Governance in many of the countries in the Asia Pacific region has worsened over the last few years, UN Economic and Social Commission for Asia and the Pacific (ESCAP) said yesterday in Colombo.
The ESCAP in their report ‘the Economic and Social Survey for Asia and the Pacific 2017’ launched yesterday, stated that many countries rely more on domestic demand for their economic growth given the prolonged weakness in external demand and global trade.The report was launched simultaneously in 24 locations around the world.
Sri Lanka’s medium-term economic development was “contingent upon the success of reforms designed to reduce stubbornly large fiscal and trade deficits,” they stated. This year’s report was centred on the theme of ‘Governance and fiscal Management”. ESCAP, Economic Affairs Officer, Jose Antonio Pedrosa Garcia, discussing the report at the Lakshman Kadirgamar Institute observed that it was uncertainty more than protectionism which was hampering investment in international trade but countries which displayed better governance generally also tended to have done better economically. The report showed that governance was better with countries that had high economic growth, governance was improved when the people were more educated and it became worse when the country had high natural resources.
“Does governance lead to development or does development lead to better governance? That is a question which still needs to be answered”, said Garcia. Either way in countries where governance was better, there was more fruitful allocation of resources, and governments spent much of their Budget on social protection mechanisms.“In countries where governance was bad, a greater percentage of their budgets was spent on defence and interestingly there was also more expenditure on infrastructure in countries where governance was bad.
But the efficiency of these infrastructure developments were lower,” Garcia said.
Effects of bad governance such as corruption had a negative impact on the revenue collection of governments. “We found that when the tax law is complicated, when a person has to have many interactions with tax officials, when tax officers have a lot of discretionary power or when the salaries of the tax officials were low; there was higher chance of corruption,” Garcia said. “Who is willing to pay tax when you think corruption is high?” he asked.