THE FOUR BASIC

ELEMENTS OF
GOVERNANCE
C

ACCORDING TO ADB.
Overview of ADB
• The Asian Development Bank was conceived in the early 1960s as a financial institution
that would be Asian in character and foster economic growth and cooperation in one
of the poorest regions in the world.
• A resolution passed at the first Ministerial Conference on Asian Economic Cooperation
held by the United Nations Economic Commission for Asia and the Far East in 1963 set
that vision on the way to becoming reality.
• The Philippines capital of Manila was chosen to host the new institution, which opened
on 19 December 1966, with 31 members that came together to serve a predominantly
agricultural region. Takeshi Watanabe was ADB's first President.
• During the 1960s, ADB focused much of its assistance on food production and rural
development.
What is ADB ?
• The Asian Development Bank (ADB) is a regional development bank established on 19 December
1966,[4] which is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro
Manila, Philippines. The company also maintains 31 field offices around the world[5] to promote social
and economic development in Asia. The bank admits the members of the United Nations Economic and
Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and
the Far East or ECAFE) and non-regional developed countries.[6] From 31 members at its establishment,
ADB now has 68 members.
• The ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes
are distributed in proportion with members' capital subscriptions. ADB releases an annual report that
summarizes its operations, budget and other materials for review by the public.[7] The ADB-Japan
Scholarship Program (ADB-JSP) enrolls about 300 students annually in academic institutions located in 10
countries within the Region. Upon completion of their study programs, scholars are expected to
contribute to the economic and social development of their home countries.[8] ADB is an official United
Nations Observer.[9]
• As of 31 December 2016, Japan holds the largest proportion of shares at 15.677%, closely followed by
United States with 15.567% capital share. China holds 6.473%, India holds 6.359%, and Australia holds
5.812%.[10]
Why does ADB cited with Good
Governance?
• The Asian Development Bank (ADB) has a mandate to play a role in enhancing governance to raise
development effectiveness. Its evolving governance agenda reflects this expectation and its response
to new needs. Three primary interests serve as the backbone of ADB’s governance operations: (i) to
strengthen core public management functions and country systems, primarily through its public sector
management (PSM) operations; (ii) to enhance governance and capacity in sectors where it is most
active and (iii) to help safeguard the integrity of project resources. The relevance of these interests
remains high, and demand for ADB support in these areas remains strong.
• The term “governance” means different things to different people. It is useful, therefore, for the Bank to
clarify, at the very outset, the sense in which it understands the word. Among the many definitions of
“governance” that exist, the one that appears the most appropriate from the viewpoint of the Bank is
“the manner in which power is exercised in the management of a country’s economic and social
resources for development.”4 On this meaning, the concept of governance is concerned directly with
the management of the development process, involving both the public and the private sectors. It
encompasses the functioning and capability of the public sector, as well as the rules and institutions that
create the framework for the conduct of both public and private business, including accountability for
economic and financial performance, and regulatory frameworks relating to companies, corporations,
and partnerships.5 In broad terms, then, governance is about the institutional environment in which
citizens interact among themselves and with government agencies/ officials
What are the countries being
member of the ADB ?
• From 31 members at its establishment in 1966, ADB has grown to encompass 68
members—of which 49 are from within Asia and the Pacific and 19 outside.
• See copy for the lists
• Accountability is imperative to make public officials answerable for government behavior and
responsive to the entity from which they derive their authority. This may be achieved differently
in different countries or political structures, depending on the history, cultural milieu, and value
systems involved. The mechanisms employed may vary from audit covenants, at one level, to
broadly elected legislatures or more narrowly conceived consultative committees, at another.
Accountability also means establishing criteria to measure the performance of public officials,
as well as oversight mechanisms to ensure that the standards are met. The litmus test is whether
private actors in the economy have procedurally simple and swift recourse for redress of unfair
actions or incompetence of the executive authority. Lack of accountability tends in time to
reduce the state’s credibility as an economic partner. It undermines the capacity of
governments to sustain the long-term business confidence essential for growth-enhancing
private sector investment. Looked at from this angle, accountability can help reduce
sovereign risk. The accountability of public sector institutions is facilitated by evaluation of their
economic and financial performance. Economic accountability relates to the effectiveness of
policy formulation and implementation, and efficiency in resource use. Financial
accountability covers accounting systems for expenditure control, and internal and external
audits
 Accountability
(building government capacity)
• public sector management
• public enterprise management and reform
• public financial management
• civil service reform
 Participation
• The principle of participation derives from an acceptance that people are at the heart of development. They are not only the
ultimate beneficiaries of development, but are also the agents of development. In the latter capacity, they act through groups or
associations (e.g., trade unions, chambers of commerce, nongovernment organizations [NGOs], political parties) and as individuals
(e.g., through letters to newspaper editors, participating in radio and television talk shows, voting). Since development is both for
and by people, they need to have access to the institutions that promote it (e.g., representative bureaucracies). Participation is
often related to accountability, but not necessarily so. In representative democracies, where citizens participate in government
through the electoral process, public officials are, indeed, accountable ultimately to the electorate. This may not be the case,
however, in other political systems (although accountability is still important). For all economies, though, the benefits of participatory
approaches can be considerable. These include improved performance and sustainability of policies, programs, and projects, as
well as enhanced capacity and skills of stakeholders. At the grass roots level, participation implies that government structures are
flexible enough to offer beneficiaries, and others affected, the opportunity to improve the design and implementation of public
programs and projects. This increases “ownership” and enhances results. At a different level, the effectiveness of policies and
institutions impinging on the economy as a whole may require the broad support and cooperation of major economic actors
concerned. To the 10 extent that the interface between public agencies and the private sector is conducive to the latter’s
participation in the economy, national economic performance (comprising the combined contributions of the public and private
sectors) will be enhanced. Participation in economic life by agents other than the state would cover not only the role of the private
sector, but also the activities (growing in recent times) of NGOs. These elements of civil society offer an alternative means of
channeling the energies of private citizens. They can be helpful in identifying people’s interests, mobilizing public opinion in support
of these interests, and organizing action accordingly. Being close to their constituents, NGOs can provide governments with a useful
ally in enhancing participation at the community level and fostering a “bottom-up” approach to economic and social
development.
 Participation
(participatory development processes)
• participation of beneficiaries and affected groups
• public sector/private sector interface
• decentralization of public and service delivery functions (empowerment of local
government)
• cooperation with nongovernment organizations (NGOs)
 Predictability
• Predictability refers to (i) the existence of laws, regulations, and policies to regulate society; and (ii) their fair and
consistent application. The importance of predictability cannot be overstated since, without it, the orderly
existence of citizens and institutions would be impossible. The rule of law encompasses both well-defined rights
and duties, as well as mechanisms for enforcing them, and settling disputes in an impartial manner. It requires the
state and its subsidiary agencies to be as much bound by, and answerable to, the legal system as are private
individuals and enterprises. The importance of rule-based systems for economic life is obvious. They are an
essential component of the environment within which economic actors plan and take investment decisions. To
the extent, therefore, that legal frameworks help ensure that (i) business risks can be assessed rationally, (ii)
transaction costs are lowered, and (iii) governmental arbitrariness is minimized, they should prove conducive to
risk taking, growth, and development. In the opposite scenario, the capricious application of rules generates
uncertainty and inhibits the growth of private sector initiatives. Regulatory uncertainty also tends to raise the cost
of capital by increasing the risk of investment Besides legal and regulatory frameworks, consistency of public
policy is also important. Government policies affect the investment climate directly, and economic actors
require reasonable assurance about the future behavior of key variables such as prices, the exchange rate, and
employment levels. However, consistency does not mean rigidity. Governments do need to respond flexibly to
changing circumstances and to make midcourse corrections, as necessary. Also, when governments change,
the successor administration will, understandably, want public policy to reflect its priorities, rather than those of its
predecessor.
 Predictability
(legal frameworks)
• law and development
• legal frameworks for private sector development
 Transparency
• Transparency refers to the availability of information to the general public and clarity about
government rules, regulations and decisions. Thus, it both complements and reinforces predictability.
The difficulty with ensuring transparency is that only the generator of information may know about it,
and may limit access to it. Hence, it maybe useful to strengthen the citizen’s right for information
with a degree of legal enforceability, for similar reasons. Broadly restrictive laws that permit public
officials to deny information to citizens need to provide for independent review of claims that such
denial is justified in the greater public interest.
• Transparency in government decision making and public policy implementation reduces uncertainty
and can help inhibit corruption among public official. To this end, rules and procedures that are
simple, straightforward, and easy to apply are preferable to those that provide discretionary powers
to government officials or that are
• susceptible to different interpretations. In relation to the above-mentioned indicators/elements of
good governance the Key Dimensions and specific areas of actions are identified by ADB as
provided on.
 Transparency
(information openness)
• disclosure of information.
OWARI ZEN’IN