Rectify Asia's 'governance deficit'

FOR a while, the sun seemed to shine on Asia's emerging economies last week as the Asian Development Bank (ADB) published a report predicting plain sailing for them over the next year or so - even suggesting that the region would be able to take "in stride" monetary tightening by the US Federal Reserve. Then, suddenly, a dark cloud loomed on the horizon in the form of another ADB report suggesting that poor public governance has become such a serious problem for emerging Asia that it eclipses all others, such as infrastructure deficiencies and inequality.

Interestingly, the report was issued not by the ADB as such but by its Independent Evaluation Unit - suggesting that the issues of government corruption and inefficiency are too sensitive politically for all shareholders to acknowledge officially. The report noted that South-east Asia "fares particularly poorly in controlling public sector corruption (while) South Asia ranks low in political stability". East Asia, meanwhile, is "weak on voice and accountability". If corruption and political instability in parts of Asia are indeed as bad as portrayed, governments in the region have real reason to worry. Vast amounts of investment are needed in Asia's emerging economies to provide basic infrastructure. Public procurement, especially in capital-intensive areas, is rife with potential for corruption and if governance standards are lax, projects will simply not get done. Governance, the report notes,"is identified with the quality of public services, which has a weak record in many countries where paying bribes for processing business applications or getting an electricity connection is common".

But development banks cannot simply refuse to lend money to developing countries that do not measure up on governance standards; that would damage the interests of the innocent as well as those of the guilty. The ADB and others can monitor projects closely to see that proper standards are observed - and this is where the Independent Evaluation Unit (which is at least nominally free from political pressure by shareholders) is of value.