Economic and Social Survey of Asia and the Pacific 2017: governance and fiscal management

Organization(s): ESCAP
Author: Hamza Ali Malik, Hongjoo Hahm, Shamshad Akhtar
Regions: Asia, Asia-Pacific
Year: 2017
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Economic growth in Asia-Pacific economies, although steady, is modest compared with its recent historical trend amid prolonged weak external demand and its ramifications, such as subdued investment and rising trade protectionism. While robust economic growth is not a sufficient condition for achieving broader development goals, the lack of it could undermine efforts to reduce poverty and expand the availability of decent jobs. At the same time, decades of rapid economic growth, facilitated by globalization and technological advances, came at a cost – rising inequality and environmental degradation. Addressing such economic, social and environment challenges in a coherent and decisive manner will be critical for improving the region’s future prospects.

The Economic and Social Survey of Asia and the Pacific 2017 contains an examination of these policy challenges, especially from the perspective of better governance and effective fiscal management. In particular, in the Survey for 2017 it is found that the quality of governance affects development outcomes through its impact on the composition and efficiency of public expenditure. At the same time, weak governance partially explains the low levels of tax revenue in several countries in the region. In the Survey for 2017 it is argued that better governance and effective fiscal management in the Asia-Pacific region can not only improve long-term economic prospects but also facilitate the process of grappling with social and environmental concerns. Indeed, balanced progress on all three fronts is the essence of the 2030 Agenda for Sustainable Development.

Governance quality has been defined in various ways by different organizations and institutions. In the Survey for 2017 political dimensions, such as democratic accountability, are avoided, and governance is framed in terms of how power is exercised instead of how it is acquired. This approach respects the diversity of cultures, historical experiences and levels of development that countries in the Asia-Pacific region share. A more functional definition of governance enables the focus of the Survey for 2017 to be on transmission mechanisms – mobilization and allocation of fiscal resources – through which governance affects various aspects of sustainable development. For this purpose, governance is measured by analysing data on government effectiveness, regulatory quality, rule of law and control of corruption – four of the six dimensions of governance covered by the Worldwide Governance Indicators database. In the Survey for 2017 it is argued that enhancing transparency and accountability in public administration is fundamental to improving governance quality and achieving better fiscal management; several policies that can help on this front are discussed.

The first chapter of the Survey for 2017 provides a macroeconomic assessment of the region, with a discussion of risks to the economic outlook, and it highlights the importance of improving the quality of economic growth. A case is made for a proactive role for fiscal policy and supporting structural reforms not only to enhance economic potential but also to strengthen social protection and improve resource efficiency. The second chapter provides a more disaggregated analysis of economic issues and indicates that the potential benefits of better governance and effective fiscal management are large and wide-ranging, including: better health outcomes in the Pacific; economic diversification in North and Central Asia; decent jobs in South and South-West Asia; ecological innovations in East and North-East Asia; and narrowing development gaps in South-East Asia. The third chapter contains a study of the relationship between governance and various dimensions of sustainable development; the study delves in detail into analysing the role of governance in improving fiscal management and contains a discussion of a range
of policy options to improve the quality of governance in support of better fiscal management.

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