Burdensome Regulation Worsens Corruption

Good governance is the new buzz phrase within the camp of the Revolutionary Democrats. The concept has become the lone anchor of their policymaking. To repeat the words of Prime Minister Hailemariam Desalegn, “streamlining good governance is an existential issue for the ruling party.”

What loudly transpired at the last congress of the ruling party, held in Meqelle, the capital of Tigray State, has now precipitated as a national movement to bring good governance. Tiers of clusters are being organised as a means to realise the ambition. The bureaucracy is busy crafting strategies, writing directives and drafting manuals. In the parlance of the Revolutionary Democrats, a wholesome cleaning act is under way.

What happened recently in Oromia, Gambella and Amhara regions has furthered the sense of urgency felt within the rank and file. Whether transient or enduring, the ruling elite has received the signal that the public is fed up of the misdirection of the system. It has become clear to them that change is their only saviour.

Unfortunately, the very movement the Revolutionary Democrats is undertaking has raised many eyebrows. Starting from the section of the population that denounces the reductionist approach of the ruling elite to the very members of the elite who are wary of the clearing act, the movement is facing challenges from the outset. And matters seem to be progressing in a disorderly fashion.

Good governance joined the global policy sphere in the 1980s. With the structural adjustment programmes (SAP), promoted by the Bretton Woods institutions (International Monetary Fund and World Bank), failing to bring the intended structural change in poor nations, especially African nations, there was need to identify causes for the failure. Under this search for a grand cause, lay the denial from the promoters’ side, of the imposing nature of the approach. After all, SAP was largely about putting conditionalities to the loans that poor countries access from the international financial institutions.

Among these conditionalities by the institutions were liberalisation of local markets, privatisation of public enterprises, downsizing government bureaucracy and reducing the state’s role in the economy. Prescribed by what is popularly known as the Washington Consensus, these approaches intended to give market forces supremacy in the economy. Failure to implement any of those conditionalities, according to the order of the day, resulted in resource constraint.

In lack of choice, most countries were forced to implement the SAP. They rushed to liberalise their markets, sold their lucrative public enterprises short and downsized their bureaucracies. Not even basic utilities were saved from the tide.

Nonetheless, the intended structural shift could not happen. And the basic cause, as the institutions later proclaimed, was lack of good governance. By good governance, the promoters of SAP were talking about the existence of the rule of law, effective checks and balances, strong institutions, and capable bureaucrats. Further, the concept is said to describe the two-way relationship between the state and the citizenry. In the broadest sense, therefore, the concept is meant to describe the existence of functional democracy in a given country.

For the ruling Revolutionary Democrats, however, the historical evolution of the concept seems to make little sense. Neither the context nor the meaning worries them.

Yet, it is vivid that their institutions are spoiled, their bureaucracy is corrupt, their systems are dysfunctional and their approach to governance is in shambles. As a result, they are sitting on a huge legitimacy deficit. The public uproar has reached its peak, to the point that in some regions it even flooded the streets with opposition.

By way of initiating the movement, the Revolutionary Democrats are engaged in crafting regulatory instruments meant to bring order in the system. The instruments vary from laws to directives and on to operational manuals. A typical trait of these instruments is their inclination to adopt a punitive stance.

A recent directive from the National Bank of Ethiopia (NBE), for instance, puts severe punishment – both fines and imprisonment, on the allegedly wrongful act of submitting requests for letters of credit (LC) to different banks. Similarly, the new competency standard regime for business registration took the requirements through the roof and stipulated that all businesses unable to meet the standards would have their licences cancelled.

From finance to trading, from Customs to property registration, the good governance movement is churning out punitive regulatory instruments. Flexibility is thrown out of the window and the environment is becoming all the more suffocating. The trend seems to have no end.

Making things worse is the fact that these layers of regulatory instruments are coming on top of a bureaucracy that is inefficient, incompetent and under-resourced. The whole play seems to be, as the Nobel Prize-winning economist, Amartya Sen, would say, misjudging capability. No better outcome could be obtained from it than a waste of resources.

In the case of the ruling EPRDFites, the outcome is proving to be more than that. The growing tiers of instruments they are imposing on the bureaucracy are creating new loopholes for corruption and opportunism. Not even the well-versed bureaucrats understand the meaning and rationale of some elements of the instruments. What they know is that the new approach puts huge discretion of interpretation (this time around), at their disposal. Hence, they sometimes trade this discretion for favours and bribes.

Meeting adopted higher standards of operation and living old habits without alternatives, remains a daunting task for businesses. They, therefore, settle for buying the discretionary powers of bureaucrats. This is true in the business sphere, as much as it is true of finance and traffic management.

Far from bringing sustainable order to the chaotic system, by and large, the new governance movement of the Revolutionary Democrats is worsening the situation to a level that would be costly to reverse. No doubt this problem will come back to haunt them sometime down the line.

But it is better if they could change gear and strive for a regulatory regime that is easy to understand, avoids subjectivities and stays transparent. Such a system entails instruments that fit the reality, bureaucrats capable of translating them and institutions empowered to effectively implement them. Not only would laws, directive and manuals be well-integrated, but they would be available for the public to use them.

Certainly, a sustainable good governance movement, based on effective instruments, would start from the political core. The political elite intending to bring such a movement would rightly know its powers and limits. Instead of throwing things down the hierarchy, it would engage all tiers of its system and remain open to change.

In light of this, the Revolutionary Democrats seem to stand farther behind. They are still inclined to take a top-down approach to governance. Voices coming from the bottom, whether from inside or outside, get little traction in the overall decision making process. Thus, there is no concerted stance on the way forward.

True, bringing a wholesome change is easier said than done. But, at least, one ought to make sure that the starting point is a right one.

In the case of Ethiopia, where much of the public disenchantment relates to economic benefits, the starting point ought to be one where regulatory instruments are less cumbersome, less subjective and less costly. Weeding out corruption cannot happen under a system that provides bureaucrats with huge discretion of interpretation.

Therefore, it is better if the ruling elite can correct their starting point. As far as streamlining good governance goes, the starting point defines the end point.

Published on Mar 21,2016 [ Vol 16 ,No 829]



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