World Bank Governance report

"Governance" is a relatively new term referring to the effectiveness of institutions, business and civic mechanisms, and policies governing a country.  In a report released Tuesday,  "Worldwide Governance Indicators 1996 - 2006", the World Bank says a considerable number of countries have made great strides in improving governance over the past decade. 

Good governance results in higher standards of living for all population segments, says co-author of the report Daniel Kaufman. "A country that improves significantly in the quality of rule of law or in controlling corruption, in the long term can expect a three-fold increase in per capita income:  going from $1,000 per year to $3,000 or from $8,000 to $24,000 per year.

It takes a while to reap all the fruits. But, they are enormous. Similarly, one gets the same type of impact on reducing infant mortality, improving illiteracy, less income inequality, less poverty and much more investment - domestic and foreign," adds Kaufman.

While governance is measured by a complex set of interdependent criteria, the World Bank expert points to corruption as a principal impediment to economic progress.

"Corruption is a one trillion dollar industry in terms of bribery around the world. It is an enormous amount, and it comes at an enormous cost," says Kaufman. "It is particularly taxing on the poor.  It is like an additional tax on the lower half of the population. It has a tremendous impact in terms of standards of living, poverty, access to basic services, like health and education."

International financial institutions are increasingly basing their aid and loans on the condition that recipients undertake reforms that ensure "good governance", says the World Bank expert.

Nordic European countries -- Denmark and Finland -- score almost 100 percent in all six measured categories of good governance.  But, Kaufman says a number of European countries in transition are making great strides in improving governance. "The data shows how much it is possible in 8-10 years to make a difference.  For example, Serbia -- a big difference has taken place; Slovakia -- very significant changes since mid-1990s."

The World Bank's report on quality of governance shows major deteriorations in Belarus, Nepal, Bolivia, Zimbabwe and Venezuela.