Policy Issues Relating to Governance

There is near consensus on the importance of governance in economic performance of nations. Policymakers, politicians, international institutions and scholars of development studies acknowledged that the quality of governance of a country matters on economic performance. A large empirical literature suggested that the quality of governance affect the growth of per capita income, investment, inflow of Foreign Direct Investment (FDI), and other measures of economic performance (See for example, Kaufmann, Kraay and Mastruzzi 2007, Ndulu and O’Connell 1999, Olson, Sarna and Swarmy 2000, Knack 2002, Gradstein 2004, Persson and Tabellini 2009; Kilishi et al 2013, among others). Empirical evidence also shows that effective government or good governance is critical for sustainable economic growth, reduction in absolute poverty, infant mortality, illiteracy rates, gender inequality, youth unemployment and so on. Hence, the issue of governance attracted momentous attention since 1990s from all development stakeholders. Most donor ageneses and international organizations such as the International Monetary Fund (IMF), the World Bank, United Nations and the United Nations Development Program (UNDP) among others incorporated governance as part of their development agenda. It is considered that improvement in the quality of governance is imperative to success of development policies and programmes. The challenges of absolute poverty, endemic unemployment, slow economic growth (stagnation or negative growth in some cases) and other economic evils in many developing countries may not be overcome without significant improvement in the quality of governance. That is, policies, programme and even external 2 aid/assistance that will assist poor countries achieve rapid economic growth and eradicate chronic poverty would succeed if only supported by good governance that is capable of delivering quality services to people. Therefore, in this paper the concept of governance, how it relates to economic performance and strategies to improve its quality are discussed. Hence, the remainder of the paper is arranged in six sections, definitions and measurement of governance are in sections two and three, while sections four and five present assessment of governance quality in selected countries and the relationship between governance and economic performance respectively. Issues of policies and challenges of improving quality of governance is discussed in section six and section seven concludes the paper.