Download GOVERNANCE ISSUES IN THE PACIFIC ISLAND STATES

GOVERNANCE ISSUES
IN THE PACIFIC ISLAND
STATES
By
Mahendra Reddy,
Associate Professor of Economics,
and
Associate Dean (Research and Graduate Affairs)
University of the South Pacific
Introduction
• The performance of the Pacific Island economies over the last
decade has been sluggish.
• The structure and performance of an economy are determined by
economic, political, legal and institutional frameworks and processes.
• These components of the overall framework are affected by the
overall governance practice.
• Recent examination of the difference in growth rates of countries
similar in resource endowments and macroeconomic polices have
been attributed to the prevalence of bad governance.
• Poor governance practices which involves lack of improvement in
capacity, lack of accountability and increased corruption can
sabotage the full impact of reforms on the economy.
• The international aid community also view governance as being key
to development and to improving the investment climate.
Introduction cont..
• The governance practice in many small island
developing states (SIDS) has been not very promising.
• Similarly, governance in PICs have also been of concern
given the poor economic performance over the last two
decades.
• Therefore, the objectives of this paper examines the
determinants of bad governance practices in the PICs.
• Often studies examine the impact of bad governance.
However, too improve governances, we need to examine
the causes of bad governance practices.
Economic Performance of PICs
• In most of the Pacific island countries (PICs),
average per capita incomes have shown little
change since independence.
• In most of these countries, population growth
rates are still high as they have not yet entered
the post-demographic transition stage, and total
fertility rates are around 4.
• Hence, with population growth rates of 2.5 per
cent or higher, the economies have had to
average GDP growth of around 2.5 per cent just
to maintain average per capita incomes.
Economic Performance of PICs
• The economic performance of the PICs in the second half of the
1990s and the first half of the 2000s varied considerably from
country to country.
• Cook Islands, Fiji, Kiribati, Samoa, Tonga, and Tuvalu all had
positive per capita GDP growth during this period, while Republic of
the Marshall Islands (RMI), the Federated States of Micronesia
(FSM), Solomon Islands, and Vanuatu experienced negative per
capita GDP growth, on average.
• The average 1995–2003 per capita GDP growth rates of the Low
Income (3.2 per cent) and Lower Middle Income (3.6 per cent)
countries are higher than that of the PICs (0.7 per cent average for
1995–2004), which suggests the PICs are not doing as well as many
other developing countries.
Economic Performance of PICs
• For the 12 Caribbean countries for which World
Bank per capita GDP data are available, the
average per capita GDP growth rate for the
period 1970–2003 was 2.8 per cent.
• For the ten PICs for which these data are
available, the average per capita GDP growth
rate was 1 per cent.
• For the period 1995–2003, the average for the
Caribbean countries was 1.6 per cent, compared
to the 0.7 per cent average for the PICs for the
1995–2004 period.
Governance and Governance
Issues in Pacific Island
Countries
• Public sector Governance is fundamentally a
decision-making
and
resource
allocation
process that would
contribute
towards
macroeconomic stability, economic growth and
development of a country.
• Implicitly implied in this definition are issues of
corruption control.
• Poor governance in the Pacific region is often
seen to be a key factor for the relatively poor
economic performance of the Pacific island
nations.
Media, Ethics and Governance
• Ethical standards have a direct implication on
governance practices.
• Those countries found to have high ethical standards will
certainly engage in practices that conform to stated rules
and procedures.
• Ethical standards are built on to a person by their family
members,
the
education
system
and
media
presentations.
• Media is a very powerful tool influences ethics and
values in two ways.
• Directly, its presentations are emulated by children in
particular.
Media, Ethics and Governance
cont..
• Therefore, media content and quality must conform to
the ethics and value systems of the society.
• Secondly, a number of public sector institutions are run
by people on whom taxpayers bestow their trust.
• Taxpayers have no way of knowing if these people on
whom trust is bestowed are carrying out their duties
properly.
• Therefore, media is seen as an important protector of
public interest by highlighting if the those in positions of
trust act in the best interest of the public.
Institutions and Governance
• Institutions guide policy change for growth and development.
• One of the distinctive feature of PICs economies is the lack of
appropriate institutions or the inefficiency of institutions that underpin
growth and development.
• An ADB study n 2004 point out that the kinds of governance
institutions so critical for producing equitable and effective
development have not had time to develop fully.
• Furthermore, the report states that these governance institutions
often are, or appear to be, at odds with traditional political and
cultural systems and process, and these island states have not had
time to work thorough the complex and complicated integration of
old and new systems.
Smallness and Governance
• There exist a large body of literature on how smallness
restricts growth and development of a country.
• These body of literature have in general tend to overlook
the impact of smallness on growth and development via
bad governance.
• Literature have pointed out a distinctive pattern of bad
governance in the Pacific Islands.
• The authors attribute some but not all of those
differences to smallness in population and land area.
• The authors argue that smallness generates particular
risks of corruption, for example in offshore activities.
Smallness and Governance cont…
• The pattern of bad governance that is not yet present in
its full form in PICs, but could emerge in future given the
smallness and the concentration of capital in the hands
of few is the phenomenon of “state capture”.
• It is defined as “the undue and illicit influence of the elite
in shaping the laws, policies and regulations of the state.
• When the institutions of the state are ‘captured’ by
vested interests in this way, entrenched elites in a
country can benefit from a worsening status quo of
misgovernance and can successfully resist demands for
change even as incomes rise.
Smallness and Governance cont..
• The issue of state capture is quite evident in countries
like Fiji and PNG when the annual national budget is
tabled in the parliament.
• One of the reasons of the Military takeover in Fiji was
that the government over the years, though elected via
democratic means, was not working in the best interest
of all the people.
• Smallness also implies people are connected with each
other and thus creates supply evenues of bad
governance practices:
– It is easy for people to engage in bad governance
practices when people are connected and thus assist
each other in creating rent and extracting rent;
– Connectedness
also
implies
absence
of
whistleblowers…thus the prevalence of a culture of
silence.
Lack of Demand Measures
• Small economies are often preoccupied
with addressing the supply side measures
to curb bad governance practices.
• However, demand side issues are ignored;
– Issues such as low income, poverty and lack
of will and resources to prosecute people
found to be involved in bad governance
practices create demand for bad governance
practices.
Private/Corporate Sector and
Supply Dimension of Bad
Governance
• The private sector and civil society plays an
important role in a country growth agenda.
• The private sector’s role is significant in the
harnessing and distribution of resources for
wealth creation and sustainable development.
• Wealth creation is largely dependent on trade
and investment. However, even here, good
governance is of major importance since a
stable and predictable environment in which the
private sector, households and investors can
expand the activities is critical.
Private/Corporate Sector and Supply
Dimension of Bad Governance cont..
• The expanded activity will also provide increasing
resources to government to carry out its role in providing
infrastructure, security, education, health and effective
judiciary.
• This in turn will further boost private sectors activities
thus expanding growth further. When bureaucracy and
red tape are high, it forces private/corporate sector to
demand for corrupt practices.
• Similarly, when rents are high (supply dimension), then
private/corporate sector will engage in corrupt practices.
Sometimes, corrupt practices tend to reduce transaction
costs and/or also raise profits. Corrupt practices always
results in loss of consumer surplus and also loss in
government revenue.
Security and Governance
• Security and governance has an important implication on
investor confidence and thus economic growth.
• Insecurity affects economy directly via loss of surplus
created.
• In the medium to longer run, it will also discourage future
investors and the surplus that they may create not be
safe.
• Indirectly, with insecurity, there will be lot of cases of bad
governance as all institutions will either not be able to
function and become weak. In this situation:
– There will be law and order problem thus creating
space for rent seekers to seek rent;
– People rights will be violated;
– People will take advantage of exiting institutions to
gain special favours.
Security and Governance cont..
• The rise in security threats to a number of Pacific island
countries over the last two decades has become a major
threat to good governance and orderly economic growth.
• The Australian conflict with PNG on the Julian Moti affair,
the conflict with Solomons over RAMSI’s mission and the
December, 2006 overthorough of the democratically
elected government in Fiji clearly demonstrates that
PICs security is quite weak and thus we have a weak
government.
• Weak governments are always related to large
government expenditure and poor public finance practice,
high corruption and low growth
Gender and Governance
• The gender dimension of governance is fairly
recent.
• “without the active participation of women and
the incorporation of women’s perspectives in all
levels of decision-making, the goals of equality,
development and peace cannot be achieved.
• While we put in growth and distributive policies
to move the country forward, we have half of the
population whose voices are not that well heard,
we will always have a situation where proper
and effective governance will not be as smooth
as it should be.
Gender and Governance cont….
• Women’s active participation in governing institutions as
politicians, local leaders, civil servants and within civil
society are important channels for entrenching gender
equality, advancing women’s concerns and deepening
gender mainstreaming strategies.
• The PICs societies are quite strong and traditional, and
thus have a strong belief in the private-public divide. The
PICs societies believe that a women’s place in the
private domain associated with household reproductive
work and femininity.
• The public domain is associated with political authority,
public decision-making, productive work and masculinity.
These beliefs have always hindered women’s efforts to
enter into active work in public domain.
Courts System and Governance
• The effectiveness and impartiality of the court system has an
important bearing the on enforcement of rights and thus good
governance.
• Courts governance is important because it involves the relationship
between the judicial and executive branches of the government.
• As such judicial independence is very important. The provision of fair,
competent, thorough and impartial judicial decision-making, it is said,
depends heavily on the strength, financial security and
organizational professionalism of the judiciary as an institution (King,
1994).
• During periods of political instability and crisis, the courts are always
targeted for control.
• Recent case where the Chief Justice in Fiji was suspended following
the Military takeover is a case in point.
Electoral System and
Governance
• The electoral system of PICs have evolved over time
taking into account communal nature of the PICs
societies. For some countries, indigenous forms of
authority provided the basis for the post-colonial order
(Samoa and Tonga).
• In other cases, customary leadership was incorporated
by way of establishment of bicameral legislatures
(Marshall Islands, Fiji).
• However, over time, as the PICs have experienced a
number of problems, the appropriateness of these
systems have often been questioned.
• For the Melanesian countries, the Westminster system
has been deemed to be unsuitable for the governance of
the country.
Electoral System and
Governance cont…
• Some writers have even argued that these electrol systems are in
part responsible for the weak, divided and inefficient governments
of the PICs.
• For example, Fiji’s first-past-the-post voting system allowed for
voting along communal lines and thus the parliament was divided
along communal lines.
• The parliamentary debates centred on ethnic issues led to further
polarization of the community along ethnic lines.
• During the review of Fiji’s 1990 constitution, the constitutional
Review Commission suggested that post independence electrol
institutions possessed a ‘divisive effect’ and thus a more progressive
system would be the Alternative Vote system (AV).
• While the AV system did see some degree of harmonization of party
platforms, the multi-party cabinet went through a number of
problems.
Electoral System and
Governance cont…
• In 2001, when the SDL government won the election, the refused to
invite the Indian dominated Fiji Labour party into the cabinet. There
was a long drawn out battle in the courts thus further dividing the
communities along ethnic lines.
• PNG also used the Westminister system and unlike Fiji where
parties are based on ethnic lines, here parties align themselves to
clans.
• Tonga has a monarchial system in which the King appoints 12
members of parliament, 33 nobles select 9 representatives while 9
are elected by a common suffrage.
• This system has long been protested and recently, there was a
major civil unrest in Nulualofa in protest of the system. Shops and
business house were burnt down by protestors.
• Samoa’s electoral system also had several restrictions in place on
voting. Following independence in early 1960s, only matai could
vote and matai’s could stand for parliament.
Electoral System and
Governance cont…
• However, this has been changed where all reaching the voting age
could vote but only matai’s can stand.
• The Solomon Islands also has a first-past-the-post electoral system
which has been linked to the social unrest experienced in the
country during 1998-2003. Roughan (2004:1) notes that “…the
electoral weakness as well as a grossly unprepared electorate,
corrupt practice at the highest levels of government and serious
ineptness throughout the public service that allowed leaders who,
perhaps influential and capable at village and local level politics,
proved incompetent and unable to cope at the provincial, national
and international levels”.
• Any long lasting electrol system must evolve over time taking into
account PICs specific factors.
Chiefly System, Communal
Culture and Governance
•
•
•
•
•
•
•
Most of the political systems in the PICs has been modified to suit the
political as well as the traditional authority.
Conflict: Traditional Structures and Government Authority
However, over time, there has been cases the traditional system has been
categorized as one which is outdated and thus not conforming to changes in
the market scenario.
The traditional system has a decision making structure the flows from the
top most authoritative person in the society such the chief (Ratu) in Fiji or
the Matai in Samoa or the “Big Man” in some of the Melanesian societies.
The traditional authority structure of the PICs remains important, with village
or clan “chiefs” or “big men” playing a major role in the government of the
people.
Often, there is considerable tension between the national governments
established following independence and the traditional authorities. These
tensions create loyalty conflicts within the minds of the people.
The traditional authority structures are less participatory than what is seen
as desirable in the conception of democratic governance.
Chiefly System, Communal
Culture and Governance cont…
Traditional Structure, Big Government and Rent Seeking
•
•
•
•
•
However, there is an acceptance of the authoritarian nature of the traditional
governance structures and this acceptance appears to fit comfortably with
acceptance of the predominant role of central governments in economic life.
These big governments are seen to provide excessive rents for rent seeking
behavior to occur;
The communal system, with its strong clan loyalties, does present
difficulties for the establishment of a market economy because markets
depend heavily upon transactions between parties that do not know each
other.
The close clan ties on the one hand and the long-standing distrust of other
groups on the other hand mean that there is little of the kind of trust (social
capital) that is needed in a market economy.
Increasingly there is healthy questioning of the deference expected for
traditional leaders’ decisions, as well as of the manner in which elected
political leaders hide behind “tradition” in response to criticisms of their
actions.
Chiefly System, Communal
Culture and Governance cont..
• Urbanisation and Future Role of Traditional Structures
• In the Melanesian countries, where the large majority are rural
dwellers, increasing the role of traditional authorities in
governmental structures in rural areas may well be necessary for
achieving improved government performance, despite the fact that
traditional authority structures may not meet expectations of nondiscriminatory community participation in political decisions.
• However, the increasing urbanisation of Pacific island countries,
especially the smaller Polynesian and Micronesian countries, raises
questions about the role of traditional authorities in these situations.
The rapid growth of urban centres, often with rapidly increasing
numbers of squatters, is presenting local governments with severe
problems in respect of the provision of basic services.
Summary: Changing the status
quo-Pacific Experience
• => Over the longer run period, the attitudes of the Pacific community
must change.
• This is only possible via education. Educating the public about
possible costs of bad governance practices, poor and inefficient
institutions will also help.
• This approach will allow ownership of decision and policy making by
the locals.
• Decision making and change must be led by the locals themselves
and not by the donor agencies or donor country experts. Otherwise,
genuine ownership of any changes or reforms will not occur.
• Local change agents must also be wary of powerful interest groups
who often play upon the fears and uncertainties of people to build
resistance to reforms.
• The only way to counteract such resistance is to back change quest
with relevant research and education.
Summary cont…
• Over the longer run period, the attitudes of the Pacific community
must change.
• This is only possible via education. Educating the public about
possible costs of bad governance practices, poor and inefficient
institutions will also help.
• This approach will allow ownership of decision and policy making by
the locals.
• Decision making and change must be led by the locals themselves
and not by the donor agencies or donor country experts. Otherwise,
genuine ownership of any changes or reforms will not occur.
• Local change agents must also be wary of powerful interest groups
who often play upon the fears and uncertainties of people to build
resistance to reforms.
• The only way to counteract such resistance is to back change quest
with relevant research and education.