with weak social cap-

ital. The former not only achieved higher levels of regional develop-

ment but were also more democratic. Putnam points out that social

capital has powerful consequences because civic networks and norms

ease the dilemmas of collective action by institutionalising social inter-

action and reducing opportunism, by fostering norms of social reci-

procity and social trust, and by facilitating political and economic

transactions. Well-developed networks of civil society organisations

also amplify the ﬂows of information and help transmit knowledge of

people’s reputations that lower economic and social transaction costs,

and provide the means for reliable political, economic and social col-

laboration—all of which are essential to effective governance.

Among the most important organisations and institutions of civil

society that can be created or strengthened in developing countries are

employers’ organisations; industry associations; commercial associa-

tions; labour unions; employee groups; professional associations; policy

and advisory groups; a free press, television and radio; gender,

Box 7 Empowerment of Women in South Africa

Since 1995 UNDP has been supporting a project managed by the Women’s

Development Foundation in South Africa, which focuses on the political

participation of women. The primary objectives of the preparatory proj-

ect are to: train women candidates standing for the ﬁrst South African

Local Government elections and train women candidates to be more effec-

tive in their jobs.

Historically, South Africa’s apartheid did little to bring local govern-

ment closer to the people, particularly black people and rural communi-

ties. In rural communities women constitute the majority (about 80%) but

their participation in formal local government structures had been

insigniﬁcant. Currently, local government is still heavily inﬂuenced by

ofﬁcials from the previous regime, and there has been little emphasis on

capacity building for women to enable them to increase their participa-

tion. Local government, however, has the potential to accommodate

gender-speciﬁc needs because women’s participation does not require

that they move away from their homes.

It is within this context that the Local Government Capacity-Building

Programme of the Women’s Development Foundation was developed.

Through this programme, the Foundation, in consultation with women

active in local government, found that there was a need to promote the

training of women who had recently entered local government. Lack of

experience had resulted in most potential women candidates having an

immediate disadvantage. In addition, if elected, women candidates also

lacked skills and opportunities for training to enable them to be effective.

There was, therefore, a need for immediate training in these areas, as well

as for the institutionalisation of a longer-term, sustainable training

programme.

(Box 7 continues next page)

language, religious and other social-interest groups; and community

and neighbourhood groups. But as societies become more complex and

uncertain, people also need the help of consumer groups, charitable and

philanthropic organisations and social organisations that bring people

together to participate in a wide range of activities, from sports and

Box 7 (continued)

The ﬁrst phase of the Foundation’s programme was to help women

prepare to vote, identify potential participants through party lists, under-

take a training needs assessment for women councillors, and plan a train-

ing programme. These were done ahead of the intention to prepare for

longer-term involvement in support of enhancing women’s roles in local

government structures after elections and including both women coun-

cillors as well as women in civil society working in related support roles.

The ﬁrst phase consisted primarily of four workshops that reached at least

200 participants. The workshops, held in four different provinces, focused

on separate topics, including: exploring ways in which women candidates

could mount a successful campaign; preparing candidates for elections as

well as identifying training needs once women were elected into councils;

and providing candidates with an understanding of the procedures for

voting, as well as those for standing for election.

In addition to the workshops, support meetings were held and

attended by party and independent candidates, allowing women to share

difﬁculties they had experienced, as well as enabling them to meet each

other along and across party lines.

The second phase of the project was implemented after elections and

focused on brieﬁng councillors on the mechanics of local government,

enabling women to understand their responsibilities, developing man-

agement skills, undertaking capacity building for greater effectiveness,

and enabling women to develop strategies of integrating gender in all lev-

els of local government. Workshops in the second phase focused on three

key issues raised during the ﬁrst phase:

•Overall gender sensitisation: From phase one, it was evident that

there was a growing demand for gender training in line with the consti-

tutional and legislative imperatives for gender equality and women’s

empowerment in South Africa.

(Box 7 continues next page)

recreational endeavours, to music, art, handicrafts, hobbies or other

social interaction (box 8). Civil society is also the seed-bed of many pub-

lic, private and voluntary organisations. All of these groups, by bring-

ing people together in common cause, provide them with mechanisms

for contributing to the quality of life in their communities and countries.

Civil society organisations can make powerful contributions to

sustaining human development in all societies, but especially in for-

mer totalitarian countries or centrally planned economies where civic

Box 7 (continued)

•Media strategies: For women in local government it is clear that

experience in the media is crucial in determining strategies to build

respective constituencies, particularly as media in the past has shown no

evidence of black women’s participation. The thrust of workshops focus-

ing on this issue was to educate women on media processes and to use

them to become more efﬁcient in their jobs, build self-conﬁdence and be

accountable to constituencies.

•Powers and functions of local government: Participants in these

workshops, predominantly women councillors, were not readily familiar

with the machinery of local government or with the expectations of their

roles. In particular, many did not understand their roles as councillors in

relation to ofﬁcials some of who have held their posts for decades.

The project has shown that enhancement of self-awareness, self-

conﬁdence, assertiveness and training in media strategies among the

women councillors who have attended the workshops on a regular basis

has been marked. In addition, participants’ evaluations have reﬂected a

general feeling of empowerment and enthusiasm to apply newly acquired

knowledge and skills to their work.

UNDP support has enabled the Foundation to ﬁll a critical void in pro-

viding services to women in local government. Through this programme,

there have been 24 workshops in 5 provinces, reaching out to 826 women

and men. The Foundation has been able to begin a process whereby pro-

vision of training for local government can be institutionalised. A unique

feature of the programme was the natural evolution of a methodology

that is uniquely South African.

Source: UNDP.

networks were not encouraged and social capital was allowed to

decay. But civil society organisations can also help off-set or mitigate

the adverse effects of market weaknesses and market failures.

Institutions of civil society play crucial roles in providing functions

Box 8 LIFE: An Innovative Approach to Participatory Local

Governance

Through the Local Initiative Facility for Urban Environment (LIFE), UNDP

has developed a methodology to promote participatory local governance

using the urban environment as the entry point. The purpose of this method-

ology is to provide opportunities for CBOs, non-governmental organisa-

tions and local authorities to work together to improve the conditions of

poor people living in urban areas. Programme objectives include inﬂuenc-

ing policy at the local, provincial, national and international levels.

The LIFE Methodology

Upstream—Conduct a national consultation, set strategies, gather support.

Downstream—Ensure effective, collaborative small-scale policy exper-

iments by CBOs, non-governmental organisations and local authorities.

Upstream—Initiate policy dialogue through the dissemination and

exchange of information nationally and internationally.

The LIFE Programme has projects in 12 pilot countries. LIFE also sup-

ports national consultations, local-local dialogue, policy dialogue and

networking at the country level. At the regional and interregional levels,

LIFE funds projects by non-governmental organisation networks and

cities’ associations that promote the documentation of (and exchange

information on) successful approaches to improving the urban environ-

ment. The LIFE Global Advisory Committee provides a forum for shar-

ing experiences from the national, regional and interregional levels and

synthesizing lessons learned.

LIFE seeks to inﬂuence the ways in which local people and organisa-

tions work together by demonstrating the beneﬁts of cooperative plan-

ning and action. The shared experience of establishing priorities,

designing projects and programmes, mobilising resources, implementing

plans and seeing results has inspired sustained local partnerships among

those involved with the LIFE Programme.

Source: UNDP.

and services that the market cannot offer, such as the promotion by reli-

gious organisations of ethical values and information on the environ-

ment by environmental protection organisations.

Civil society organisations have especially strong impacts on eco-

nomic, political and social development when they work in coopera-

tion with each other, the government and the private sector. They can

contribute to economic development by helping create an “entrepre-

neurial milieu” so essential to sustaining a market system, by working

with other institutions in developing human resources, by protecting

the economically weak in the population from the potentially adverse

effects of economic transformation, and by participating in activities

that help alleviate poverty and protect the environment.

Trade unions, employers’ associations, industry associations,

chambers of commerce, policy and interest groups, and the media also

contribute to creating social conditions necessary for market develop-

ment. Merchants groups, such as chambers of commerce, promote

commercial enterprises, attract new industries and businesses to their

communities, promote laws and regulations assuring competitive

trade, and undertake surveys and promotion campaigns to ensure that

business leaders are aware of the advantages of their communities as

locations for business activities.

Labour unions and employee organisations are playing important

roles in privatisation in some Latin American and Eastern European

countries by safeguarding jobs during the transfer of ownership and by

participating in decisions about the restructuring of privatised enter-

prises. Employers’ organisations are also beginning to emerge in Central

and Eastern Europe, playing a more important part in privatisation.

Some are carrying out campaigns that develop support for privatisation;

others are attempting to inﬂuence policies affecting privatisation and

insisting on increased transparency and predictability for investors.

Employers’ organisations also provide the government and the private

sector with advice on the procedures and impacts of privatisation and

establish programmes to promote small-enterprise development.

Governments have a strong responsibility to provide the public

goods aspects of health care—that is, information about and control of

contagious diseases, requiring child immunisation and vaccinations

against transmittable diseases, reducing environmental pollution and

social behaviours posing health hazards, providing cost-effective

health services to the poor and unemployed, and overcoming prob-

lems created by uncertainty and insurance market failure. But many

civil society organisations—including employer and trade union

organisations, charitable groups and religious and social organisa-

tions—also play a critical part in inﬂuencing health care policy and in

providing some types of health services directly to their members or

to other groups in society. Such organisations can also play a vital role

in promoting respect for diversity.

To alleviate poverty in developing countries, civil society organi-

sations must work closely with governments and the private sector to

prepare the poor to participate effectively in the society and the econ-

omy. This requires providing social services and increasing the access

of the poor to basic education and health services; giving the rural poor

a more equitable distribution of land and agricultural resources; open-

ing access to credit for the poor by changing criteria of creditworthi-

ness and decentralising credit institutions; and expanding productive

employment opportunities and sustainable livelihoods for those who

are unemployed or underemployed. Civil society organisations can

increase the participation of the poor in the development and imple-

mentation of poverty reduction policies and programmes. Institutions

of civil society can also provide some aspects of the social safety net to

protect those who are excluded temporarily or permanently from the

market. Some organisations also help to increase people’s capacity to

use resources in a sustainable and environmentally beneﬁcial way.

Developing countries must provide an enabling environment that

allows institutions of civil society to be established and to perform

their functions freely. This requires the cooperation of government and

the support of private enterprise.

For a civil society to ﬂourish in a developing country, an enabling

environment is required that provides:

• A legislative and regulatory framework that guarantees the

right of association

• Tax and other incentives to facilitate support from corporate

and philanthropic organisations to civil society associations

•Agreed mechanisms for the involvement of civil society organi-

sations in decision-making and in the implementation of decisions taken

•Financial support from the state and the donor community,

especially for start-up expenditures.

An active civil society that is rich in institutional and social capi-

tal is better equipped to resolve conﬂicts without recourse to violence

and dramatic changes in political power and economic policies. A

proper institutional setting reduces transaction costs (and corruption)

in the economy, and creates a climate in which productive investments

and employment prosper.

The Role of the Private Sector

Over the next decade the international economy will continue to

change the ways in which private enterprises must interact both within

and across national borders. Economic globalisation requires

enterprises of all sizes to respond to greater market fragmentation,

shorter product life, smaller production runs and faster redesign and

production of customised goods. It requires manufacturing and ser-

vice ﬁrms that want to compete internationally to become more ﬂexi-

ble in their operations; use advanced technology to produce

high-quality, reasonably-priced goods; rely on speed-to-market

methods of operation; use multi-site locations; and adopt just-in-time

production and delivery and worldwide components sourcing.

The United Nations Centre on Transnational Corporations points

out that in order to cope with the rapidly changing trends in the

international economy, transnational manufacturing and service

enterprises will, increasingly, have to operate more ﬂexibly; become

more attuned to the changing and diverse needs of their customers; be

able to reorganise rapidly their systems of suppliers, distributors,

workers and managers; and make use of high-speed telecommunica-

tions and transport networks to collect and disseminate information

and to obtain inputs and distribute products (box 9). Although pro-

duction costs are crucial in the global economy, labour costs alone are

becoming far less important than overall cost efﬁciency.

Competitiveness in the global economy requires enterprises to provide

high-quality goods and to deliver them rapidly and to service them

promptly. In a globalising economy enterprises of all sizes will depend

more heavily on worldwide networks of communications and trans-

portation to remain responsive and ﬂexible. They will not only have to

adopt agile manufacturing practices, but organise teams of managers

and workers to achieve speciﬁc and temporary goals, and then reor-

ganise them into new teams as new opportunities arise.

Speed-to-market practices require that manufacturers adopt con-

current engineering in which all aspects of a product’s development

are planned simultaneously rather than waiting for research and

development phases to end before testing them with customers and

developing marketing and service strategies. Cross-functional teams

representing engineering and design, marketing, purchasing, distrib-

ution and service departments and customer representatives—some of

whom are scattered widely in different cities or countries—will be part

of product development in companies seeking to compete globally.

Internationally competitive businesses will have to empower man-

agement teams and organisational units to make decisions and carry

them out, adjusting as they learn more about the business environ-

ment, customer needs and the characteristics of logistics systems.

The rise of large-scale enterprises in many developing countries,

however, has not diminished the importance of small- and microen-

terprises. Despite rapid industrialisation in many developing

countries over the past half century, the portion of the labour force

employed in large enterprises is still small. In emerging market

economies large state-owned enterprises are likely to be privatised and

restructured, displacing many surplus workers. Special attention must

be given in any country pursuing large-scale privatisation to creating

or expanding small- and medium-sized enterprises that can absorb

redundant labour.

Box 9 Government and Private-sector Development in Egypt

The Civil Service Reform Project Document was signed by the

Government of Egypt, UNDP and the Canadian International

Development Agency in January 1995. The project’s aim was to facilitate

the implementation of the government’s civil service reform through sen-

sitisation to the new role of government and a demand for change, cou-

pled with support and technical assistance to sustain these initiatives.

At the time when the Project Document was being discussed, Egypt

was fundamentally engaged in transformation—and still is. Having

undergone signiﬁcant changes of an economic, political, social and insti-

tutional nature, Egypt is moving away from a centrally planned economy

towards an economic system based on a free-market economy. The pri-

vate sector is taking an active part in economic modernisation, not only

as a vigourous driving force, but also because Egypt wants to rely more

on its private sector. This is having profound effects on bureaucratic prac-

tices, on the role of the government, and on the way the civil service will

have to be redeﬁned.

Meetings held between private-sector organisations and the govern-

ment looked at the reforms necessary to support private-sector develop-

ment. These meetings identiﬁed problems and constraints, and resulted

in decisions to remove some constraints and to modify certain rules and

regulations relating to the private sector. The key theme adopted for the

Civil Service Reform Project was “enabling economic growth and private

sector development through civil service enhancement and reform”,

directly responding to one of Egypt’s top priorities, namely the moderni-

sation of production capacity within an Economic Reform and Structural

Adjustment Programme.

The substance of the reforms was not deﬁned at the outset. Instead, the

project would support reforms deﬁned through the political and adminis-

(Box 9 continues next page)

Small enterprises play a crucial role as job generators in both the

service and manufacturing sectors. In South Asian countries, such as

Bangladesh, India and Pakistan, most manufacturing jobs is accounted

for by small-scale and cottage industries. If wage labourers in enter-

prises that do not offer social security and other forms of labour pro-

tection are counted, the portion of the total labour force in the informal

Box 9 (continued)

trative process. This is to the underlying project philosophy: “if the fail-

ures, shortcoming and pitfalls of so many programmes of civil service

reform are to be avoided, it is necessary that those who are supposed to

implement reforms become part and parcel of the deﬁnition of the latter

so that those who must change attitudes are the ones who must ﬁrst pos-

tulate changing their attitudes”. Whatever the envisaged reforms, or what-

ever the top-down instructions may be, reform will only really take place

when those who have to change their attitudes are the ones proposing it.

By creating the Steering Committee for Private Sector Development

and a Legislative Review Committee, and later a High Level Committee

for Civil Service Reform, which was to have overall responsibility for

speeding up civil service reform associated with private investment, the

Egyptian Government clearly indicated where its priorities lay. In a meet-

ing in July 1995 the High Level Committee, made up of representatives

of both the public and private sectors, determined that the main tenets

of a practical civil service reform concerning the problems that the busi-

ness community faces. In stating the top priorities, the group declared

that Construction Licensing and Investments Licences were a top

priority.

Progress in both these focus areas is underway, and the Civil Service

Reform Secretariat, an organisation set up to manage and support the pro-

ject, has conducted a detailed analysis of the complex realities in under-

taking reforms in these priority areas and bringing the stakeholders of the

reform together in order to develop recommendations and a workplan for

future reform. Signiﬁcant steps have also been taken in developing a pilot

“one-stop shop” for business, which aims to provide business clients of

the government with accurate and timely services, linking them to all

sources and providing decentralised delivery.

Source: UNDP.

sector represents more than half of the workforce in many developing

countries. Even in Asia’s newly industrialised countries, where growth

in manufacturing jobs has been relatively high, micro-, small- and

medium-sized enterprises in the services sector have absorbed the

largest portion of the employed labour force. For these and other

developing countries, small enterprises provide most goods-

producing jobs, the majority of which are found in cities.

Moreover, in many developing countries small enterprises, such

as food vending and preparation, are operated by women and provide

a source of employment that supplements the income of other family

members. Indeed, the sale of household goods, food marketing, street

food preparation and sales, and similar occupations are dominated by

women in many Asian and African countries.

Small enterprises are the main source of jobs for unskilled labour-

ers who migrate to urban areas and for those who shift from agricul-

tural to non-agricultural occupations in rural areas. Because of ease of

entry, small capital investment and low skill demands, small enter-

prises such as street trading, food preparation, and hawking and vend-

ing offer survival for the urban poor and for new migrants to cities and

towns. Small-scale transportation services, street stalls, mobile vend-

ing and low-cost services all employ large numbers of city dwellers in

many developing countries. And small manufacturing enterprises can,

under proper conditions, contribute signiﬁcantly to a country’s

exports.

Despite their critical importance for job creation and economic

growth, many entrepreneurs wishing to establish or expand small

enterprises in developing economies suffer from limited access to and

the high costs of credit, hidden costs of start-up and operation and lim-

ited managerial skills. Many lack access to the information and tech-

nology they need to improve production, efﬁciency and product

quality. They also face difﬁculties in establishing and maintaining ade-

quate marketing networks, in reducing long marketing chains and in

responding quickly to changes in market demand. Most smaller

businesses cannot compete effectively with larger ﬁrms that beneﬁt

from preferential government policies and programmes.

Governments and international development agencies are recog-

nising the importance of small enterprises to job creation and wealth

generation, and many are seeking to develop programmes that will

strengthen and expand these businesses. But experience suggests that

assistance programmes to small enterprises have had mixed results

because they have often been poorly designed and ineffectively

implemented.

3. Governance and Sustainable Human

Development in a Changing World

Economic, social and political systems throughout the world have

gone through dramatic changes since the early 1980s. The transforma-

tion of centrally planned socialist economies into market-oriented sys-

tems, the emergence of democratic political regimes in formerly

totalitarian states, the rapid development and global proliferation of

new technologies, the pervasive spread of telecommunications sys-

tems, the growing importance of knowledge-based industries and

skills, and the continued integration of the world economy through

trade and investment have together created the foundations for a new

era of human development. These and other changes in the world’s

economic, political and social systems have brought historically

unprecedented improvements in human living conditions in both

industrial and developing countries. At the same time, they have

brought new uncertainties, complexities and challenges for human

development as the world enters the 21st century.

Our ability to improve the human condition sustainably is con-

strained by the rapidity, unpredictability and complexity of change in

the modern world. This chapter examines some of the major drivers of

change, what Lester Thurow refers to as the “tectonic plates” of change

that grind simultaneously and inexorably to affect the shape of our

planet’s future. The chapter also considers brieﬂy some of the impli-

cations of change for governance and sustainable human develop-

ment. These matters are explored in greater detail in the ﬁnal chapter.

Over the past 35 years progress has been made in all major dimen-

sions of UNDP’s human development proﬁle. Developing countries

have experienced annual growth in agriculture and industry of more

than 3% a year in the past decade, and more countries are exporting

non-commodity products, reducing poverty signiﬁcantly in Asia,

Latin America and the Middle East. The health of people in develop-

ing countries has improved signiﬁcantly; life expectancy has risen by

more than a third since 1960, and accessibility to safe water supplies

has doubled to almost 70% of the population. Per capita food produc-

tion increased by more than 20%. Despite still high rates of population

growth in some regions, fertility rates among women in developing

countries fell by more than a third. Primary and secondary enrolments

of girls rose from 38% to 68% over the past two decades and, overall,

net enrolments in primary schools for both girls and boys increased by

almost two-thirds, reaching 77% in 1991. Between 1960 and 1992, the

infant mortality rate in developing countries dropped by more than

half, from 149 to 70 per thousand live births. Immunisation has saved

the lives of about 3 million children a year since the early 1970s. More

than two-thirds of the population in developing countries now live

under relatively pluralistic and democratic political regimes.

Rapid and dramatic changes in economic, social and political

conditions in the 1980s and early 1990s did not, however, eliminate

human development problems nor ensure the sustainability of

progress for future generations. Developing countries still face over-

whelming challenges in reducing poverty and increasing the access of

the poor to economic and social opportunities that can improve their

living conditions. Almost a third of the population in developing coun-

tries—about 1.3 billion people—still live in poverty. About 800 million

people lack sufﬁcient food, and about 500 million subsist in a state of

chronic malnutrition. More than 130 million children in developing

countries do not attend primary school, and 275 million do not have

access to a secondary education. More than 17 million people a year

die needlessly from infectious diseases in developing countries where

the under-ﬁve child mortality rates are still nearly seven times higher

than in industrialised nations. Rapid industrialisation and urbanisa-

tion are contributing to environmental degradation, as is the continued

exploitation of natural resources such as tropical forests. Although the

living conditions of women have improved in some parts of the devel-

oping world, in other parts women still lack access to employment,

education and political representation.

Breakdown, Breakthrough and Fibrillation

Capitalism has exerted a dominant inﬂuence over development in the

nineteenth and twentieth centuries. As we move towards the close of the

millennium, there is no credible ideological competitor on the intellectual

landscape. Yet there are signs of growing uneasiness between the mate-

rial, social, psychological and cultural interests of the majority of people

and the interests of the environment, on the one hand, and the underly-

ing premises of the capitalist system, on the other. Capitalism is about the

ownership of assets, but today’s most valuable asset—intelligence or

brainpower—deﬁes conventional forms of ownership. Capitalism pro-

motes the interests of the individual over the group, yet increasingly

problems of development, indeed of survival, demand cooperative solu-

tions that place the common good above narrow self-interest.

Our time is characterised by such contradiction and disharmony,

by confusion and uncertainty, by great leaps forward for some and

giant steps backward for others. We are experiencing what has been

referred to as breakdown, breakthrough and ﬁbrillation.1

Signs of breakdown are everywhere: disintegration of families;

destruction of indigenous societies; degradation and destruction of

plant and animal life; pollution of rivers, oceans and the atmosphere;

rising levels of crime, alienation and substance abuse; and increasing

unemployment and disparities in income and capability.

At the same time, profound breakthroughs are being made in com-

munication and transport, medicine and genetic engineering, com-

puterisation, new forms of environmentally friendly energy, political

transformations, peace settlements, improved systems of agriculture

and so on.

These times of ﬁbrillation and chaos are bewildering and stressful,

continually challenging and undermining old ways of seeing and

knowing and familiar beliefs and values. According to Thurow, this

foreshadows a period of “punctuated equilibrium”, of massive, spon-

taneous change leading to radically different structures. In such times

ideologies, technologies and social systems are in disequilibrium. They

are unsynchronised.

Into the New Era

Such turbulence, uncertainty and confusion will be the environ-

ment of governance for the foreseeable future. But rather than being

helpless passengers on time’s roller-coaster, our challenge is to design

systems of governance that can accommodate and exert some inﬂu-

ence over the future. In our attempts to do this, we need to take into

account the major forces shaping the future.

Environmental Degradation

In our drive for material betterment, we have become so indifferent to our

roots in nature that we are in danger of tearing them out.

—Shridath Ramphal

Massive, irreparable damage to the environment is perhaps the

single most destructive element of global change. It is now almost cer-

tain that deforestation and depletion of the ozone layer have brought

about signiﬁcant, irreversible climate changes that are causing hard-

ship throughout the world. In many spheres, rich countries contribute

disproportionately to environmental degradation. For example,

though they constitute only one-ﬁfth of the world’s population, peo-

ple in industrial countries consume almost nine times as much energy

per capita as people in developing countries. Each year, damage to

forests from air pollution leads to estimated economic losses of $35

billion. In Southeast Asia and the Paciﬁc more than 3 million hectares

of tropical forest were lost between 1981 and 1990, probably forever.

Deforestation in South Asia is even worse: roughly 4 million hectares

of land are deforested each year. On the African continent, desertiﬁca-

tion has claimed an average of 1.3 million hectares of productive land

a year for the past 50 years.

We are in danger of bequeathing to future generations a soiled,

ecologically impoverished planet stripped of its life-sustaining tropi-

cal forests and its rich and beautiful diversity of animal and plant life—

a planet of polluted atmosphere, oceans and rivers barely capable of

supporting the few species that remain. Governments have the respon-

sibility to confront this bleak prospect. Unless there is ﬁrm cooperation

by governments, transnational corporations and international bodies

to put an end to this destruction, future generations will remember this

time as the turning point for the earth, a watershed between an era of

natural beauty and bounty, and one of desolation and sterility.

The United Nations Conference on Environment and Development

held in Rio de Janeiro in June 1992 reﬂected world concern about envi-

ronmental degradation. Its declaration on environment and develop-

ment endorsed 27 principles to improve global cooperation and action.

For example, Principle 7 says:

States shall cooperate in a spirit of global partnership to conserve, protect

and restore the health and integrity of the Earth’s ecosystem. In view of the

different contributions to global environmental degradation, States have

common but differentiated responsibilities. The developed countries

acknowledge the responsibility that they bear in the international pursuit of

sustainable development in view of the pressures their societies place on the

global environment and of the technologies and ﬁnancial resources that they

command.

There is unprecedented urgency attaching to these tasks. But ﬁve

years after Rio, there are depressing signs of business continuing as

usual. Environmental degradation continues apace. It is as if statistics

signifying the death of the planet have become so commonplace that

they have lost their meaning and signiﬁcance for ordinary people—an

ironic case perhaps of information overload, leading to a kind of bad

news fatigue. Yet Maurice Strong’s grim warning at the Rio summit

must be heeded:

In our negotiations with each other, nature must have a place at the table,

for nature will have the last word and our decisions must respect the bound-

ary conditions it imposes on us as well as the rich array of resources and

opportunities it makes available to us. We have to face up to the dire impli-

cations of the warnings scientists are sounding. They point to the real

prospect that this planet may soon become uninhabitable for people. If we

respond only with rhetoric and gestures, this prospect could become reality.

Economic Globalisation

In the early years of the next century, successful participation in the

global economy will be a key factor affecting the wealth of nations,

regions and cities of the world. But equally, the assumptions on which

the global market is based—productivity, proﬁtability and efﬁciency—

can produce undesirable consequences, such as jobless growth, mar-

ginalisation of peoples and environmental devastation. Economic

globalisation is therefore both an opportunity and a threat.

The following aspects of economic globalisation will be of partic-

ular importance to developing countries:

International trade. By the 1980s, international trade had become the

driving force for economic growth not only in industrialised nations

but also in the many developing countries that liberalised their eco-

nomic and trade policies. The value of world merchandise exports

doubled from a little more than $2 trillion in 1980 to a little more than

$4 trillion in 1994. Countries that have diversiﬁed their exports and

opened their economies to imports and investment have grown faster

than countries that continue to export only basic commodities and raw

materials or that maintain protectionist policies.

Internationalisation of investment. Although trade continues to be a

critical force in global economic integration, foreign direct investment

is an even more important source of economic development and may

well exceed exports as a basis for economic growth in the future. By

the early 1990s, sales of foreign afﬁliates of transnational corporations

exceeded exports as the primary means of transferring goods and ser-

vices across national borders. Developing countries not participating

in foreign direct investment incur serious opportunity costs because

such investment can help develop their domestic and export manu-

facturing industries, and can provide foreign exchange and tax rev-

enues, increase regional and personal incomes, modernise social

institutions and change social values.

Increasing mobility of factors of production. Since the late 1950s all fac-

tors of production—labour, capital, ownership of land and technol-

ogy—have begun to move more rapidly and easily across national

borders. Although capital has always been mobile, the scale of the

transfer has increased signiﬁcantly with the expansion of foreign direct

investment over the past 25 years. Capital ﬂows across national bor-

ders have accelerated through direct investment, medium- and long-

term foreign private borrowing, short-term borrowing and domestic

outﬂows, private grants and ofﬁcial bilateral and multilateral foreign

aid. Workers too move more freely among nations or are transferred

within transnational ﬁrms or through contracts for large projects in for-

eign countries. World-wide employment in transnational corporations

grew from about 40 million people in 1975 to more than 73 million in

1992.

Deeper economic integration through transnational corporations. At the

microeconomic level, international integration intensiﬁes as enterprises

expand across national borders either through equity investments

(mergers, acquisitions or greenﬁeld investments) or through nonequity

linkages (strategic alliances) that integrate the activities of independent

ﬁrms. Cross-border acquisitions in such industries as telecommunica-

tions, energy and transportation, have been substantial. Economic

interaction is moving from shallow integration based on simple trade

linkages to deep integration shaped by worldwide production-based

linkages through transnational corporations.

Structural changes in developing economies. Many developing coun-

tries are diversifying from agriculture and low-wage industrial produc-

tion to technology-based manufacturing and services. Although there

are wide variations among countries in Latin America and the

Caribbean, for example, in the region as a whole agriculture now

accounts for only about 10% of GDP and 25% of the labour force, indus-

try accounts for about 33% of GDP and 25% of the labour force, and

services have grown to 56% of GDP and 50% of the labour force.

Shift towards technology and knowledge-based production. As the

world economy becomes more deeply integrated, the basis of national

economic development is also shifting quickly from mass production

industries relying on low-wage labour and cheap raw materials and

energy to a technology- and knowledge-based system of production

and services. This system will require better educated and higher

skilled workers, modern infrastructure, and ﬂexible and responsive

public and private organisations.

The Collapse of Communism

The dismantling of the former Soviet Union and other communist

regimes has not only served to reveal some of the ﬂaws in market

approaches to economic management applied too quickly, it has also

brought to light the great economic and skill potential of the once com-

munist republics, which will exert a major inﬂuence over world devel-

opment in the future. For example, the countries of the former Soviet

Union are the world’s largest producers of oil. With the collapse of the

Soviet Union, the easy accessibility of this supply of energy—for the

industrialised countries in particular—has reshaped the geo-political

interests of the major world powers. Ukraine could eventually regain

its 19th century status as the grain basket of the world, outstripping

Argentina, Australia and the United States in production capacity and

prices. The same has already happened with wool; Russian exports

have risen from 9 to 186 million kilogrammes a year, with devastating

effects on less efﬁcient producers such as Australia.

The former USSR has many high-quality but underpaid scientists

and technicians. Nobel prize winners earn as little as $100 per month.

Indeed, most of the former communist countries are particularly well-

endowed with the modern currency of capitalism—brain power.

Thurow observes that the educational systems of the former commu-

nist countries have consistently produced greater numbers of better

educated citizens than would be the case in many industrialised coun-

tries. The ramiﬁcations of such a skill discrepancy for employment,

incomes and economic activity are obvious.

China will have an even bigger impact on the world order.

Economically this will be felt most acutely in manufacturing that

requires low- and mid-level skills, such as textiles, shoes and electronic

parts. This will affect the availability of jobs the world over. Moreover,

while it will take China a long time to achieve per capita GDP levels

approaching those of rich countries, the overall size of its economy,

particularly when measured in purchasing power parity, could over-

take that of Japan.

These are immense and profound forces of change, which will

cause shifts in the balances of economic, political and strategic power

whose effects on global and national governance at this stage can be

only dimly perceived.

Strategic Multi-polarity

Outside threats, culture, social capital, leadership, ethnicity, language

and religion (or ideology) together are the social glue that help

systems cohere. But experience has shown that such factors, either

combined or by themselves, are rarely enough. On the other hand, a

powerful external threat, such as communism, can strengthen beyond

the breaking point the weaker bonds established by variables like lan-

guage and religion and prevent even dissimilar systems from falling

apart. The demise of the communist ideology has clearly had a splin-

tering effect on the former republics of the Soviet Union and Eastern

Europe.

When neither a unifying ideology nor an outside threat is present,

but there are internal pressures caused by, say, ethnic conﬂicts, poverty

or high unemployment, then social disintegration is almost inevitable.

Yugoslavia provides a tragic example. Under such circumstances soci-

ety turns in on itself and tears itself asunder on the basis of ethnicity

or religion or perceived privilege.

Without the fear of communism to hold it together, the old capi-

talist world is likely to be re-ordered, perhaps into regional trading

blocs, many of which have already been established. Such develop-

ments can also be seen as evidence of constructive economic engage-

ment and cooperation between countries that had formerly erected

protectionist barriers to interaction. Either way, since the late 1970s

countries have been expanding their international trade by forming

regional alliances ranging from customs unions and free trade areas

to economic communities. These trade agreements usually reduce or

eliminate tariffs, provide preferential trade and investment condi-

tions, and allow the freer ﬂow of capital, goods, services and people

among member countries. The Southern Africa Customs Union

(SACU), the Arab Common Market (ACM) and the Association of

Southeast Asian Nations (ASEAN) all affect national trade in their

regions. In the Western Hemisphere, the North American Free Trade

Agreement (NAFTA), the European Union (EU), the Caribbean

Common Market (CARICOM), the Latin American Integration

Association (LAIA), Central American Common Market (CACM), the

Andean Pact and the Southern Cone Common Market (MERCOSUR)

are among the growing number of regional trade associations into

which countries have clustered. Other countries are applying for

membership in these regional trade pacts or forming new ones. Since

1970 nearly all of these trade pacts have seen their share of intra-bloc

trade increase.

Aworld of fractured, multi-polar interests seems likely to unfold,

placing even greater demands on systems of governance. In develop-

ing countries where, because the institutions of governance are absent

or less durable, the forces of such change are likely to erupt through

society’s thin crust more easily and more frequently, as in the cases of

Burundi and Somalia.

Religious and Ethnic Tensions

Religions and culture often have a humanising effect on society

because they emphasise ethical values and concern for the well-being

of other people. Religious fundamentalism and other types of ideo-

logical extremism, however, are likely refuges for those who are

unwilling or unable to cope with the uncertainties and traumas of the

new era. Signs of the emergence of religious fundamentalism are evi-

dent in many parts of the world. In Kashmir and the Punjab religious

wars are almost a part of everyday life. Islamic fundamentalism has

resulted in the deaths of up to 40,000 civilians in Algeria; in Israel

young Muslim men turn themselves into human bombs; in Jerusalem

a Jewish fundamentalist murders 29 Muslims at prayer in a mosque;

in Bosnia, in Germany, in Iran, in Afghanistan—the list is long and

growing.

Ethnic separatism gains momentum under these circumstances

too. When only small minorities beneﬁt from economic growth while

more than 80% of people experience real-wage reductions, as they are

in many developing and industrialised countries, the ordinary person

quickly looks for easily identiﬁable scapegoats. For many of these peo-

ple, race and ethnicity serve as convenient means for allocating blame

and gathering allies. Humankind must reach mutual understanding

and mutual agreement concerning means for dealing quickly and

effectively with the profound threats to the well-being of people every-

where and to the environment.

Notes

1. The terms ‘breakdown’, ‘breakthrough’ and ‘ﬁbrillation’ are from

Henderson (1991).

4. Challenges for the Future:

Building Governance Capacity

As the world enters the 21st century, rapid political, economic and

social changes will continue to challenge all institutions of governance

to ﬁnd new solutions to the problems of sustainable human develop-

ment. The three major domains of governance—the state, the private

sector and civil society—must address new cross-cutting issues in a

complex and uncertain era of political and economic globalisation.

The Cross-Cutting Issues

Among the governance issues of particular importance are ﬁnding

effective ways of coping with new challenges to the state in promoting

sustainable human development; enhancing the role of governance in

promoting gender equality; alleviating poverty; managing more efﬁ-

ciently and effectively ﬁnancial, environmental and natural resources;

and developing new institutional arrangements for sustainable human

development in all three domains of governance.

New Challenges to State Structures

Developing countries face two challenges in restructuring states to

cope with growing uncertainty and change. In some countries, or areas

within countries, the absence of any legitimate state authority makes

the implementation of human development programmes difﬁcult or

impossible. In some of the poorest countries in Africa, Eastern Europe,

the Baltic region and the Middle East, the state has a weak capacity to

govern and to maintain law and order. As a result, serious ethnic,

language-group and religious conﬂicts are undermining the state’s

capacity to promote sustainable human development. In countries

where minorities cannot participate in the formal systems of gover-

nance, there is little opportunity to inﬂuence public policy making and

implementation. In countries undergoing transition from totalitarian

regimes or central planning systems and where people now seek

democracy and freedom, the state faces serious challenges in building

new political and governmental structures.

In other countries the state is too large. The state bureaucracy has

grown rapidly and become entrenched in all aspects of society. Where

the public sector’s role has grown too large, as in many of the former

centrally planned economies, it often displaced both the private sector

and organisations of civil society. Bureaucracies focused their

resources and activities on perpetuating themselves. In some cases,

totalitarian regimes have implemented policies that have led to seri-

ous social and political conﬂicts that continue to undermine both

sound governance and human development programmes.

In many Latin American countries dominated by military rule in

the 1970s and 1980s, there has been substantial progress in re-

establishing democracy. The challenge for the state, however, will be

to consolidate democratic achievements and to hasten economic and

social reforms. In some Latin American and Caribbean countries, the

state must revitalise organisations of civil society that had little or no

participation in governance during periods of military rule. The chal-

lenges for the state in these countries are to manage the transition from

authoritarian to democratic systems of governance and to make

reforms that will satisfy the rising economic expectations of the popu-

lation. New mechanisms are needed for citizen participation in all

stages of political decision-making.

The Latin American, African and Eastern European regions also

suffer from a widening gap between formal legal system reforms and

the ability of governments to apply laws effectively. The inability of

governments to enforce laws and restrain corruption grants impunity

to and provides immunity for the economic and political elite. The

problem of corruption is also a reﬂection of weak controls and over-

sight on government by civil society.

Eastern European countries must cope with the traumatic transi-

tion from totalitarian to democratic regimes, but new models of gov-

ernance cannot simply be imported. During the time of central

planning, people were socialised to take orders and not to take risks.

Although the speed of change varies throughout the region, all Eastern

European countries are in transition from controlled economies to

market systems, from the industrial revolution to the information rev-

olution, and from authoritarian to more democratic political systems.

They are all fundamentally engaged in nation-building, and the state

must be able to manage all of these changes simultaneously under con-

ditions of serious ﬁnancial stress.

The Arab states, having struggled with alternative forms of gov-

ernance for decades, still have not fully adopted democratic political

processes. Because of its variety of religious, cultural and social tradi-

tions, the Middle Eastern region needs different governance strategies

in countries with different levels of economic resources. Continuing

political conﬂicts within the region, however, have slowed the evolu-

tion of sound governance.

In Africa the crucial challenge to the state is modernising govern-

ment and controlling and preventing violence. Many African countries

need to ﬁnd effective ways to change the role of the military from a

destabilising force to a positive force for promoting security, economic

progress and human development. African states must also ﬁnd ways

to control organised non-state actors who employ violence to achieve

their ends. The widespread violence in Africa results from new

regimes taking over state responsibilities and from ﬁnancial and social

crises that have weakened the state and created imbalances between

political parties and government administration.

In the Asia and the Paciﬁc region, the role of the public sector grew

tremendously in the post-colonial era, and the state took on much wider

responsibilities. Political leaders in some countries embraced the idea of

providing welfare functions, but the state did not have the resources or

administrative capacity to deliver them effectively. Governments in East

Asia have been more successful in delivering goods and services, but in

many South Asian countries they have have managed services less effec-

tively. The challenge for the state in the Asia region is to ﬁnd a suitable

balance among government, the private sector and non-governmental

organisations in achieving sustainable human development.

The state must take steps to enhance participation in governance,

from fostering civil education to create new values to restructuring state

institutions (the executive, judiciary and parliament), decentralising real

Box 10 Electoral Assistance to Bangladesh

Bangladesh has been going through a period of political turmoil that

began in 1994 when opposition parties walked out of Parliament in

protest against, among other things, the alleged unfair practices by the

ruling party in by-elections. This period ended with the amendment of

the Constitution to allow for a neutral, interim caretaker government,

with a general election to be held within 90 days.

There was wide political support for the UNDP to be involved in this

election process, and the government decided that all donor funding for

the elections should be channelled through UNDP. The Election

Commission established in April 1996 requested immediate UNDP assis-

tance in voter education, training of electoral ofﬁcials, and support to

international observers.

UNDP support to the Election Commission was implemented through

three small-scale but strategic projects. The ﬁrst project involved the

UNDP in voter education, resulting in the production of many posters,

leaﬂets and copies of the election code of conduct. The project also

produced a range of television and radio spots, television discussion pro-

grammes, short ﬁlms and folk-cultural shows performed in villages and

bazaars nationwide. The UNDP was particularly successful in establish-

ing links with non-governmental organisations, as a channel for distrib-

uting voter education materials, and in enhancing women’s participation.

(Box 10 continues next page)

power and resources to lower levels of government and deregulating the

economy (box 10). Good governance implies that citizens trust in and

entrust themselves to the rule of law. The state must have mechanisms to

limit arbitrary power and authority in government and in the private sec-

tor, but it must also ﬁnd more effective ways of guaranteeing human

rights and preventing abuses of discretionary power. Developing coun-

tries must support governance systems that integrate marginalised

groups into the national dialogue. This requires promoting civil educa-

tion, creating a national identity and deepening popular involvement.

The state will continue to play an important role in achieving sus-

tainable human development in all regions of the world. To do so effec-

tively, there must be stability, security, sovereignty and unity. Each state

must develop its system of governance in its own way. Reforms imposed

from outside the country or by the central government often do not work.

Box 10 (continued)

This effort represented the ﬁrst time in Bangladesh’s history that massive

voter education had been undertaken, particularly using the electronic

media.

Asecond project focused on another ﬁrst—training all electoral ofﬁcials.

More than 50,000 manuals for Returning and Presiding Ofﬁcers were pro-

duced and distributed by UNDP three weeks before the elections. Through

a third project, UNDP supported the Ministry of Foreign Affairs, which was

responsible for coordinating a record number of international observers.

While UNDP received overwhelming expressions of appreciation from

the Government of Bangladesh for its support, perhaps the most reward-

ing aspect of the intensive effort was the massive voter turnout (73%), rep-

resenting a 33% increase from 1991, as well as a signiﬁcant increase in the

number of women voters. In addition, the election was declared “free and

fair” by all observers. UNDP is now continuing to work with the Election

Commission on a longer-term technical assistance project that aims to

institutionalise the voter education and the information, training and NGO

networking activities established for the June election.

Source: UNDP Bangladesh.

Reforms must be culture-speciﬁc and participatory. States must ﬁnd

national solutions to human development problems that can be carried

out incrementally with widespread participation by non-governmental

organisations and the private sector. In a rapidly changing world, the role

of the state must be carefully re-examined, along with the structure of the

political system. New ways must be found for making government more

efﬁcient and effective in all countries that are seeking to achieve sustain-

able human development. Political, business, social and government

leaders must decide together with citizens on the most appropriate

means of reforming the state governance system and of creating an

enabling environment for achieving sustainable human development.

Governance and Gender Equality

For a good system of governance for sustainable human development,

women must be involved in decision-making at all levels—from the

family to the national political regime (box 11). Women make up half

of the world’s population, and all of the institutions of governance face

challenges in ensuring gender equality. Women must have equal

opportunities to participate in public decision-making through repre-

sentation in legislative, judicial and executive branches of government.

Representation without empowerment, however, is not enough. Three

major elements are necessary for women’s leadership: an economic

base (for example, access to and control of funds), education and access

to information and legal rights.

In Latin America mechanisms to ensure gender equality are still

weak. The social, political and economic inequalities that women face

are the result of cultural traditions that are only slowly changing. In

many Latin American countries, women are still under-represented in

public policy-making, but they are playing a larger role in reorganis-

ing the political party system and in formulating rules of apositive

discrimination to increase their representation in national legislatures

and other policy-making organisations.

To ensure equality in government decision-making, legal quotas

for the representation of women in legislative bodies may be needed

in Latin America, Eastern Europe, the Middle East and some parts of

Asia. When Moldova, for example, had a quota system requiring that

Box 11 Gendered Governance

Within its overall commitment to foster sustainable human development,

the UNDP has a mandate to ensure a greater role for women as contribu-

tors to, and participants in, development. To support the agency’s efforts

to incorporate women and women’s concerns into all of its policies and

programmes, the Gender in Development Programme was established.

The Programme’s mandate is to:

• Assist UNDP to formulate and implement gender-sound policies

•Support the mainstreaming of women and women’s perspectives

throughout its activities.

The mandate is embedded in UNDP’s broader commitment to incor-

porate a participatory approach into its programmes in order to achieve

people-centred development at all levels.

The Programme has been working towards a greater understanding of

gender in the governance process. Governance is presumed to be gender-

neutral, but the discourse, procedures, structures and functions of gover-

nance remain heavily skewed in favour of men. This unequal sharing of

power leads to an unequal sharing of resources—time, incomes and prop-

erty—between men and women. The consequences are evident in the dis-

proportionately high number of women who are illiterate and living in

extreme poverty. Redressing these inequalities requires a gendered analy-

sis of the processes and structures of governance. Such an analysis sug-

gests that the family (or household) and the community are sites of

governance, in that they are spaces where people interact and where

power is exercised. Furthermore, these sites exist interdependently within

the three tiers of government—local, national and international—as is evi-

dent in the way gender relations mediate and are mediated by regulations

that span the public and private domains. Indeed, a gendered analysis of

governance erases the conventional distinctions between private and

public spheres, regarding them as mutually dependent spaces in which

gendered norms, values and traditions are played out.

(Box 11 continues next page)

25% of the seats in parliament be reserved for women, women were

assured some representation in the legislature. When the quotas were

lifted, however, women made up only 4% of the parliament. When

Box 11 (continued)

Erasing these conventional distinctions allows for better analysis of the

inequalities in power. The attitudes and behaviour of men within the pri-

vate sphere helps determine the relations, and the power imbalances,

between women and men in the community, the workplace, and political

spaces. In addition, the workplace remains a site of unequal power

between men and women, with implications that transcend the private

sector, given the role that large enterprises and multi-national corpora-

tions play in national and international governance.

A gendered analysis of governance the local and national government

highlights the issue of representation. It is sometimes argued that gov-

ernment decentralisation to the local level helps redress gender inequali-

ties because decentralisation increases grassroots representation. Each

centre of local power, however, does not automatically allow or encour-

age marginalised groups to participate in decision-making or have ways

of ensuring their representation. Indeed, women and their interests,

needs, perspectives and demands have not been regarded as deserving of

speciﬁc representation. There is a presumed commonality of interest

between women and men by which governance decisions and actions are

taken in the name of women without consulting them. The legitimacy of

existing governance structures and processes, however, must be ques-

tioned when the interests and voices of more than half the population are

not reﬂected in the decisions that are made.

Agendered analysis of governance exposes the reality and severity of

women’s subordination. In so doing, it challenges power structures and

encounters resistance. It should also generate an agenda for change, draw-

ing on good practices that do exist, such as identifying electoral systems that

support women’s participation and gender training for men and women,

and on programmes that effecting civil service reform through equal oppor-

tunity and afﬁrmative action. Urgent implementation of the international

conventions that provide the conceptual and legislative framework for

redressing women’s inequalities in governance is also needed.

Source: Gender in Development Programme, UNDP.

Egypt abolished its quotas for women in parliament, their membership

dropped to 2%.

In some African countries, women are not recognised as having

the capacity for political leadership and thus they remain invisible in

the policy arena. African women, however, who are leaders in associ-

ational life and traditional or indigenous structures, increasingly are

achieving leadership at the local level. They play important institu-

tional roles that can help in making decisions that promote the status

of women. But they need the support of modern laws that give them

land ownership rights and control over ﬁnancial resources. In Africa,

this issue is best addressed at the interface between traditional and

modern laws.

In some Arab states, improvements in the status of women have

come from economic growth, but a fundamental inconsistency

remains between economic and political reforms. In many Arab coun-

tries, women remain marginalised or excluded, and there are few

channels of participation. In these countries, legislation that recognises

the legitimacy of non-governmental organisations can help promote

gender equality because non-governmental organisations have the

capacity to include both women and men in their activities.

In Africa, Latin America and Eastern Europe new mechanisms are

needed for developing women leaders. The Grameen Bank in

Bangladesh is a model for empowering women by making loans avail-

able to them and encouraging savings. Organisations of civil society

are effective mechanisms for training women in leadership skills.

Women’s leadership is clearly demonstrated in local governments,

non-governmental organisations, community groups and families. In

Latvia, for example, 38% of local government ofﬁcials are women, a

much higher percentage than in national government. But new mech-

anisms are needed for consulting with women concerning resource

allocations at local and national levels.

Gender equality for women is an issue for society, and all institu-

tions of governance that can promote gender equality need to be

strengthened. Solving gender inequality requires changing the

stereotypes of men and women. Theatre, debates and role playing are

mechanisms for presenting the gender message to society. The media

must introduce the public to new roles for both women and men.

Artistic organisations can help ﬁght stereotypes and non-governmental

organisations can be used for training.

Governance and Poverty Alleviation

In the past 20 years the real incomes of most workers in many countries

have fallen substantially. Disparities between rich and poor in income

and capabilities have also increased in most rich and poor countries. In

Eastern Europe, for example, the transition from centrally planned to

market economies has both created a new foundation for economic

growth and left some people worse off economically. In many Eastern

European countries, GDP fell drastically during the transition to a mar-

ket economy, and the government cut deeply into expenditures for social

programmes. This worsened inequalities and relegated many people

who could not easily participate in the market economy to poverty. The

average monthly income for workers during transition was far below

the amount needed to survive. Although widespread famine did not

erupt because people relied on an informal social support system, some

groups continue to experience serious economic difﬁculties. Many peo-

ple subsist in the grey economy. Government support for the unem-

ployed, children, the disabled, pensioners and senior citizens is

insufﬁcient. Throughout the region, the dependency ratio is high, and

there is an acute conﬂict between social and economic priorities.

Although privatisation is modernising some state enterprises, it

can also lead to massive layoffs during a time of sluggish economic

growth. In some developing countries, the state does not have the

capacity to create jobs, but the market economy is not strong enough

for the private sector to do so either. Some governments impose heavy

tax burdens on the private sector and weaken the capacity of private

enterprises to restructure, grow and create new jobs. At the same time,

many governments are decentralising responsibility for providing

social services to local governments that do not have the ﬁnancial

resources to deliver them effectively.

Southeast Asia has been conspicuously successful in reducing

poverty and inequity through rapid economic growth. Among the fac-

tors that have contributed to poverty alleviation are the strong empha-

sis on human resource development in economic growth policies and

the high value placed on education, cultures and political systems that

promote tolerance and the ability to save, and the strong synergy cre-

ated between business and government.

Poverty reduction requires three basic elements: empowerment of

people through education to ensure access to opportunity, social invest-

ment and sustainable livelihoods. Poverty, inequality and governance

are related in access to power. Poverty and inequality exacerbate weak-

nesses in governance. Participation in governance is weak because the

poor are socially, economically and politically marginalised and have

difﬁculty expressing opinions that will be heard by government. The

cycle of poverty that brings feelings of helplessness can be changed only

through empowerment and civic and social education that promotes a

broader understanding of individual rights and responsibilities. But

newly emerging interest groups in many developing countries do not

always express the needs and concerns of the poor, making it difﬁcult

for them to organise and have their opinions heard. Poverty is rein-

forced by access to the justice system. The legal system plays an impor-

tant role in providing some degree of consistency in society, particularly

for the poor. If people can be guaranteed redress of grievances through

the judicial system, there is always some sense of stability and hope.

And poverty is not just a material condition, it is based partially in capa-

bilities and values. Greater access for the poor to the educational system

can reduce poverty and inequality. High rates of illiteracy in many of

the poorest developing countries prevent people from getting a job or

participating effectively in public decision-making.

As the priorities of government and the private sector have

changed over the past decade, linkages among poverty, inequality,

governance and sustainable human development have become

blurred. The legitimacy of the state’s role in dealing with poverty is

increasingly being challenged. Yet the enabling environment that gov-

ernment can create remains a critical factor in dealing with issues of

poverty and inequality and in promoting job creation and sustainable

livelihoods. In the past, solutions to poverty were seen as the respon-

sibility primarily of governments, but there is a growing recognition

in developing countries that poverty and inequality must be dealt with

collectively by the state, civil society organisations, families, non-gov-

ernmental organisations and the private sector. Developing countries

must shift from dealing with poverty and inequality solely through

sectoral line ministries to working with nongovernment entities at the

local level and through civil society organisations.

Following the World Summit of Social Development held in

Copenhagen in June 1995, the Executive Board of UNDP assigned

“overriding priority” in its programmes to the goal of poverty eradi-

cation. Strategies for accomplishing this goal include moves towards

greater inter-agency collaboration, such as the task force on

Employment and Livelihoods for All led by the International Labour

Organisation, with participation from the Food and Agriculture

Organisation, the International Fund for Agriculture Development,

the International Monetary Fund and UNDP.

In partnership with leading academic think tanks and other agen-

cies, UNDP is trying to improve knowledge and understanding of the

nature and causes of poverty, particularly in the areas of economic pol-

icy and ﬁnancing. For example, in Africa UNDP and the International

Labour Organisation are developing a comprehensive analytical

framework for a ﬁve-year Employment Generation for Poverty

Reduction Programme. This framework incorporates macroeconomic

and sectoral policies concerning economic growth, investment and

production, the redistribution of assets and incomes, and downstream

interventions designed to produce productive employment and

income opportunities. UNDP has also taken the lead in expanding the

involvement of civil society in poverty reduction through a pro-

gramme for Civil Society Empowerment for Poverty Reduction. This

programme addresses three crucial areas: increasing the understand-

ing of poverty issues among decision-makers and increasing the abil-

ity of leaders of civil society to become engaged in poverty policy

dialogue, monitoring trends and learning about the coping strategies

of the poor in order to inform programmes of assistance and encour-

aging the exchange of information and ideas among the stakeholders.

This programme is a key initiative within the Governance Component

of the UN System-Wide Special Initiative for Africa.

Similar initiatives have been undertaken in other regions. For

example, an Independent South Asia Commission on Poverty

Alleviation was established in 1991, and in the countries of Eastern

European and the former Soviet Union, UNDP is supporting the for-

mulation of national poverty alleviation strategies. At the national

level, UNDP’s contributions are widespread including assistance with

the formulation of the Poverty Alleviation Action Plan in Zimbabwe

and broad-based assistance to the Mongolian National Poverty

Alleviation Programme. The United Nations Capital Development

Fund (UNCDF) is supporting the creation of local development funds

(box 12).

Management of Financial and Natural Resources

To alleviate poverty, achieve gender equality, and protect the environ-

ment, governments must be able to collect, allocate and redistribute

ﬁnancial resources effectively and to mobilise natural resources

efﬁciently. In East Asia the state has succeeded in mobilising economic

resources, particularly through high rates of domestic saving and

investment. This has not been possible to the same extent in countries

where an elite class dominates the political system. Although there has

been some land reform in South Asia, for example, a feudal culture

remains in rural areas, and the elite who make political decisions often

block access of the poor to resources. In rich countries such as the

United States, skewed income distributions are no less marked, but

their roots are in more recent economic ideologies. Choices with regard

to resource mobilisation derive from the social structure of society and

the persistence of outdated values, be they capitalist or feudal.

In Eastern Europe the challenge is to create macroeconomic sta-

bility and wealth for more people in order to generate the ﬁnancial rev-

enues needed to overcome poverty and to protect natural resources.

But in some Eastern European countries neither the private sector nor

Box 12 Local Development FundsÑPromoting Decentralised,

Participatory Planning and Financing

The Local Development Funds supported by the UN Capital Development

Fund channel ﬁnancial and technical assistance to local governments,

mostly in rural areas of developing countries. The Funds enable countries

to assume primary responsibility for local development and poverty alle-

viation programmes—and to associate many local civil society organisa-

tions with the planning, ﬁnancing and management of such programmes.

Linking local development and poverty alleviation to the decentrali-

sation of government and to people’s participation policies, The Funds’

programmes are conceived explicitly as policy experiments in local gov-

ernance. In this sense they belong to the growing family of donor-sup-

ported programmes that reﬂect the Development Assistance Committee

orientation on participatory development and good governance, pub-

lished by OECD in 1994.

The programmes focus on the potential role of local governments in

the development process and are meant to pilot working models of decen-

tralised governance systems based on three key elements:

•Devolution of responsibilities and resources for capital spending to

local authorities. Here the LDF ﬁnancial facility is seen as a pilot for a sys-

tem of intergovernmental ﬁscal transfers (IGFTs) for ﬁnancing local devel-

opment and poverty alleviation.

(Box 12 continues next page)

the government has access to credit that can expand the private sector

and the public tax base.

In the Arab states there is some movement towards integrating

economies into the global economy through structural adjustment. But

this process has been slow in countries where governments have

focused on supply-side policies. The next stage of development must

be demand-driven and participatory. Government cannot easily

increase public revenues or provide social services essential to human

development without the participation of citizens. Many Arab states

lack adequate institutions of governance to mobilise and allocate

ﬁnancial resources effectively for human development.

Box 12 (continued)

•Simultaneous adoption of local participatory planning procedures

and local-local dialogue among multiple actors in the local space. Here,

LDF resources are seen as a catalyst for people’s participation and innov-

ative local institutional arrangements for the provision of local services.

• Transfer of ownership of local development initiatives to local

authorities and community groups, which would then assume owner

responsibility for the management of project implementation. LDF ﬁnanc-

ing of new owners in this domain is seen as a critical factor for reorient-

ing the loyalty of local bureaucrats and creating among them a sense of

local service and accountability.

The purpose of the LDF policy experiments is to demonstrate that

these three dimensions of local governance have a critical and direct pos-

itive effect on sustainable local development and poverty alleviation.

The focus on local governments is not exclusive, however. Stronger,

better-funded local governments are seen as key enabling factors to

increase participation of organised civil society groups in local develop-

ment. The Funds’ programmes could conceivably generate opportunities

for a multi-actor local-local dialogue, involving deconcentrated line agen-

cies, NGOs and the local civil society. This is essential for fuller commu-

nity participation, wider resource mobilisation and sustainable delivery

of local services.

Source: United Nations Capital Development Fund.

In many developing countries there is a strong need to decentralise

management and control of ﬁnancial and natural resources.

Decentralisation can increase trust, transparency, accountability and

capacity. Because not all social classes beneﬁt from stronger central

government capabilities to mobilise ﬁnancial resources, solutions that

simply make more money available to central governments can lead

to the consolidation of political control and greater inequity.

Decentralising ﬁnancial resources, on the other hand, can assist local

governments and civil society organisations to participate more effec-

tively in governance and sustainable human development.

To achieve environmentally sustainable development, governments

need appropriate incentives, organisational structures and capacities to

Box 13 Environmental Policy in Central and Eastern Europe

Environmental protection is most efﬁcient when it can rely on economic

instruments and when pollution control costs can be internalised through

the price system. While economic instruments will generally be used in

conjunction with regulatory instruments instead of replacing them, every

effort should be made to rely on economic instruments. Until well-

functioning markets that permit economic instruments to be effective are

in place, reliance on command and control regulatory measures may be

necessary. Even in the early stages of transition, however, there should be

scope for economic instruments such as carbon taxes, which would simul-

taneously have a favourable impact on the environment and help develop

a secure revenue base.

Restoring credibility to environmental institutions and, where neces-

sary, building new ones, are another priority. This will require an impor-

tant training effort. New procedures should allow greater public

involvement in decision-making, and coordination among government

ministries should be strengthened to ensure compatibility of environ-

mental policies with measures in other areas. Decentralisation of respon-

sibility for implementation to locally or regionally based agencies is

needed, because pollution control is generally more efﬁcient the closer it

is to the source.

Source: OECD (1992, p. 103).

raise ﬁnancial resources for protecting natural resources and enforcing

regulations for environmental protection. But in some fast-growing

economies in Asia, Latin America and the Arab states, governments and

the private sector have been unable to use the proceeds from growth to

protect the environment. High growth has led to unsustainable resource

extraction. In rapidly industrialising countries in Asia and in the transi-

tion economies of Eastern Europe, environmental protection will require

not only stronger enforcement of environmental regulations but also

more market mechanisms and economic incentives to promote it (box 13).

The resolutions of the 1992 Conference on Environment and

Development in Rio de Janeiro provide clear guidelines on a range of

governance issues. For example, Principle 10 states:

Environmental issues are best handled with the participation of all con-

cerned citizens, at the relevant level. At the national level, each individual

shall have appropriate access to information concerning the environment

that is held by public authorities, including information on hazardous mate-

rials and activities in their communities, and the opportunity to participate

in decision-making processes. States shall facilitate and encourage public

awareness and participation by making information widely available.

Effective access to judicial and administrative proceedings, including

redress and remedy, shall be provided.

The state, civil society and the private sector have crucial contri-

butions to make in other areas relevant to environmental protection,

such as improving the position of women in society, educating young

people, recognising and strengthening the role of indigenous peoples

and their communities, strengthening the role of non-governmental

organisations, strengthening the role of workers and trade unions,

educating farmers and providing incentives for them to conserve the

environment, regulating business and industry and re-shaping

people’s values away from immediate gratiﬁcation to investments in

more qualitative aspects of life.

Governance for Sustainable

Human Development

Good governance for sustainable human development requires

stronger mechanisms for people to participate in politics, government,

the private sector and the organisations of civil society. In much of

Africa, for example, good governance will require strengthening civil

education, information dissemination and two-way communication.

Only through these means will it be possible to create new values and

broaden awareness of the rights and responsibilities of governance

institutions regarding participation, transparency and accountability.

Improving governance in Africa will require all societal institutions to

work together to: broaden the understanding of the role of political

parties, strengthen the judiciary and law enforcement, foster openness

and accountability of legislative and other elective institutions at all

levels, expand local management capability and develop a broad

national policy framework that allows local activities to ﬂourish.

In Latin America new governmental and civil society organisa-

tions and organisational arrangements are needed to develop human

capacities. The most important are organisations that provide educa-

tion in civic values to build social capital and social trust. Civil educa-

tion is needed to legitimise local organisations, strengthen citizen

oversight of government and create legal frameworks or structures for

political participation. In the Arab states, there is a need to disseminate

information about democracy and human rights through non-govern-

mental organisations, civil society organisations and the educational

system. Capacity building is needed at all levels of government.

If governance is viewed as an open system, linkages must be

developed among countries within the region. Mechanisms are

needed to demonstrate the advantages of democratisation and decen-

tralisation to central authorities.

After decades of internal wars in Africa and the Middle East,

restoring people’s conﬁdence in the state is one of the main challenges

in re-establishing sound governance. Government leaders, capable of

gaining public conﬁdence, are needed. Political parties can help

develop good decision-makers. Decentralising responsibilities and

resources to local and community levels can also restore participation.

Supporting civil education will be essential for long-term progress,

and providing more information through the media will be crucial to

develop public awareness and conﬁdence in current political regimes.

One of the most important challenges for governments in the Arab

states, Latin America, Eastern Europe and the countries of the former

Soviet Union is re-establishing the rule of law. There must be mecha-

nisms outside the formal government structures to ensure the rule of

law. Acritical challenge in all developing countries is creating partici-

patory institutions of governance and making them sustainable.

In the long run countries must build the notion of participation

into education systems. In the short-term, however, teachers must be

trained to instill in children the values of participation. Another means

of fostering participation is through citizen charters. Other mecha-

nisms such as local and national elections are important means of

involving citizens. Developing public consciousness is also a key to

ensuring that mechanisms such as decentralisation result in participa-

tion, leading to stronger inﬂuence from the bottom up. Governance

systems must make people feel like active citizens.

ReÞning Concepts of Governance

in International Assistance Programmes

Coping with uncertainty and its consequences will be one of the great-

est challenges facing developing countries in the new era. People

around the world have many responses to the increasing uncertainty

about the future, including helplessness, hopelessness, hostility to

technology, a yearning for a golden age of traditional beliefs and val-

ues and resistance to change. Given these reactions, societies in coun-

tries at all levels of development must reconstruct a fair, efﬁcient and

equitable system of governance, and international assistance organi-

sations must ﬁnd ways of incorporating concepts of good governance

into all of their development activities. The behaviours resulting from

uncertainty can constitute a powerful force of resistance to change and

to social integration. Societies around the world must ﬁnd new ways

of coping with people’s responses to the processes of accelerated

change and increasing uncertainty.

Bilateral and multilateral assistance organisations have come to

recognise the importance of governance and sustainable human devel-

opment, but they often deal with each in piecemeal fashion. In both the-

ory and practice, there are still unresolved questions about what

governance is. Is it about public management, democracy, a participa-

tory decision-making process, or simply legitimate authority? Or, as this

paper argues, all of these things and more? Governance has distinctly

different meanings and implications in different regions of the world

and in different regions within countries. Before assistance can be better

targeted to improve governance for sustainable human development,

the concepts of both governance and sustainable human development

must be better understood in international assistance programmes.

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Sources by Chapter

Chapter 1

The following sources were drawn upon for the material presented in

Chapter 1: Blunt (1995); Handy (1995); Kubr and Prokopenko (1991);

Scott (1987; 1995); UNDESC (1992); and UNDP (1994; 1995a,b,c; 1996a).

Chapter 2

The major sources drawn upon in Chapter 2 were: IFC (1992); Helleiner

(1987); Demery and Addison (1987); Gupta and Hagemann (1994);

Cheema and Rondinelli (1983); Rondinelli (1983); Rondinelli, Nellis

and Cheema (1983); UNDP (1995d); Putnam (1994; 1995); Schliwa

(1994); World Bank (1993); Goldman and Nagel (1994); Port and Cary

(1991); Port (1992); Hayes and Pisano (1994); Maital (1994); Bleeker

(1994); Rondinelli and Kasarda (1992); ILO-ARTEP(1987); Castells and

Portes (1989); Edgren and Muqtada (1989); Cohen (1984); Rondinelli,

Dougherty and VanSant (1991); Le and Rondinelli (1993); Neck and

Nelson (1987); and Liedholm and Mead (1986).

Chapter 3

The major sources used in Chapter 3 were: UNDP (1995b); Henderson

(1991); Thurow (1996); UN (1993); WTO (1995); World Bank (1994);

Billerbeck and Yasugi (1979); UNDESIP (1993); and Wilber (1996).

Chapter 4

Chapter 4 drew on: UNDP (1996b); and OECD (1992).

Enhancing IDLG’s Contributions to National and Sub-National Governance: Rationale, Strategic Opportunities, and Reform Proposals

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Aug 2015
Progr Dev Stud

It is argued that the battle to restore the sovereignty of the Afghan state will be won or lost subnationally. Victory will be more likely if, following Ghani and Lockhart (2008), citizen security can be assured; if the rule of law can be established and upheld without fear or favour; if reasonably effective, efficient, merit-based and accountable leadership and administrative means for service delivery can be institutionalised; and if social policies can be implemented that cut across regions and ethnic groups. However, progress towards these ambitious ends and the introduction in its support of pragmatic, evidence-based policy to strengthen the existing deconcentrated system of subnational governance (SNG) is hampered by stakeholder conceptual confusion about SNG, competing vested interests, and largely incommensurable and irreconcilable SNG policy paradigms. Success will depend on whether links can be forged between SNG pragmatic imperatives and political expediency.

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Urban governance is a multidimensional process, based on planning, allocation of limited resources, implementation of current and investment tasks, monitoring and control. The management processes involve stakeholders with different interests, role, and degree of involvement in management. At the institutional level, there are central government organizations that provide the parameters of urban policy on a country scale, city politicians and managers responsible for managing all urban systems and the citizens themselves. The inconsistency of interests and plans reduces the attractiveness of the city, can lead to an increase in the cost of living, an outflow of population. This article discusses how the concept of a smart city can affect the quality of management and improve the quality of decisions. Case of Kazakhstan cities allows us to conclude that the quality of management and interaction of participants affects the sustainability of the city's development in all areas of development. Good governance affects economy, lifestyle and living conditions, attractiveness for living. In turn, new opportunities used by citizens to influence policies create the sustainability in city's development.

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The Adolescence of Institutional Theory

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W. RICHARD Scott

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Charles Handy

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